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Should we be loaning out $100k at 5% interest to teenagers, without making kids pay it down for 4 years, and not being able to discharge it in bankruptcy? Woul
by hbosch 7y ago
Should we be loaning out $100k at 5% interest to teenagers, without making kids pay it down for 4 years, and not being able to discharge it in bankruptcy?
Would a bank approve an 18 year old high school grad for a $100k mortgage at the same rates? Say, $0 down, 5% interest, no mortgage payments for 4 years?
Why can a high school grad get the first one and not the other? Is an 18 year old even smart enough about personal finance and debt to understand the differences between the two?
I was a kid who took out a huge student loan to attend university. At the time, all I knew was that “college was mandatory” and I was encouraged to “study my passion”. Fortunately for me I’ve been able to monetize my passion... but at the time, I had no concept of how much money I’d be needing, or how interest stacks debt on top of debt, or how it would affect my credit when I wanted to buy a house at the age of 30, because no one told me these things and with a verbal agreement my parents co-signed the loan (I never signed a paper myself) for me and now I have this baggage for probably a few more decades.
It’s almost impossible to expect an 18 year old in today’s American society to fully understand the crippling punishment of six figure debt and its long term effects on your life. When you have 1 year to figure it out, and the choices are “go to college” or “be a failure” then there is only one way forward — isn’t there? I feel so badly for people in my situation that aren’t working at tech industry wages... and there are many.
- pbreit 7y agoCollege presumably increases the borrowers earning potential. Not so, a house. Average student debt load I believe is much less than $100k. 5% interest accrues very modestly. The bankruptcy thing is irrelevant to this discussion.
- wpdev_63 7y ago>The bankruptcy thing is irrelevant to this discussion. Well if we are talking about the American educational financial system then it's absolutely relevant to the discussion. Cars, houses, credit card debt etc. are all discharged with bankruptcy which keeps the markets in check. Student loan debt is the only debt that cannot be discharged when it becomes impossible for the debtor to repay. As a result we are with in a 1.3 trillion dollar[0] debt bubble. And with the government printing IOUs for the students, the universities/profit education centers take full advantage. If the students were able to discharge the debt then the market would correct itself and education would be affordable and there would be less economic risk. Right now the government is projected to go to a 30 trillion dollar deficit by 2030 with its government job programs and these education 'loans'. Even if you do not have student loans or work in the education system, you should be aware of the large debt bubble that's forming. And if Saudi Arabia, Iran, etc. decide to trade oil on different currencies... well then things will get interesting... It will affect everyone just like the mortgage crisis in 2008.
- orthecreedence 7y ago> The bankruptcy thing is irrelevant to this discussion. Wait, what?? Why do you think costs of education are skyrocketing? It's because lenders can write blank checks to 18 year olds who are going to be the ones footing the bill for the next 20-30 years. If student loans were bankruptcy-forgiveable, lenders would think very carefully about what loans they give out to who, and why. Schools would be focusing on education instead of building worthless buildings that remain mostly-empty (yes, I saw this happen at UC Santa Cruz) or lining the pockets of the administrators. Lenders would be incentivized to loan people money based on their income potential in the future, which does not currently happen. Bankruptcy is not only relevant, it's the entire crux of the issue. Make lenders partially responsible for the debt and you solve an entire slew of problems we currently face.