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Are student loan interest rates to high?

Are student loan interest rates to high?


  • Total voters
    43
Perhaps student loan interest rate should be 0% for all student loans.
However that would mean that you could effectively pay whatever the hell amount of money you wanted for education, without worry about your costs increasing over time.
Tuition costs would go up, undoubtedly.
In fact, any degree of decrease in the interest rate would have that effect, likely...

What's ****ed up about that is, the measure of "how much it can cost" is apparently "how much is the maximum the market can stand".
Only the market in this case is higher education students. Which IMO for damned sure doesn't promote education, which is (also IMO) ****ing stupid.

I'm not entirely sure how that can be improved though, without some kind of grand governmental education, or somehow all the universities deciding to offer education for free or less money, for some inexplicable reason due to an unexpected mass change of heart/style.
 
Personally, I think that the issue isn't so much interest rates, as it is how insanely high the total cost of education can be.

That is part of the problem as well. I remember my tuition for a full time load at one very large state university was around $500. Now that same tuition is about $5000. It is totally insane. However, that is a separate discussion of its own.
 
What a stupid notion. That's ALMOST like saying no one forces someone to drink the water that they drink.

No it's not. I paid cash. No loan, no grant and I didn't die in three days.
 
No it's not. I paid cash. No loan, no grant and I didn't die in three days.

Like I said earlier my tuition was around $500, full time, at a major state university for one semester. That same tuition is around $5000 now. It is impractical.
 
That is part of the problem as well. I remember my tuition for a full time load at one very large state university was around $500. Now that same tuition is about $5000. It is totally insane. However, that is a separate discussion of its own.
In some ways it is a different discussion

But in other ways it is absolutely the same discussion - if tuition costs weren't so insanely high, the current interest rates wouldn't be nearly as painful.

After all, 5% interest on $100,000 is far more than 5% interest on $25,000.


Edit: And repayment plans are often set up so the minimum payment is barely over the amount necessary to pay whatever the interest is for the planed payment period (a month, for example).
 
I disagree with you in the strongest terms. No one is saying it should be a gift. One the other hand the government should not be gouging customers either. For example, a parent could borrow $100,000 to buy a house at 3 or 4 percent interest. However, if he wanted to borrow money for his kid to attend medical school he might have to pay 8.5 percent, regardless of his credit. It is ridiculous. It is especially ridiculous when the government is paying at the most 2.5 interest for a 30 year loan. The problem with your assertion is that it ignores the purpose of the loans. It's to facilitate education, not to make a profit.

Are you kidding me? Are you now arguing that a secured loan is "just like" a non-secured loan? The parent may well be able, should they so choose, to use that home equity as collateral and thus get a second mortgage (secured loan) to fund their child's college costs.
 
Like I said earlier my tuition was around $500, full time, at a major state university for one semester. That same tuition is around $5000 now. It is impractical.

I graduated not long ago, and it took me nearly 10 years. I figure on average I put back about 700 a month for the duration. I lived conservatively and enrolled in as many night and weekend and online classes as I could. I believe my credits were in the neighborhood of 450 each, books were the killer, almost as much as the tuition.
 
Are you kidding me? Are you now arguing that a secured loan is "just like" a non-secured loan? The parent may well be able, should they so choose, to use that home equity as collateral and thus get a second mortgage (secured loan) to fund their child's college costs.

No I am not kidding you. And again, you are confusing the purpose of private commercial lending with trying to facilitate education. It's two different goals. Furthermore, the person may not have that much equity in their home to borrow the type of funds that it would take to send a kid to med school.
 
I graduated not long ago, and it took me nearly 10 years. I figure on average I put back about 700 a month for the duration. I lived conservatively and enrolled in as many night and weekend and online classes as I could. I believe my credits were in the neighborhood of 450 each, books were the killer, almost as much as the tuition.

Someone with the typical wages that a student would get, would be hard pressed to pay $5000 a semester for tuition out of pocket. It is as simple as that.
 
