OT: Today is National Student Debt Day
http://www.politico.com/tipsheets/morning-education/2016/01/its-nationa…
Today is National Student Debt Day. A group of student debt activists are convening in DC to bring attention to the student debt crisis that America is facing.
Personally, I think this is really important and I believe student loans are a huge anchor weighing down the economy and I'm glad it's getting more attention. I wanted to see what MgoBoard thought. Discuss.
January 28th, 2016 at 4:03 PM ^
But who will pay for the loan if you're forgiven for it? You think the company that provided the loan is going to say, "OK, we don't need you to pay us that money, so we'll write it off." Hell no. The people/companies that provided the loans are going to get their money one way or another.
January 28th, 2016 at 4:09 PM ^
I'm not asking for it to be forgiven. I think my generation and I deserve a fair interest rate on it. I have no problem paying the balance and some interest, just dont want to pay exorbitant interest
January 28th, 2016 at 7:49 PM ^
Someone mentioned 6.5%. I think that is more than fair. Look at credit card companies. Some charge 20%-30% interest. An interest rate of less than 10% is fair.
January 28th, 2016 at 9:40 PM ^
Ok, if it wasn't clear before, now we know you really don't undertand the real impact of interest rates.
Credit cards are the worst interest rates on Earth.
Do you have any notion of what 10% on a $50,000 sum of student loans would be? I'll tell you.
The first month of repayment, the loans would accrue $417 in interest. In one month. Just interest. 50,000*(0.10/12).
To pay off 50k in 10 years at 10% APR, you'd have to make monthly payments of about $660.
A.) $660 a month is tough to swing at just about every entry level job imaginable, regardless of discipline. You are almost certainly putting off saving for retirement.
B.) In total, you end up paying almost $80,000. That's $30,000 in interest alone over the course of 10 years.
Now, let's say you take 15 years to pay off the loans. That means you're making payments of $535, for a final total of $96,300. Almost twice the original balance!
If the interest rates were something much more reasonable (3% for example), you could have much more financial space to invest in retirement, put money away for a first home purchase, car purchase, etc.
In fact, a 3% interest rate on that same 50k means you can pay off those loans in 10 years with - get this - a monthly payment of 485. That's the power of interest rates on large amounts in the tens of thousands. $485 is much more reasonable. The government still gets an interest rate that outpaces inflation and you are much more able to fully participate in the economy.
January 29th, 2016 at 12:46 AM ^
There's no collateral. It's literally money based on the hope that you'll spend it wisely and invest in education that will bring you more money than you normally would, which is very risky. You can put the 50k into a bond and get nearly 3% without any risk.
You're explaining how interest rates work on repayment, but you act like these numbers are set arbitrarily. To any extent they are set arbitrarily it's to be under what the market's interest rate would be.
January 29th, 2016 at 7:33 AM ^
You make a good point that I admittedly have never put much thought into.
My personal (political) view is that the government should not be making money off of student loan lending. It should be a break even enterprise. However, what I don't probably consider well enough is that someone like me, paying 6.55% interest is making up the loss of people defaulting.
Someone mentioned above that the interest rate should be linked to the institution, which I would certainly think is worth considering. Go to a school that has a track record of putting graduates in promising careers after 4 years of schooling? You get 3.5%. University of Phoenix? 7.2%.
Those higher interest rate schools are also going to be schools with lower tuition to begin with, so maybe there's something to that idea.
January 28th, 2016 at 4:47 PM ^
You know what investing in your future was called? Giving you a below-market interest rate so you could go to college. The interest rate you're paying is below market rate for a loan that has zero collateral. My wife and I both have history degrees, we both took out loans to get them, we both live frugally.
What we don't do is expect someone else to pay our bill in the name of "helping the economy" when that really just means helping ourselves.
You literally took someone else's money and are now asking to take a second person's money to pay back the first person because you don't want to.
January 28th, 2016 at 10:48 PM ^
See MGoBender's explanation of student loans above. I know I've taken 'someone else's money' to go to school and I am willing to pay it back. And I have been. But at what point does it get ridiculous? I'm more than happy to pay it back with some interest but to pay a massive amount of interest that basically rivals the original principal, then theres something seriously wrong. My point is that you shouldn't have to live frugally because of student loan interest.
January 29th, 2016 at 12:41 AM ^
We are already paying low interest subsidized by taxpayers. You keep acting like you're paying some crazy interest rate when in reality you're paying a reasonable one. Why would you expect anyone to give you money and then charge you an interest rate close to significantly less risky option like federal bonds? Your complaint is that artifically low rates are still to high without offering anything other than you find them to be an inconvenience.
