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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?"
I worked at a mid size private university in the midwest and tuition rates were astronomical ($30k for undergrad). I think the loans are one thing but tuition rates are a larger issue. I wondered how they stayed in business especially these days.
You saw the rates when you signed the papers. Not anyone's fault but yours. And no, I didn't want a bailout for GM or the banks either.
Yes, because clearly paying taxes isn't a return on the government's investment.
Mortgages and car loans are secured loans, where the property or car that is bought with them is pledged as collateral. This makes a big difference for the interest rates. Student loans just ain't so.
Anyway, I've heard complaints like this about student loan rates before, and I've always had the same basic response: you're barking up the wrong tree. You don't really want lower interest rates on student loans; you want the government to spend more on making higher education affordable for those who qualify for it. There's a bunch of countries out there where if you get admitted into a university, the government picks up the tuition bill, period. Those countries ain't richer than the USA.
Are you adequate?
Fuck off, Department of Education spokesperson (and the quoted Republican party stance in the story too). I saved up three years of minimum wage for my college fund and I didn't do it just to hear how I'm an ungrateful child when I ask why I'm forced to pay a ridiculous amount of extra money on top of what is turning into an endeavor that is beyond the concept of "costly." Give me a break. Even with that hard work through high school I'm still forced into penny pinching.
30-year fixed-rate mortgages are backed by the property itself as collateral, and usual require either a 20 percent down payment or private mortgage insurance to protect against market fluctuations. (Of course, banks and mortgage companies have been known to market more "creative" products such as subprime mortgages, but presumably they have either learned their lesson or have been shut down by Federal regulators).
So that's comparing apples with oranges. Part of the higher rate for the student loan goes into a pool against defaults, when the government has no collateral to seize.
If students are a "credit-unworthy lot" then limit the amounts they can borrow or make it a fixed amount that they must repay. Charging a higher interest rate for "credit-unworthy" people makes it more likely that they'll default, making it a self-fulfilling prophecy. This holds true for all borrowers.
It's plain and simple. The reason interest rates on a certain category of loans is high is because the borrowers in that category present a high risk of default to the lenders. This means that as more and more college grads struggle to land jobs, more and more of them will default on their loans, and interest rates on the whole will rise for everybody as lenders compensate for the increased risk.
Grow up, go to state college, get a job.
The government subsidy on college loans is being able to get a loan in the first place. How else can you get a loan for $30-60k (or more) as an 18 year old with no credit history, no job, and no skills! You're an idiot to place yourself in that much debt with a very clear understanding of the terms and a strong plan on how exactly you're going to pay them off. The job market is weak right now, but companies are still hiring - go train yourself up and find one.
If you can live cheap you should be able to pay off state college as you go. If you do Co-ops or internships all the way through you can pay a quarter work a quarter and graduate with no debt and a better chance of getting a full time job when you get out.
Someone (god only knows why) decided that simply because you wanted to go to college you were worth tens of thousands of dollars at honestly a really low interest rate, compared to if you wanted that money to do anything else (go try to get a signature loan for ten grand from a bank and see what interest they give you, if they don't laugh in your face).
You got yourself in debt and you alone. If you decided to spend that money you acquired on something that isn't going to allow you to pay it back, it's nobody's fault but your own.
Nearly 50% of all fortune 100 CEO's graduated from a state university. There's no reason to think you need any better if you can't afford it.
No it doesn't.
A civilized nation should provide free education to the highest level each person wishes to attain, because that's part of believing that the nation's most most important resource is its people.
But when a government just wants dumb consumers, then it's a very different matter.
"The question of whether machines can think is no more interesting than [] whether submarines can swim" - Dijkstra
The rules on college loans does need reform and the interest rates should be reduced. Plus the cost of higher education needs to be reigned in to levels that are affordable to the middle class.
And when you default on the student loans your wages and other income gets garnished. That renders your point moot.
