View Poll Results: Are high student loan interest rates a form of tax on the middle class?

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    13 46.43%
  • No

    13 46.43%
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    2 7.14%
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Thread: Are high student loan interest rates a form of tax on the middle class?

  1. #131
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by MildSteel View Post
    I was talking to one of my daughters today. She was saying that it is ridiculous that the interest rate on her car loan is only 3 percent while the interest rate on her student loan is more than double that. Such gouging is no more than a tax that is being imposed on the middle class. It is especially disgusting at a time when Republicans are proposing tax cuts that will benefit the wealthy.
    I answered "Maybe", as I don't have the necessary information to answer the question. I do have a suspicion that the rates charged are actually too low, however, as the general level of rates is caused by massive FED intervention. Based on this subsidy the student loans are probably very costly for us all.
    But there is another important aspect I am not sure of. That is how the rates on the loans come about. If, as I suspect, they are bundled and sold in the market as bonds and the rates depend on this transaction, then the loans are correctly priced albeit at a generally to low level that has, however, nothing to do with the type of loan this is.

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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by joG View Post
    I answered "Maybe", as I don't have the necessary information to answer the question. I do have a suspicion that the rates charged are actually too low, however, as the general level of rates is caused by massive FED intervention. Based on this subsidy the student loans are probably very costly for us all.
    But there is another important aspect I am not sure of. That is how the rates on the loans come about. If, as I suspect, they are bundled and sold in the market as bonds and the rates depend on this transaction, then the loans are correctly priced albeit at a generally to low level that has, however, nothing to do with the type of loan this is.
    Any rate, the government is making the loans. We know what rates the government is paying to borrow money and they are far less than the rates that they are charging for student loans. One report said that the government profited $41 billion dollars from student loans. The purpose of the loans should be to facilitate education, not to make money for the government.

  3. #133
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by MildSteel View Post
    Did you know that there is a report that the government profited $41 billion dollars from student loans? Did you read the thread to find that out? Or did you just jump in and make another stupid post.



    I sincerely hope they do a better job than you are doing.



    You may have plenty, but your posts are a waste of it.
    Personal attacks aside, maybe if you read more than just the headlines: "It's actually neither accurate nor fair to characterize the student loan program as making a profit," Education Secretary Arne Duncan"

    Again, you don't know the expenses, but all you have is outrage. Go ahead and toss it at me. It is certainly better than imposing logic and facts on your daughter. Your outrage certainly demonstrates to her that you "care."

  4. #134
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by AliHajiSheik View Post
    Personal attacks aside, maybe if you read more than just the headlines: "It's actually neither accurate nor fair to characterize the student loan program as making a profit," Education Secretary Arne Duncan"
    Again, you have jumped in and made an assumption. I read it. But perhaps you don't understand the part the deals with how that conclusion was reached. Do you understand that part?

    Quote Originally Posted by AliHajiSheik View Post
    Again, you don't know the expenses, but all you have is outrage. Go ahead and toss it at me. It is certainly better than imposing logic and facts on your daughter. Your outrage certainly demonstrates to her that you "care."
    What is a fact is that the government charges for more interest on the loans that what it pays in interest to borrow money. What is fact is that according to one method of accounting the government profits billions of dollars from student loans, more in fact that all but two companies, namely Apple and Exxon. Those are facts and it is logical to conclude from these facts that the government is charging to much in interest on the loans. Like I said, I hope that others can do a better job than you of debating the subject.

  5. #135
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by MildSteel View Post
    They are too high because the purpose should be to facilitate the educational needs of citizens, not to make a profit.
    That is incorrect. The purpose of a loan is to make profit. The effect is hopefully to facilitate the purpose to which the recipient intends to put it, but that is not guaranteed. Usually this system creates incentives for lenders to see to it that the effect happens as much as possible (it increases their ability to profit from lending to it), but unfortunately, when you introduce government into the decision-making, it jacks that up a bit.

    The spread between the rate the government borrows money and what it is charging student loan customers is too large.
    hey, it was President Obama's idea to nationalize the student loan industry. And if anything, the reality of how the program is running suggests that the spread is too low. The Government isn't in default on 17% of its' debt, and if it was, you can bet it's cost of borrowing would shoot through the roof.

    It is most certainly dangerous, and it can be debilitating and dumb, but not necessarily.
    I can see a few examples where it might not be, but that is not true of the vast majority of times that we Americans incur debt, including undergraduate student debt. It isn't necessary, and school administrators (who are incentivized to push it) push it on kids, who then make dumb decisions and sign up for it.

    Thanks. She was adamant about going to that school. It was a bit more expensive and selective than some other choices available to her, but that is what she wanted to do. Definitely a good learning experience in that regard, no doubt.
    So is the debt associated with it, then.

