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One way to deal with the student loans crisis is for a nationwide student loan bailout. You don't have to erase the loans, just refinance them at a much lower i

One way to deal with the student loans crisis is for a nationwide student loan bailout. You don't have to erase the loans, just refinance them at a much lower interest rate. Currently the rate is 7%, which is just insane. For a virtually no-risk loan, which cannot even be discharged in default, that is a terribly high rate. Refinancing will be a transfer of wealth from the rich to the poor. Good for the economy, shores up consumption, and all that. Has the added side-benefit of freeing indentured slaves.

evanpw 11y ago
If the current interest rate is high compared to default risk, why hasn't some private company come in to undercut the government and make a killing? I don't think it's because the banks aren't greedy enough. My guess would be that it's because of the extremely high default rate on student loans, and the extremely favorable repayment terms that government loans offer: payments capped at 10% of discretionary income, and forgiveness after 20 years (10 if working in non-profit or government)[1]. [1] https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven https://studentaid.ed.gov/sa/repay-loans/understand/plans/in...
- littletimmy 11y ago
  If that were true, why would private student interest rate be 7% also? It has no such favorable repayment terms.
  - evanpw 11y ago
    It's my impression that there isn't much private student-loan industry left, having been driven out by federal loans. What's left probably targets a different demographic from the usual one, like borrowers who have already maxed out their federal loans, which might be a riskier group.
pkaye 11y ago
I would be okay with this but other things need reform. They need to cut down on bloated middle management layer in colleges. They need to cut out the shitty diploma mills that don't give graduates much success in getting jobs after graduating.
ersii 11y ago
In Sweden - the current interest rate is 1%. This is financed by the state and is low because of a multitude of factors. One being that it is practically impossible to default on the loan. It will stick around. (The tuition is free for higher education in Sweden, but you can choose to take out a loan for your living expenses during your study period).

evanpw 11y ago

If the current interest rate is high compared to default risk, why hasn't some private company come in to undercut the government and make a killing? I don't think it's because the banks aren't greedy enough. My guess would be that it's because of the extremely high default rate on student loans, and the extremely favorable repayment terms that government loans offer: payments capped at 10% of discretionary income, and forgiveness after 20 years (10 if working in non-profit or government)[1]. [1] https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven https://studentaid.ed.gov/sa/repay-loans/understand/plans/in...

littletimmy 11y ago
If that were true, why would private student interest rate be 7% also? It has no such favorable repayment terms.
- evanpw 11y ago
  It's my impression that there isn't much private student-loan industry left, having been driven out by federal loans. What's left probably targets a different demographic from the usual one, like borrowers who have already maxed out their federal loans, which might be a riskier group.

pkaye 11y ago

I would be okay with this but other things need reform. They need to cut down on bloated middle management layer in colleges. They need to cut out the shitty diploma mills that don't give graduates much success in getting jobs after graduating.

ersii 11y ago

In Sweden - the current interest rate is 1%. This is financed by the state and is low because of a multitude of factors. One being that it is practically impossible to default on the loan. It will stick around. (The tuition is free for higher education in Sweden, but you can choose to take out a loan for your living expenses during your study period).