> There is no expectation that the servicer will act in the interest of the consumer... Navient says its public statements encouraging borrowers to contact the company didn’t mean it would act in their best interest.
So, pardon in advance for the vulgar language, but why the fuck is this OK? From any company?
I'm getting real damn sick and tired of "what the big print gives, the spidery print takes away" and how we're all just supposed to be OK with this, as if this is how the world works or some crap.
If your public advertising--especially, but not limited to, when administering a service on behalf of the government--explicitly says "call us and we will help you," your company should not then be able to turn around and say "well, caveat emptor for calling us, sucker." Meanwhile, the handful of agencies devoted to trying to help the individual get any kind of a fair shake from the company "provider" that massively outguns any one individual customer, are all under attack from all sides as being "too heavy handed." (I love the CFPB, in case you can't tell.)
Oh, and this whole "consumer" crap? I'm not a "consumer," I'm a customer. I'm not consuming anything from a financial services provider, I'm using their services. Stop with the idea that all of us are just mindless drones, eating our Pac Man-like dots on the way to a swift end, and maybe get back to the idea that real people are on the other end of those faceless account numbers.
(FWIW, this applies to every company with mandatory, binding arbitration clauses, including the oh-so-enlightened participants in Y Combinator. Don't restrict my ability to hold you to your side of the agreement while reserving all rights to pound me into the sand at your leisure.)
>I'm getting real damn sick and tired of "what the big print gives, the spidery print takes away"
I propose "the bigger the print, the stronger the statement". Therefore, if you make one claim in 24 point and then attempt to rescind or modify it in 8 point, the 24 is legally binding because it was larger and so nullified the smaller. This also means that if you want to place limitations (like 'one per customer' etc) on an offer you make in print, those will have to be printed in an equal font in order to be valid.
I was thinking about this the other day looking at a billboard, talking about how Alive/Bob/Carol wasa winner! at the local casino, with a tiny 'play responsibly' box huddled in the corner. I don't have a strong opinion about gambling but I do care about externalities, and I was amused by the idea that some percentage of billboards (reflective of the incidence of problematic gambling) should feature Alive, Bob and Carol losing everything to their great despair, but with the same logo and typesetting choices as the positive advertising.
More seriously, I think first amendment protections for commercial speech are too generous. Game theory tells us that perverse incentives will often win out, and while it's tempting to fall back on caveat emptor it's also a cop out. The reality is that the huge and increasing information asymmetry between organizations and individuals leads inevitably to inequitable outcomes; further, it's entirely predictable that by swamping the recipient of a contract with reading material they'll just go ahead and agree to it because it's not obvious that it will be worth the effort of analysis. I can't remember the last time I read a EULA, and I like reading contracts and legal documents.
Free business idea: a fiduciary AI that parses contracts, simplifies contractual terms for maximum clarity, and rates contracts on their adherence to/deviation from industry norms.
>The reality is that the huge and increasing information asymmetry between organizations and individuals leads inevitably to inequitable outcomes
Consider the following three statements.
Consent cannot exist when the information asymmetry becomes too great.
The information asymmetry between a massive corporation (as compared to some mom and pop shop) and an individual consumer is great enough to invalidate consent.
We allow and legally enforced consent between these entities (with very limited exceptions; even things like arbitration clauses tend to be binding).
One of the above statements cannot be true for us to be moral in our actions, yet all three seem true. I honestly have a moral issue with how this all works, even though I'm not sure how to fix it and recognize a fix may completely change how we do business.
Note that for example in germany (and I'd guess in other parts of the EU also), there is a law that limits what "standard contracts" can do to a consumer [1]. I.e. whenever a business has one contract that it uses for more than one natural person, then that contract is considered an AGB thereby greatly limiting what kind of clauses would be considered valid in that contract.
As far as I understand, many clauses will then be automatically invalid if they are too one-sided for the company. Also maximum durations of contracts are greatly restricted while certain standards for contract cancellation rights are enforced.
In the United States we have a judicial concept called a "contract of adhesion". For a contract to be treated as a contract of adhesion, it must be presented on a standard form on a "take it or leave it" basis, and give one party no ability to negotiate because of their unequal bargaining position. The court will treat any terms outside of the reasonable expectations of the person who did not write the contract as invalid, and any ambiguous terms will be interpreted in their favor also.
Interesting, didn't know this. This seems to be similar to AGB-Law, albeit pretty weak. While the US "contract of adhesion" [1] concept protects against terms "outside of the reasonable expectations", the AGB-Law [2] also protects against terms that are "unreasonably to the disadvantage" of the consumer. Arbitration clauses are not valid, for example.
Compounding/causing this issue is people in general don't take expectation values into account - we always subconsciously overestimate the probability of a rare, positive event (winning the lottery) and underestimate the probability of a rare, negative event (dying in a car crash tomorrow).
Spending ten bucks on a lottery ticket doesn't hurt most people while winning the lottery can have a live-changing impact. Every action is rational for a properly chosen value function.
Yep. I'll spend 8-16 bucks a month on lottery tickets. It's what I use spare cash left in my wallet for. It's not going to break the bank and I'm likely not going to win, but it's a nice pipe dream and where I live a decent amount of the money goes to the environment.
Playing the lottery is more paying for the fantasy of winning than actually expecting to.
It makes for some fun office chats, and worth a couple of extra bucks.
One of them does around here. The one that always amuses me is '05% payout on slots'. I like to imagine some nice people handing a crumpled up $100 to a cashier and getting nice crispy bills in return totalling $95.
That was actually my first idea, but everyone knows that the odds are with the house, and as people pointed out the odds are printed right on lottery tickets and people still buy them despite the terrible deal on offer.
I figured that adjusting say 8% of the ads to reflect an (imaginary) 8% incidence of problem gambling would actually be more effective, by balancing the legitimate commercial desires of the casino, the legitimate worry of gambling addiction, and making the billboards just unpredictable enough to keep people playing...er, guessing.
