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Student Loan Interest Rankles College Grads
theodp writes "Like many recent college grads, Steven Lee finds himself unemployed in one of the roughest job markets in decades and saddled with a big pile of debt — he owes about $84,000 in student loans for undergrad and grad school. But what's really got Lee angry are the high interest rates on his government-backed student loans. 'The rate for a 30-year mortgage is around 5%,' Lee said. 'Why should anyone have to pay 8.5%? The government has bailed out homeowners. It's bailed out big businesses. Why can't it also help students?' Not only that, federal student loans are the only loans in the nation that are largely non-dischargeable in bankruptcy, have no statutes of limitations, and can't be refinanced after consolidation, so Lee can forget about pulling a move out of the GM playbook. And unlike mortgages on million-dollar vacation homes, student loans have very limited tax deductability. A spokeswoman for the Department of Education blamed Congress for the rates which she conceded 'may seem high today,' but suggested that students are a credit-unworthy lot who should thank their lucky stars that rates aren't 12% or higher. Makes one long for the good-old-days of 3% student loans, doesn't it?"
In India, student loans are 12% compound interest; while the borrowing rate in good banks is as high as 7.5% compunded quarterly.Money makes the world go round...
If you keep throwing chairs, one day you'll break windows....
I think you mean "deductibility", not "detectability", though I'll admit to not reading very closely.
The rate for a 30-year mortgage is around 5%,' Lee said. 'Why should anyone have to pay 8.5%?
Because if you default on the mortgage, they can take your house. Education repossession technology is still in beta. Even when it works it and rarely returns anything of value.
Pay your loan for 10 years... and the government will excuse the rest.
Some restrictions apply...
http://www.nextstudent.com/articles/student-loans-forgiven.asp
In Australia, an average degree costs about $20K to $30K (depending on arts vs science/law/engineering/etc) and there's no interest on the government loan. It is, however, indexed to inflation.
If you go overseas, you don't have to keep paying it until you return to Australia, and it is terminated upon death. That maximum rate it is taken from you pay at is 7% and that only starts when you hit about $30K to $40K per year.
This only applies to degrees taken at public universities, but most of the universities in Australia are public (certainly all the best ones are).
So to hear about this system America uses is quite disturbing. The university attendance rate over there must be exceptionally low?
There are two general type of student loans: direct and non-direct with a dirt cheap and a cheap interest rate. 8.5% is cheap for an UNSECURED loan that doesn't START accumulating interest until AFTER you graduate (actually Govt pays interest till you graduate).
Dude- you got $85K with ZERO collateral. The rate is NOT unreasonable. It is the best investment you can make for your future.
You can always become a teacher in the inner city or work 2 years for Peace Corps or any of the other methods the government has setup for most or all of your loan to be FORGIVEN.
Stop complaining about getting cheap money with no collateral and no limitation, except that you go to school.
Maybe it's because you're borrowing over 80,000 dollars for a college education.
5 minutes with a spreadsheet would tell you how much and for how long you have just screwed yourself, and by borrowing that kind of money you prove that you can't or won't spend even that much effort to think before borrowing.
I think part of the problem is cultural: I was broke back when I went to college, and I needed loans; but I also knew that you should never borrow anywhere near enough to pay your whole tuition bill. That's far too much money to borrow even if you aren't dead broke. Poverty forces you into indebtedness, but it also makes you paranoid about accumulated debt, and you understand that something that costs tens of thousands of dollars will require you to eat Ramen, work multiple jobs, and make affordable choices even if someone will extend you credit.
But now I hear horror stories about students who borrow enough money to buy a house in much of the USA, and use that to pay for an entire four-year degree plus graduate school. It's like the kids don't understand that they're poor; they get a credit line and stop acting like people who have to work for a living.
Really? Grad school's been a pretty good deal for me as far as loans go. I just called up my lenders, and got all my student loans deferred (with no interest) until i complete my PhD. And considering that I get paid to do grad school, I plan to pay off those loans as soon as I graduate. I think the answer is to stop whining, save money, and if you couldn't afford the school in the first place, perhaps choose a cheaper option?
I think you must have loans that are somehow different from mine. While I don't have to make payments on most of my loans while I'm in grad school, the interest continues to accrue. I would also like to propose a distinction between "whining" and anecdotally highlighting a situation that is both unfair to individuals who decide to pursue an advanced education and harmful to the intellectual and scientific health of the country.
No they don't. The max is $2500, and the deduction is income limited, i.e., over a certain threshold it is reduced with rising income until it hits zero.
What changed under Obama? Nothing Good
There's a vast difference between the skilled tradesman and what you call morons. Give me a licensed master plumber, master electrician, mechanical contractor, etc and I'll show you someone that truly understands their field and has years of experience under their belt. Sure the variety of assistants range in ability like any job, but to label the actual skilled person as a moron shows you don't understand the field. That'd be like comparing someone who flips burgers to a skilled chef. Also the skilled trades are very strongly union in every major city, unions being one of the strongest backers of the Democrats.
As for continuing education much of the green movement is powered by installation of ultra high efficiency equipments. Pull up a wiring schematic for a 96% boiler and the various pumps and zone valves - it's anything but moronic work.
So what's up with the trades bashing? Watch a few episodes of Dirty Jobs and you'll see some examples of problem solving at the finest.
[ Disclaimer: I work for a non-profit company in the Student Loan business who has been around for 25+ years ]
The reason loans rates were low had nothing to do with DIRECT loans. The FFEL (ie; non-DIRECT) program has exactly the same rates, and existed long before DIRECT was even a thought. These rates are determined by Congress, and are a supposedly based on the governments cost of getting loans from the private sector (T-Bills, etc...) DIRECT loans was an attempt to remove private enterprise from the student loan arena, and for the most part it has succeeded. Companies are no longer motivated to give benefits to students (interest rate reductions, forgiveness of debt, etc...). Any 'profits' made from student loans for a FFEL lender must be given back to the students and/or given back to the government. With DIRECT, this is no longer the case, since DIRECT *is* the government. Congress still will set the rates, and you'll still pay the same amount you always paid, and you'll get the same wonderful service you get from the IRS and other government agencies.
As we all know, when government gets involved, effeciencies and such go through the roof. People's motivation to do a good job skyrockets, and for the most part everything will be well. (BTW, the former is sarcasm...)
As others have stated, the problems is NOT about student loans, the problem is the cost of education. (Unfortunately, the cost of not getting an education is much worse.. 'Would you like fries with your burger?')
You can. Get a bank loan from somewhere else and pay off your student debt in full. Then it is not bound by the rules any more. Or have you promised to pay over a certain time span ?
That just got modded "flamebait" by somebody who clearly resents being reminded that some degrees (his own most likely) have nearly zero economic value.
It's an annoying way to stifle debate, but at least I find it amusing. :-/
According to http://www.springerlink.com/content/u380751518251x56/
"Majoring in a scientific or technological discipline, earning good grades, persisting to degree completion, getting and staying married, and not having dependent children are all actions that substantially increase the likelihood of repayment and lower the likelihood of default."
You have to pay to get the full publication I guess, but that first part says what should be obvious: people with nerd degrees don't default.