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A lot of people have trouble paying their student loans and many seem to call for cancellation of all student debts. The interest rates on US student loans are

• Rebelgecko 5y ago
  Theres a strong correlation between the cost of a house and mortgage interest rates (which makes sense- most people set their budget based on a monthly payment, not on an overall purchase price). I wouldn't be surprised if there was a similar correlation for tuition costs (which have blown up over the last few decades)
  • entangledqubit 5y ago
    From what I understand, in the US it's much easier to walk away from a mortgage (with an underlying asset to reclaim) than student loans. I'm under the impression that this (and government default guarantees) makes lenders more willing to lend money. I'm curious if tuition would have risen as much if lenders were less willing to lend money due to structural changes (e.g. actually being able to lose money).
• lordnacho 5y ago
  The government is a very different credit risk to a student. More likely to default -> higher interest rate. Having said that I do think they've got something wrong over there.
  • JJMcJ 5y ago
    Private student loans often have very high rates, like credit cards. Very easy to end up paying $200,000 to retire a $50K debt.
    • chrisseaton 5y ago
      > Private student loans often have very high rates, like credit cards. Credit card rates are often something like 20%. Are student loan rates really that high?
      • monocasa 5y ago
        I've seen people with above 10%.
      • somehnguy 5y ago
        My highest was 14%. At their suggested payment rate it was going to take something like 15 years to pay off because the payments are mostly just covering interest. Without giving too much information away this loan was for an in-state state university, not some crazy expensive private school. It's borderline criminal in my opinion. I'm so glad I was talked into going to a state university instead of the great private school I got accepted at, the loans for that would still be absolutely soul crushing. The loans I have now are just mildly soul crushing.
        • chrisseaton 5y ago
          I thought the unspoken truth was almost nobody actually pays the published private tuition rates so it’s usually actually cheaper or even free to go to a private university?
          • somehnguy 5y ago
            Maybe people more well off or the opposite than I. As someone smack dab in the middle (my parents were just starting to make OK money and not struggle as I finished high school, AKA non-existent savings but current income looked good) the university said our out of pocket costs were around $40k a year when we sat down with financial aid. They give you next to nothing in cases like that, it is expected to be all parents money or loans. Not happening. That was the case for the 2 private schools I visited while in the process of picking a college. Very small sample size of course, YMMV.
  • cipher_system 5y ago
    The point would be that the government assumes the risk of all students as a collective. With government rates much fewer people would default.
    • lordnacho 5y ago
      Fewer of the people who are currently borrowing would default. That's not the same as fewer people would default. Lower rates will cause more people to take a loan, and you have to think they are the more marginal students. Then you're left with whether it's ok for society to pay for more people trying college and not finishing. A political question of course.
• brandonmenc 5y ago
  > swedish student loan Genuinely curious how common borrowing money for university is in Europe. A lot of people here in the states are under the impression - myself included - that education is more or less free of charge over there.
  • chrisseaton 5y ago
    Like the idea that health insurance isn’t a thing in Europe, it’s not the case everywhere.
  • guitarbill 5y ago
    Well, it's cheaper but not always free. And there are costs apart from tuition. You may want to study at a uni that isn't close, so you have to move/move out and rent a place. Then there's food, etc. I believe student loans sometimes are explicitly for that, so you aren't dependent on a grant from a certain uni if your parents can't cover those costs.
  • cipher_system 5y ago
    Almost everyone does it, but it's for living expenses, books and such, not for tuition. Currently, a university student borrows around $800 and gets around $300 each month. Then you are supposed to pay back what you borrowed during 25 years starting 6 months after you stopped borrowing. It really is a great system imho. edit: Had to check, apparently only 70% takes student loans.
    • b9a2cab5 5y ago
      Hah, good luck paying for living expenses in the Bay Area with that kind of money. $1100 will get you a shack built in the 1920's with 3 roommates and drug addicts at your front door.
  • 1cvmask 5y ago
    In many parts of the world government schools are often free or close to free. But the private universities are not and most governments do not offer student loans for private schooling as there is the freeish government alternative (if you pass the university entrance exam). That’s why many of them are both harder and more prestigious than the private sector ones. Some countries have mandatory service for a couple of years for free medical schooling though.