Political, not commercial. All politicians lie or are "economical with the truth". If you want to get the courts involved in judging political statements, especially in a country that has already politicised the courts to a greater extent than many other Western countries, then you're on a hiding to nothing.
But the money that funds PACs can come from commercial activities. If all a company has to do is create a PAC, and PACs don't need to be truthful, it seems to me commercial speech is protected.
Wow, that is one of the most simple, effective ideas I've ever heard -- kudos. Not joking or sarcasm, I would love for that to be the rule, it would make life so much simpler.
> I propose "the bigger the print, the stronger the statement". Therefore, if you make one claim in 24 point and then attempt to rescind or modify it in 8 point, the 24 is legally binding
The EU has a ton of regulation like that..
For example you can't say "free" if it's associated with a subscription or other tricks.
You must advertise the complete price if selling phones with binding subscription, etc..
IMO, there is still many shady business practices to kill.
But the EU is doing a great job at this.
---
Good luck in the US, maybe you should just start by targeting the payday loan industry...
But not sure the current President is going to help Elizabeth Warren fix anything.
Although I completely agree with you, I took it as a challenge to come up with something that follows the above rules and is still devious. Here is my 1 min of effort attempt: https://ibb.co/giqgDv
> So, pardon in advance for the vulgar language, but why the fuck is this OK? From any company?
I dunno, why wouldn't it be okay? I interact with a lot of companies on a day-to-day basis; big ones (Facebook, Google), small ones (the corner shop I bought an energy drink at on my way to work), and everything in between.
Offhand I'd say that none of them have a legal expectation to work in my best interest, nor would I have expected any of them to, nor do I believe a law requiring them to would be workable.
My interest in buying an energy drink is to get the brand I wanted at the lowest possible price; the store's interest is in selling it to me at the highest possible price. If they had to work in my best interests would they be required to sell it to me at cost? Maybe I drink too many energy drinks, would they be required on pain of criminal sanctions to try and talk me into buying some fruit juice instead? The mind boggles. :)
Or do you think there's something special about this particular product that makes it different than every other good or service in the economy? Or that their very vague ads somehow set up a special relationship that's more akin to a doctor/patient relationship than the borrower/lender relationship one would expect from, you know, a loan company?
The energy drink company's interest is to minimize its cost. Years of bad behavior in this regard eventually led to pure food/drug laws, but in places with weak rule of law plenty of people are still poisoned by dodgy food.
Oh yes, absolutely. We have laws banning outright fraud, setting minimum food safety standards, a lot of rules about packaging and labelling. And that's good!
But we don't have any laws or expectation that a food vendor is going to be acting in my best interests. If I want to spend my rent money on 87 large pepperoni pizzas, nobody is going to arrest the guy who took my order because he didn't sit down and have a 30 minute session with me to ensure that my order was in my best interests, fit within my budget, and would improve my life. All we do is make sure that I 1) have the money 2) get my pizzas and 3) they aren't poisonous or mislabelled.
The difference between "you can't blatantly lie" and "you have a fiduciary duty to act in your client's best interests" is enormous.
They are a servicer, not a lender -- they are contracted by the lender to collect the money from the borrower. So the borrowers never asked to be customers of Navient. They borrowed some money from a bank or the government, who then contracted Navient to service the loans.
Now servicing loans is like owning an interest only bond -- you get a small payment every month as long as the loan is paying. When you own servicing rights, what you want to do is for payments to drag on for as long as possible -- since you don't get the principal, having the loan pay early is the second worst thing that can happen.
Now its very possible that Navient is doing things which are not in the interest of either the borrower or the lender, but are in the interest of Navient. And it's likely perfectly legal.
But again many of these loans are not just simple transactions in the marketplace, but rather subsidized social programs, where the government in promoting the program has a reasonable expectation that some part of this subsidy should fall to the borrower, and is reasonable frustrated when a provider whom they have hired tries to prevent this.
> But again many of these loans are not just simple transactions in the marketplace, but rather subsidized social programs, where the government in promoting the program has a reasonable expectation that some part of this subsidy should fall to the borrower, and is reasonable frustrated when a provider whom they have hired tries to prevent this.
IF SO, that seems like a damning indictment of the government and the contracts they have drawn up then?
If you're trying to run some sort of soft touch social program where maximising the amount collected isn't your primary goal, then obvious the ONE thing you shouldn't do is then outsource managing it to a private company who gets paid based on their ability to maximise the account collected. Right? Given that's the one thing the government could do most likely to undermine their goals?
If you want happy borrowers, sign a contract with Navicent that pays them based on their NPS score. :)
Maybe we shouldn't be mad at Navient then? Seems like the government is the root cause of the entire student loan mess. Basically unlimited amounts of unsecured debt for people that don't understand the implications and are not required to get a degree that has a ROI to pay it back in a reasonable amount of time. Setting people up for a lifetime of wage slavery...
If the food vendor straight up says in their marketing, "At Pepperoni Pizza Meister's, our priority is to help each of our 12 customers successfully manage their meals in a way that works for their individual circumstances", one might, not entirely unreasonably, argue that they should in fact have that 30 minute session with you, and are lying if they don't.
I think the outrage is because it seems to many people that "outright fraud" and "blatantly lie" are pretty apt descriptions of what happened here. It seems like the lawyers involved don't agree, but from my lay perspective it isn't easy to see why not.
Basically, people tend to think "false advertising" is fraudulent, even if that is not true from a legal perspective.
>Or do you think there's something special about this particular product that makes it different than every other good or service in the economy?
The difference is that we have drawn a line beyond which that company cannot operate by passing a law that bans certain practices, and the CFPB is alleging Navient violated that law.
I have had the idea for a long time that the FTC should basically work as follows: put a few dozen randomly chosen people through a sales funnel and then give them a quiz at the end about how much they will be charged and other terms of service engagement. If more than x% of people fail the quiz, then you are guilty of misleading advertising.
> So, pardon in advance for the vulgar language, but why the fuck is this OK? From any company?