Provided that you have an income. If someone is defaulting on hist student loan (and given the generous forbearance and other options before the dishonorable default), what makes you think he actually still has his job?
If someone has a mortgage, then unless he's done something illegal he does have a house that can be repossessed—it may be worth less than the mortgage, but it's still something, unlike with education.
Exactly, why does he not just refinance through a secured load, oh thats right, he has no security (assuming).
The big question being asked is how come students lap up such loans - because we are all convinced you are
a failure without going to an expensive college, which is crap.
The university attendance rate in the U.S. is way, way too high, and will get even worse if interest rates on student loans are lowered further below the free market rate. U.S. colleges are churning out hundreds of thousands of graduates with useless majors. Half of all recent graduates are unemployed, and half of those that are employed are working jobs that don't even require a college degree. The government is encouraging all this useless, non-productive "education" by subsidizing loans for high-risk borrowers who don't consider the risk of the investment.
Think about it-- an 18 year old student spending $200,000 to study basket-weaving for 8 years gets the same rates as a 25 year old getting a nursing certification at a community college, even though their risk/reward profile is completely different. It doesn't make any sense.
"The government has bailed out homeowners. It's bailed out big businesses. Why can't it also help students?"
Why not, indeed?
Besides the fact that we have no money left, didn't before we started, and have been borrowing all of this, why not help the students?
Well, will someone else please tell them? I'm tired of it. Thanks.
ps - My wife and I paid off her student loans. She had a higher interest rate.
pps - No one is bailing me out of my mortgage on my home which is worth about half what I paid for it in 2005. I owe about %60,000 more than it is worth right now. My property taxes have not gone down a penny, cause everyone else around here is in the same boat. I can't afford to go back to college right now... Loans or not.
ppps - We are not doing a great job of bailing out big business. I work for one, and took a 15% pay cut in April. And I'm thankful to have my job still. Graduates should be thankful if they get a job at all before 2011.
We're teaching them well. Just the wrong lessons.
deleting the extra space after periods so i can stay relevant, yeah.
I worked my way through college.
It sucked. I didn't get to go ivy league (not a big problem since only a 1270 sat, 3.2gpa, and activities were computer club and D&D club).
Mainly, I didn't get to take a 4 to 5 year vacation. I studied 20 hours on top of 12 hours of classes on top of 40 to 55 hours a week of work.
But I graduated with no debt. It was my choice.
Students have the choice of going to public schools, or cheaper schools over seas, or on-line schools.
One of the reasons colleges have gotten so expensive is that children are willing to take on $200,000 debt to get a degree.
Look- if the professors were not making mid 100k incomes (yea, I know adjunct professors are poorly paid), if the universities were not funding research on the student's backs, if the university presidents were not making $350k!!! and if the universities JUST TAUGHT THE MATERIAL like they used to back in the 50's, then school wouldn't be so expensive.
Health care is super expensive for the same reason. People have shown that they *will* pay anything for it, so the providers have jacked up the bill.
You can get a good solid degree from a public university and graduate with little or no debt.
You can't get an idiot degree of course.
Given the work climate (that any INDIAN or CHINESE national can get a similar quality degree and take your job for $16,000 to $25,000 working in their companies for our corporations), you are an idiot to get a degree for something with that kind of exposure. At least get something that requires you be physically present, or that has national security implications.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
Up to $2500. Whoop-de-fuckin-do.
What changed under Obama? Nothing Good
Maybe you should work for a few more years paying down your loans instead of going to grad school. What do you think grad school is, an entitlement!? Do you think the taxpayers should subsidize your pursuit of advanced knowledge even more than they have been already?
Nothing stopped you from postponing grad school for a few years to pay down the balance. Your loan papers clearly spelled out when and how interest would accumulate.
Lots of people do this. Others take 6+ years to get their degree part time or in night school to minimize borrowing.
Why should you get special treatment?
That seems to be an argument to reduce university tuition costs, not reduce interest rates.
