5 ms·

What would the effects of changing the student loan system be? I assume you mean to increase the creditor's risk to levels comparable to other types of debt. Pe

What would the effects of changing the student loan system be? I assume you mean to increase the creditor's risk to levels comparable to other types of debt. Personally, I'd expect that to result in higher interest rates for student debt, and more stringent eligibility requirements. IOW, a higher barrier to entry to education. Maybe that would be good, it depends on how the price of education would react, and in whether a high level of education is seen as a positive or not.

rocqua 6y ago
If you want to make student loans more accessible, the trick is not to stimulate student loans be legalizing the loan-sharking of students. This way you are just encouraging students to take a bad deal. You are making the system more accessible by offering really bad options. If the reasoning is "It is a good idea to have high education", then stimulate that directly. At the very least, have government-backed or government-supplied loans. And ensure those loans have reasonable terms. I know australia has an interesting system. In my country (the Netherlands), student loans are given by the government. They are hard to get rid of, _but_ the repayment terms are very very lenient. Very low interest rates (either 0% or the current 10 year government bond rate); a maximum monthly payment of 30% of what you make above minimum income; debt forgiveness after 30 years; the ability to pause repayment for 2 years in total. I am not a big fan of this system (I still think it is too burdensome on students) but it sure seems a lot more reasonable than the US system. Even though this is also a form of debt that cannot be cleared by bankruptcy, the generous repayment terms really help. The trick here is that the government is willing to take a slight loss (through the 30 year debt-forgiveness) on repayments. Though that the moment, since our 10 year bonds have negative interest, the student loans might be making a profit for our government. Still I am not going to complain about a loan with 0% interest.
- vonmoltke 6y ago
  > In my country (the Netherlands), student loans are given by the government. Over 90% of American student loans are also issued by the federal government.
  - pnutjam 6y ago
    My daughter got a scholarship that covers her tuition 100%, so she only needed loans to cover room and board. Federal oans were still not enough to cover this, in one of the least expensive state schools. My credit sucks and we didn't qualify for a cosigned loan to cover the extra. Luckily the school offers a reasonable payment plan and I'm taking advantage of that. She is just living in a dorm with a standard meal plan. Between this extra out of pocket cost and the books, I can't see how a lower income family could afford college.
    - vonmoltke 6y ago
      > My credit sucks and we didn't qualify for a cosigned loan to cover the extra. I assume by that you mean the parent PLUS loan? Yeah, the federal loan limits outside the PLUS program are pretty low, especially for underclassmen. I don't have any statistics, but I suspect most of the Department of Education's newly-issued debt (by dollar amount) is in PLUS loans since those cover the full cost of attendance.
  - rocqua 6y ago
    hmmm, I did not know this. What are the terms offered?
- tomp 6y ago
  Do you even know anything about what you’re talking about? A lot of student loans in the US are also backed by the government. So obviously this isn’t the solution. Making money easier to get simply increases the “supply” (or rather, increases the buying power of the students) which basically allows colleges to keep increasing their prices with no increase in quality. If instead loans were given by private creditors, believe me, the quality (in terms of job prospects and earning potential) of the specific college and specific course that a student will study would quickly become very important. No more “social media marketing” or “feminist history” courses costing 50k per year.

rocqua 6y ago

If you want to make student loans more accessible, the trick is not to stimulate student loans be legalizing the loan-sharking of students. This way you are just encouraging students to take a bad deal. You are making the system more accessible by offering really bad options. If the reasoning is "It is a good idea to have high education", then stimulate that directly. At the very least, have government-backed or government-supplied loans. And ensure those loans have reasonable terms. I know australia has an interesting system. In my country (the Netherlands), student loans are given by the government. They are hard to get rid of, _but_ the repayment terms are very very lenient. Very low interest rates (either 0% or the current 10 year government bond rate); a maximum monthly payment of 30% of what you make above minimum income; debt forgiveness after 30 years; the ability to pause repayment for 2 years in total. I am not a big fan of this system (I still think it is too burdensome on students) but it sure seems a lot more reasonable than the US system. Even though this is also a form of debt that cannot be cleared by bankruptcy, the generous repayment terms really help. The trick here is that the government is willing to take a slight loss (through the 30 year debt-forgiveness) on repayments. Though that the moment, since our 10 year bonds have negative interest, the student loans might be making a profit for our government. Still I am not going to complain about a loan with 0% interest.

vonmoltke 6y ago
> In my country (the Netherlands), student loans are given by the government. Over 90% of American student loans are also issued by the federal government.
- pnutjam 6y ago
  My daughter got a scholarship that covers her tuition 100%, so she only needed loans to cover room and board. Federal oans were still not enough to cover this, in one of the least expensive state schools. My credit sucks and we didn't qualify for a cosigned loan to cover the extra. Luckily the school offers a reasonable payment plan and I'm taking advantage of that. She is just living in a dorm with a standard meal plan. Between this extra out of pocket cost and the books, I can't see how a lower income family could afford college.
  - vonmoltke 6y ago
    > My credit sucks and we didn't qualify for a cosigned loan to cover the extra. I assume by that you mean the parent PLUS loan? Yeah, the federal loan limits outside the PLUS program are pretty low, especially for underclassmen. I don't have any statistics, but I suspect most of the Department of Education's newly-issued debt (by dollar amount) is in PLUS loans since those cover the full cost of attendance.
- rocqua 6y ago
  hmmm, I did not know this. What are the terms offered?
tomp 6y ago
Do you even know anything about what you’re talking about? A lot of student loans in the US are also backed by the government. So obviously this isn’t the solution. Making money easier to get simply increases the “supply” (or rather, increases the buying power of the students) which basically allows colleges to keep increasing their prices with no increase in quality. If instead loans were given by private creditors, believe me, the quality (in terms of job prospects and earning potential) of the specific college and specific course that a student will study would quickly become very important. No more “social media marketing” or “feminist history” courses costing 50k per year.