Because that's the default rule when it comes to arm's-length transactions in the economy? Unless there is a special relationship (e.g. doctor-patient), everyone takes care of their end of the transaction. The government offers very generous loan repayment options for student borrowers. It's Navient's job to collect payments, which helps keep the whole system solvent and lowers interest rates for other borrowers. Why should it be its job to help borrowers figure out their repayment options?
Okay, then... New rule: the primary loan provider for higher education in America - education that is argued in many circles as being a public good and benefit to society - shall be considered to be in a "special relationship" with the student borrower... Let people know what they're getting into.
I don't see how this should be any different from the relationship a fiduciary has with his/her client.
Are you suggesting that when people signed for the loan - which was not with Navient, as they're on the servicing and collections side - that they didn't know what the terms of repayment would be?
The central problem I have with a loan like this is that it is tied to a socially encouraged activity that is central to most Americans' ideas of a successful path to adulthood. If we're going to socially encourage this, it needs to have some backstops to catch folks who fall.
Whether the collections is outsourced or insourced, your average student borrower isn't planning on having their life's trajectory fall apart. They aren't expecting the hardships that lead them to need remediation. However many warnings you provide them on the front end, it's at the time of crisis that they need advice and guidance. Navient has been horribly negligent and predatory in this regard. Anyone taking on the job of preferred collector of gov't loans should be required to act in the interests of the borrowers - aka the American public.
I agree with your paragraph 1, not with paragraph 2. The US Dept. of Ed. could have come up with any number of solutions including outright forgiveness, work programs, access to cheap fee-based financial planners, more scholarships, changes to the tax code for the borrowers, or hiring incentives for employers. Instead, it chose to sell it off the debt in order to keep the accounting balanced under the desired time frame.
Navient should pay what the court compels it to if outright deception is found, but let's not overstate their role in the general problem around the structural non-sustainability of federal education loans, and the short-sightedness executive decision to spin off the liabilities into private hands.
I don't think we necessarily disagree - you think outsourcing the liabilities was a bad move, presumably because in private hands, collections will be ruthless... I'm complaining about the same point. I just see no reason why "private actor" must imply ruthlessness. The terms of the contract or laws governing the collection of gov't loans could be written to enforce a fiduciary-like expectation into the arrangement.
When I got my student loans, I had to do a whole bunch of online orientation. It included the various repayment plans, and even what the monthly oayment would be under each plan, and how much total interest each plan would eventually cost me. I think its a federal requirement that this information is provided before the loans are disbursed.
If someone doesn't take the time to understand their student loans, which are one of the most important things in their lives at that age, I just don't know what to say.
I'm glad you got that coaching, but I don't think that is very universal as a practice... My student loans were handed over with the usual fine-print paperweight. I had prior knowledge of how they worked, and fortunately never had to seek payment remediation, but that's just me being lucky. I want a system that mandates supportive care of the customer (who, in this case, is not a professional financial investor, but most likely a kid without a wealth of life experience to draw on).
I was a kid then, and if I hadn't been given an explanation of how the loans worked, I would have looked it up. I was borrowing tens of thousands of dollars, and I wasn't about to screw that up.
I always look up the terms of any loans I take, including student loans, car loans, credit cards, etc. Honestly, is that too much to expect?
Must be those gosh darn millennials.
Regardless, this is a separate issue from a loan servicer falsely advertising that it will help you cope with dept.
Let's say an honest lending start-up rushes to fill this niche and then rejects people's applications based on imperfect academic record, lack of summer jobs or internships (so potential laziness), subpar math skills and very minimal knowledge of foreign languages (so indicative of poor information retention). It also honestly tells you that art history majors have no place in a business world, and honestly maybe a career in plumbing is a better fit.
This is just based on their model, and the rejection is worded in a nice, legally safe and sound, way.
How long before such lender is being sued into oblivion for discriminatory practices?
Well, no one's 100% safe from discrimination lawsuits.
However, looks like such practices are not considered discriminatory by law.
> Two federal laws, the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA), offer protections against discrimination. The ECOA forbids credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or whether you receive income from a public assistance program.
I understand the distinction. I'm suggesting that, since Navient is also responsible for remediation, they be held to a higher standard for guiding customers' adverse payment options.
"Let people know what they're getting into." was intended to refer to the whole loan process, but specifically (in Navient's case) to the remediation options they present, and how they present them. That could include things like: 1) Guiding borrowers towards income-based repayment rather than deferment or forbearance, and 2) Recommending external options such as re-financing or consolidation where possible and advantageous.
Common sense would suggest that a loan collection agency's idea of helping the borrower will be helping them find ways to pay off their loan, which is not necessarily the same as working in the borrower's best interest.
The interests can be aligned, though: if the lender puts too much stress on the borrower's finances such that they default, the lender does not win either. So the lender has an incentive to work with the borrower to get their money back in a way that ensures they're able to make payments without so much hardship that they just stop making payments.
The government offers very generous loan repayment options for student borrowers.
From what I understand, I don't think that the US government is generous at all with their student borrowers. Yes, they allow more flexibility around repayment options than do many other lenders. However, the government has largely eliminated the option of personal bankruptcy [1] for student loans. So, they're really just as complicit in this mess as the for-profit colleges and the loan collection agencies.
It isn't the default rule. Maybe it used to be. But today most people have nowhere near the resources of most companies, so we regularly regulate those who act to harm their customers.
That's the thing that pisses me off: if you're going to act a certain way, say so. I'm actually totally ok with a company that is going to act in its best interests (and not its customers), as long as they are up-front and clear that that's the case.
If you advertise that you're going to help people deal with their debt better, then that should be legally binding (regardless of what your fine print says), and a failure to do so should at the very least be illegal under false advertising laws, and I'd say more reasonably it should be considered breach of (implied) contract.
(IANAL, so clearly my terms are not meant in a strict legal sense, because I have no idea what I'm talking about.)
One of the measures from Dodd-Frank that the current administration wants to roll back is a provision that investment professionals act in the best interest of their clients.
Presumably, they want the option to steer you towards their in house funds that have the highest fees instead of helping you het the max return on your investment.
