Much Ado About Student Debt

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TTTLS
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Re: Much Ado About Student Debt

Postby TTTLS » Thu Mar 22, 2012 9:46 pm

InGoodFaith wrote:
goodolgil wrote:
TTTLS wrote:If you thought the housing crisis was bad, wait until the education bubble bursts.

xo dude wrote:Third year of corporate work.

Borrowed: $168,800

Have paid: $63,182

Still owe: $158,360.

That's the tyranny of 8.5% interest.


Oh man. That's the one part of the debt situation that never really set in for me (seriously).


The good news is that as you keep making payments, more and more will go toward the principal. So your first few years look awful because so much is going to interest (see above), but it will only get better.

Well that's comforting, I guess. Hopefully I won't be stuck doing doc review.

alllucknotalent
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Re: Much Ado About Student Debt

Postby alllucknotalent » Thu Mar 22, 2012 11:42 pm

my 2 cents-

I have little sympathy for people smart enough to get into law school that argue they aren't smart enough to understand the risks associated with taking out loans. If our "brightest minds" can't understand this concept, then how can it be expected that the average person understood the concept during the housing bubble...

I swallowed my pride and took at full ride at TTT instead of taking full tuition at the T25-50 range and don't regret it... I ranked in top 10% after 1L and still stayed because of loan money. I went to law school to become a lawyer and knew the job market was terrible and the risks associated because of it. I had nothing beyond my own self confidence to expect to do this well but now I sit in an equal or better hiring ability as probably 50-75% of the people that could have been my peers at T25-50 range while having 150k less in debt.

Not saying that everyone could do this, but when you go to a school where your LSAT is 10-15 points higher than the median (which many people who attend T25-100 would be at many TTT's, mine was 12 points higher) you have to think that you have at least a decent shot to get the magic area around the top 10-20% associated with my TTT and decent jobs compared to the what I will generously call top 25-50% to get the same job prospects.

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Bronck
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Re: Much Ado About Student Debt

Postby Bronck » Thu Mar 22, 2012 11:46 pm

InGoodFaith wrote:The good news is that as you keep making payments, more and more will go toward the principal. So your first few years look awful because so much is going to interest (see above), but it will only get better.


I thought that Stafford and Gradplus loans accrue simple interest while you are in law school, but then are capitalized once you begin repayment. Thus, once you're paying back your loans post-graduation, it doesn't matter whether you pay down more to the principal or the interest since it all becomes one.

Am I understanding this correctly?

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sunynp
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Re: Much Ado About Student Debt

Postby sunynp » Thu Mar 22, 2012 11:55 pm

alllucknotalent wrote:my 2 cents-

I have little sympathy for people smart enough to get into law school that argue they aren't smart enough to understand the risks associated with taking out loans. If our "brightest minds" can't understand this concept, then how can it be expected that the average person understood the concept during the housing bubble...

I swallowed my pride and took at full ride at TTT instead of taking full tuition at the T25-50 range and don't regret it... I ranked in top 10% after 1L and still stayed because of loan money. I went to law school to become a lawyer and knew the job market was terrible and the risks associated because of it. I had nothing beyond my own self confidence to expect to do this well but now I sit in an equal or better hiring ability as probably 50-75% of the people that could have been my peers at T25-50 range while having 150k less in debt.

Not saying that everyone could do this, but when you go to a school where your LSAT is 10-15 points higher than the median (which many people who attend T25-100 would be at many TTT's, mine was 12 points higher) you have to think that you have at least a decent shot to get the magic area around the top 10-20% associated with my TTT and decent jobs compared to the what I will generously call top 25-50% to get the same job prospects.


You know your experience isn't typical. Just because your LSAT seems to correlate with your grades, that doesn't mean it does for everyone. And even if it did, you realize that 80 to 90% of your class is in trouble with finding a job and debt. What do you think they should do or should have done?

