5 ms·

The logic runs like this: A secured loan should be easy and cheap to get, because if it goes bad, the lender can reposes the collateral. This is like your hou

by Lazare 7y ago

The logic runs like this: A secured loan should be easy and cheap to get, because if it goes bad, the lender can reposes the collateral. This is like your house and the truck; you ran up some debt, it didn't work out, you lost them both, but you also lost the debt. An unsecured loan should be harder to get and pretty expensive, because it's riskier. If I run up $20k on my credit card paying for a fancy vacation, then can't pay, they can't take that vacation back from me. If I declare bankruptcy, I get a "free" vacation (I mean, not exactly, bankruptcy is complicated and expensive, but...) That's why credit cards run a 16% interest rate. Student loans are for an education, which you can't repossess, but we also don't want to carefully vet applicants or charge them 16% interest rates. To try and square the circle, we've decided that student loans will be super easy to get and have very low rates, but then to try and avoid abuse we've decided they can't be discharged in bankruptcy. And then to try and avoid people being stuck with massive loans they can never repay, there's a bunch of complex income-based repayment plans and schemes where you can get balances forgiven in some cases. > Why is it I can ditch close to 90 grand in loans lickety-split but students cant? how is education any different? Education debt is different due to the combination of being inherently riskier than, say, a mortgage to buy a house, while still being something we want widely and cheaply available. That being said, your biologist friend may have some better options if she looks into it.

hammock 7y ago
>Student loans are for an education, which you can't repossess, but we also don't want to carefully vet applicants or charge them 16% interest rates. To try and square the circle, we've decided that student loans will be super easy to get and have very low rates, but then to try and avoid abuse we've decided they can't be discharged in bankruptcy. And then to try and avoid people being stuck with massive loans they can never repay, there's a bunch of complex income-based repayment plans and schemes where you can get balances forgiven in some cases You say that like there was some master central plan, but I doubt that's the case. Would love to know the history of how our whole "system" / tangle of rules etc came to be, timeline of events, etc
- throw20102010 7y ago
  Here you go: https://www.cappex.com/articles/money/history-of-bankrupty-dischange-for-student-loans https://www.cappex.com/articles/money/history-of-bankrupty-d... The parallel history to this is that the banks lobbied for the "mean" changes to the bankruptcy rules. The politicians were seeking reelection by guaranteeing that everyone could go to college at lower and lower rates, but they needed to keep the bankers happy too: https://www.nerdwallet.com/blog/loans/student-loans/federal-student-loan-interest-rate-timeline-events/ https://www.nerdwallet.com/blog/loans/student-loans/federal-... Caveat: If you don't live in the US, neither of these histories apply to you.
acct1771 7y ago
> we also don't want to carefully vet applicants Sounds like you don't want to vet them at all, when carefully vetting would be a good answer.
- Lazare 7y ago
  > Sounds like you don't want to vet them at all I'm struggling to understand how you could read my comment and feel like you have any idea what I think should be the case. I am making a positive claim about US politics, not a normative claim about how it should be. > when carefully vetting would be a good answer. No doubt you have a citation for this? An example country that has implemented this with excellent outcomes?
- JamesBarney 7y ago
  What does vetting an 18 yr old for a 60k unsecured debt look like?
desertedisland 7y ago
Who is the 'we' exactly? Perhaps, in my cynicism, it's an attempt to sound like 'we're all in this together everyone! hugs' Maybe this is not a kumbaya moment. I'm guessing the 'we' breaks down the moment someone defaults on their loan hey? Maybe the reality is that student loans are a zero risk gravy train - a bonanza for greedy, rapacious companies who can lump 20 year olds - kids basically - just starting their working lives with a lifetime of indenture that they can never break free from - regardless of how their life circumstances may change. It is the ultimate business model! (Of which I'm guessing you're a part).
- rdiddly 7y ago
  Society - all of us, insofar as we are imperfectly represented by our Congresstrons.
- Lazare 7y ago
  "We" in this case, means US society. You can look at the laws, and the debates, and the campaigns of different political candidates, and the debates over bankruptcy law reforms, and the jokes on late night comedy shows, and you can see fairly clearly the consensus that society has settled on. We have clearly decided that higher education should be open to almost everyone, and that it should be affordable, although we're deeply conflicted on what that means. > I'm guessing the 'we' breaks down the moment someone defaults on their loan hey? I mean, we have a major political candidate campaigning in part on forgiving all student loans and making tuition free at state schools, so...apparently not? I mean, she's not doing that well in polling so far, but it's clearly a topic on the table for discussion. > a bonanza for greedy, rapacious companies who can lump 20 year olds - kids basically - just starting their working lives with a lifetime of indenture that they can never break free from That's not how it works in the US, as has been discussed a fair bit in this thread. Get into an income based repayment program and you can pay 10% of your discretionary income a year for 20 years, and then the balance will be forgiven. > It is the ultimate business model! (Of which I'm guessing you're a part). I don't even live in the US, have never had a student loan, and have never worked for an educational institution or a company involved in making student loans, so perhaps you should try making better guesses. :)
nullc 7y ago
> and have very low rates, The rates used to be very low. They are no longer very low. Lower than 16% yes, but 9% is not uncommon. The much-higher-than-inflation rate turns a languishing undischragable loan into a debilitating time-bomb.

