Why not 3.5%

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Summerz
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Why not 3.5%

Postby Summerz » Sat Dec 21, 2013 3:21 pm

I was looking at home interest rates and that are (give or take) @3.5%. So, why are our student loans 6.5%? For the good of the national economy the gov’t wants us all to buy homes, but they also want a smarter nation, so why are interest rates higher for (education) us? Given that we cannot bankrupt our loans, why are we not receiving better treatment?

For someone with $150K in loans the difference (10 year plan) is $26K, est. $220 a month.

nucky thompson
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Re: Why not 3.5%

Postby nucky thompson » Sat Dec 21, 2013 3:28 pm

Summerz wrote:I was looking at home interest rates and that are (give or take) @3.5%. So, why are our student loans 6.5%? For the good of the national economy the gov’t wants us all to buy homes, but they also want a smarter nation, so why are interest rates higher for (education) us? Given that we cannot bankrupt our loans, why are we not receiving better treatment?

For someone with $150K in loans the difference (10 year plan) is $26K, est. $220 a month.


debt owing on a house is typically secured by the house. this is called a mortgage. when debt is secured, the creditor is exposed to less risk. less risk equals lower interest rate. tuition creditors cannot foreclose on your diploma to recoup debt owed after default. therefore, higher interest rate.

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rinkrat19
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Re: Why not 3.5%

Postby rinkrat19 » Sat Dec 21, 2013 3:36 pm

Also, those 3.5% home loan rates are for people with good credit. The govt sets a much lower bar to qualify for student loans. Higher interest makes up for the higher risk of giving loans to almost anyone.

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jbagelboy
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Re: Why not 3.5%

Postby jbagelboy » Sat Dec 21, 2013 4:50 pm

Our student loans should be 0.75%, the rate offered by the gov't to financial institutions (See Warren's June proposed bill). This country shits on its students, and promotes policies to widen the income gap. There is no justification for current student loans rates: students are defaulting all over the place. Rather, they should stop offering loans to anyone and their pet fucking goldfish and give a reasonable (<1%) interest rate on worthy investments (i.e., not $250,000 for TTTT degree in nothing) with some legitimate actuarial perspective.

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Summerz
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Re: Why not 3.5%

Postby Summerz » Sat Dec 21, 2013 8:11 pm

Wholeheartedly agree. On a 150K 10 year plan the result is — monthly payments drop from $1,703 to $1,298… a $450 monthly swing. An overall $48.6K deduction. A 6.5% interest rate combined with no bankruptcy exit, is simply unwarranted.

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Nonconsecutive
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Re: Why not 3.5%

Postby Nonconsecutive » Sat Dec 21, 2013 10:06 pm

jbagelboy wrote:Our student loans should be 0.75%, the rate offered by the gov't to financial institutions (See Warren's June proposed bill). This country shits on its students, and promotes policies to widen the income gap. There is no justification for current student loans rates: students are defaulting all over the place. Rather, they should stop offering loans to anyone and their pet fucking goldfish and give a reasonable (<1%) interest rate on worthy investments (i.e., not $250,000 for TTTT degree in nothing) with some legitimate actuarial perspective.


Agree with all of this.

rambleon65
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Re: Why not 3.5%

Postby rambleon65 » Sat Feb 08, 2014 12:25 pm

Nonconsecutive wrote:
jbagelboy wrote:Our student loans should be 0.75%, the rate offered by the gov't to financial institutions (See Warren's June proposed bill). This country shits on its students, and promotes policies to widen the income gap. There is no justification for current student loans rates: students are defaulting all over the place. Rather, they should stop offering loans to anyone and their pet fucking goldfish and give a reasonable (<1%) interest rate on worthy investments (i.e., not $250,000 for TTTT degree in nothing) with some legitimate actuarial perspective.


Agree with all of this.


It's unfathomable that a student loan for a Harvard Law degree yields the same interest rate as a student loan for a Cooley degree. Especially if we consider interest rates more or less a proxy for investment worthiness, I must drink heavily.

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patogordo
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Re: Why not 3.5%

Postby patogordo » Sat Feb 08, 2014 12:28 pm

nucky thompson wrote:
Summerz wrote:I was looking at home interest rates and that are (give or take) @3.5%. So, why are our student loans 6.5%? For the good of the national economy the gov’t wants us all to buy homes, but they also want a smarter nation, so why are interest rates higher for (education) us? Given that we cannot bankrupt our loans, why are we not receiving better treatment?

