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

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


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Maybe she should have looked at the interest rate before signing the paperwork, eh?

Even if she looked at the interest rate, I AM SAYING that the interest rate she is being charged is too high. Get it?

Why would you complain on the internet about the rates as opposed to help her make decisions about her education prior to signing the paperwork?

If you had determined that the interest rates were too high before signing the loan, all of this would have been avoided.

Day late, dollar short, eh?

I am discussing the matter on the internet. If you don't like what I have to say, if you find it disturbing, then don't listen. Otherwise, I AM SAYING, that the interest rate that my daughter is paying on her student loan is too high.
 
Ah, so you told her to sign the paperwork, knowing the interest rate up front.

I see.

Ah! So you continue to make unsubstantiated claims to mask your inability to make a substantial contribution to the subject matter at hand.

I see.
 
My daughter can repay the loan. The interest rates are too high.

A massive % of student loans are non-performing, and their prevalence are driving college costs stratospherically upward. If anything, the rates are too low, as they are not pushing people to seek other options.

My daughter is capable of repaying the debt, has a job making north of $50,000 a year, and is repaying the debt. It is not sinful to borrow money, what is sinful is not repaying it because that is stealing, and usury, which is charging excessive interest rates.

Oh I agree, from a Biblical standpoint debt isn't sinful - it's merely dangerous, debilitating, and dumb.


:) But I'm glad to hear your daughter has landed on her feet. That puts her well ahead of many in her generation, who are currently discussing all the sociology they learned while serving as barista's at Starbucks. Hopefully this experience is a good learning tool for her about the pain associated with having to dig your way up and out of debt.
 
Even if she looked at the interest rate, I AM SAYING that the interest rate she is being charged is too high. Get it?



I am discussing the matter on the internet. If you don't like what I have to say, if you find it disturbing, then don't listen. Otherwise, I AM SAYING, that the interest rate that my daughter is paying on her student loan is too high.

And I am telling you that it is her fault, and yours, for not having that revelation prior to signing the paperwork.

It is ridiculous to waste bandwidth to complain about the cost of money (called interest) that you already knew prior to signing the contract.

Truthfully, it makes you look foolish for making the decision in the first place.
 
A massive % of student loans are non-performing, and their prevalence are driving college costs stratospherically upward. If anything, the rates are too low, as they are not pushing people to seek other options.

They are too high because the purpose should be to facilitate the educational needs of citizens, not to make a profit. The spread between the rate the government borrows money and what it is charging student loan customers is too large.


Oh I agree, from a Biblical standpoint debt isn't sinful - it's merely dangerous, debilitating, and dumb.

It is most certainly dangerous, and it can be debilitating and dumb, but not necessarily.

:) But I'm glad to hear your daughter has landed on her feet. That puts her well ahead of many in her generation, who are currently discussing all the sociology they learned while serving as barista's at Starbucks. Hopefully this experience is a good learning tool for her about the pain associated with having to dig your way up and out of debt.

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.
 
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.
 
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.
 
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."
 
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?

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.
 
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.

:shrug: 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.
 
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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.
 
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.

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.

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.
 
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
 
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.

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.
 
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.



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.


- Possibly the loans purpose it to facilitate education. But that does not support your proposition. You do not even address the fact of risk, which is presently the highest component of interest rates charge of private companies and individuals.

- I am afraid, that you must look up the meaning of "public good". There is a very good write up in Wikipedia, if you don't want to look into a textbook.
 
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.
This is true, but not for benevolent reasons.
The Government helps people get an education, so they can earn more, and pay more taxes.
It is my understanding, that any extra funds generated from the loan program would be used to fund
additional Pell grants, but have not seen any evidence of the Pell grants increasing.
If they actually did that it would fit into the democrat mantra of letting the rich, pay for the poor.
 
My daughter can repay the loan. The interest rates are too high.

Be thankful it's only 6%. You're frame of reference is one that has benefits other generations didn't have and loans typically were much higher than 6% if they were obtainable at all. 6% given a wider frame of reference is way easy. Choices have consequences - welcome to life lessons 101.
 
Apparently you don't know what democracy means. Since I am taxed to the tune of thousands of dollars each year by the Federal Government, I get to voice my opinion on government policy. The interest that the government is charging is too high. If you don't like me saying that, then don't live in a democracy.

Receiving a loan is not democratic. It is a financial decision. You go to the bank (or other financial organization, which is what the government is acting as here), see what rates you qualify for and then either accept the loan or do not accept the loan. You are certainly welcome to your opinion that the rate is too high, at which point, you can go and look for other alternatives. Let us know when you find some.
 
