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

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

  1. #241
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by gdgyva View Post
    want to do some simple math?

    lets use your 90% recovery rate for defaults

    lets use 25k as an average student loan

    lets use 6% as the rate the government charges

    for every one default....how many perfect loans does the government need on their books?

    now look at the total number of student loans outstanding.......

    now take your 90% recovery rate

    is the 6% rate covering the defaults? yes or no?
    You run someone's business and you said that? That recovery rate includes interest and is 90 percent of the defaulted loans only. Most of them do not default. As such, it more than covers the principle that was lent.

  2. #242
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by Ironfist View Post
    Why is it hard for you to understand that the overwhelming majority do not default? And that your statement is false. You lend the principle. The 90 percent is 90 percent of principle PLUS interest. Do you get it?
    Yes, I get that. My point is that a 3% interest rate does not make up for a 10% default rate. Just like any business, the fact that most (even 90%) customers do pay for their goods does not mean that shoplifting (or spoilage on the shelves) makes no difference. The mark-up, in this case the interest rate, must at least cover the losses (defaults) or the business cannot survive. That is why the same money cannot simply be re-lent as it is repaid and the taxpayers must pony up ever more each year in order to make new student loans.
    “The reasonable man adapts himself to the world: the unreasonable one persists to adapt the world to himself.
    Therefore all progress depends on the unreasonable man.” ― George Bernard Shaw, Man and Superman

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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
    Yes, I get that. My point is that a 3% interest rate does not make up for a 10% default rate. Just like any business' the fact that most (even 90%) customers pay for their goods does not mean that shoplifting (or spoilage on the shelves) makes no difference. The mark-up, in this case the interest rate, must at least cover the losses (defaults) or the business cannot survive. That is why the same money cannot simply be re-lent as it is repaid and the taxpayers must pony up ever more each year in order to make new student loans.
    The recovery rate is 90 percent on the defaulted loans and includes interest. As such, it makes up for the TOTAL principle, non default and default, that was lent.
    Last edited by MildSteel; 04-17-15 at 11:06 AM.

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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
    You run someone's business and you said that? That recovery rate includes interest and is 90 percent of the defaulted loans only. Most of them do not default. As such, it more than covers the principle that was lent.

    yes...i am in the car business

    and "recovery rate" used by the guys i know in finance, means what % of the loans they get paid on after repossessions, auction fees, towing fees, etc

    so ie a 10k auto loan with a 90% recovery rate means they get back 9k on average for those loans

    i dont work for the government, but my assumption is everyone in the finance loan business uses the same meaning for the same terminology

    of course "most" of them dont default.....

    but the interest your daughter pays on her loan, and everyone pays on their loans, covers those that do default

    what is total interest paid on her note? do you know?

    it doesnt take too many defaulted loans at 25k-30k to eat up her interest paid, plus others

    but...it doesnt matter

    i'm done with this.....you keep bitching about the rate she is paying

    and i'll send you a quarter.....call someone who freaking cares
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by Ironfist View Post
    No, the fact is that you said if you are a lender all you care about is whether they repay the loan, REGARDLESS of coercion. IF THAT IS THE CASE, then you don't give a damn about the suffering of others. That is a fact.
    Now, in addition to engaging in opinion, you're putting words in my mouth. If I engage in coercion to get someone to agree to terms he otherwise wouldn't agree to, doesn't that evolve my "loan" to something else, like extortion? On the other hand, since I'm not the government or a moron, I wouldn't extend a loan ahead of time knowing that it wouldn't be repaid. When I want to exert social change I give to charity.
    Last edited by Ahlevah; 04-17-15 at 11:55 AM.
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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
    The recovery rate is 90 percent on the defaulted loans and includes interest. As such, it makes up for the TOTAL principle, non default and default, that was lent.
    You can't exclude the cost of collections and things like forbearance and forgiveness. These are costs, and they're born not by the government as stewards of the public trust, but by taxpayers.
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by Ahlevah View Post
    You can't exclude the cost of collections and things like forbearance and forgiveness. These are costs, and they're born not by the government as stewards of the public trust, but by taxpayers.
    That 90 percent recovery rate includes collection costs. Actually the real recovery rates exceed 100 percent. Its just that when you account for collection costs, etc. it comes down to 90 to 95 percent, depending on the type of loan.

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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
    That 90 percent recovery rate includes collection costs. Actually the real recovery rates exceed 100 percent. Its just that when you account for collection costs, etc. it comes down to 90 to 95 percent, depending on the type of loan.
    The other thing you're excluding is this: Are these loans an efficient use of resources? Let me give you an example. I work in the casino industry. There's a local casino school that recruits from the state employment office. It gets young welfare moms to sign up for all of the casino games for a cost of about $9,000, even though they could probably get a job just knowing craps or roulette and blackjack. Then the school passes them whether they know the material or not. The casino hires them because they have a financial incentive to do this, but very often these people don't even make it through their 90-day probationary period because they're completely clueless. In every instance these students require considerable remedial training. Only a couple of casinos (break-in houses) will even hire them now. So they end up saddled with all of this debt that many of them can't repay, while the owners of the school are making bank. It's a racket. In fact, most of the defaults are occurring with these trade and vocational schools.
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    Re: Are high student loan interest rates a form of tax on the middle class?

    And let's get back to the faulty premise of your poll--that federally-guaranteed student loans are "high." Thanks to the way government does its books, whatever profits you think the government is making on these loans are vastly overstated. Basically, to arrive at the cost of the loans, the CBO discounts the "net present value of the future federal cash flows" over the life of the loan. The CBO takes the term of the loan and compares is to a Treasury bond or note of a like term. No other lender, to my knowledge, does this. In essence, CBO is making the case that your daughter is just as likely to repay her loan as the federal government is to repay its loans, and this clearly isn't the case. So when we read a headline like "Government soaking college kids to the tune of $50 billion!" that's just bogus.

    One more thing. In spinning this fairy tale, the CBO does not consider administrative costs. As we all know, it take a lot of bureaucrats at the Department of Education to administer these loan programs. In any case, if you look at a CBO breakdown, the government loses money lending to undergrads. Whatever "profits" will accrue over the next ten years will likely come from parents and graduate students.

    https://www.cbo.gov/sites/default/fi...tudentLoan.pdf
    Last edited by Ahlevah; 04-18-15 at 11:03 AM.
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    Re: Are high student loan interest rates a form of tax on the middle class?

    Quote Originally Posted by Ahlevah View Post
    The other thing you're excluding is this: Are these loans an efficient use of resources?
    If you really want to get into it, the whole educational system is very inefficient and needs radical overhaul. That is another subject. The interest rates that the government is charging are too high.

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