For someone with $150K in loans the difference (10 year plan) is $26K, est. $220 a month.


debt owing on a house is typically secured by the house. this is called a mortgage. when debt is secured, the creditor is exposed to less risk. less risk equals lower interest rate. tuition creditors cannot foreclose on your diploma to recoup debt owed after default. therefore, higher interest rate.

this is dumb. there are no tuition creditors. the lender is the federal government. the federal government has tremendous power to recoup debt owed -- you can't discharge it in bankruptcy, they can garnish wages, withhold your tax refund, etc etc. there is absolutely no reason the gov't should be charging such a high interest rate on student loans.

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MyNameIsFlynn!
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Re: Why not 3.5%

Postby MyNameIsFlynn! » Sat Feb 08, 2014 12:46 pm

patogordo wrote:
nucky thompson wrote:
Summerz wrote:I was looking at home interest rates and that are (give or take) @3.5%. So, why are our student loans 6.5%? For the good of the national economy the gov’t wants us all to buy homes, but they also want a smarter nation, so why are interest rates higher for (education) us? Given that we cannot bankrupt our loans, why are we not receiving better treatment?

For someone with $150K in loans the difference (10 year plan) is $26K, est. $220 a month.


debt owing on a house is typically secured by the house. this is called a mortgage. when debt is secured, the creditor is exposed to less risk. less risk equals lower interest rate. tuition creditors cannot foreclose on your diploma to recoup debt owed after default. therefore, higher interest rate.

this is dumb. there are no tuition creditors. the lender is the federal government. the federal government has tremendous power to recoup debt owed -- you can't discharge it in bankruptcy, they can garnish wages, withhold your tax refund, etc etc. there is absolutely no reason the gov't should be charging such a high interest rate on student loans.


Agreed. No doubt the fed govt could easily recoup up to 250k in loans from someone in default. Ya know, since people who don't have enough money to pay their loans often have high wages and large refunds

Can't squeeze blood from a turnip

UnderrateOverachieve
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Re: Why not 3.5%

Postby UnderrateOverachieve » Sat Feb 08, 2014 12:48 pm

Make interest rates correspond to law school employment stats---subject to governmental audits. Shit would get real interesting when schools have a huge advantage to report and report correctly. Plus, I imagine the government could assist as they could just see the filed taxes of law students and see how they the mean income is.

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sublime
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Re: Why not 3.5%

Postby sublime » Sat Feb 08, 2014 12:48 pm

..

UnderrateOverachieve
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Re: Why not 3.5%

Postby UnderrateOverachieve » Sat Feb 08, 2014 12:50 pm

rambleon65 wrote:
Nonconsecutive wrote:
jbagelboy wrote:Our student loans should be 0.75%, the rate offered by the gov't to financial institutions (See Warren's June proposed bill). This country shits on its students, and promotes policies to widen the income gap. There is no justification for current student loans rates: students are defaulting all over the place. Rather, they should stop offering loans to anyone and their pet fucking goldfish and give a reasonable (<1%) interest rate on worthy investments (i.e., not $250,000 for TTTT degree in nothing) with some legitimate actuarial perspective.


Agree with all of this.


It's unfathomable that a student loan for a Harvard Law degree yields the same interest rate as a student loan for a Cooley degree. Especially if we consider interest rates more or less a proxy for investment worthiness, I must drink heavily.


I wonder if CC would actually be better interest rates than Harvard. Similar employment stats, but CC offering more scholarships would result in a total net reduction in amount. Thus, similar employability + less total debt = less revolving debt.

rambleon65
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Re: Why not 3.5%

Postby rambleon65 » Sat Feb 08, 2014 1:02 pm

UnderrateOverachieve wrote:
rambleon65 wrote:
Nonconsecutive wrote:
jbagelboy wrote:Our student loans should be 0.75%, the rate offered by the gov't to financial institutions (See Warren's June proposed bill). This country shits on its students, and promotes policies to widen the income gap. There is no justification for current student loans rates: students are defaulting all over the place. Rather, they should stop offering loans to anyone and their pet fucking goldfish and give a reasonable (<1%) interest rate on worthy investments (i.e., not $250,000 for TTTT degree in nothing) with some legitimate actuarial perspective.


Agree with all of this.


It's unfathomable that a student loan for a Harvard Law degree yields the same interest rate as a student loan for a Cooley degree. Especially if we consider interest rates more or less a proxy for investment worthiness, I must drink heavily.


I wonder if CC would actually be better interest rates than Harvard. Similar employment stats, but CC offering more scholarships would result in a total net reduction in amount. Thus, similar employability + less total debt = less revolving debt.


I don't know that Cooley actually offers more in scholarships than Harvard, but point being, there's no reason why the gov't should be making a high-risk / low-yield investment in Cooley. Scratch that, ANY investment in Cooley. "Graduate School" being one giant categorical investment for the government is simply wrong because the risk of default is so insanely different at different fields / schools.