"It is possible to commit no errors and still lose. That is not a weakness. That is life." -Peak Performance
Yup, plus he could have always chosen not get a loan or not borrow as much. The latter could be done with support from family or a job beforehand to build up buffer cache. A loan is a responsibility and a bit of an education in itself: be aware of what you're getting yourself into and accept the consequences. Life is hard and if you're not born into money, you have to take the long road to obtaining it : P. Sry.
Think about what you just said, you are spending nearly a decade being a net drain on society rather than contributing in some productive industry. Sure, you'll be more productive in the long run, but you're not being "fleeced left and right". You're *not* earning your keep right now, you are currently living off of someone else's productive efforts, which you'll have to pay back once you join the real world.
By the way, nobody gets forced to go to college. If the numbers don't work out in your favor, you were pretty dumb to sign up for an extended 'fleecing' at the hands of that evil educational institution.
I was the oldest child of a middle class family of 3. I applied to 2 public and 3 private universities and was accepted to all of them, but with minimal financial aid. I chose to attend a nearby public university that offered a quality education that cost approximately $10,000/year in the late 90's.
Why did I make this choice?
- I could afford to finance about 75% of tuition via savings that my parents had set aside for me.
- I worked various jobs while in school, eventually hitting $15-17/hr, which more than covered the remaining tuition & expenses.
- I didn't want to screw my siblings out of an education or force my parents into debt. In the end, I was able to leave about $4,000 of my parent's savings for my brother or sister.
I have friends who are teachers who decided that they needed to attend small, private New England colleges with tuition and expenses over 350% more than my education. One of those friends and his wife makes $120k combined teaching, but after years of deferments owes over $300,000 a decade after graduation (not including graduate work form a private school which would have been FREE had they gone to the state university) -- my friend and his wife can barely afford rent, and will likely become homeowners when they inherit a house when one of their parents pass.
People don't need bailouts, they need to live within their means and not assume that they are entitled to a specific lifestyle or type of job due to the circumstances of their birth. If you can't afford four years of college, borrow money to go to trade school and work as a plumber, HVAC, electrician, etc. If you really want to go to college, you'll be able to earn the money to do so.
Conformity is the jailer of freedom and enemy of growth. -JFK
Education should be FREE
Me, I'm PISSED at the bail-outs. We've done stupid idiotic things in order to financially support companies that have done stupid idiotic things, essentially giving them license to do more stupid, idiotic things. And we, lowly, powerless tax-payers are going to foot the bill.
"Stimulous money" should go to things that create wealth: Science exploration, improving education, infrastructure (roads, powerlines, maybe the "smart grid") pure research, space exploration. These are things that create wealth and set us up (as a country) for the next big wave of wealth. But instead, we prop up companies that are "too big to fail" who do stupid things like borrow money to buy derivatives that were created from borrowed money. A multi-trillion dollar industry created out of thin air and lots of pencil-pushing.
Meanwhile, our roads are clogged and crowded, our power grid is ancient and increasingly taxed/unstable by the more volatile alternative fuels being used to power it, and our schools lag so far behind that some are even considering teaching creation as "science".
Meanwhile, we squander our wealth with wild abandon, killing Iraqis and Afghans, spending a TRILLION DOLLARS PER YEAR just to send in planes and bombs.
Hey, I have a better idea. Let's take just 1% of that trillion dollars per year, and use it to feed EVERY SINGLE !@## STARVING KID THE WORLD OVER. Yes, that's all it would take. A Billion dollars per year could by a handful of rice, corn, or wheat to put into the hands of every single starving kid in the world. Can you imagine just how much goodwill this would cause? We'd be hailed the world over as harbingers of peace.
But, instead, we send the bombs and drone planes and guns, we violate international treaties by torturing people who haven't been accused of any crime, and do our damnedest to repeat the mistakes the Russians made when they invaded Afghanistan and spent their status as a world power trying to bring order to the same country we have so far failed completely to do.