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20130312
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Re: Much Ado About Student Debt

Postby 20130312 » Fri Mar 23, 2012 7:12 am

Bronck wrote:
InGoodFaith wrote:The good news is that as you keep making payments, more and more will go toward the principal. So your first few years look awful because so much is going to interest (see above), but it will only get better.


I thought that Stafford and Gradplus loans accrue simple interest while you are in law school, but then are capitalized once you begin repayment. Thus, once you're paying back your loans post-graduation, it doesn't matter whether you pay down more to the principal or the interest since it all becomes one.

Am I understanding this correctly?


They accrue simple interest in school and then capitalize upon graduation, yes. But that doesn't mean they stop charging you interest. It just means they now have a bigger base to charge the interest on, since the principal will become larger when the interest capitalizes. So it still matters even after graduation because the loans continue to accrue interest until they are fully paid off.

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Mattalones
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Re: Much Ado About Student Debt

Postby Mattalones » Fri Mar 23, 2012 9:17 am

alllucknotalent wrote:my 2 cents-

I have little sympathy for smart [people claiming they don't] understand the risks associated with taking out loans.


Bro, people understand.

You're top 10% - good. But many in the bottom 90% probably had the same understanding and mindset as you, even though it didn't work out as well for them.

Class action law suits against places like University of Phoenix and ITT Tech were based on the argument that millions, if not billions, of government dollars were going to waste. The establishments were supposed to create people with a marketable skill set or education education, which is why the government invests. But most students didn't acquire those things - assuming they they finished the program. Law schools have the same flaws. So do business schools. Dental schools are the worst. Some students spend $100,000 each year and still have trouble finding a job.

If institutions expect the government to pour upwards of $75,000,000,000 (billion) each year into higher education loans, schools should be more accountable to providing benefit to students and the economy. Otherwise, why all the investment?

At your TTT school, and many in the TTT, the odds of things not going so well can be as high as 90 to 100. Even at my T20 school, only 25%-35% get jobs that won't require IBR (only 20% or so last year). The most any law school places directly into jobs with good salaries is only about 60%. Of course, many students choose to work in lower paying jobs, but that's the minority. Construed liberally, that's as much as a 90% waste of public funds on many law school. Whether people understand how the loans works doesn't change any of this.

There's a balloon filling rapidly and it will be a fiercely agressive bubble when it burst.

alllucknotalent
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Re: Much Ado About Student Debt

Postby alllucknotalent » Fri Mar 23, 2012 6:59 pm

sunynp wrote:
alllucknotalent wrote:my 2 cents-

I have little sympathy for people smart enough to get into law school that argue they aren't smart enough to understand the risks associated with taking out loans. If our "brightest minds" can't understand this concept, then how can it be expected that the average person understood the concept during the housing bubble...

I swallowed my pride and took at full ride at TTT instead of taking full tuition at the T25-50 range and don't regret it... I ranked in top 10% after 1L and still stayed because of loan money. I went to law school to become a lawyer and knew the job market was terrible and the risks associated because of it. I had nothing beyond my own self confidence to expect to do this well but now I sit in an equal or better hiring ability as probably 50-75% of the people that could have been my peers at T25-50 range while having 150k less in debt.

Not saying that everyone could do this, but when you go to a school where your LSAT is 10-15 points higher than the median (which many people who attend T25-100 would be at many TTT's, mine was 12 points higher) you have to think that you have at least a decent shot to get the magic area around the top 10-20% associated with my TTT and decent jobs compared to the what I will generously call top 25-50% to get the same job prospects.


You know your experience isn't typical. Just because your LSAT seems to correlate with your grades, that doesn't mean it does for everyone. And even if it did, you realize that 80 to 90% of your class is in trouble with finding a job and debt. What do you think they should do or should have done?


