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Not defending student loans or the entire predatory infrastructure that supports them, but rates on all unsecured loans are nasty. Home loans can be cheap beca
by saalweachter 8y ago
Not defending student loans or the entire predatory infrastructure that supports them, but rates on all unsecured loans are nasty.
Home loans can be cheap because they are secured by the value of the house: if you default, the bank thinks it can sell your house and still make a profit.
Unsecured loans yield nothing when they go bad, so they have absurd interest rates whether the loan is for education, business, or whatever. That’s why many people choose to eg take out a second mortgage when starting a business: better interest rates, because it is secured, but you lose your house if your business fails.
- asmithmd1 8y agoEducational loans are guaranteed by the US government. When she defaults, Sallie Mae will sell her loan to the government and will be compensated 100% for all principal and interest. The US government now owns a non-performing loan which they then sell for 10%-15% of what they bought it for to - you guessed it - Sallie Mae loan recovery. Since this loan can't be discharged by bankruptcy, part of every paycheck she ever earns will be garnished, every tax refund will be seized until Sallie Mae gets their money.
- saalweachter 8y agoMy understanding is that only federal student loans are insured & guaranteed by the government, and that private student loans, while they benefit from the whole “can’t be defaulted on” thing, can still go bad.