by Lazare 7y ago

hammock 7y ago

>Student loans are for an education, which you can't repossess, but we also don't want to carefully vet applicants or charge them 16% interest rates. To try and square the circle, we've decided that student loans will be super easy to get and have very low rates, but then to try and avoid abuse we've decided they can't be discharged in bankruptcy. And then to try and avoid people being stuck with massive loans they can never repay, there's a bunch of complex income-based repayment plans and schemes where you can get balances forgiven in some cases You say that like there was some master central plan, but I doubt that's the case. Would love to know the history of how our whole "system" / tangle of rules etc came to be, timeline of events, etc

throw20102010 7y ago
Here you go: https://www.cappex.com/articles/money/history-of-bankrupty-dischange-for-student-loans https://www.cappex.com/articles/money/history-of-bankrupty-d... The parallel history to this is that the banks lobbied for the "mean" changes to the bankruptcy rules. The politicians were seeking reelection by guaranteeing that everyone could go to college at lower and lower rates, but they needed to keep the bankers happy too: https://www.nerdwallet.com/blog/loans/student-loans/federal-student-loan-interest-rate-timeline-events/ https://www.nerdwallet.com/blog/loans/student-loans/federal-... Caveat: If you don't live in the US, neither of these histories apply to you.

acct1771 7y ago

> we also don't want to carefully vet applicants Sounds like you don't want to vet them at all, when carefully vetting would be a good answer.

Lazare 7y ago
> Sounds like you don't want to vet them at all I'm struggling to understand how you could read my comment and feel like you have any idea what I think should be the case. I am making a positive claim about US politics, not a normative claim about how it should be. > when carefully vetting would be a good answer. No doubt you have a citation for this? An example country that has implemented this with excellent outcomes?
JamesBarney 7y ago
What does vetting an 18 yr old for a 60k unsecured debt look like?

desertedisland 7y ago

Who is the 'we' exactly? Perhaps, in my cynicism, it's an attempt to sound like 'we're all in this together everyone! hugs' Maybe this is not a kumbaya moment. I'm guessing the 'we' breaks down the moment someone defaults on their loan hey? Maybe the reality is that student loans are a zero risk gravy train - a bonanza for greedy, rapacious companies who can lump 20 year olds - kids basically - just starting their working lives with a lifetime of indenture that they can never break free from - regardless of how their life circumstances may change. It is the ultimate business model! (Of which I'm guessing you're a part).

rdiddly 7y ago
Society - all of us, insofar as we are imperfectly represented by our Congresstrons.
Lazare 7y ago
"We" in this case, means US society. You can look at the laws, and the debates, and the campaigns of different political candidates, and the debates over bankruptcy law reforms, and the jokes on late night comedy shows, and you can see fairly clearly the consensus that society has settled on. We have clearly decided that higher education should be open to almost everyone, and that it should be affordable, although we're deeply conflicted on what that means. > I'm guessing the 'we' breaks down the moment someone defaults on their loan hey? I mean, we have a major political candidate campaigning in part on forgiving all student loans and making tuition free at state schools, so...apparently not? I mean, she's not doing that well in polling so far, but it's clearly a topic on the table for discussion. > a bonanza for greedy, rapacious companies who can lump 20 year olds - kids basically - just starting their working lives with a lifetime of indenture that they can never break free from That's not how it works in the US, as has been discussed a fair bit in this thread. Get into an income based repayment program and you can pay 10% of your discretionary income a year for 20 years, and then the balance will be forgiven. > It is the ultimate business model! (Of which I'm guessing you're a part). I don't even live in the US, have never had a student loan, and have never worked for an educational institution or a company involved in making student loans, so perhaps you should try making better guesses. :)

nullc 7y ago

> and have very low rates, The rates used to be very low. They are no longer very low. Lower than 16% yes, but 9% is not uncommon. The much-higher-than-inflation rate turns a languishing undischragable loan into a debilitating time-bomb.