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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.
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?
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.
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.
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.
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
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
"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?"
Ouch. While I'm enormously sympathetic and entirely on the same side of the political fence as you, your numbers here are tremendously screwed up. Pretty embarrassing, actually.
(a) 1% of a trillion dollars is not "a billion" -- it's 10 billion. (b) U.S. already donates over $22 billion per year in foreign aid *. (c) Highly skeptical that another billion (or 10) could feed all starving children -- citation needed. (d) Many locations are documented as not allowing US/UN personnel in, and/or have confiscated food donations in the past from the poor to the army, etc. -- would you be willing to force that with military action?
Get your facts straight and it will strengthen our campaign for social justice in the world.
* Source: http://en.wikipedia.org/wiki/Foreign_policy_of_the_United_States#Foreign_aid
We know where leadership by an anti-intellectual "strongman" who scapegoats minorities and likes boisterous rallies goes
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!
Your post brings up the thing that really bothers me about the 'healthcare is a right' and 'education is a right' crowds.
I am all in favor of helping out people who don't have healthcare, but in order for those people to have healthcare, someone else is going to get screwed. It isn't like this stuff comes from the Universal Rights God, it is from the noodly appendage of someone else's wallet that the benefit must come. Calling it a 'right' kind of hides that fact.
And I am happy to pay for it. I'm happy to help someone out whenever I can. But geez, if you worked hard through high school, isn't the knowledge you gained from that hard work enough? I mean, you're going to college, you are working hard, and YOU are going to be the primary beneficiary of all your hard work. Do you really want to force someone else to pay for it? If you don't think it's truly worth it, don't do it. If you don't want to penny pinch, then don't; go do something where you don't have to. If it is too costly, then it's probably not worth it. Go do something else.
But if it is worth it, then you're clearly getting your money's worth. Good job, keep it up.
Qxe4
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!
Your conclusion fails to follow from your premise. Paying for someone's degree in Advanced Featherbedding just because they want on does little for the nation but produce yet another idiot with a meaningless degree and a sense of entitlement.
A nice soundbite, but nothing else.
Personally, I think a system that makes people work to pay for their education works just fine. It sorts out the those with the skills and dedication to obtain an advanced education from those without - the same skills and dedication they will hopefully employ in whatever career that education prepares them for.
Here in the UK our student loans are linked to inflation. My current APR is -0.40 :)
I dont read
Spoken like someone who cant think beyond their own pocket.
Because proper education systems increase your wealth as well, the same as proper health systems benefit your health as well. Let me ask you this, would you rather have a nation full of highly educated white collar workers or a nation full of barely educated blue collar slobs barely able to swing a hammer?
Well the white collar workers of course, you cannot compete with the third world on manufacturing whilst maintaining a first world economy. Now if education is difficult to afford then you will end up with a large section of your workforce earning low wages, low wages means that their contributions to tax will also be low as well as the amount of money they have to spend or invest. This means that YOU as the middle class will contribute MORE in tax to maintain the same quality of life or YOU will have to accept a LESS fortunate lifestyle.
If you have more highly educated workers you can attract and create high tech industries which pay higher wages and thus contribute more in tax. This means the as a net result of more people paying more tax YOU pay less tax over all. YOU also benefit from OTHERS spending more disposable income or INVESTING that income which in turn creates more wealth and REDUCES the tax burden on INDIVIDUALS.
I suggest you look at HECS, a scheme created by the Australian Federal Government which covers the cost of tertiary education for Australians. This is in turn paid back as it is factored into the amount of tax a receiver of HECS pays (I.E. you pay only for the HECS that you have used) at the end of each financial year. In effect the government extends a near zero interest loan with a flexible amortisation schedule, so the tax taken from mr to pay HECS gets returned in full later in life via a reduction in taxes and economic benefits. It's almost like, well like an investment and an investment that has been working for Australia for the last 20 years.
Calling someone a "hater" only means you can not rationally rebut their argument.
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
Spoken like someone who cant think beyond their own pocket.
Spoken like someone who doesn't give a shit about other peoples' pockets.
Because proper education systems increase your wealth as well, the same as proper health systems benefit your health as well. Let me ask you this, would you rather have a nation full of highly educated white collar workers or a nation full of barely educated blue collar slobs barely able to swing a hammer?
Would you rather have a nation of workers or of parasites?
Well the white collar workers of course, you cannot compete with the third world on manufacturing whilst maintaining a first world economy. Now if education is difficult to afford then you will end up with a large section of your workforce earning low wages, low wages means that their contributions to tax will also be low as well as the amount of money they have to spend or invest. This means that YOU as the middle class will contribute MORE in tax to maintain the same quality of life or YOU will have to accept a LESS fortunate lifestyle.
The question here is why is education difficult to afford? I think it's because government has been throwing money at education in the form of subsidized loans and overly generous financial aid. If education were free, there'd be two possible outcomes, either everyone would consume as much education as they could, driving costs up even further, or someone would have to regulate consumption. Either outcome is avoided by the third choice, making people pay for their education.
If you have more highly educated workers you can attract and create high tech industries which pay higher wages and thus contribute more in tax. This means the as a net result of more people paying more tax YOU pay less tax over all. YOU also benefit from OTHERS spending more disposable income or INVESTING that income which in turn creates more wealth and REDUCES the tax burden on INDIVIDUALS.
Except that the tax burden and future obligations aren't going down. Education won't fix what's wrong with the US because it's not the cause of the problem, and because the "investment" is consumed by those that had no part in it.
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
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.
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!