I actually have no problem with this, I have a bigger problem with the misnaming of people's roles - I.e. It's BS to call a stock broker without a fiduciary duty a "financial advisor" but if they're called a Sales Rep I have no problem if they're not looking out for you
> shareholder capitalism. they have zero accountability except to their shareholders.
Random thought that just came to mind. Have coalition of debt holders (borrowers ) ever considered buying stock in these companies to influence them in the form of another company that is jointly owned or invested in by thousands or tens of thousands of folks?
Eg, mass activism campaign launches request for everyone to invest X% of what they normally would have paid into loans for the month (above the minimum thresholds of course), and/ or y% of disposable income into this fund. Now obviously one or ten people doing this will own just a few hundred stocks, but thousands doing this get tens of thousands of stocks-- thats when it could get interesting ;)
Obviously, would not be available to those really struggling under massive loan burdens and struggling to make every payment, BUT for those in the AND gate between reasonably high loan burden and comfortable income, which is a huge overlap with HN by the way, the impact could be massive.
In the end the results could be beautiful though: cannibalizing capitalism , - an inside job.
the combined assets of the entire class of student debtors is probably NEGATIVE (they are debtors, remember) whereas the assets of even a single major shareholder (Carl Icahn as a benchmark) are in the billions of dollars and outweigh the rest of it combined.
this is one of the side effects of the massive income and wealth inequality American style capitalism causes.
If debtors could get organized and all stopped paying at once, it seems likely that Navient would run out of money before they got the spigot turned back on.
The consequence of course would be that student loans would cease being made, or be made much less frequently. This would have effects, some good, some bad.
US has never had problems with putting 1% of their population in jail. If every student, even the children of billionaires, massively refuse to pay back as a group, the banks would be too happy to strike a deal with the children of billionaires in order to put the 99% others in jail.
We need to be a little more clear: Carl Icahn's asset is the students' debts. That is what his wealth is made out of, in the way that soda is made out of corn syrup and water. No student debt would mean Carl Icahn would have to make an honest living, and he's not gonna go quietly.
Present assests- probably, but when taken over a longer time scale this makes increasing sense. many folks with >100k debt usually have several grad degrees , medical, engineering, law, etc, & whether annualized or summed, their future earnings may be productively invested into an advocacy campaign which would not only benefit them but others who have less natural income cushion and thus less of a parachute.
Individual mega-investors are no doubt powerful, but what about investor collectives. if a single company and/or entity can take on even 1/10th the power of Icahn collectively, it is something worth considering.
there is asymmetry of purpose as well as asymmetry of net worth. an individual mega investor spends as much as he (or she, but lets be honest, its almost always he) wants on anything at all. a class of several tens of thousands of investors in a collective will struggle with their decision making in all the expected ways.
Navient is a servicer. They make sure the money gets from the borrower's account into the lender's account on time. Their revenue consists entirely of the fees paid by the lenders for providing this service.
Make radical changes that impact the servicer negatively and the lender will switch to a new servicer to manage its payment flow.
The coalition of debt holders is now stuck with shares of some underperforming servicing company that just lost a huge contract.
Ever seen those articles talking about how in the last few decades increases in wealth have overwhelmingly gone to the top 1%? This is the outcome. The little people can't hope to compete.
Target market would not be folks already massively invested in these stocks. Target market would be student loan debtors who have comfortable jobs and salaries north of 50k.
Apps like Robinhood have opened the ability for folks earning even less than 50k , to comfortably invest.
Many tens of thousands may be interested; there could be a bigger market opportunity than you think.
They presumably have a charter to operate from a government that is supposedly by and of the people (all chuckling aside). That type of ideology is cancerous (it uses the resources of a host to replicate itself without regard to the host's well-being) to a social system.
This mythology needs to rest. There has been little shareholder capitalism action in recent history when one would think it would be at its highest.
Let's just look at the financial crisis from 2008, all the fraud, mismanagement, downright criminality with serious consequences for the companies involved has seen little to no shareholder activism. No executives or CEOs have been held accountable for their behavior or called to action by shareholders inspite of taking huge hits on their holdings.
The agency problem, 'short termism' and extravagant compensation and golden parachutes has also seen little action from shareholder activism.
Yet when it comes to anti-social behavior in regard to customers, employees and wider society 'shareholder interests' is rolled out on cue as some 'central plank of capitalism' when it barely works. It's become self serving and meaningless.
just barely. to be held legally accountable an injured party has to file suit, litigate the case (long and expensive), and win a judgment that will be a large enough quantity of money to force the company to not just break the law in the same way again because it was profitable to do so.
For the same reason that it's always been expected from any company. Do you expect a local car dealer to act in your best interests if you show up as a result of a radio ad?
Caveat Emptor is in Latin for a reason - people have been living by the maxim for a really really long time.
Its becoming apparent that a lot of people do expect them to at least not be malicious. People don't want to be ripped off because of an information asymmetry, and when they have the information they don't want to waste hours haggling it down to an actual fair price.
I'd be willing to bet that played a role in the large number of those direct to consumer pre-orders and why Tesla is valued higher than Ford.
This is a consequence of a weak FTC and anti-trust bodies. I facepalm every time I see the FTC fining a company making tens of billions of dollars a year something like $2 million over significant multi-year violations.
If you gave a rapist a week in jail, would that make him stop? If not, then why are we acting as if a $2 million fine is going to stop a company from doing further violations that help it make billions of dollars?
And all the settlements, which don't even ask the company to admit to any wrongdoing, are even more blood-boiling. It's almost like it pays to be on the side of corporations when you work for the government these days.
Devil's advocate...if there are limited providers for something you need, then many times the relationship is very much one of you being a "consumer" vs. a "customer." They know you don't have many options, so they don't need to fight for your business. They just need to fight to extract as much profit from you as possible while minimizing their risks.
Thinking of them less like "companies" and more like "parasites" starts to make a whole lot more sense. And it is hard to be angry with a parasite--it is in its nature.