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cotiger
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Re: Why not 3.5%

Postby cotiger » Sat Feb 08, 2014 1:09 pm

jbagelboy wrote:Our student loans should be 0.75%, the rate offered by the gov't to financial institutions (See Warren's June proposed bill). This country shits on its students, and promotes policies to widen the income gap. There is no justification for current student loans rates: students are defaulting all over the place. Rather, they should stop offering loans to anyone and their pet fucking goldfish and give a reasonable (<1%) interest rate on worthy investments (i.e., not $250,000 for TTTT degree in nothing) with some legitimate actuarial perspective.


In a world run by technocrats, sure. But in a world run by politics, not gonna happen. Cheap loans to the (generally) rich kids going to T14s, while completely shutting out the (generally) lower income kids going to T3s and T4s? Tough for me to see that happening, regardless of who proposes the legislation.

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sublime
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Re: Why not 3.5%

Postby sublime » Sat Feb 08, 2014 1:18 pm

..

NYstate
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Re: Why not 3.5%

Postby NYstate » Sat Feb 08, 2014 1:19 pm

The government is making massive loans to people who for the most part have no credit history and no income to show they will repay the loans. Even though the loans are not dischargeable in bankruptcy, there is no way to know they will ever be repaid. The only certainty the government has right now for new borrowers is that under PAYE people will have a huge tax bill in 20 years.

Student loan interest is a profit making exercise for the government. The government is never going to get in the business of evaluating schools other than require accreditation. If anything, blame the ABA for doing nothing to protect law students from fraud.

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patogordo
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Re: Why not 3.5%

Postby patogordo » Sat Feb 08, 2014 1:25 pm

you do realize that students with massive amounts of student loan debt make up a tiny percentage of all borrowers, yes? like less than 1% have >$150k debt.

onionz
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Re: Why not 3.5%

Postby onionz » Sat Feb 08, 2014 1:26 pm

jbagelboy wrote:Our student loans should be 0.75%, the rate offered by the gov't to financial institutions (See Warren's June proposed bill). This country shits on its students, and promotes policies to widen the income gap. There is no justification for current student loans rates: students are defaulting all over the place. Rather, they should stop offering loans to anyone and their pet fucking goldfish and give a reasonable (<1%) interest rate on worthy investments (i.e., not $250,000 for TTTT degree in nothing) with some legitimate actuarial perspective.


The 0.75% interest is completely unreasonable. The 0.75% interest rate reflects SHORT-term loans from government to banks. I *do* think that the government should cap the amount of loans given to students for educations: by covering the full expenses, schools just keep jacking up tuition. However, even if I think their prospects are terrible, non t14 students deserve an opportunity to school to. Rejecting people for loans is a slippery slope: where do we draw the line? O you have undergraduate debt, you can't go to school! O you're only at a t50, you can't get money to go to school! In practice in our democratic society, the government has make it equally available to all, they should just cap it.

patogordo wrote:this is dumb. there are no tuition creditors. the lender is the federal government. the federal government has tremendous power to recoup debt owed -- you can't discharge it in bankruptcy, they can garnish wages, withhold your tax refund, etc etc. there is absolutely no reason the gov't should be charging such a high interest rate on student loans.


Also unreasonable. If you graduate Cooley 250k in debt (maybe more with undergrad) and have a job making 45k for the rest of your life (or even if it goes up slowly), you'll never pay off the principal. Additionally, the government amnesties loans with some regularity. (http://www.huffingtonpost.com/2013/08/2 ... 33832.html) So no, like an above poster said: without securing the loan, of course it's higher.

If you have a problem with the 6.8% interest, don't go to law school. No one forces you to buy a house at a high interest, why go to law school?
Last edited by onionz on Sat Feb 08, 2014 1:32 pm, edited 2 times in total.

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sublime
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Re: Why not 3.5%

Postby sublime » Sat Feb 08, 2014 1:26 pm

..

onionz
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Re: Why not 3.5%

Postby onionz » Sat Feb 08, 2014 1:27 pm

patogordo wrote:you do realize that students with massive amounts of student loan debt make up a tiny percentage of all borrowers, yes? like less than 1% have >$150k debt.


That's for all students, including undergrad. For law students specifically, it's much much higher.

NYstate
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Re: Why not 3.5%

Postby NYstate » Sat Feb 08, 2014 1:46 pm

patogordo wrote:you do realize that students with massive amounts of student loan debt make up a tiny percentage of all borrowers, yes? like less than 1% have >$150k debt.