Like I said earlier my tuition was around $500, full time, at a major state university for one semester. That same tuition is around $5000 now. It is impractical.

I went to private schools -undergrad and grad. They have both quadrupled. The undergrad went from about $6,000 to about $24,000; the grad school from $10,000 to $40,000. I couldn't go there now. Back then I managed to graduate with $16,200 in student loans (rest was mainly grants and scholarships; we kicked in about $1,000 per semester). I thought $16K was a lot in loans! these days, that's nothing....
 
The problem with your response is that you appear to confuse the purpose of private commercial lending institutions and federal student loans. The purpose of the former is to make a profit, while the purpose of the latter is to facilitate education. As such, the level of risk is somewhat, though not entirely irrelevant to the interest rate.

I'm not confusing anything. What you're doing is trying to ignore the fundamental facts.

"A student, with little to no credit history, is provided loans into the $10's of thousands, based on no income, or at the very most, the hope of future income, ..."

That, no matter who originates the loan, represents a high risk, and interest rates represent what is necessary for such a high risk loan to be made.
 
No I am not kidding you. And again, you are confusing the purpose of private commercial lending with trying to facilitate education. It's two different goals. Furthermore, the person may not have that much equity in their home to borrow the type of funds that it would take to send a kid to med school.

What the hell is "private commercial lending"? A mortgage isn't a "private commercial loan". A commercial loan is a commercial loan. A mortgage is a consumer purpose, real estate secured loan.
 
I went to private schools -undergrad and grad. They have both quadrupled. The undergrad went from about $6,000 to about $24,000; the grad school from $10,000 to $40,000. I couldn't go there now. Back then I managed to graduate with $16,200 in student loans (rest was mainly grants and scholarships; we kicked in about $1,000 per semester). I thought $16K was a lot in loans! these days, that's nothing....

Wow! That's a lot! Yeah, the rate that higher education prices have soared recently is ridiculous.
 
I'm not confusing anything. What you're doing is trying to ignore the fundamental facts.

The fundamental fact here is that you want base borrowing for higher education on commercial, for profit lending by the private sector. That is the fact.

"A student, with little to no credit history, is provided loans into the $10's of thousands, based on no income, or at the very most, the hope of future income, ..."

The purpose of making the loan to the student is to facilitate the student's ability to obtain a higher education, not to gouge the student to make a profit. It is as simple as that.

That, no matter who originates the loan, represents a high risk, and interest rates represent what is necessary for such a high risk loan to be made.

And the interests rates that you mention are based on commercial lending models whose motives are for profit. We are not talking about that. The government's motive should be to facilitate the student's education, not gouge for profit.
 
The fundamental fact here is that you want base borrowing for higher education on commercial, for profit lending by the private sector. That is the fact.



The purpose of making the loan to the student is to facilitate the student's ability to obtain a higher education, not to gouge the student to make a profit. It is as simple as that.



And the interests rates that you mention are based on commercial lending models whose motives are for profit. We are not talking about that. The government's motive should be to facilitate the student's education, not gouge for profit.

You seem to gloss over (purposefully ignore?) the obvious - the student that gets a degree, in a field that gets them a decent paying job, is not the one that is likely to default regardless of the interest rate. The basic problem is that "facilitating access" to college alone does nothing but guarantee (government) tuition payment to the educational institution, it is still up to the borrower to repay the (government) loan even if they do not graduate with a valuable degree.

Since the (on time) graduaiton rates for college are about 60% then it follows that about 40% will be faced with repaying their student loans yet will still lack a college degree thus being much more likely to default. To blow that off as not important means that instead of recycling a pool of student loan money, more must be added each year simply to cover the losses from those who defaulted. IMHO, that default cost should be shared, if not totally born, by those that actually use these loans - not only "the rich" as we now seem to call federal income taxpayers.
 
