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> you’d get no sympathy if you buried yourself in debt to buy a Tesla and then didn’t pay off the principle for years. Banks get to create the principal that t

> you’d get no sympathy if you buried yourself in debt to buy a Tesla and then didn’t pay off the principle for years. Banks get to create the principal that they loan out of thin air[1], lend it at ridiculous interest rates to students and have it guaranteed by tax money...they do not have my sympathy! Risk usually dictates interest rates. Meaning that there must be a chance for you to lose the money, but that is not the case with most student loans. Yet they still charge high interest rates. It is criminal that zero-interest (or near zero) loans are not available for students from the government. I am fine with hounding them for life the principal and even not letting them discharge it with bankruptcy, but the interest is practically evil considering the banks take no risk at all. There is literally nothing we can invest our tax money in that will return bigger gains than education and healthcare. [1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

jstanley 8y ago
> I am fine with hounding them for life the principal and even not letting them discharge it with bankruptcy Why?
- SOLAR_FIELDS 8y ago
  The idea is that you can’t “give back” the education so if you could discharge student loan debt the whole system would probably collapse as students would just finish their education and declare bankruptcy.
  - user5994461 8y ago
    The idea is that students have nothing to lose and a mountain of debt when they graduate, so they should systematically declare bankruptcy to erase the debt.
    - Turing_Machine 8y ago
      The bankruptcy would remain on their credit report for seven years (affecting their ability to buy a house, rent an apartment, or perhaps even get a job), so it's not at all correct that they have "nothing to lose".
      - user5994461 8y ago
        It's not like they could repay hundreds of thousands of debt and buy a house within 7 years anyway.
talltimtom 8y ago
As the article clearly shows, the risk in student loans is that the student will accrue more debt that they can handle and not get a high enough income to pay down the principle, in which case the lender will end up getting their money back far far slower than planned. Just because there isn’t a risk of default doesn’t mean there isn’t any risk. If American Student loans were risk free profit at 8% the entire financial market would rush to invest, bringing about competition and driving down the rates.
- mhuffman 8y ago
  > end up getting their money back far far slower than planned "Their money" is where we have a disagreement. They get to create that money (nearly) out of thin air.[1] [1] https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp https://www.investopedia.com/articles/investing/022416/why-b...
hathathat 8y ago
> Banks get to create the principal that they loan out of thin air[1] I’m not sure how you get this from your reference - people deposit money at a bank, and the bank lends (gives!) some of that money out to (e.g.) students. The “creation” comes from both the depositor and the borrower thinking they have the money.
- mhuffman 8y ago
  > people deposit money at a bank, and the bank lends (gives!) some of that money out to (e.g.) students People deposit money at a bank and the bank lends out 10 times as much! Granted the "new money" is destroyed as the principle is paid back, but its new money out of thin air -- and the interest is real money! Here is a more easy-to-read version[1] [1] https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp https://www.investopedia.com/articles/investing/022416/why-b...

jstanley 8y ago

> I am fine with hounding them for life the principal and even not letting them discharge it with bankruptcy Why?

SOLAR_FIELDS 8y ago
The idea is that you can’t “give back” the education so if you could discharge student loan debt the whole system would probably collapse as students would just finish their education and declare bankruptcy.
- user5994461 8y ago
  The idea is that students have nothing to lose and a mountain of debt when they graduate, so they should systematically declare bankruptcy to erase the debt.
  - Turing_Machine 8y ago
    The bankruptcy would remain on their credit report for seven years (affecting their ability to buy a house, rent an apartment, or perhaps even get a job), so it's not at all correct that they have "nothing to lose".
    - user5994461 8y ago
      It's not like they could repay hundreds of thousands of debt and buy a house within 7 years anyway.

talltimtom 8y ago

As the article clearly shows, the risk in student loans is that the student will accrue more debt that they can handle and not get a high enough income to pay down the principle, in which case the lender will end up getting their money back far far slower than planned. Just because there isn’t a risk of default doesn’t mean there isn’t any risk. If American Student loans were risk free profit at 8% the entire financial market would rush to invest, bringing about competition and driving down the rates.

mhuffman 8y ago
> end up getting their money back far far slower than planned "Their money" is where we have a disagreement. They get to create that money (nearly) out of thin air.[1] [1] https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp https://www.investopedia.com/articles/investing/022416/why-b...

hathathat 8y ago

> Banks get to create the principal that they loan out of thin air[1] I’m not sure how you get this from your reference - people deposit money at a bank, and the bank lends (gives!) some of that money out to (e.g.) students. The “creation” comes from both the depositor and the borrower thinking they have the money.

mhuffman 8y ago
> people deposit money at a bank, and the bank lends (gives!) some of that money out to (e.g.) students People deposit money at a bank and the bank lends out 10 times as much! Granted the "new money" is destroyed as the principle is paid back, but its new money out of thin air -- and the interest is real money! Here is a more easy-to-read version[1] [1] https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp https://www.investopedia.com/articles/investing/022416/why-b...