Oh give me a break. The primary rule for being an adult: do not take on debt you may not be able to reliably pay back. No lender owes any borrower favors to help with their debt. If you can't afford the debt, don't borrow it. Debt isn't some magical tool to obtain free money. You're taking money from someone, with a straightforward contract to pay it back. If you can't pay it back, you shouldn't be borrowing.
The level of entitlement people have when borrowing money is insane. You're not borrowing from a family member that can be manipulated into forgiving you for being a freeloader who never pays back. Every single loan and line of credit is a serious matter - stop treating it like an externality where you get money now, completely pushing the eventuality of paying it back as "something that will magically happen". You need a plan to pay back debt. If you do not have an actionable plan to pay off debt, you have no business taking it on to begin with.
Why is debt considered "normal" in the 21st century? People are living beyond their means, trying to offload the blame on lenders, while the real fault lies entirely with the borrowers. Far too many people think that loans are just fake numbers on paper or a digital screen. No, loans are real money that you need to account for. Debt is not abstract concept that can be willed away.
> Why is debt considered "normal" in the 21st century?
Probably because it's extremely hard to get a university education or a house without it?
Especially educational debt; people are required to commit to it right at the beginning of adulthood and before they've learned the skills for the career that's supposed to be able to pay it back.
Well, by my interpretation, this hasn't been validated as a successful evasion quite yet. This is their response to a complaint that one lawyer calls, "a sound legal argument," but sound argument != final verdict. They might still get their comeuppance as the whole situation plays out.
I'm getting real damn sick and tired of "what the big print gives, the spidery print takes away" and how we're all just supposed to be OK with this, as if this is how the world works or some crap.
So reject it already. Use cash. Spend only money you already have. Keep it simple; don't accept anything that comes with fine print. It's really not hard, you're just not used to saying "no" to it.
The world, as you function in it, is OK with how this works. Nobody is forcing you to comply.
Yes, it is against the consumers. But why do the big companies have it? It certainly costs them a lot in legal fees to have all that fine print. Most of the time it is just CYA for them because they have been burned by lawsuits (some stupid, some not, all costly). As long as the US has a sue-happy culture, then we will see lots of fine print.
i buy the expensive local eggs at my fancy california grocery store. it's $8 for a dozen. they taste like real eggs, not corn and slime.
i don't expect the $2 eggs company to care about any of the stuff that the $8 eggs company does. i just don't think that's realistic. i just assume they're fucking the chickens over, and the customer over, and themselves over, and that's going to continue as long as people buy $2 eggs -- which they will, forever, because people feel that tug at their stomach when they reach for the $8 ones. i feel it too, even with my techbrodude salary. difference is i buy it anyway, because of $many_reasons.
so i spend my money where i know the chickens aren't getting fucked over, what can i accomplish by worrying about the chickens? it's quicker to spend $8 and the world will be a better version of itself tomorrow (to me).
be the change you want to see in the world. expecting others to operate out of altruism is just not a practical thing to preach.
if i have children, i will advise them not to get college loans, and i will advise them to skip college if that means you need to. i will tell them not to do 10000 other things that are dangerous. that's what parenting is. expecting the world or companies not to try to harm you is insane and irresponsible, in my opinion.
It's mind-blowing how the majority of high school students are lied to each year about the ROI of college. The internet has re-written the rules, and high school educators don't know how to teach that.
I would have benefited so much more from a program that taught how to be self-sufficient and the major, major benefits of living debt free.
Context: $150k in student loans - lucky enough to have an electrical engineering corporate job to (minimally) pay the bills.
EDIT: More Context: I went to an engineering focused private university, borrowed my way through the whole thing (housing, food, everything), parents didn't pay a dime. Stupid? Yes.
IMHO, reality paints a sightly more optimistic picture...the average debt per graduate is $30,000--about the price of a new car, but as measured by wages, a degree gains value (this is because since 2009 wages for grads have seen much stronger growth than wages for non-grads) http://greyenlightenment.com/is-college-a-big-waste-of-time-...
I read stories on Reddit about grads who have debt but are also making decent 5-6 figures and paying the student loan debt, but also also investing the stock market and buying a home, so it's not like they are in poverty or living paycheck to paycheck. The student loan debt can be manageable in many instances, especially if you major in a high-ROI subject.
It would be helpful (though very difficult) if we could isolate the branding/signaling value of certain colleges from the education/training value of colleges, to ascertain the nature of the return on investment value that is being derived from colleges or varying statures, locations, etc.
"What we are buying" through 4 years of college seems to be getting less and less clear to me, and the administrators are very much involved in keeping things as difficult to measure as possible.
The Department of Education has stats on the average salary after graduation at many institutions (realize this is only a weak proxy for the signals you want, but is at least correlated). You can play with, and download, their data here:
Just looked up the school I dropped out of. I made >2x in my first year of dropping out than what it says is average salary for new graduates. Suckers.
Tuition + room and board was about $40K for 4 years.
The school has a good internship/co-op program, so I was fortunate to step into a junior engineering role right after graduation. I'm a C+/B- student. Graduated with a 2.98 GPA.
The median student debt is a lot more interesting, it's much lower than $30,000. The median of all outstanding student debt is around $14,000 today (for households that have any student debt). The median debt for individuals that went to public universities is closer to $10,000.
The average is massively skewed by the top few percentage of all borrowers that have taken on almost unfathomable loans.
You're comparing two different cohorts - newly graduated students, and everyone who has any student debt. Obviously the second group is going to have lower median and average, so comparing the two is pointless.
Because I think HN likes data I plotted some for ease. We can see that by linear fit the cost grows 2.5 times that of the number of students. The 2015 cost of school is 3.5 times that in 1990. The 2015 number of students is 1.47 that of 1990 students.
What's interesting here is the average or median debt of just-graduated students though; counting those who already repaid almost all their debts isn't meaningful.
College degrees still mostly have a good ROI. The huge lie is the ROI on pedigree, prestige, whatever you want to call it. Kids are still being told to apply to expensive small private schools and to worry about the financial aid process later. Kids are told to find the right fit.