• kube-system 5y ago
  In finance, interest rates are calculated with the formula: rate = risk free interest rate + inflation premium + default risk premium + liquidity premium + maturity premium Stable governments can currently borrow at or close to the risk free rate because inflation is low, stable governments are at low risk of default, and bonds are fairly liquid. These things are not the case for student debt, however. Selling a student loan is harder than selling a bond, and any individual borrower is less reliable than the entire US or Swedish government. The only other way to influence those rates is through direct intervention, like government subsidies, or other regulations that change the risk profile (like making student loans nondischargeable) Which is exactly what the US government does with their public loans, which are at lower rates than loans through any bank. (3.73% for undergrads) Sweden must subsidize their loans more.
• AmVess 5y ago
  The people crying the loudest about loan forgiveness are people who went to expensive colleges and obtained unmarketable degrees. It is well known that many of these boutique colleges charge a lot of money because they will find people to pay the price. Simply lowering the interest rate on a loan will do nothing to stop this. Requiring colleges to peg the total cost of an education to what a graduate can earn in that field in one year would be a good step towards reducing pointless degrees and laughably expensive tuition.
  • diogenes_of_ak 5y ago
    I had an expensive education, just paid it off last year. We lived with my folks for a year to finally pay it off after 10 years. Nobody should have to struggle that way. Make college free and forgive the outstanding debt. My $1000/mo made my life extraordinarily expensive…
    • gladinovax 5y ago
      you are in favor of removing the consequences of bad decisons. No wonder you struggle. Flag away.
    • b9a2cab5 5y ago
      In the long run, having lower taxes from not paying for other peoples' educations is cheaper for you and for anyone with a useful degree. I will take the example of my friend. He's at a no name company as a new grad software engineer making $96k. That is, he's working at a position attainable to everyone. That's $8000/mo pre-tax and he lives in a fairly LCoL area. $1000/mo for 5-8 years is peanuts compared to the extra taxes he'd pay for a lifetime under your idea. If you consider it from the perspective of someone working at FAANG ($200k new grad salary) $1k/mo is even more trivial.
  • jurassic 5y ago
    I don’t agree with necessarily tying price to value. I don’t want people choosing art history over CS just because it is cheaper. I do think each major should have something akin to a Nutrition Facts label laying out clear information about the financial outcomes for recent graduates. So people can understand if financing that educational pursuit is likely to be worthwhile.
• fn-mote 5y ago
  There are economic hazards here. If the loan has interest below the market rate, then the students provide a vehicle for the transfer of money from the state to the (possibly for-profit) university. Education is an investment in society only if it benefits the student. Looking at a default rate of around 45% for students who did not receive any degree at all and also for students who received some kind of certificate (cosmetology school), I would guess the students are not repaying because they gained no benefit from the "education". There needs to be some mechanism to ensure that education loan subsidies benefit society and not just some institutions. There are problems all around. E.g., state laws governing cosmetology certification that require hundreds of hours of training.
• thrower123 5y ago
  Neither do I, and I'm an American who had a few tens of thousands of dollars in loans when I graduated. I wasn't making any money early in my career, $40k, and I had my loans paid off inside of five years.
• logicalmonster 5y ago
  I don't know exactly how Sweden works and don't have the basis to make a comparison with the American system. But I believe that many countries emphasize some kind of competitive exams for college entry and have far fewer good college spots than are available in America? Is that the case? Perhaps there's some significant differences in the overall system that just wouldn't work in America that drastically changes the financial incentives. But speaking strictly about America, is it possible that dramatically expanding access to cheap educational loans may have some unintended negative consequences? For instance, you could argue that the price of education in the US has continued to increase even as more and more funding assistance became available. Some observers see it as colleges taking advantage of society's goodwill and just continuously expanding their administrations and spending as students attain more access to credit. Let's conduct a thought-experiment: if society offered students 100K free per year for the sake of education, is it any doubt that college prices would find a way to rise to around that amount soon after? As another consequence, maybe unserious people are financially incentivized to go to college to take nearly useless degrees. Is it a good thing for society to perpetuate this system of debt? Keep in mind that we live in an Instant Gratification society, and many people go to school purely for the fun social experience. Kids are basically pressured to take on tens of thousands of dollars (or more) in debt just to live life on easy mode for a few years and many people don't take actually useful degrees that are hard (some kind of engineering for instance) but many people take degrees with truly marginal or even negative social value. Would expanding access to credit not just exacerbate this?