Just going to preface everything with I don't think we have overly conflicting opinions on the job market so not going to create an argument out of something that isn't there. But seriously, I don't know if you are trying to make me sound like more of a dick than I likely already came off, but I will simply answer that it is none of my business to say anything to people who don't have jobs. I would say that most people at my school came with different hopes/expectations for themself than I had for myself and they understand their personal situation a lot better than I do.

With that said, the overall doom and gloom isn't that bad here because of the lowered expectations/hopes many of my classmates had coming in. People knew the market was bad and many wanted to do public interest and/or criminal work like an assistant state's attorney to start anyway. Combine that with a fairly low state public tuition, slightly better than expected number of people who got decent unconnected paying jobs, and then the oddly high amount of people in our class that have a job waiting on them with relatives, there are actually only a minority of students here that regret their choice to attend here.

But to turn back to what I was trying to say, what would be the flaw in decision making of similarly situated potential law student to what I was (22-25 year old, mid 160's LSAT, 3~ GPA) choosing full ride at a lower ranked school than attending a T25-50 at sticker?

First, I understand that I was, to some extent, lucky with how things worked out grade wise. Regardless of how it actually turned out, I am more of interested in understanding the flaw in what I was trying to explain about my decision making process for going to law school. I am actually confident that there must be an obvious argument against it but due to my likely personal biases and/or being burned out from having just taken a midterm, I couldn't come up with one off the fly. Besides that, I would rather hear different perspectives on my choice because I find decision making processes interesting (and again, I by no means am arguing that I clearly made the right choice but I more of am wondering why choosing $$$>rank was the wrong choice since I didn't know my lucky outcome).

Lets say I come down to my lowly ranked school and was unsuccessful (I guess median?), why would I have been better off going to a T25-50 school? I think it is fairly inarguable that if I had done poorly at my current school, I wouldn't have been able to reasonably wonder if I would have ranked higher at a school with students that have a much higher baseline for potential law ability. So in the negative outcome situation, I wasted a year of life either way to find out that law isn't for me but I would save 50k by going to my current school to find that out.

I always looked at it simply that since the risk of being unsuccessful was going to be somewhat unpredictable, it would be best to minimize what I risking on this bet to be a sucessful lawyer. The hedge here was that it wouldn't cost me much if things didn't work out here because I would still be a 24 year old college grad with options, which of course would be exactly what I would be if things didn't work out at the higher ranked school, except I would be in a lot more debt.

this post is already far too long, I can add to the above thought process if anyone is intersted

dixiecupdrinking
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Re: Much Ado About Student Debt

Postby dixiecupdrinking » Fri Mar 23, 2012 7:01 pm

It is not good public policy to burden a large chunk of the brightest/most ambitious members of a generation with six-figure debts lent at usurious rates. I feel certain of at least that much relating to this issue.

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sunynp
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Re: Much Ado About Student Debt

Postby sunynp » Fri Mar 23, 2012 7:28 pm

http://online.wsj.com/article/SB1000142 ... 04846.html

The amount Americans owe on student loans is far higher than earlier estimates and could lead some consumers to postpone buying homes, potentially slowing the housing recovery, U.S. officials said Wednesday.

Total student debt outstanding appears to have surpassed $1 trillion late last year, said officials at the Consumer Financial Protection Bureau, a federal agency created in the wake of the financial crisis. That would be roughly 16% higher than an estimate earlier this year by the Federal Reserve Bank of New York.

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Bronck
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Re: Much Ado About Student Debt

Postby Bronck » Fri Mar 23, 2012 9:22 pm

InGoodFaith wrote:
Bronck wrote:
InGoodFaith wrote:The good news is that as you keep making payments, more and more will go toward the principal. So your first few years look awful because so much is going to interest (see above), but it will only get better.


I thought that Stafford and Gradplus loans accrue simple interest while you are in law school, but then are capitalized once you begin repayment. Thus, once you're paying back your loans post-graduation, it doesn't matter whether you pay down more to the principal or the interest since it all becomes one.

Am I understanding this correctly?


