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The normally given reason is that the asset being paid for (education) can’t be taken back by the loan provider. If you get a mortgage and can’t repay it, the b
by mdorazio 7y ago
The normally given reason is that the asset being paid for (education) can’t be taken back by the loan provider. If you get a mortgage and can’t repay it, the bank repossesses your house. If you get a college education and can’t pay your student loan, the bank can’t take back your degree or what you learned.
This is, of course, not any kind of valid basis for the current status quo and in a sane setup lenders would either have to be much pickier about who they lend to or require tangible collateral.
- anovikov 7y agoBut what if you can't repay your credit card debt for example? There's also no collateral.
- Ambele 7y agoCredit card interest rates typically range from 20 to 25%. Students have a thin credit file and wouldn't qualify for lower rates. Student loan interest rates range from 6.6% to 7.6%. If a percentage of student loans were allowed to default, then student loan rates would have to increase much more for the lenders to break even. Hopefully the Fed would consider bailing out the students like they did with the big banks but I wouldn't bet on it.