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Student loans are at below-market interest rates and are guaranteed to be available in quantity. The market does not generally offer non-secured signature loan

by patio11 11y ago

Student loans are at below-market interest rates and are guaranteed to be available in quantity. The market does not generally offer non-secured signature loans for $20k to $140k to people with no credit history or limited credit history and no income. When it does, it charges literally 10+% more.

kefka 11y ago
I only care at what the banks' interest percentage is. Student loans should be at that. And that's 0.25% Student loans are 8%. And that's bullshit. Theyre making 8% on us for absolutely nothing. And they get guaranteed repayment, since default risk is 0 due to garnishments.
- nordsieck 11y ago
  It's not true that there's zero risk. As they say - "you can't get blood from a stone". There are plenty of people who just don't pay their loans and make so little money there is no realistic recourse for the banks.
  - kefka 11y ago
    Unfortunately, the recourse is a lifetime of garnishment. That may (and can) include garnishment of Social Security.
- tptacek 11y ago
  This doesn't sound right. The markets are populated with people who will invest hundreds of millions of dollars to outcompete other firms for sub-penny advantages on trades, and, contrary to popular belief, the largest and most successful of those firms are not making so much money that they're upending the finance industry. So if somebody is making 8% for doing "absolutely nothing", can you explain why somebody else isn't taking them to the cleaners by offering to do the same nothing for 7.9%?
  - kefka 11y ago
    That's because the interest rate is set by Congress. Captive audience. In essence, there's no reason to.
- rtpg 11y ago
  That 0.25% is for a 24-72 hour loan, not for a multi-year loan. If you spread it out, that's a 25% yearly interest rate. You want that rate?
steven2012 11y ago
But they are secured. Meaning that if you don't pay, your wages will get garnished, etc. You can't dispose of the debt, so how is that not secured?
- PeterisP 11y ago
  They are unsecured in that there's no collateral that can be "quickly" (<1 year) repossessed to recover most of the loan, just as any other unsecured debt - credit cards and other consumer lending. The differences in bankruptcy are not relevant; for student loans the lender can easily be unable to pay for the rest of their lives, thus it's classified as unsecured loan.

by patio11 11y ago

kefka 11y ago

I only care at what the banks' interest percentage is. Student loans should be at that. And that's 0.25% Student loans are 8%. And that's bullshit. Theyre making 8% on us for absolutely nothing. And they get guaranteed repayment, since default risk is 0 due to garnishments.

nordsieck 11y ago
It's not true that there's zero risk. As they say - "you can't get blood from a stone". There are plenty of people who just don't pay their loans and make so little money there is no realistic recourse for the banks.
- kefka 11y ago
  Unfortunately, the recourse is a lifetime of garnishment. That may (and can) include garnishment of Social Security.
tptacek 11y ago
This doesn't sound right. The markets are populated with people who will invest hundreds of millions of dollars to outcompete other firms for sub-penny advantages on trades, and, contrary to popular belief, the largest and most successful of those firms are not making so much money that they're upending the finance industry. So if somebody is making 8% for doing "absolutely nothing", can you explain why somebody else isn't taking them to the cleaners by offering to do the same nothing for 7.9%?
- kefka 11y ago
  That's because the interest rate is set by Congress. Captive audience. In essence, there's no reason to.
rtpg 11y ago
That 0.25% is for a 24-72 hour loan, not for a multi-year loan. If you spread it out, that's a 25% yearly interest rate. You want that rate?

steven2012 11y ago

But they are secured. Meaning that if you don't pay, your wages will get garnished, etc. You can't dispose of the debt, so how is that not secured?

PeterisP 11y ago
They are unsecured in that there's no collateral that can be "quickly" (<1 year) repossessed to recover most of the loan, just as any other unsecured debt - credit cards and other consumer lending. The differences in bankruptcy are not relevant; for student loans the lender can easily be unable to pay for the rest of their lives, thus it's classified as unsecured loan.