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The federal student loan programs are actually awful value-wise. If you're in a degree program that typically pays well upon graduation, private student loans u

The federal student loan programs are actually awful value-wise. If you're in a degree program that typically pays well upon graduation, private student loans usually offer much lower interest rates -- lower than even the subsidized federal loans. I got my loans from SoFi at 4.5%; federal rate was around 7.5%. The way federal student loans work right now (auto-approved at high interest rates with no cap or restrictions on degree program) basically ensured a generation of Americans were bound to wage-slavery.

bsanr2 7y ago
Much like subprime loans, they're often the only ones available to the ones most in need of them. The idea of "risk" based on things like one's race or or location of residence or income actually INCREASING the price of these loans is cynical and deplorable.
- toasterlovin 7y ago
  Do you have evidence that race is used? I’m almost certain that would be illegal.
  - bsanr2 7y ago
    It's illegal, and it's totally been used. https://www.pbs.org/wnet/need-to-know/opinion/wells-fargo-settlement-an-important-victory-for-minority-homeowners-communities/14150/ https://www.pbs.org/wnet/need-to-know/opinion/wells-fargo-se... That was the instance they were caught for mortgages, but it's happened infamously and recently in auto loans, farm loans, and business loans also. It's unlikely that covert discrimination wouldn't then extend to student loans. While that likely phenomenon is hidden, what does happen out in the open is that interest rates are higher for people who live in majority-black neighborhoods, which also correlates to a higher default rate. That means one of two things. The intent could be to discriminate against black people by suffusing the loan terms with America's general distrust of black people (and considering the history of racism in lending across all loan types, I don't doubt that this is the case). Alternatively, non-black people in majority-black neighborhoods might be subject to the same high rates; in that case, direct discrimination isn't taking place, but it shows that the banks are setting rates knowing that they'll result in higher interest payments and defaults. Unfortunately, there's no way to know because the banks refuse to reveal their formulas or allow matched pair testing.

bsanr2 7y ago

Much like subprime loans, they're often the only ones available to the ones most in need of them. The idea of "risk" based on things like one's race or or location of residence or income actually INCREASING the price of these loans is cynical and deplorable.

toasterlovin 7y ago
Do you have evidence that race is used? I’m almost certain that would be illegal.
- bsanr2 7y ago
  It's illegal, and it's totally been used. https://www.pbs.org/wnet/need-to-know/opinion/wells-fargo-settlement-an-important-victory-for-minority-homeowners-communities/14150/ https://www.pbs.org/wnet/need-to-know/opinion/wells-fargo-se... That was the instance they were caught for mortgages, but it's happened infamously and recently in auto loans, farm loans, and business loans also. It's unlikely that covert discrimination wouldn't then extend to student loans. While that likely phenomenon is hidden, what does happen out in the open is that interest rates are higher for people who live in majority-black neighborhoods, which also correlates to a higher default rate. That means one of two things. The intent could be to discriminate against black people by suffusing the loan terms with America's general distrust of black people (and considering the history of racism in lending across all loan types, I don't doubt that this is the case). Alternatively, non-black people in majority-black neighborhoods might be subject to the same high rates; in that case, direct discrimination isn't taking place, but it shows that the banks are setting rates knowing that they'll result in higher interest payments and defaults. Unfortunately, there's no way to know because the banks refuse to reveal their formulas or allow matched pair testing.