7 ms·

I think student loans should be 0% interest forever.

by sjg007 6y ago

m348e912 6y ago
I think something like this might be a more reasonable approach than forgiving student loan debt completely. There is little risk to banks servicing federally backed student loans, so interest rates should reflect that. There is a cost to servicing the loan, and banks should be compensated for that, but I don't think student loans should be a large government backed profit center for banks.
- uncoder0 6y ago
  Yeah... I would even be fine if the govt covered the cost of servicing the loan to keep the interest at 0%.
  - ipsocannibal 6y ago
    The federal government used to subsidize the interest on some student loans. Isn't this effectively making the interest rate 0%.
  - sjg007 6y ago
    Just run the program through the IRS.
- valuearb 6y ago
  Zero risk isn’t zero cost. Banks pay interest to depositors, pay for loan servicing, have staff and marketing costs, etc. 0% would just be another handout to those least entitled to deserve one. The average college graduate will make roughly double the lifetime earnings of a high school graduate. Why should high school graduates pay more in taxes to make college loans cheaper for their bosses?
  - jdmoreira 6y ago
    The college graduate will pay at least double in taxes. Will hopefully also deliver more in terms of innovation a competitiveness. It could be easily seen as an incentive.
    - valuearb 6y ago
      The college graduate only pays more in taxes because they make immensely more. If your wages were doubled, would you complain about paying a quarter of the new earnings in taxes? They will contribute innovation regardless, why should they be allowed to foist their education costs on their subordinates?
quantified 6y ago
There needs to be a meaningful repayment schedule, though. Otherwise I can run up the debt and never pay it back, thus making it free. Accumulating interest at least keeps you “interested” in paying back sooner than later.
- sjg007 6y ago
  I'm sure the IRS can figure out a way to keep people interested. We already get a deduction for interest so I'm sure they can incentivize repayment.
Meph504 6y ago
then all student loans would be be via the government, as why would any financial institution loan the money at 0% even more so now, with the level of default that high? Is that possible, certainly, is there enough will from the people of the U.S. to make it a priority to pay an increase in taxes, no. I think people should be responsible with their choices and that these sort of debts should require a class be taken before you have access to this level of debt.
- m463 6y ago
  There could be a case made for educated people paying more taxes over the years, so in that respect there could be some "externalities" to support a zero interest rate. That and the fact that large institutions are paying very little to borrow money nowadays. So maybe there is an argument for a "wholesale" interest rate. I thought it is also impossible to default on student loans.
  - Meph504 6y ago
    From the banks perspective to make the money back, that it takes for a lot of people to payback their student loans, means they end up charging massive interest. I don't like to see people placed in a financial situation that is a massive hardship, but the details were there, they weren't tricked, it's not like they are people loan sharing these loans. The people go to them, have the terms presented and seemingly take the loans that put them in a world of hurt. Many of these loans, have you building interest the whole time you are in school. So you end up owning principal + 4 years interest the day you graduate, that's a bad deal that students take every semester. And you can't easily discharge the debt, but tons of people just don't pay their loans back. And many more that take 10 times as long as they agreed to.
- sjg007 6y ago
  >then all student loans would be be via the government They already are effectively. Private student loans are for the difference between what the government will loan out at for the tuition/cost of living costs. The government doesn't guarantee them. The problem is you can't discharge private student loans in bankruptcy. So they are personal loans that get special treatment.

I think student loans should be 0% interest forever.

by sjg007 6y ago

I think student loans should be 0% interest forever.

I think something like this might be a more reasonable approach than forgiving student loan debt completely. There is little risk to banks servicing federally backed student loans, so interest rates should reflect that. There is a cost to servicing the loan, and banks should be compensated for that, but I don't think student loans should be a large government backed profit center for banks.

uncoder0 6y ago
Yeah... I would even be fine if the govt covered the cost of servicing the loan to keep the interest at 0%.
- ipsocannibal 6y ago
  The federal government used to subsidize the interest on some student loans. Isn't this effectively making the interest rate 0%.
- sjg007 6y ago
  Just run the program through the IRS.
valuearb 6y ago
Zero risk isn’t zero cost. Banks pay interest to depositors, pay for loan servicing, have staff and marketing costs, etc. 0% would just be another handout to those least entitled to deserve one. The average college graduate will make roughly double the lifetime earnings of a high school graduate. Why should high school graduates pay more in taxes to make college loans cheaper for their bosses?
- jdmoreira 6y ago
  The college graduate will pay at least double in taxes. Will hopefully also deliver more in terms of innovation a competitiveness. It could be easily seen as an incentive.
  - valuearb 6y ago
    The college graduate only pays more in taxes because they make immensely more. If your wages were doubled, would you complain about paying a quarter of the new earnings in taxes? They will contribute innovation regardless, why should they be allowed to foist their education costs on their subordinates?

quantified 6y ago

There needs to be a meaningful repayment schedule, though. Otherwise I can run up the debt and never pay it back, thus making it free. Accumulating interest at least keeps you “interested” in paying back sooner than later.

sjg007 6y ago
I'm sure the IRS can figure out a way to keep people interested. We already get a deduction for interest so I'm sure they can incentivize repayment.

Meph504 6y ago

then all student loans would be be via the government, as why would any financial institution loan the money at 0% even more so now, with the level of default that high? Is that possible, certainly, is there enough will from the people of the U.S. to make it a priority to pay an increase in taxes, no. I think people should be responsible with their choices and that these sort of debts should require a class be taken before you have access to this level of debt.

m463 6y ago
There could be a case made for educated people paying more taxes over the years, so in that respect there could be some "externalities" to support a zero interest rate. That and the fact that large institutions are paying very little to borrow money nowadays. So maybe there is an argument for a "wholesale" interest rate. I thought it is also impossible to default on student loans.
- Meph504 6y ago
  From the banks perspective to make the money back, that it takes for a lot of people to payback their student loans, means they end up charging massive interest. I don't like to see people placed in a financial situation that is a massive hardship, but the details were there, they weren't tricked, it's not like they are people loan sharing these loans. The people go to them, have the terms presented and seemingly take the loans that put them in a world of hurt. Many of these loans, have you building interest the whole time you are in school. So you end up owning principal + 4 years interest the day you graduate, that's a bad deal that students take every semester. And you can't easily discharge the debt, but tons of people just don't pay their loans back. And many more that take 10 times as long as they agreed to.
sjg007 6y ago
>then all student loans would be be via the government They already are effectively. Private student loans are for the difference between what the government will loan out at for the tuition/cost of living costs. The government doesn't guarantee them. The problem is you can't discharge private student loans in bankruptcy. So they are personal loans that get special treatment.