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> Finance is a very important industry that adds a lot of value. If you get a student loan, you can go to university tomorrow The vast majority of student loan

> Finance is a very important industry that adds a lot of value. If you get a student loan, you can go to university tomorrow The vast majority of student loans are guaranteed by the federal government. The banks take zero risk on these loans and still charge higher rates than home mortgages. Something seems broken there.

bdhess 7y ago
> The vast majority of student loans are guaranteed by the federal government. The banks take zero risk on these loans Do you have a source for this? I can't confirm it. As an example, this description implies that the guarantee is for 97% of outstanding principal: https://www.nolo.com/legal-encyclopedia/what-is-federally-guaranteed-student-loan.html https://www.nolo.com/legal-encyclopedia/what-is-federally-gu... Assuming something close to that, the bank is out 3% of the principal, plus any accumulated interest-- which I would guess is usually substantial, because payments are typically deferred while the student is in school, but the bank's been paying the fed interest during that time period. So I don't have all the numbers, but on the face of it, it doesn't seem totally ridiculous that a secured loan like a mortgage would fetch a better rate than student loans that aren't fully guaranteed.
listenallyall 7y ago
Not for the past 10 years, when govt-guaranteed loans were discontinued. As far as student loans in general, let's see -- no collateral, no down payment, no proof of income. A bit riskier than a mortgage, I'd say.
LatteLazy 7y ago
That doesn't change the fact the loans are useful. In fact it re-enforces it. Finance is so important the federal government underwrites it at huge cost. But it's also not useful or productive apparently!?
- 411111111111111 7y ago
  Nobody you've responded to said that though. They explicitly said that if you wanted to get a loan, private Banks should be there to enable you. The only thing that they wanted was a public bank, so you're not forced to support them if all you need is an online account for transfers.
  - LatteLazy 7y ago
    Sorry, I'm not sure what you mean? My point here is that finance is useful. The view that institutions make too big of a profit off too little risk isn't really relevant to that. Cars are useful no matter what profit Ford makes by making them. Maybe we need to examine the market to make sure its working? Maybe they're duping the government? Maybe they have some hidden reason to justify those rates. I don't know. But the underlying product is useful wither way. I don't object to any of that. But none of it changes the need for credit. The original comment I replied to is very clear: finance is not useful, it's a wealth extraction process Etc. Am I missing your point?
    - 411111111111111 7y ago
      I think you're misunderstanding the original point then It definitely is a wealth extraction industry. This however doesn't mean that it shouldn't exist. even in the best case scenario of the bank financing someone who starts producing products which he sells.. the banks job will only be to extract as much money they can get from this person. As such, they're not producers.. they live off of them. Nonetheless, there'd be less producers without the banks (at least short term), so they're also enablers. This makes them valuable. But still, they earn their money by extracting the value of someone else's product. Which is fine if everybody is a willing participant...

bdhess 7y ago

> The vast majority of student loans are guaranteed by the federal government. The banks take zero risk on these loans Do you have a source for this? I can't confirm it. As an example, this description implies that the guarantee is for 97% of outstanding principal: https://www.nolo.com/legal-encyclopedia/what-is-federally-guaranteed-student-loan.html https://www.nolo.com/legal-encyclopedia/what-is-federally-gu... Assuming something close to that, the bank is out 3% of the principal, plus any accumulated interest-- which I would guess is usually substantial, because payments are typically deferred while the student is in school, but the bank's been paying the fed interest during that time period. So I don't have all the numbers, but on the face of it, it doesn't seem totally ridiculous that a secured loan like a mortgage would fetch a better rate than student loans that aren't fully guaranteed.

listenallyall 7y ago

Not for the past 10 years, when govt-guaranteed loans were discontinued. As far as student loans in general, let's see -- no collateral, no down payment, no proof of income. A bit riskier than a mortgage, I'd say.

LatteLazy 7y ago

That doesn't change the fact the loans are useful. In fact it re-enforces it. Finance is so important the federal government underwrites it at huge cost. But it's also not useful or productive apparently!?

411111111111111 7y ago
Nobody you've responded to said that though. They explicitly said that if you wanted to get a loan, private Banks should be there to enable you. The only thing that they wanted was a public bank, so you're not forced to support them if all you need is an online account for transfers.
- LatteLazy 7y ago
  Sorry, I'm not sure what you mean? My point here is that finance is useful. The view that institutions make too big of a profit off too little risk isn't really relevant to that. Cars are useful no matter what profit Ford makes by making them. Maybe we need to examine the market to make sure its working? Maybe they're duping the government? Maybe they have some hidden reason to justify those rates. I don't know. But the underlying product is useful wither way. I don't object to any of that. But none of it changes the need for credit. The original comment I replied to is very clear: finance is not useful, it's a wealth extraction process Etc. Am I missing your point?
  - 411111111111111 7y ago
    I think you're misunderstanding the original point then It definitely is a wealth extraction industry. This however doesn't mean that it shouldn't exist. even in the best case scenario of the bank financing someone who starts producing products which he sells.. the banks job will only be to extract as much money they can get from this person. As such, they're not producers.. they live off of them. Nonetheless, there'd be less producers without the banks (at least short term), so they're also enablers. This makes them valuable. But still, they earn their money by extracting the value of someone else's product. Which is fine if everybody is a willing participant...