Although that might be the case, the government should not be profiting from student loan interest rates. The purpose of the loans is to facilitate education, not to make a profit for the government. The government is borrowing money at very low interest rates, but charging my daughter 6.8 percent for her loan. That is quite a big spread in the rate the government borrows money and what they charge my daughter. It is especially ridiculous when you consider that she purchased a car with a loan at 3 percent.

Then get the people who gave her the car loan to give her money for school.
 
No, my daughter took out the loan, and she is paying it back. Do you understand that? What I am saying is that the interest rates the she is paying are too high. Do you understand that?

Then why are you the one bitching about it? If your daughter is so upset about the rates, she can get an account here and complain on her own.
 
Although that might be the case, the government should not be profiting from student loan interest rates. The purpose of the loans is to facilitate education, not to make a profit for the government. The government is borrowing money at very low interest rates, but charging my daughter 6.8 percent for her loan. That is quite a big spread in the rate the government borrows money and what they charge my daughter. It is especially ridiculous when you consider that she purchased a car with a loan at 3 percent.

No offense, but who's more credit worthy? The federal government or your daughter? I mean, you're arguing that the government is profiting from these loans, but we won't have the answer to that question until all of the money is paid back, and, if history is any guide, it won't be. I see the word "forgiveness" being extended to a large percentage of these loans, because, thanks to the fact that federally-guaranteed, subsidized loans charge the same rate to everyone, regardless of risk, a lot of capital is being misallocated. For example, can we really say that people as a whole who have degrees in dead languages have the same earnings prospects as people who study engineering? What we're finding is that even people with some types of engineering and science degrees (think petroleum and geology at the moment) are having difficulty finding employment, so how are the philosophy and marketing majors going to pay back their supersized portion of the $1.3 trillion (including private loans) they owe? If one believes people like Bill Ackman, they simply won't, and this could potentially destabilize the financial system. In that case, Poof! There goes your alleged profit.
 
Well this may disappoint you, but it is quite obvious that you are not Dershowitz because this would be a much more challenging discussion. Dershowitz would not make the statement "nor am I any other liberal" while having the label "Very Liberal" emblazoned on his account. Rather it is a frame of mind that is the point.

So the idea that not every liberal is alike is confusing to you. I suppose that is not surprising.

The point is not that you are Dershowitz, Epstein, or necessarily part of the liberal elite. Rather the point is that your posts represent a frame of mind that demonstrates your interests intersect their's in one or more of the areas that I described. Your interest in liberal values, if your label is to be believed, is certainly not founded on compassion for others. Rather it is based on narrow selfish interests which is demonstrated by your lack of concern for the type of challenges that young student borrowers face today.

Well, that is wrong on every single count. You rather clearly do not understand other points of view.

No they don't have much control over the kinds of scholarships they get because that is determined by other people. Over and above that, even when they get scholarships, the costs of education are so steep these days that the scholarships frequently are not sufficient. My daughter got scholarships, but they were not enough to cover her costs. Although student loans are not the only way to attend college, they are a practical means to obtain the type of education that is necessary these days to get employment that pays a living wage. As such, the government should not gouge borrowers with interests rates that are excessive. The fact that someone like my daughter could finance a car a 3 percent interest but pays more than double that interest on a student loan from the government is quite frankly disgusting.

Actually they have a ton of control over the scholarships available to them. Takes some effort, but definitely doable. And scholarships are not the only method of financing a higher education. For a measly 3 years of her life, your daughter could have had a GI Bill. Working while in school can supplement scholarships. There are solutions out there that make college affordable to most.

I think it is a good thing that the government does several things to make college affordable. I also have no problem when some strings are attached, such as having to repay a loan. What I do have a problem with is when you give some one a benefit and they complain you are not helping them enough. A college degree increases earnings enough to far outstrip the costs of college, and the costs of student loans. Your daughter got help in getting a degree that could increase her earning potential by a million dollars, and you are complaining?
 
It is not a tax for the simple reason that you are not forced to pay it. You do not have to take a student loan.

So then sales tax isn't a tax?
 
Government is also not a lender. But they act like one. And everyone is surprised.

You want government in the lending business? Then they will act like a lender.

How you feel about whether they should loan out money or not is besides the point. If they are going to do it then interest rates should cover only upkeep. Would think a conservative like yourself would agree (or do you want more money going to Dept. of Ed?)
 
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