    I went to an expensive (for us) school myself - total cost was probably about $28K/year. Which is why I had to sacrifice to pay for it. Now your daughter is going to have to sacrifice to pay for hers. For me, that meant busting my chops to get a bunch of scholarships and then several years in the military. For your daughter, apparently, it means having a 6% interest rate on her student debt.

    And it was a great experience, no doubt, but it wouldn't have been worth accruing that kind of debt over. Unless you are going to some Ivy League institution or something else with instant national name-recognition for your chosen field, one school is generally about as good as another.
    Last edited by cpwill; 04-15-15 at 08:28 AM.
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  6. #136
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by MildSteel View Post
    Any rate, the government is making the loans. We know what rates the government is paying to borrow money and they are far less than the rates that they are charging for student loans. One report said that the government profited $41 billion dollars from student loans. The purpose of the loans should be to facilitate education, not to make money for the government.
    All lending is done at rates higher than the lender pays to borrow. That cannot be and is not the deciding factor, which is the risk of the individual loan and the price that the market is willing to accept.
    But one thing is clear. Loans are a private good and the government should not be involved.

    PS: The $ 41 Billion might sound like a lot of income. But remembering the desaster with mortgages should put that in perspective.

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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by cpwill View Post
    That is incorrect. The purpose of a loan is to make profit. The effect is hopefully to facilitate the purpose to which the recipient intends to put it, but that is not guaranteed. Usually this system creates incentives for lenders to see to it that the effect happens as much as possible (it increases their ability to profit from lending to it), but unfortunately, when you introduce government into the decision-making, it jacks that up a bit.
    You and I have a very big disagreement on this. If it were a private lending institution that's ok. But the government should be facilitating education with such loans, not making money. Sorry, I don't agree with you one bit on that.

    Quote Originally Posted by cpwill View Post
    The Government isn't in default on 17% of its' debt, and if it was, you can bet it's cost of borrowing would shoot through the roof.
    My daughter isn't in default and should not have to pay interest rates that are that high.

    Quote Originally Posted by cpwill View Post
    So is the debt associated with it, then.

    I went to an expensive (for us) school myself - total cost was probably about $28K/year. Which is why I had to sacrifice to pay for it. Now your daughter is going to have to sacrifice to pay for hers. For me, that meant busting my chops to get a bunch of scholarships and then several years in the military. For your daughter, apparently, it means having a 6% interest rate on her student debt.
    Although I think the tuition costs were too high, that is not what I am talking about here in this thread. Neither I am talking about the fact that she incurred debt to get her education. What I am saying is that the interest rate that the government is charging on the loans is too high. And that is where you and I have a big disagreement because we don't agree on the purpose of the loans.

  8. #138
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by MildSteel View Post
    Do you have a link for that default rate? Not only that but the government has the mechanism of wage garnishment to protect itself from the losses associated with default.

    According to this source the government made $41 billion dollars in profit from student loans, depending on how the accounting is done.



    Government books $41.3 billion in student loan profits



    I don't know about that, but that is not the point. I was just noting that it appears that you may have attended UT Austin. If you look at their tuition rates, they have gone up quite a bit. When you factor in room and board and the price of books and supplies, you end up with some whopping expenses.
    Indeed, it depends on how the accounting is done. If student loans actually made a profit then why must we budget more each year just to continue to make them?

    Background & Analysis

    How Much Do Student Loans Really Cost Taxpayers? | Fox Business

    Default rates on student loans:

    National student loan default rate dips to 13.7 percent; still
    “The reasonable man adapts himself to the world: the unreasonable one persists to adapt the world to himself.
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by joG View Post
    All lending is done at rates higher than the lender pays to borrow. That cannot be and is not the deciding factor, which is the risk of the individual loan and the price that the market is willing to accept.
    Yes, but in this case the lender is the government which has tools at its disposal that private lenders don't have. That is one thing. The other thing is that the government is not there to simply make a profit from citizens. Therefore the purpose of the loans should be to facilitate education.

    Quote Originally Posted by joG View Post
    But one thing is clear. Loans are a private good and the government should not be involved.
    That is not clear. Such loans that facilitate educational needs are a public good because a well educated workforce benefits the government and everyone else.

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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by ttwtt78640 View Post
    Indeed, it depends on how the accounting is done. If student loans actually made a profit then why must we budget more each year just to continue to make them?

    Background & Analysis

    How Much Do Student Loans Really Cost Taxpayers? | Fox Business

    Default rates on student loans:

    National student loan default rate dips to 13.7 percent; still
    Thanks for that. Give me a chance to go through it carefully and I will get back with you.

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