You seem to gloss over (purposefully ignore?) the obvious - the student that gets a degree, in a field that gets them a decent paying job, is not the one that is likely to default regardless of the interest rate. The basic problem is that "facilitating access" to college alone does nothing but guarantee (government) tuition payment to the educational institution, it is still up to the borrower to repay the (government) loan even if they do not graduate with a valuable degree.

Since the (on time) graduaiton rates for college are about 60% then it follows that about 40% will be faced with repaying their student loans yet will still lack a college degree thus being much more likely to default. To blow that off as not important means that instead of recycling a pool of student loan money, more must be added each year simply to cover the losses from those who defaulted. IMHO, that default cost should be shared, if not totally born, by those that actually use these loans - not only "the rich" as we now seem to call federal income taxpayers.

What I would say is that you are overlooking the fact that the government has powerful tools at its disposal to recover funds from student loans in that they garnish wages and tax refunds. That is one thing. Again, as I said to you before, the government, through its empowered representative the Federal Reserve, has taken toxic loans from banks to the tune of trillions of dollars. These powerful mechanisms are enough such that the government does not have to resort to gouging student loan customers through interest rates.
 
You seem to gloss over (purposefully ignore?) the obvious - the student that gets a degree, in a field that gets them a decent paying job, is not the one that is likely to default regardless of the interest rate. The basic problem is that "facilitating access" to college alone does nothing but guarantee (government) tuition payment to the educational institution, it is still up to the borrower to repay the (government) loan even if they do not graduate with a valuable degree.

Since the (on time) graduaiton rates for college are about 60% then it follows that about 40% will be faced with repaying their student loans yet will still lack a college degree thus being much more likely to default. To blow that off as not important means that instead of recycling a pool of student loan money, more must be added each year simply to cover the losses from those who defaulted. IMHO, that default cost should be shared, if not totally born, by those that actually use these loans - not only "the rich" as we now seem to call federal income taxpayers.

Things may have changed, of course, but when I was in undergrad I had a friend who was planning to go to law school - ergo a field that would get her a decent paying job. She got pulled in to the financial aid office and raked over the coals because they said lawyers were the ones most likely to default on their loans - they knew all the loopholes.

At any rate, when I did some quick research a few days ago, there was about a 14% default rate on student loans, but the "for profit" schools were a lot higher than the not for profit schools.

In fiscal 2011, more than 4.7 million student borrowers from about 6,000 schools began repaying loans. Of those, about 650,000 defaulted.

For public colleges, which educate most postsecondary students, the default rate fell to 12.9 percent from 13 percent a year ago.

For private nonprofit colleges, the rate fell to 7.2 percent from 8.2 percent.

For for-profit colleges, the rate fell to 19.1 percent from 21.8 percent.

National student loan default rate dips to 13.7 percent; still

But even with the relatively high default rate (business loans in general are more like 4 or 5%) I think student loans are a good investment and should be at a low interest rate. However, I think we need to look at the for profit colleges - those with too low a graduation rate and a high loan default rate should no longer be eligible for the student loan program, in my opinion.
 
The fundamental fact here is that you want base borrowing for higher education on commercial, for profit lending by the private sector. That is the fact.



The purpose of making the loan to the student is to facilitate the student's ability to obtain a higher education, not to gouge the student to make a profit. It is as simple as that.



And the interests rates that you mention are based on commercial lending models whose motives are for profit. We are not talking about that. The government's motive should be to facilitate the student's education, not gouge for profit.

Given a credit unworthy person a loan in the first place should be considered a gift. Asking taxpayers to put their own money at risk without recognition is a slap to the face.

If a person can't afford the loan, find another way to get the education. Just how do you think people did that before this era of easy money, and the exploitation scam Public and Private Colleges and Universities have been pulling?
 
Given a credit unworthy person a loan in the first place should be considered a gift.

No its not a gift if you have to repay it. What I am saying is that the government should not gouge customers.

