3 ms·

A little bit unrelated question: why are HE revolving loans so cheap, having negative CAGR? Some piece of economics i totally fail to understand.

lotsofpulp 7y ago
They are guaranteed by taxpayers. >Lots of student loans are also owned by pseudo government agencies or private companies with beneficial relationships with the Department of Education, such as NelNet Inc. (NYSE: NNI) and Sallie Mae (NYSE: SLM). Sallie Mae holds a lot of the loans made under the Federal Family Education Loan Program (FFELP), which was replaced by the federal government. https://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp https://www.investopedia.com/articles/personal-finance/08121...
- drak0n1c 7y ago
  Exactly. To the tune of $120 Billion per year. That's a lot of people being artificially willing and able to pay higher and higher tuitions. The federal taxpayer guarantee on these loans is one of the strongest forces behind the dramatic rise in tuitions - if people can pay and pick the pricier institution, then universities will happily charge and spend more. https://www2.ed.gov/about/reports/annual/2017report/fsa-report.pdf https://www2.ed.gov/about/reports/annual/2017report/fsa-repo...
ThrustVectoring 7y ago
Growth rate of the category is a different thing than internal rate of return. Negative CAGR just means that consumers are paying off or otherwise discharging the loan type at a faster rate than they're taking it out. Revolving home equity got a large amount of that wiped out in the 2008 crisis, which happened in the timeframe in question (2005-2018).
- anovikov 7y ago
  Oh God i just missed the point of that particular chart - it was the chart of average interest of each type of load, by growth rate of the total amount outstanding! LOL! Then it's clear.

3 ms·

A little bit unrelated question: why are HE revolving loans so cheap, having negative CAGR? Some piece of economics i totally fail to understand.

by anovikov 7y ago

lotsofpulp 7y ago
They are guaranteed by taxpayers. >Lots of student loans are also owned by pseudo government agencies or private companies with beneficial relationships with the Department of Education, such as NelNet Inc. (NYSE: NNI) and Sallie Mae (NYSE: SLM). Sallie Mae holds a lot of the loans made under the Federal Family Education Loan Program (FFELP), which was replaced by the federal government. https://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp https://www.investopedia.com/articles/personal-finance/08121...
- drak0n1c 7y ago
  Exactly. To the tune of $120 Billion per year. That's a lot of people being artificially willing and able to pay higher and higher tuitions. The federal taxpayer guarantee on these loans is one of the strongest forces behind the dramatic rise in tuitions - if people can pay and pick the pricier institution, then universities will happily charge and spend more. https://www2.ed.gov/about/reports/annual/2017report/fsa-report.pdf https://www2.ed.gov/about/reports/annual/2017report/fsa-repo...
ThrustVectoring 7y ago
Growth rate of the category is a different thing than internal rate of return. Negative CAGR just means that consumers are paying off or otherwise discharging the loan type at a faster rate than they're taking it out. Revolving home equity got a large amount of that wiped out in the 2008 crisis, which happened in the timeframe in question (2005-2018).
- anovikov 7y ago
  Oh God i just missed the point of that particular chart - it was the chart of average interest of each type of load, by growth rate of the total amount outstanding! LOL! Then it's clear.