They accrue simple interest in school and then capitalize upon graduation, yes. But that doesn't mean they stop charging you interest. It just means they now have a bigger base to charge the interest on, since the principal will become larger when the interest capitalizes. So it still matters even after graduation because the loans continue to accrue interest until they are fully paid off.


So the loans are henceforth compounded, right? Wouldn't that mean it doesn't matter whether you dedicate more to principal or interest once repayment begins?

Student A: 200k principal, ~16k interest --> pays off 16k interest and 30k principal --> 170k total after year 1
Student B: 200k principal, ~16k interest --> pays off 10k interest and 36k principal --> 170k total after year 1

Or am I missing something?

bdubs
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Re: Much Ado About Student Debt

Postby bdubs » Fri Mar 23, 2012 9:29 pm

Bronck wrote:So the loans are henceforth compounded, right? Wouldn't that mean it doesn't matter whether you dedicate more to principal or interest once repayment begins?

Student A: 200k principal, ~16k interest --> pays off 16k interest and 30k principal --> 170k total after year 1
Student B: 200k principal, ~16k interest --> pays off 10k interest and 36k principal --> 170k total after year 1

Or am I missing something?


Once the interest capitalizes then it doesn't matter. The real benefit of simple interest is that during school you're not accruing any interest on your accrued interest. So if you want to apply a payment while you are in school (from SA salary or whatnot) it makes more sense to pay down principal. Then again, you are probably better off taking out less in loans for your 3rd year than paying down anything, since the fees on Plus loans are pretty high.

lobolawyer
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Re: Much Ado About Student Debt

Postby lobolawyer » Fri Mar 23, 2012 9:40 pm

[quote="alllucknotalent"]my 2 cents-

I have little sympathy for people smart enough to get into law school that argue they aren't smart enough to understand the risks associated with taking out loans. If our "brightest minds" can't understand this concept, then how can it be expected that the average person understood the concept during the housing bubble...

We bailed out Wallstreet, which was supposed to have the "brightest minds." It's only a matter of time before the student loan bubble bursts. Will students get the same benefits that were afforded brokers, bankers, execs, CEOs, etc.?

ryemanhattan
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Re: Much Ado About Student Debt

Postby ryemanhattan » Fri Mar 23, 2012 10:15 pm

The concept of a student loan "bubble" is problematic, since it gives the impression that it will "burst". It's not like the housing bubble.

The student debt problem is a massive drain on the economy. The US economy has been propped up on (unsustainable levels of) consumerism for some time, and young people with good jobs are excellent consumers. But not when they are saddled with mortgage-sized student loan debt.

So yeah, student loan debt is a big problem for this generation of students, and the nation as a whole, but I don't know if it can be called a "bubble". It is definitely approaching it's peak though. Education is becoming a poor investment and the costs must come down.

There may be a "TTTT law school bubble". Or at least we can hope.

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beachbum
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Re: Much Ado About Student Debt

Postby beachbum » Fri Mar 23, 2012 10:23 pm

So what you're saying is, we need to find a way to securitize student loans.

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bk1
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Re: Much Ado About Student Debt

Postby bk1 » Fri Mar 23, 2012 10:28 pm

TTTLS wrote:If you thought the housing crisis was bad, wait until the education bubble bursts.

xo dude wrote:Third year of corporate work.

Borrowed: $168,800

Have paid: $63,182

Still owe: $158,360.

That's the tyranny of 8.5% interest.


This motherfucker must be living like a king if he's only paid 20k/year after 3 years in biglaw. No sympathy.

run26.2
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Re: Much Ado About Student Debt

Postby run26.2 » Fri Mar 23, 2012 10:50 pm

bk1 wrote:
TTTLS wrote:If you thought the housing crisis was bad, wait until the education bubble bursts.

xo dude wrote:Third year of corporate work.

Borrowed: $168,800

Have paid: $63,182

Still owe: $158,360.

That's the tyranny of 8.5% interest.


