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Student Loan Interest Rankles College Grads

Posted by kdawson on from the loan-arranger dept.

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?"

4 of 1,259 comments (clear)

  1. Typo in summary: detectability vs deductibility by bipbop · · Score: 5, Informative

    I think you mean "deductibility", not "detectability", though I'll admit to not reading very closely.

  2. Hmm.. must be some difference by cjfs · · Score: 5, Informative

    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.

  3. Re:All mine were cheap! by Anonymous Coward · · Score: 5, Informative

    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?

  4. Real world loans are going to really freak you out by Anonymous Coward · · Score: 5, Informative

    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.