MGoBender's explanation has nothing to do with the fact that college loans are lower than they'd normally be. He is, however, giving a good explanation as to why you should try to pay off your debt as soon as you can (or not take out as much debt in the first place)
Sent from MGoBlog HD for iPhone & iPad
January 28th, 2016 at 2:52 PM ^
January 28th, 2016 at 3:34 PM ^
And the amazing thing is, almost all residency positions in the US are partially subsidized by the Federal government, CMS to be specific. So the actual price tag for her education was even higher. If the medical school is to be believed.
January 28th, 2016 at 2:56 PM ^
That's how interest works . . .
Here is what you can do: if you own a home, get an equity line. Roll your loans into the equity line and those loan payments become tax deductible. So, you effectively reduce your loans by your marginal tax rate.
Although the IRS says that you can't deduct interest on home equity lines unless it is for home improvements, many accountants take a different position and go ahead and deduct it anyway.
Just a thought.
January 28th, 2016 at 3:59 PM ^
Also (though I don't have direct evidence of this in front of me) I have to imagine that even for people who can afford their loan payments, carrying a debt that will take 10-20 years to pay off makes it more difficult to get financing for things like mortgages or small business loans.
January 28th, 2016 at 2:10 PM ^
We are also forgetting that there is lots of loan forgivness if you work in certain jobs/industries. Not taking a position if that is a good or a bad thing, however, those things do exist.
January 28th, 2016 at 2:16 PM ^
January 28th, 2016 at 3:00 PM ^
January 28th, 2016 at 3:29 PM ^
We should avoid going down the road to a discussion of politics, but if you read the plan, he proposes financing it through electronic financial transaction fees, not direct taxes. I'm not saying that will necessarily work, but that's what he put out there.
I think the other comment is spot on, if (public) college becomes free, the price tag will go up.
January 28th, 2016 at 3:01 PM ^
If you think college is expensive now, wait until it is "free"
January 28th, 2016 at 3:57 PM ^
Honest question. How does Germany make it work?
I know the standard, US is bigger than Germany thus more problems etc. But actually, have they felt any repercussions since "freeing" college?
The tax burden must be enormous.
January 28th, 2016 at 3:59 PM ^
They don't. The German economy -- like all of Europe -- is treading water.
To the extent they spend more on education, it is mostly because they hardly spend any money on national defense as Uncle Sam has been paying for thier national defense since 1945. Let them pay 20% of the GDP towards their own defense and then I won't puke when they start spouting off about how bad American "infrastructure" is.
January 28th, 2016 at 4:17 PM ^
I'm sure a 42% tax rate above 60k goes a long way to help along with a cultural belief in a strong safety net/social programs, which doesn't exist in America to the extent it does in Europe.
January 28th, 2016 at 4:22 PM ^
January 28th, 2016 at 4:42 PM ^
I would love to straighten out the tax code, but nobody in DC wants to since the days of Bill Bradley...
January 28th, 2016 at 4:18 PM ^
January 28th, 2016 at 4:27 PM ^
Talking about budget, not GDP. That's a typo. We spend about 3 to 3.5% in GDP and Germany spends a little over 1%.
January 29th, 2016 at 12:27 AM ^
Sent from MGoBlog HD for iPhone & iPad
January 28th, 2016 at 2:17 PM ^
January 28th, 2016 at 2:34 PM ^
is national student debt day.
January 28th, 2016 at 2:45 PM ^
Sent from MGoBlog HD for iPhone & iPad
January 28th, 2016 at 7:35 PM ^
Sent from MGoBlog HD for iPhone & iPad
January 28th, 2016 at 2:45 PM ^
You borrowed money. Now pay it back. Humans have been doing this for *literally* thousands of years.
January 28th, 2016 at 2:52 PM ^
Not to mention, pretending there has ever been an analogous situation to this one in all of financial history is just silly
And anyway,
January 28th, 2016 at 2:52 PM ^
Sent from MGoBlog HD for iPhone & iPad
January 28th, 2016 at 2:54 PM ^
January 28th, 2016 at 3:52 PM ^
Sent from MGoBlog HD for iPhone & iPad
January 28th, 2016 at 3:05 PM ^
One of my siblings went to UDM for dental school. The tuition is flatout disgusting. In Canada, we end up with managable debt by the time we finish up school. Also, we have provincial loan services that don't require a co-signer and don't hassle you.