This motherfucker must be living like a king if he's only paid 20k/year after 3 years in biglaw. No sympathy.

If he's in his third year, I guess he would be somewhere between his 25th to 29th month. Which would mean he has paid about 2200-2500/month. Could do better, but if the person is in NYC, that's not terrible.

I will say, though, at 8.5% interest, I'd be living in a box and paying $5K-6K/month until I paid that off.

ryemanhattan
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Re: Much Ado About Student Debt

Postby ryemanhattan » Fri Mar 23, 2012 11:19 pm

beachbum wrote:So what you're saying is, we need to find a way to securitize student loans.


I like the way you think. We'll chop em up, mix em around, place a thin veneer of Stanford MBA debt on top, and wait for the ratings agencies to label that shit quintuple A, even though it's primarily TTTT law and UPhoenix debt. Boom.

lawlcat4179
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Re: Much Ado About Student Debt

Postby lawlcat4179 » Fri Mar 23, 2012 11:32 pm

alllucknotalent wrote:
sunynp wrote:
alllucknotalent wrote:my 2 cents-

I have little sympathy for people smart enough to get into law school that argue they aren't smart enough to understand the risks associated with taking out loans. If our "brightest minds" can't understand this concept, then how can it be expected that the average person understood the concept during the housing bubble...

I swallowed my pride and took at full ride at TTT instead of taking full tuition at the T25-50 range and don't regret it... I ranked in top 10% after 1L and still stayed because of loan money. I went to law school to become a lawyer and knew the job market was terrible and the risks associated because of it. I had nothing beyond my own self confidence to expect to do this well but now I sit in an equal or better hiring ability as probably 50-75% of the people that could have been my peers at T25-50 range while having 150k less in debt.

Not saying that everyone could do this, but when you go to a school where your LSAT is 10-15 points higher than the median (which many people who attend T25-100 would be at many TTT's, mine was 12 points higher) you have to think that you have at least a decent shot to get the magic area around the top 10-20% associated with my TTT and decent jobs compared to the what I will generously call top 25-50% to get the same job prospects.


You know your experience isn't typical. Just because your LSAT seems to correlate with your grades, that doesn't mean it does for everyone. And even if it did, you realize that 80 to 90% of your class is in trouble with finding a job and debt. What do you think they should do or should have done?


Just going to preface everything with I don't think we have overly conflicting opinions on the job market so not going to create an argument out of something that isn't there. But seriously, I don't know if you are trying to make me sound like more of a dick than I likely already came off, but I will simply answer that it is none of my business to say anything to people who don't have jobs. I would say that most people at my school came with different hopes/expectations for themself than I had for myself and they understand their personal situation a lot better than I do.

With that said, the overall doom and gloom isn't that bad here because of the lowered expectations/hopes many of my classmates had coming in. People knew the market was bad and many wanted to do public interest and/or criminal work like an assistant state's attorney to start anyway. Combine that with a fairly low state public tuition, slightly better than expected number of people who got decent unconnected paying jobs, and then the oddly high amount of people in our class that have a job waiting on them with relatives, there are actually only a minority of students here that regret their choice to attend here.

But to turn back to what I was trying to say, what would be the flaw in decision making of similarly situated potential law student to what I was (22-25 year old, mid 160's LSAT, 3~ GPA) choosing full ride at a lower ranked school than attending a T25-50 at sticker?

First, I understand that I was, to some extent, lucky with how things worked out grade wise. Regardless of how it actually turned out, I am more of interested in understanding the flaw in what I was trying to explain about my decision making process for going to law school. I am actually confident that there must be an obvious argument against it but due to my likely personal biases and/or being burned out from having just taken a midterm, I couldn't come up with one off the fly. Besides that, I would rather hear different perspectives on my choice because I find decision making processes interesting (and again, I by no means am arguing that I clearly made the right choice but I more of am wondering why choosing $$$>rank was the wrong choice since I didn't know my lucky outcome).