None of that really matters. The big ROI is just getting a degree or the type of degree. There are few elite schools that have a much better ROI but they tend to be very generous with financial aid anyway.
Also, community colleges are a great resource. As long as community colleges exist, we shouldn't even allow student loans for the freshman and junior year. You can do your first two years while working part time to pay the very minor tuition. Then you can transfer to another school. Every flagship state school takes tons of transfers. My buddy transferred from a podunk community college to Stanford.
And when you transfer you should go to a cheap school. Unless you get a great college scholarship, it should be your state's flaghship public school.
Nortwestern is a great school, but not 150k better than UIUC (and for engineering its not better period). If you get a nice financial aid award, great, but otherwise don't go. My college counselor in high school was telling people to pay full price for DePaul instead of UIUC just because they wanted a "city experience." No, that's not worth it.
I agree with this 100%. I went to a state school (michigan state) on an academic scholarship instead of going to rensselaer or MIT, where i'd been accepted but with a lot more loans in my financial aid package.
It's conceivable that I'd have had a better job right out of college, especially given the network effects of the big-name schools, but I got an excellent education. Of course, my job prospects were helped by grad school (UC Berkeley), but by that time I knew very well what I wanted to Be When I Grew Up, so the investment was worth it (and ended up being very small, as I managed to live cheaply (it was the early 2000s) and swing a grad assistantship most of the time. On top of all that, the stuff I'm doing means I have to keep learning all the time, so the actual stuff I learned as an undergrad and in grad school was far less important than the habits of mind I acquired there that made me a good learner.
Bargain hunting for an education is really important. I've met lots and lots of people since graduating, some were amazing at their jobs and could get work anywhere and some were ... not. That didn't seem to correlate much with alma mater.
So yeah: a college degree can be great, but you don't need to go to a small elite private school to hone your analytical, technical, communication, and creative skills. It's way more about making use of what's available.
I think my lackluster grades in High School were actually a blessing in disguise. I attended Rockland Community College (as no one would accept me anywhere else) and received an A.A.S. in Cyber Security with a very high GPA. Due to my performance at my CC I received a great academic scholarship to Rochester Institute of Technology.
I graduated RIT with just more than $15k in loans.
I'm glad it went the way it did. But, coming out of HS the stigma of CC was palpable, and it shouldn't be - the education at my CC was surprisingly good. Many of my peers who graduated with me at RIT, and those who graduated with me in HS but went straight to private well renowned schools, are in 10x more debt than me.
Luckily I'm the oldest off all my cousins, and will be drilling this into them when they start looking at schools.
Depends on the job. If you want to get on the US Supreme Court, you have to go to Yale or Harvard.
But in general yes, it's a good idea to shop around. It also depends on the field you want. CSU Northridge is a pretty marginal school, but it's great at geology.
Law is a big outlier in general. There the degree doesn't matter at all, only the prestige. But I still wouldn't recommend paying 200k to go to Yale if Northwestern offered you a full ride. There is one SCOTUS job every 4-5 years.
For law, I'd say get a scholarship or aid at a great school or don't go at all.
In many ways grad school is an outlier in general. It's often just not worth it to get a PhD from a less respected institution. The difference is that most PhD programs pay you, not nice versa.
High school should teach students how to get what they want from life and give them the rudimentary foundation they need to attain it. In retrospect my education was greatly lacking in certain aspects. High school should involve at least one course on directing your life - studying the benefits and downsides of trade school, college, university, proprietorship, basic business operations, political action, personal finance... give them a taste of the options at least. Seems like home economics was an attempt at this but grew outdated and became an elective. This education should be mandatory for all students regardless of what they want to do with their lives. They are the basics of earning a living in the US and even if the skills do not become necessary for an individual, they should know where to start looking when they need money. Without these skills people resort to shitty options like payday loans, student debt, etc...
Did you run the numbers? Look at the outcomes for those with just a high school diploma, they are very grim. If the internet has re-written the rules it sure hasn't shown up in the data yet.
That's not a direct comparison, though - that's all people with a high school diploma versus all people with a college degree.
To draw any conclusion off this, you'd need to compare people who were considering college but do not attend versus those who were considering college but did attend - even if they didn't graduate. Only then do you have a metric that you can use to represent the ROI of attending college.
No, go learn a trade, join a union, and in 5-10 years, make 100k+...
You can easily make what an average lead developer makes if you pursue a career in the industrial operations industry (power plant operator, bulk electric system operator, etc.)
I don't have much to add but that it's nice to see comments from someone in the same situation as me. When I was growing up, I was basically told that an undergrad STEM degree was a golden ticket, and when I asked about how such an expensive tuition could be worth it, I was told time and time again that I would make more than enough money to pay it off. Turns out I make just enough money to keep up with my minimum payments, but not enough to keep up with terrible interest rates on 100k+ of debt and pay rent.
What're you doing? My current plan is to try my damnedest to get a big 4 job. It sounds like you're trying to freelance in your off hours? How is that going?
The first plan is to get a 100% remote job in front-end development to save costs and time, and then use that to continue working on the side.
I've been working on the side to learn web development for the past year and a half, and I have only now been reaching out to job applications that I qualify for.
I at least want to pick up some higher paying part-time hours.
I plan on using the debt snowball to get out of debt faster and live within my means. If I follow that, the maximum time I will be in debt is 10 years, and that's with no income increase or extra income on the side.
I want to cut it down to 5 years or less.
Just trying to build skills and find ways to use them for profit!
There is absolutely no reason to pay so much for a BA. For example, annual tuition for an BA from a California State University is $5,742 (2017-2018; there are some fees on top of this). Many "working class" public universities have a large positive ROI. See: https://www.nytimes.com/2017/01/18/opinion/sunday/americas-g...
On the flip side, your chances of ever getting past 200k/year (or equivalent) are much better with a degree... if you accept that you aren't likely to hit the top 5-10% of income earners, then most people are not better off with the college experience.
I know 200k is much more, and the point is nearly as relevant even at 100k... the percent brackets are more relevant. It's just worth knowing what you want to do, and if it requires a degree, and what you're likely to make working at it for 2-5 years or getting the degree first, then paying back loans.