Just !@#@ing stupid, and it's me, the smart, hardworking, disappearing upper middle class that gets to pay the !@#$ing bill.
Yes. I'm pissed.
I have no problem with your religion until you decide it's reason to deprive others of the truth.
University is free.
But if it were free, then conservatives would have to throw up a bunch of other hurdles to keep the minorities that they don't like out of their little white world. Instead, they make it really damn expensive and declare that anybody who can't handle the debt is a loser who deserves to be poor and ignorant.
So you see, it can't be free. Republicans would cry.
Fascism trolls keeping me up every night. When I starts a preachin', he HITS ME WITH HIS REICH!
Everything in life should be free, but it isn't. Grow up.
Most ignorant post of the day award goes to you, Profane MuthaFucka (The name says it all, right?). How do you propose that College employees (Professors, Adjuncts, Non-teaching Staff, Maintanence, etc) get paid if education was free. I'm sure it's just a vast right-wing conspiracy to keep minorities out of college, right? Has nothing to do with economics, nahh that'd be nuts.
Maybe they shouldn't give loans for people to get worthless degrees...
The university attendance rate in the U.S. is way, way too high, and will get even worse if interest rates on student loans are lowered further below the free market rate.
Yes but think of how good the youth unemployment figures look with so many young people studying!
Every degree is valuable, you know? Every student must get a degree! (probably because we already watered down the high school diploma by insisting that every student must get one, no matter if they can't effectively understand math usage or the meaning of something they read)
Imagine the outrage if it were suggested that physics, engineering, and math were more worthy than black studies, women's studies, and LGBT studies. We're going to Hell in a very nicely woven handbasket.
Perhaps the worst thing is that this perpetuates the idea that college education is generally worthless. When people see college graduates failing in the job market, they often conclude that education is not worth any effort. The correct conclusion is of course that your field of study matters, but that doesn't generally sink in.
I'm very thankful to see this reply to the earlier post bashing plumbers, electricians, etc. I'm a math professor, so I certainly value education, but I know that there are plenty of "morons" that end up with college degrees just because their parents were rich enough to foot the bill.
There are skill sets and learned knowledge that don't come from college yet are still immensely valuable to society. If my house is flooding from a busted pipe, I don't want an engineering professor trying to fix it, I want a plumber! And, I sure as hell don't want an electrical engineering professor wiring my house... I want a licensed electrician.
Now, here's my opinion on paying for a university education: never take on a ridiculous debt burden to go to school unless your career options will allow you to quickly pay it off. Just got accepted to Harvard Law School, congrats, of course it's worth getting $300,000 worth of debt. But most people can get a good education at a public university while paying in-state tuition rates. I plan on sending my kids to an in-state public school. (Unless they get some amazing scholarships or I win the lottery.)
Education is free. Diplomas are not.
When you're afraid to download music illegally in your own home, then the terrorists have won!
Here in the UK our student loans are linked to inflation. My current APR is -0.40 :)
I dont read
I take it that you didn't notice you were living in a democracy. Degrees like history or philosophy that have no direct application to employment (although the skills developed in doing such a degree have a general application) are exactly the sort of degrees that engender an informed and capable citizenry capable of properly holding its representatives to account. A citizenry incapable of evaluating arguments and ignorant of history is more easily duped.
It has long been a dream of fascists to eliminate such forms of education for precisely that reason.
And before anyone starts, you should already have noticed that the same phenomenon occurs with science degrees. Some of those who think science degrees are great as long as science graduates are making useful widgets tend to get very agitated when science graduates start using their education to hold policy makers to account (climate change is an obvious example, as is teaching evolution in schools).
Beware those who say that all education must be "useful". They often have a hidden agenda.
"by that I mean people who don't sit on slashdot all day wondering why everyone else isn't building robots" DECS
It seems to me that most of the people who study philosophy, economics, politics and history are the people who go into politics and proceed to f**k everyone else. The less of them the better.