Asking taxpayers to put their own money at risk without recognition is a slap to the face.

The government has spent trillions of dollars in Iraq on the pretext of a wild goose chase WMD charge. Not only that but the government, through its empowered agent the Federal reserve, provided trillions of dollars in debt relief to banks. Not only that but the government garnishes wages and income tax returns. Therefore it should not gouge student loan customers through interest rates.

If a person can't afford the loan, find another way to get the education.

You don't gouge student loan customers because they must have a higher education to be able to earn a living wage.
 
No its not a gift if you have to repay it. What I am saying is that the government should not gouge customers.



The government has spent trillions of dollars in Iraq on the pretext of a wild goose chase WMD charge. Not only that but the government, through its empowered agent the Federal reserve, provided trillions of dollars in debt relief to banks. Not only that but the government garnishes wages and income tax returns. Therefore it should not gouge student loan customers through interest rates.



You don't gouge student loan customers because they must have a higher education to be able to earn a living wage.

I guess we have a different opinion on what "gouging" is. Sorry, but I don't see it the same way you do.
 
As was pointed out before, interest rates aren't really the real problem, the amount of the loan is.



And like the rest of our economy, I'm willing to wager the culprit is the same...skyrocketing executive pay. I wonder how much more per year the president of whatever college makes vs his staff, rank and file? And I wonder how much of an increase that current pay is from, say, 2004?
 
Someone with the typical wages that a student would get, would be hard pressed to pay $5000 a semester for tuition out of pocket. It is as simple as that.

Yea, I did it pushing a mower, gardening etc. It really just depends on how hard you are willing to work. Not to say that there isn't a place for loans, I just don't think (actually I know for certain) that it's optional. Therefore you pay the going rate and appreciate the opportunity it affords you.

BTW. There is no doubt that "easy money" in the system is what allows tuitions to grow faster than inflation, consistently and by a large margin. If rates were even lower, tuitions would grow even faster. The universities will suck every dime they can out of each student, and the students will passively allow it because they have been conditioned to believe that debt is the norm. Bad bad bad.
 
Yea, I did it pushing a mower, gardening etc. It really just depends on how hard you are willing to work. Not to say that there isn't a place for loans, I just don't think (actually I know for certain) that it's optional. Therefore you pay the going rate and appreciate the opportunity it affords you.

BTW. There is no doubt that "easy money" in the system is what allows tuitions to grow faster than inflation, consistently and by a large margin. If rates were even lower, tuitions would grow even faster. The universities will suck every dime they can out of each student, and the students will passively allow it because they have been conditioned to believe that debt is the norm. Bad bad bad.
Almost seems like we need some kind of...negotiation agency for tuition...

Students/parents pay a consulting fee and get help bargaining for the best price, or whatever. Would only work if everyone did it though - at least for a given area.
 
As was pointed out before, interest rates aren't really the real problem, the amount of the loan is.



And like the rest of our economy, I'm willing to wager the culprit is the same...skyrocketing executive pay. I wonder how much more per year the president of whatever college makes vs his staff, rank and file? And I wonder how much of an increase that current pay is from, say, 2004?

Elizabeth Warren, the great hero of the left who has people convinced that student loan interest rates are a problem, earned $430,000 from Harvard in 2011 alone, teaching attorneys how to make it easy to file bankruptcies which result in more charged off balances that get passed on to the rest of us.

In 2011 Harvard president Drew Faust earned $874,559 in salary and benefits.

I wouldn't worry about the "staff, rank and file" at Harvard.
 
I guess we have a different opinion on what "gouging" is. Sorry, but I don't see it the same way you do.

Well ocean, gouging is taking advantage of people with a need to charge them more than necessary. It is disgusting that a parent who wants to borrow $100,000 for medical school for his kid is forced to pay 8.5 percent interest when the government is paying 2.5 percent interest on a 30 year loan. That is a hell of a spread. That is gouging.
 
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