My advice to people today, is go to the cheapest school you can, local community college is probably the best option, unless you're going to a top tier school, and have plenty of funding for it without student loans.
It's not just the internet. It's also a question of supply and demand. Supply is up; demand is down. ROI on college can be quite good, but you have to pick the right major - "have a college degree" won't get you too far any more unless you're planning to work for the government.
One of the big problems is structural changes in the legal business. It used to be if you didn't have a very marketable undergraduate degree you would go to law school. But discovery work that used to be the bread and butter of newly minted lawyers is now being done by computers.
"[Navient pointed out]...more than 40 percent of loan balances it services for the Education Department are enrolled in income-based repayment plans."
Over 40% of people with US Government-sponsored student loans--which were presumably taken out in order to advance the career prospects of the borrower--are not being paid sufficiently to repay their loans on the basis of their original issuance, _and this is presented as a good thing_.
Navient is a debt collector. They were sold loans owned by the US Dept of Ed (or hired by the department of ed maybe?)
"more than 40 percent of loan balances it services...." means that out of the loans that the US Dept of Ed decided it can't collect on anymore -- many of those are using the option that would benefit them the most.
The article talks about Navient saying one thing: "we want to help all of the borrowers because they are actually not just borrowers but citizen/constituents"; while doing another: "thanks for calling Navient, having trouble paying your loan? Just hit the loan-pause-button and we will pause your loan for 24 months. No, we will not tell you this but you could have asked for the 'smaller loan payments because you're not earning much' button'."
It's both[0]. But what it's not doing is duping aspiring college graduates to take out these loans in the first place. As detestable as their predation on the delinquent may be, they're not pumping up the loan bubble.
On the other hand, my loan servicer was changed to some unbelievably poorly managed servicing company years after I had graduated (not one of the big 3-4 companies): think login without ssl, mailing me paper with my SSN printed on it, couldn't get a person on the phone after waiting on hold for hours.
I never choose to make any financial deal with that company and I never would have given any choice. The net result was just that I made it my absolute top priority to pay off the rest of my loans held by them (which was also a very frustrating process, with several rounds of extra interest and surprise tiny fees and more inability to get someone on the phone) but other people wouldn't have that luxury.
While I appreciate that people are sour about student debt, I don't think Navient, qua big business, should behave in any other way.
I personally think public universities should be free and highly selective, rather than the opposite. But I also think taking out loans with no plan to repay them is criminally stupid. If the education product being sold is fraudulent, go after the fraudulent institution (as has been done). But the bank? They're just a bank. And no, I don't think it's good that we have banks financing student debt, but I sure as hell don't blame banks for doing it.
This is a fabulous example of why privatizing what should be a public service is a terrible idea, yes, and this is the ridiculous game we get to play as a result... blaming the bank for playing hardball over money. Really?
The core of the issue is still the university tuition rates, and universities involved are usually not privatized. These public institutions have become profit centers, benefiting from the captive audience of young career seekers, and cranking up administration overhead costs in their budgets to absorb the increased amounts of loan money available to prospective students.
Loans are always hardball business, and student loans are no different (although this case is clearly false advertising). The fact that the government sought to get more university degrees into the hands of citizens by increasing loan availability and size is the short-sighted idiocy that helped bootstrap this mess.
Withholding information is not playing hardball, that position is just stupid. So you're saying banks should be able to lie and mislead people, with no consequences or regulation?
I believe that school loans should only be allowed for jobs. If you love art and are interested in "under water basket weaving" as a degree that is great, but it won't pay the bills and so you should save your money to pay for it. When you decide to become a medical doctor, it is understood your eventually worth will pay off reasonable loans.
My solution: student loans may be discharged in bankruptcy, but your school records are discharged too. Thus if you get an expensive degree that won't pay off the loan just give up the degree and credits. Doctors will not do this because their pay.
Note that loan companies now have incentive to ensure you graduate and get a job. Getting Ds in a few classes: they will cut you off now rather than try to see if you can turn it around. Maybe you can find the money to pay for your next semester one your own and improve your grade, and if you do this long enough they might change their mind and give you loans to finish.
The only angle I'm still working out is if someone finishes a degree, declares bankruptcy, and then goes back to the same degree (elsewhere) - they don't have the credits but they presumably know the material and can easily pass all the classes the second time around with a better grade.
Allow borrowers to default on student loans. Then banks can charge an appropriate interest rate for the credit risk of the borrower, based on pursued major (among other things).
Very few students would qualify. Most of them have no credit history and little to no income. If it were easy to default, the entire system would collapse.
Obviously the impossibility of defaulting and the ease of getting loans feeds the problem, but what you are proposing would destroy the system rather than fix it.
Very few students in worthless degree would qualify. Engineering and medical degrees would do much better because good students would not default as the degree is part of what drives their job.
> The only angle I'm still working out is if someone finishes a degree, declares bankruptcy, and then goes back to the same degree (elsewhere) - they don't have the credits but they presumably know the material and can easily pass all the classes the second time around with a better grade.
Is that a problem, though? Presumably they still have to pay for the degree the second time around. And if they don't (say, a free community college), then sure, they're getting something "easier", but they still have to spend the time to get it, and they're getting a degree from a low-ranked college vs. the (for example) elite university they went through the first time.
My wife and I have dealt with these goons before. Their favorite trick is missing a payment, leaving it on a desk and then despoiting it weeks later, after charging fees. Or, if you have 2 loans, they are sure you never pay any of them down, even if you literally tell them (pay loan #1 all of this months payments, ending it). They purposefully screw up...
All roads lead to money in politics allowing them to do whatever they want and not have repercussions.
Why is a student loan servicer any different from a mortgage servicer? I don't go to my mortgage servicer for leniency or charity; why should my student loan servicer be any different?
If we want student loan servicer behavior to change, we need to legislate it. Just like we did (or didn't, depending on your point of view) for mortgage servicers.