Lets say I come down to my lowly ranked school and was unsuccessful (I guess median?), why would I have been better off going to a T25-50 school? I think it is fairly inarguable that if I had done poorly at my current school, I wouldn't have been able to reasonably wonder if I would have ranked higher at a school with students that have a much higher baseline for potential law ability. So in the negative outcome situation, I wasted a year of life either way to find out that law isn't for me but I would save 50k by going to my current school to find that out.

I always looked at it simply that since the risk of being unsuccessful was going to be somewhat unpredictable, it would be best to minimize what I risking on this bet to be a sucessful lawyer. The hedge here was that it wouldn't cost me much if things didn't work out here because I would still be a 24 year old college grad with options, which of course would be exactly what I would be if things didn't work out at the higher ranked school, except I would be in a lot more debt.

this post is already far too long, I can add to the above thought process if anyone is intersted


You are a rare voice of sanity and I think that there are a lot of people who can benefit from doing exactly what you did. I will never understand people who take out almost a quarter million dollars to go to a lower T14. I've always operated on the concept of not gambling more than you can afford to lose. If you can afford to lose 250k, go for it, if not, you shouldn't be going.

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Bronck
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Re: Much Ado About Student Debt

Postby Bronck » Sat Mar 24, 2012 1:35 am

bdubs wrote:
Bronck wrote:So the loans are henceforth compounded, right? Wouldn't that mean it doesn't matter whether you dedicate more to principal or interest once repayment begins?

Student A: 200k principal, ~16k interest --> pays off 16k interest and 30k principal --> 170k total after year 1
Student B: 200k principal, ~16k interest --> pays off 10k interest and 36k principal --> 170k total after year 1

Or am I missing something?


Once the interest capitalizes then it doesn't matter. The real benefit of simple interest is that during school you're not accruing any interest on your accrued interest. So if you want to apply a payment while you are in school (from SA salary or whatnot) it makes more sense to pay down principal. Then again, you are probably better off taking out less in loans for your 3rd year than paying down anything, since the fees on Plus loans are pretty high.


Okay, thought so. Thanks for confirming.

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beachbum
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Re: Much Ado About Student Debt

Postby beachbum » Sat Mar 24, 2012 1:52 am

ryemanhattan wrote:
beachbum wrote:So what you're saying is, we need to find a way to securitize student loans.


I like the way you think. We'll chop em up, mix em around, place a thin veneer of Stanford MBA debt on top, and wait for the ratings agencies to label that shit quintuple A, even though it's primarily TTTT law and UPhoenix debt. Boom.


Boom. And we can separate risk across different levels, or "tranches" (I love my fancy words), which we can further subdivide to create entirely new bastard securities. It's perfect. We'll call them Compartmentalized Dollar Operations.

In related news, I have AIG on the phone and they're down for the first $10 mil.

keg411
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Re: Much Ado About Student Debt

Postby keg411 » Sat Mar 24, 2012 10:58 am

beachbum wrote:So what you're saying is, we need to find a way to securitize student loans.


They already do securitize student loans.

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beachbum
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Re: Much Ado About Student Debt

Postby beachbum » Sat Mar 24, 2012 11:10 am

keg411 wrote:
beachbum wrote:So what you're saying is, we need to find a way to securitize student loans.


They already do securitize student loans.


Twas sarcasm.

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bk1
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Re: Much Ado About Student Debt

Postby bk1 » Sat Mar 24, 2012 12:23 pm

run26.2 wrote:If he's in his third year, I guess he would be somewhere between his 25th to 29th month. Which would mean he has paid about 2200-2500/month. Could do better, but if the person is in NYC, that's not terrible.

I will say, though, at 8.5% interest, I'd be living in a box and paying $5K-6K/month until I paid that off.


Ah, misread it. If he's toward the start of his 3rd year it's more reasonable but if it's towards the end then my comment stands.




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