I didn't think there was good data on this anywhere. I thought part of the issue with student loan debt is that the data is all over the place.
patogordo wrote:
nucky thompson wrote:
Summerz wrote:I was looking at home interest rates and that are (give or take) @3.5%. So, why are our student loans 6.5%? For the good of the national economy the gov’t wants us all to buy homes, but they also want a smarter nation, so why are interest rates higher for (education) us? Given that we cannot bankrupt our loans, why are we not receiving better treatment?

For someone with $150K in loans the difference (10 year plan) is $26K, est. $220 a month.


debt owing on a house is typically secured by the house. this is called a mortgage. when debt is secured, the creditor is exposed to less risk. less risk equals lower interest rate. tuition creditors cannot foreclose on your diploma to recoup debt owed after default. therefore, higher interest rate.

this is dumb. there are no tuition creditors. the lender is the federal government. the federal government has tremendous power to recoup debt owed -- you can't discharge it in bankruptcy, they can garnish wages, withhold your tax refund, etc etc. there is absolutely no reason the gov't should be charging such a high interest rate on student loans.


Does the government garnish wages for student loan payments? I just know nothing about their collection efforts other than I've read about them making endless harassing calls to people. I know that new borrowers have a huge advantage over the old system now there is PAYE and previously IBR.

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cotiger
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Re: Why not 3.5%

Postby cotiger » Sat Feb 08, 2014 1:50 pm

sublime wrote:
patogordo wrote:you do realize that students with massive amounts of student loan debt make up a tiny percentage of all borrowers, yes? like less than 1% have >$150k debt.



Yea, I don't think the system is terrible as it is now. Help more with UG debt, but if you want to go to grad school, it is on you.

The last thing we need to encourage right now is more LS students.


Yeah, that's the thing. Make it cheaper to go to law school, and you'll encourage even more people to go.

That's why the best solution is to cap the loans. If a school feels like the value of their program is worth more than what the feds are willing to lend out, then make the school be on the hook for that extra lending to their students.

LRGhost
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Re: Why not 3.5%

Postby LRGhost » Sat Feb 08, 2014 8:38 pm

Capping loans, placing barriers on loans, saying 'this school gets this rate but that school gets another rate' places a pretty arbitrary barrier for entry into grad school and law school. You fucked off in UG but did well on your LSAT? lol ur fukked. Wanna go to your Big State U but don't have a top 10% LSAT score? lol ur fukked. And so on and so forth.

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cotiger
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Re: Why not 3.5%

Postby cotiger » Sat Feb 08, 2014 10:04 pm

LRGhost wrote:Capping loans, placing barriers on loans, saying 'this school gets this rate but that school gets another rate' places a pretty arbitrary barrier for entry into grad school and law school. You fucked off in UG but did well on your LSAT? lol ur fukked. Wanna go to your Big State U but don't have a top 10% LSAT score? lol ur fukked. And so on and so forth.


I'm not sure how capping loans places a barrier on prospective law students. If the feds said that you could borrow up to $100k from them for law school, then the max tuition schools could charge and have sticker students borrow exclusively from the government would be ~$15k/yr (assuming COL loans). If a school wanted to set its tuition at $50k, they of course could, but those loans (and thus the assumption of risk) would come from the school itself. Schools that were confident that they could place students at a rate that justifies a high level of tuition would do so; schools where 40% of their grads are completely unemployed would price at the 15k/year rate or else quickly go out of business due to massive defaults.

This plan would constrain law schools' pricing in a relatively organic, market-based way. It doesn't place barriers on students.

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jbagelboy
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Re: Why not 3.5%

Postby jbagelboy » Sat Feb 08, 2014 10:10 pm

cotiger wrote:
LRGhost wrote:Capping loans, placing barriers on loans, saying 'this school gets this rate but that school gets another rate' places a pretty arbitrary barrier for entry into grad school and law school. You fucked off in UG but did well on your LSAT? lol ur fukked. Wanna go to your Big State U but don't have a top 10% LSAT score? lol ur fukked. And so on and so forth.


I'm not sure how capping loans places a barrier on prospective law students. If the feds said that you could borrow up to $100k from them for law school, then the max tuition schools could charge and have sticker students borrow exclusively from the government would be ~$15k/yr (assuming COL loans). If a school wanted to set its tuition at $50k, they of course could, but those loans (and thus the assumption of risk) would come from the school itself. Schools that were confident that they could place students at a rate that justifies a high level of tuition would do so; schools where 40% of their grads are completely unemployed would price at the 15k/year rate or else quickly go out of business due to massive defaults.

This plan would constrain law schools' pricing in a relatively organic, market-based way. It doesn't place barriers on students.


I would support a variant of this. Make the schools invest in their own students. They will only do so at appropriate levels of risk. Makes sense.




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