Not to actually argue for or against, but mortgage holders don't hand 5 or 6 figures of unsecured debt to an 18 year old without any due diligence on if the loan has a chance of being repaid.
Student loan servicers are guaranteed repayment by statute. They are in a much easier business than mortgage lenders.
That said, Navient is in the business of collecting on debts, and they have every right to do so within the bounds of the law. They don't owe borrowers anything.
And those statues are the only reason student loans exist. It's a laughable idea, at the scale they are now anyway, otherwise.
I don't personally expect Navient to do anything better than follow the law; I don't expect any help or counseling from them. In fact, I'd be suspect of any such counsellings.
when they took over my loans from salliemae they told us (in writing) that auto-pay would transition.... then it didn't transition, and they tried to ding me for a missed payment. what a nightmare. ultimately my issue was resolved, but only after i filed a complaint with a team at the federal student aid office that handles disputes that cannot be resolved through the lender:
I meant specifically in dealing with their customer service being knowledgeable and honest. Of course their online payment tools work properly, that's how they make money :). Suggestion- depending on your loan details, you may be able to pay down debt faster by paying the 1/2 the minimum twice a month. You're spending the same amount, but cutting down some of the interest every time which will reduce the principle faster over time and hence also reduce future interest accrued.
Maybe this is tangential but this is a theme that seems to have infected schools themselves as well. I was recently swindled (yes, straight up swindled) by my university. I go to a uc (not riverside or merced) and the student health and wellness center literally swindled me out of almost a hundred dollars by using fine print. To protect my anonyminity i wont go into details but rest assured a called every authority i could and nothing was done. Consider that and then look at the swelling administration, lack of class availability, the sheer cost of attending and finally and most importantly the lack of meaningful learning. Its all a huge scam. But you need a degree if you want to have a high quality of life (unless youre exceptional in some way which the average dude is of course not) so nobody can do a damn thing about it. Fuck this shitty sytem.
This is good advice for a certain subset of people. If your income is high enough that you won't qualify for the income-based repayment plans, it can make sense to refinance.
On the other hand, if you need IBR, or some of the other protections offered by federal loans, you are taking a risk by refinancing. You'll lose those protections, and you might need them in the future. If you are pursuing one of the public service loan forgiveness programs, you probably need to keep the federal loans.
I refinanced with Commonbond, a Sofi competitor, a few years ago. My loan balance was fairly low compared to my income, I would never qualify for income-based repayment, and my federal loan rate was something like 6.8%. I refinanced my 10-year loan to a 5-year loan with a low interest rate. My situation was ideal for this. However, if your loan balance is more than your annual salary, or you need to rely on the federal loan protections for some other reason, you shouldn't do it.
On the other hand, there seems to be no downside to refinancing private student loans.
Honestly, this is a private corp acting in its own best interests under the law. Everyone here complaining that Navient is horrible... this is what capitalism is. If you don't like the law, talk to your congressman/senators and get the law changed.
IMHO the schools are the bad guys here.. they are taking advantage of a situation where the government will just hand loans to everyone and there is no way they can lose. Why not just make an undergraduate degree a public good at this point. Taxpayers are already paying to bail all these people out, it is partially a public good already except the students who hold all the debt have to go through hell and Navient gets a cut of the taxpayer money in the process.
So does anyone know where to find stats on student debt amounts outstanding, the maturity schedules, and the proportion of variable rate to fixed rate debt? I'm curious to see how vulnerable the country is to default risk should interest rates move upward or some other shock to the economy take place.
Anyone here know if this whole mess is going to end badly?This is something I google a lot as I kind of don't want to pay, but I suffer from selection bias and HN usually has good insight on things.
The way I see it, maybe there is a misunderstanding going on,
Or maybe Navient's publicity materials are too touchy-feely.
According to the article, Navient is a private company,
So shouldn't they have an expectation of return on
Investment. This is not the U.S. government, which may
Forgive debt.
Another point is why the hunger for expensive education,
Which may be a Marxist critique, but since when did
A credential make you a better software designer.
People are dying all over the globe, and we are worried
About the top 20 percent wage earners of the superpower
USA.
When public agencies push for more than kickback money, they always run the risk of being declared unconstitutional in a costly court battle that at best case undermines the agencies' budget.
The CFPB is young and they might have bat higher than they should have.
Take a page out of the SEC playback and settle for kickbacks.
No, I don't. But why would that matter? This is yet another story about yet another enormous business lying about putting the interests of their "customers" first.
Student loan money is awesome. Go to a state school, pay for school with PELL grants and working. Take the loan money and bank/invest/refinance stuff with it. The interest doesn't start accruing until after graduation so until then it's free money. The worst thing you can do with it is actually pay for school with it, especially an expensive private school for a degree with uncertain job prospects.
That's a bad assumption that PELL grants are just freely given out to anyone and everyone. You still have to qualify, and the financial status of your parents weighs heavily on that factor.
So, pardon in advance for the vulgar language, but why the fuck is this OK? From any company?
I'm getting real damn sick and tired of "what the big print gives, the spidery print takes away" and how we're all just supposed to be OK with this, as if this is how the world works or some crap.
If your public advertising--especially, but not limited to, when administering a service on behalf of the government--explicitly says "call us and we will help you," your company should not then be able to turn around and say "well, caveat emptor for calling us, sucker." Meanwhile, the handful of agencies devoted to trying to help the individual get any kind of a fair shake from the company "provider" that massively outguns any one individual customer, are all under attack from all sides as being "too heavy handed." (I love the CFPB, in case you can't tell.)
Oh, and this whole "consumer" crap? I'm not a "consumer," I'm a customer. I'm not consuming anything from a financial services provider, I'm using their services. Stop with the idea that all of us are just mindless drones, eating our Pac Man-like dots on the way to a swift end, and maybe get back to the idea that real people are on the other end of those faceless account numbers.
(FWIW, this applies to every company with mandatory, binding arbitration clauses, including the oh-so-enlightened participants in Y Combinator. Don't restrict my ability to hold you to your side of the agreement while reserving all rights to pound me into the sand at your leisure.)