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higher risk how? COmpany A borrow 80k and goes bankrupt - that money goes to collections and comes out of the assets of the company, very unlikely the full amo
by unprepare 11y ago
higher risk how?
COmpany A borrow 80k and goes bankrupt - that money goes to collections and comes out of the assets of the company, very unlikely the full amount will be paid back
Alternatively, Person A borrows 80k in student loans and goes bankrupt. 100% of the 80k will still be collected from the student, as student loans are not dischargeable debt. Person A's wages will be garnished, debt resold to collection agencies, credit adversely affected, and yet still the entire amount will be paid back.
If you think the scenario where its possible you never get your money back is less risky, i have a bridge I'd like to sell you.
- dragandj 11y agoYes, but there are many bumps and time passed until many of those loans are paid back. And if the debtor does not have enough money, there is nothing to repossess. These loans also starts getting paid back at least 4 and likely more years later. As other people noticed, if it is such a great investment, people should start student loan companies and offer loans with less interest.
- harryh 11y agoIf you think that student loans are systematically overpriced you should consider starting a student loan company that charges a lower interest rate. There are ample backers for this sort of thing if you have strong enough evidence for your thesis. Or maybe student loans are pretty much a commodity product in which sellers viciously compete to provide the lowest possible price so the interest rates we see are commensurate with the actual risk being taken.
- unprepare 11y agoshifting the goalposts i didn't say student loans are overpriced, i said a student loan is lower risk than most other types of loan, since it is non-dischargeable debt. That is the argument i'm making and your response doesn't address any of it. also, in case you arent aware, the overwhelming majority of student loan debt has been financed through federal and state government programs, not the private market "in which sellers viciously compete to provide the lowest possible price" as you seem to believe
- harryh 11y ago1) Loans are priced based on their risk! Saying student loans are actually less risky than lower priced loans IS saying that they are overpriced. 2) You are correct that most student loans are financed by government programs. That allows them to undercut even the viciously competing private market because the government isn't trying to make a profit. So that makes the loans even cheaper which makes your assertion that they're overpriced more, not less, ridiculous.
- unprepare 11y agoCongress sets the rate for federal student loans, they are not based on their risk.
- unprepare 11y agoTo whomever is downvoting my comment: >Rather, pricing and loan limits are politically determined by Congress https://en.wikipedia.org/wiki/Student_loans_in_the_United_States#Federal_loans_to_students https://en.wikipedia.org/wiki/Student_loans_in_the_United_St... >Who sets interest rates for federal student loans? >Interest rates on federal student loans are set by Congress. https://studentaid.ed.gov/sa/types/loans/interest-rates https://studentaid.ed.gov/sa/types/loans/interest-rates Also, there have been several bills proposed to congress to lower the loan rates, and to allow refinancing of existing loan rates. Anyone saying federal loan rates are determined by some actuary calculating risk is plainly wrong.
- mark-r 11y agoYou're forgetting the case where the person dies. I wonder if there's a correlation between student loan debt and suicides?