January 28th, 2016 at 3:12 PM ^
There needs to be an attitude change in America. The current parents of my generation as a whole have pushed college on so many people that are not meant for it. I got to a MAC school where tuition is fairly inexpensive (University of Toledo) and it is known for being a decent engineering school. Co-ops are not required for my program (Construction Engineering Technology) but I do plan on doing a similar thing or internship this summe which should lead me to a decent job once I graduate. After everything I should only end up with 20-25k in student loans after paying for part of it myself and a little help from parents.
I really don't understand the people that go to college anymore and accumulate the cost of a small house in 4-5 years. You've just screwed yourself for basically the rest of your life unless you're making over 100k or more a year.
Something has to change, but colleges know they can charge that much because people will pay it and will screw themselves with moutains of easily available loans.
January 28th, 2016 at 3:44 PM ^
<DING DING DING>
We have a winner, folks.
January 28th, 2016 at 4:33 PM ^
*the opinion you like best.
January 28th, 2016 at 4:43 PM ^
Is this entire country. Not everyone will end up retiring at 65 owning their home and riding off into the sunset.
People that don't go to college are now saying give me $15/hr, for every damn job. Flipping burgers isn't worth $15/hour. Find a job that doesn't require a college education, but more involved then working at McDonalds. There are jobs and professions that cannot and will never be outsourced.
Develop a skill outside of a college enviroment and don't expect handouts. That's what I ask.
January 28th, 2016 at 5:40 PM ^
I understand these are kids making decisions and they don't see the $$$ at the end of the tunnel or just don't realize what's going to happen.
If you need to take out loans, go to a cheaper school, or work your butt off to get in for less to the school of your desire. All the more reason to do well in high school, but no one tells these kids any of that.
Sent from MGoBlog HD for iPhone & iPad
January 28th, 2016 at 3:44 PM ^
I feel good that they have a day for me...
Engineering Degree and MBA both in state - still cost me almost $80K in loans and that sounds like I am lucky - have $38K or something left....yay! If those degrees were out of state - probably about $200K in loans - sweet baby Jesus...sorry to all those poor souls with no good in state public universities.
January 28th, 2016 at 4:46 PM ^
One of the perversities in the system is that colleges bear none of the risk of their students defaulting on their loans; they get paid up front and get to keep the tuition you paid no matter what happens later. If you changed the system so that universities themselves became liable when their students defaulted on loans, schools would find ways to control their costs right quick.
As is, there are many "schools" that exist for absolutely no reason other than to suck up student loan dollars, and they contribute hugely to the crisis. This is especially bad in my industry (law), where an absolute ton of law schools have popped up over the last decade, admitting tens of thousands of people who have no business whatsoever going to law school and enticing them to go by pushing misleading or outright fraudulent "statistics" about their graduates' career prospects. As a result, there are legions of people who took on 6-figure debt loads thinking they could pay it off with solid $80-$90k jobs and found themselves unable to get any work at all -- legal employers looked at their degrees and said "that's a shitty school, we don't hire attorneys from there"; and non-legal employers looked at their degrees and said "this person has a JD, they'll probably bail on me as soon as they can find a job as a lawyer." But the schools rake in millions regardless because the loan checks cash no matter what and there's always a new group of suckers to prey on.
January 28th, 2016 at 6:47 PM ^
Sent from MGoBlog HD for iPhone & iPad
January 28th, 2016 at 4:51 PM ^
tried to warn us
January 28th, 2016 at 4:54 PM ^
End the federal reserve, end debt. Return constitutional money that is debt free and issued by the government, not foreign nationals.
January 28th, 2016 at 5:37 PM ^
This thread reminds me, I need to look at my loan paperwork to make sure that my federally backed loans are still forgiven when I die.
Sorry Uncle Sam, the odds of my ever paying them in full aren't so great according to the mortality tables even though I faithfully pay on time every month.
January 28th, 2016 at 5:40 PM ^
is basically signing yourself up for future enslavement to debt for the majority of people. You need a degree to get a basic professional job, but they nickel and dime you for it. It is bullshit.
January 28th, 2016 at 5:49 PM ^
The Federal government should get together with these note holders and come up with a plan and then simply hire all the people who are deeply in debt to work x amount of time per week for x amount of time to satisfy all or a portion of the debt. Things that need to be done in the community. There are so many cash strapped cities who are crying out for workers to do upteen different things that aren't getting done. Check out Cleveland, Detroit, Chicago, and Flint as examples.
January 28th, 2016 at 9:17 PM ^
Sent from MGoBlog HD for iPhone & iPad