In the west from 1900-1980ish the ugliest forms of ideology; Marxism, Facism, Eugenics, Totalitarianism were at one stage or another broadly and openly supported and advocated for by student bodies, senior faculty and universities in the west. Unapologetic support for the methods and madness of Mao, Lenin, Stalin, and yes - even Hitler (in the '20s and '30s before it became a faux pas to support him) accompanied loving gazes and embarrassing wistful looks over to Russia and China.
It was the "citizenry incapable of evaluating arguments and ignorant of history" aka "the average person" who kept *them* in check - the "useful idiots" as Lennon so lovingly referred to them were born out of western higher education.
As I've constantly found in my life a university degree in philosophy or social history in the hands of someone who doesn't have the experience of life to temper what they're being told often by "true believer" lecturers who like to try and be evangelicals for their own radical political beliefs causes more harm than good. Radical, violent support for Mao during the 60s and 70s among privileged middle and upper class kids in western universities while he was starving 30 million or more of his own country men out of their farms proves this indisputably.
Beware those who say that all education must be politicised, they *always* have a hidden agenda.
Degrees like history or philosophy that have no direct application to employment (although the skills developed in doing such a degree have a general application) are exactly the sort of degrees that engender an informed and capable citizenry capable of properly holding its representatives to account. A citizenry incapable of evaluating arguments and ignorant of history is more easily duped.
The problem isn't history/philosophy/sociology majors themselves. Quite a number of them do good, valuable things for the country and their fellow people (especially if their academic and intellectual experience is tempered with some real-world experience). The problem is the number of people who don't go to school for those things, but who go because "everyone needs to go to college" and they choose a major like that because they need to choose something. Coorectly or not, they pick something that sounds easy just so they can have a degree--and everyone knows that "you need to go to college to have a good job".
Part of the problem is that we're encouraging people to go to college when they aren't going to use it or even care about it. We've elevated the office job and made skilled trades a thing of contempt. The guy who sits in a cubicle churning out TPS reports a five-year-old could write is automatically elevated over a master CNC machinist and programmer simply because he has a degree and works in an office. There ought to be no shame in taking up a trade like machining or welding; a good machinist, for example, is as valuable to a company as any engineer.
Now don't get me wrong--it's always great for people to go and learn more. It's always a good thing to have a better-educated populace. But I think the current pushes of "everyone must go to college" and "you need a degree to get a decent job" force too many people to go befre they can afford it, and therefore take on piles of debt for something they don't need. Ideally, it would be far better to wait until they could afford it.
To put it another way, going tens of thousands into debt just to get a generic degree is stupid.
The meek may inherit the earth, but the strong shall take the stars.
Do you always search purposefully with that confirmation biased strategy, or is that just a coincidence?
I think you need to consider a time scale. One could have made that same remark re practicalities 100 years ago. But when I look back at the math that was done 100 years ago, I find very little of it unused. Physics is similar. Quantum theory was basically useless when it was developed...until now. Evolution was useless, now we use it to predict the course of flu epidemics.
Science and math form a web, and it is impossible to predict just how those future practicalities correspond to any one particular theory. It isn't even clear how one does that with current practical devices, they rely on so much that went on before in very complicated relationships.
The problem is the number of people who don't go to school for those things, but who go because "everyone needs to go to college" and they choose a major like that because they need to choose something. ....
The guy who sits in a cubicle churning out TPS reports a five-year-old could write is automatically elevated over a master CNC machinist and programmer simply because he has a degree and works in an office. There ought to be no shame in taking up a trade like machining or welding; a good machinist, for example, is as valuable to a company as any engineer.
As someone who lives in a Uni town, worked in a machine shop, got some college, and now sits in a cubical (well.. I do not to turn out TPS reports.. thank the FSM); I wholey endorse the parent and agree with what the comment said.
