The thing is, they cant take away your education and you dont put anything up as collateral on a student loan right? How would bankruptcy work for the lender?
This is completely ludicrous. Here is what will happen. Students will graduate at 22 years old and 60 to 80k or more in debt. They will immediately pay a lawyer 1500 in cash, and file for bankruptcy. Remember…they are 22 years old without a job. Then they will pay a higher percentage on car loans, but everyone will be willing to lend because now they cant declare BR again for 7 years. By the time they are 30, a mere 8 years later, they will have steller credit and be able to buy a home.
There are other ways that could help these kids out. If the govt is willing to loan the banks cash at 2%, why doesnt the govt loan it to students at the same rate for school and leave the banks out of it? Or have the loan repayment start 5 years after graduation so that hopefully they will be in a steady job.
I think the law of unintended consequences is gonna hit this plan hard if it is inacted.
What is the interest rate on student loans?
Last I read, about 6.8%.
My daughter started at Va Tech in 2012. There are 2 rates of interest. One is for “Federally Subsidized” and the other is for “Unsubsidized”.
The FS rate was 3.4% and the US rate was 6.8% The plan you were in was based on your parents income. If parents make less than 50k, pretty much everything was the FS rate, If your parents made over 50k, pretty much everything is UnS rate, At the time, I made about 70k a year. My daughters tuition was 21k per year. They offered her 1500 dollars annually at the FS rate, but the remaining 19,500 was at the UnS rate of 6.8%
I was fortunate that I had a home paid for and only one kid. My wife and I put a mortgage on it covering all her tuition at 4.5% interest for thirty years. I made the payments while she was in school. When she graduated and started working, she took over the payments. I am still making them as well so the loan should be fully repaid in 7 more years.
We should drop it to .5%
One of the other options that has been brought up is to make colleges be on hook for student loans. In other words make them back their product like all other businesses do. Consider this:
“The high delinquency rate is a symptom of a wider problem — a broken higher-education system. Colleges are paid tuition regardless of whether their alumni succeed. They face little incentive to control costs when those costs can be passed on to students who fund them with government-guaranteed loans that are available regardless of the students’ ability to repay.”
Here is the rest of the article:
I super heart this.
Why is it every industrialized nation in the world except the USA has free/affordable education and free/affordable health care?
■■■ is wrong with us?
Typical “Got mine, ■■■■ yall” approach of Boomers.
As someone who spent nearly 2 decades in the High School system I became convinced that much of that system saw its role in society to push as many customers to the university system as possible.
It had to go through the legislative process, did it not? Who and why did it occur?
I could go out on a limb and guess lobbyists from the banking industry were involved.
Or lenders will stop loaning 60k - 80k which might be a good thing
Not sure I’m following you. Why do you think it may be a good thing?
The real problem is universities are full extremely high paid people who do very little, and there is no one to get rid of them. And they are really full of them selves and feel entitled…
Exactly. I work with schools as well and the pressure to go to college is immense starting in 8th grade! Kids paying for college when they aren’t ready. It is sad.
Great! I hope it passes. We need bankruptcy for current loans. No one should be able to loan money without risk.
It depends. On federal loans (thru the gov) they are 6.8% un-subsidized. Private loans can be much higher.
It’s just my opinion, but I believe it has to to with the privatization of Sallie Mae in 1997. Eliminating bankruptcy was the backbone of their revenue growth. It really was the wild west for Neo-Liberal economics in the 90s; deregulation of whole industries and privatization or public entities.
IMHO, the core problem is the escalation in tuition rates. If they remain unaffordably high, we will be forever tinkering with strategies to pay for a college education.
I cite my own example, using percentages rather than numbers: I went to a private, large city university at a time when the tuition, room and board costs were about 1/5 - 1/4 of the annual median family income. Today, those costs are around 110% of the median annual income. This means that was was affordable - admittedly with some strict budgeting in some cases - is now largely unaffordable for students in my category (low/middle income, blue collar households) So unless the student is very rich, or has a skill set that will enable him/her to fund tuition through scholarships, the only option is for the student to take out loans.
Trying to figure out ways to pay these very high tuition rates should not be the starting point of discussion; rather, we ought to be trying to figure out why tuition rates have increased so dramatically and where that tuition money is going.