I see tons of people that think college is just a 4-year extension of High School, and the degradation of the K-12 US schooling system (or it seems like it's dumber then when I was in it), means that often HS grads are in fact not qualified for basic jobs.
----- The internet has given everyone the ability to have their voice heard equally as loud.. even if they shouldn't be
So maybe they were wrong. Or maybe they were just idealistic and didn't have all of the information about the true actions of those people. It's easy to point fingers in hindsight when you have all the facts and it's easy to look a name up on the wiki and see all the horrible things they've done.
Imagine a world where noone was allowed to possess those beliefs and was forced into whatever the government decided was right. It's those kids who dared to question the prevailing authority who are able to step back now and take a broader perspective of the world, and wonder how much of a distorted perspective the "average person" has. It's that education which allows them to question the things that our government is doing, like in the 60s and 70s regarding Vietnam, or something like Iraq.
Tell that to someone who majored in medical physics and works at GE.
Tell that to the guys who work down the hall from me who design high performance motors for hybrid and electric vehicles.
Tell that to the mathematician doing model parameter estimation in our software.
You already told *me* - the software guy who uses math on nearly a daily basis.
Tell the business folks who employ these people.
BTW, I believe everyone mentioned here makes 6 figures. So no, there must not be economic value in math and physics.
Maybe you're one of those wall street guys that put the economy in the toilet because they all used the same flawed mathematical model for planning purposes - because they don't have too many math folks, because they have no economic value. Or the MBAs who say people in the US will just outsource and "manage" everything, because none of those things like engineering, design, manufacturing, distribution, etc... are "economically valuable".
Because you can't foreclose on someone's education. Next question.
Because you students are who is needed to pay for the other bailouts. Now go procreate and create us some more slaves.
After bailing out wall street, the banks, and the UAW, why can't "they" bail out students now? Simple. "They" (we) are broke. Actually, we're worse than broke. It'll take a few more years of suffering before we can get back to being broke.
"We've elevated the office job and made skilled trades a thing of contempt."
I agree absolutely. I think it is disgraceful that people hold trades in contempt. There is nothing degrading about being a plumber or an electrician.
"by that I mean people who don't sit on slashdot all day wondering why everyone else isn't building robots" DECS
DUH, Public school was designed to churn out good factory workers. The world moved past the design and we no longer have lots of factories. so now our indoctrination system we call public school is failing.
Charter schools and private schools are picking it up, but very few people get to go to those compared to those that can only afford public school.
I know not ALL are set up badly, but most are. They squash children's free thought, creativity, and focus on things that make you a good worker.
Do not look at laser with remaining good eye.
So you don't think that colleges charge whatever the market will bear?
Have you been to a US college recently? The one near me is still on a building spree that it has been on at least since I started there, eight years ago (I graduated and found a job in town). They have spent AT LEAST a half a billion dollars since I started paying attention, with the largest chunk being the first 100 million dollar expansion of the stadium to build box seats for rich donors. All this for a school with 30,000 students.
Also, you don't think the housing boom was caused by freely available cheap credit? Hell, while I was still in school, I was able to get a mortgage while I didn't even have a job! The mortgage payment was cheaper than rent!
Your post points to the military a lot. The military is not for everyone. If every kid thought that joining the military was the best thing to do, we'd have more kids coming back in body bags. Would it be good for little Billy to learn discipline? Of course. Would little Billy die? Maybe. Would little Billy die for a cause he don't give a damn about? Probably. Would little Billy be safer simply taking out the damn loan? Definitely. It seems a bit extreme when possible death or physical injury is less of a hazard than having debt.
Just like not every high school student is going to be the next Einstein, not every high school student is going to be a soldier. We're all good at certain things, and we really need to stop trying to make everybody okay at everything.
When the richest people make the most money by pushing buttons to move virtual pieces of paper, can you really blame them???
Your average college administrator has burned out on teaching and burned out on research, so they went into administration seeking something different, and as a side benefit get double the salary they had before!