5 ms·

So unsecured personal loans? Those depend on your credit which most students don't have much/any and your debt-to-income which is normally infinite for students

by mrep 4y ago

So unsecured personal loans? Those depend on your credit which most students don't have much/any and your debt-to-income which is normally infinite for students because they don't work. You would massively screw over kids whose parents cannot pay/co-sign a normal loan as it would force them to work and study. Also, you normally cannot get very much with such low income and cherry on top, they have awful interest rates which range from about 6% to 36%. The APR on loans for borrowers with excellent credit is around 12%; it's about 29% for bad credit borrowers which students with no credit are likely to be. As an example: say you work at target for 2 8 hour days on the weekend making 15 an hour and with a 36% debt-to-income ratio limit, you could afford a payment of $374.4 a month. $15,000 punched in a 30 year repayment at 29% interest rate equals a $362.57 payment. So you might be able to do it but I would hate to be working every single day between weekend work and weekly school and that is assuming an entire 4 year degree could be pushed to to $15,000.

kevinsundar 4y ago
Colleges already have a mechanism for determining chance of success in college, and degrees have data on the average income after graduation. It would be trivial for private lenders to take into account the school, factors in standard college applications, the degree, and expected income to make a loan decision instead of relying on credit, debt-to-income, etc.
- mrep 4y ago
  And just hope students don't default right after they graduate? You realize how picky they'd have to get? 40% of undergrads drop out [0] who would probably all default alone which is completely unworkable to be profitable considering credit card default rates are between 1.5 and 7 percent [1] and look at the interest rates they charge. It would also create a massive false negative problem where kids whom could have succeeded never got to go to college because banks would get so picky if they even were too somehow make a loan like that work. [0]: https://educationdata.org/college-dropout-rates#:~:text=In%20the%20United%20States%2C%20the,drop%20out%20within%206%20years https://educationdata.org/college-dropout-rates#:~:text=In%2.... [1]: https://fred.stlouisfed.org/series/DRCCLACBS https://fred.stlouisfed.org/series/DRCCLACBS
bombcar 4y ago
Or just work for a year before college and pay the $15k in cash? Or cut out the middle-man entirely and have the government provide college education for free.
- mrep 4y ago
  Fair point and I'm not against free public education, but $15k is also a magical fantasy number to get too if you include housing/food/utilities.
  - bombcar 4y ago
    To be fair, it's not like you don't have housing/food/utility costs if you choose to not go to college. Apparently the average community college costs about $10k to graduate from, less if you're on a 2 year degree. Cue "that's not real college" crowd, of course.
throwawayboise 4y ago
> ...it would force them to work and study This was very normal and possible when I went to college. I could work part time during the year, full time in the summer, and pay my tuition. It didn't leave much free time but it was possible and a lot of people did it. These days tuition is so high at most universities that it just isn't possible. Yet they are not actually teaching anything more or any better than they were back then. It's just way more expensive.

by mrep 4y ago

kevinsundar 4y ago

Colleges already have a mechanism for determining chance of success in college, and degrees have data on the average income after graduation. It would be trivial for private lenders to take into account the school, factors in standard college applications, the degree, and expected income to make a loan decision instead of relying on credit, debt-to-income, etc.

mrep 4y ago
And just hope students don't default right after they graduate? You realize how picky they'd have to get? 40% of undergrads drop out [0] who would probably all default alone which is completely unworkable to be profitable considering credit card default rates are between 1.5 and 7 percent [1] and look at the interest rates they charge. It would also create a massive false negative problem where kids whom could have succeeded never got to go to college because banks would get so picky if they even were too somehow make a loan like that work. [0]: https://educationdata.org/college-dropout-rates#:~:text=In%20the%20United%20States%2C%20the,drop%20out%20within%206%20years https://educationdata.org/college-dropout-rates#:~:text=In%2.... [1]: https://fred.stlouisfed.org/series/DRCCLACBS https://fred.stlouisfed.org/series/DRCCLACBS

bombcar 4y ago

Or just work for a year before college and pay the $15k in cash? Or cut out the middle-man entirely and have the government provide college education for free.

mrep 4y ago
Fair point and I'm not against free public education, but $15k is also a magical fantasy number to get too if you include housing/food/utilities.
- bombcar 4y ago
  To be fair, it's not like you don't have housing/food/utility costs if you choose to not go to college. Apparently the average community college costs about $10k to graduate from, less if you're on a 2 year degree. Cue "that's not real college" crowd, of course.

throwawayboise 4y ago

> ...it would force them to work and study This was very normal and possible when I went to college. I could work part time during the year, full time in the summer, and pay my tuition. It didn't leave much free time but it was possible and a lot of people did it. These days tuition is so high at most universities that it just isn't possible. Yet they are not actually teaching anything more or any better than they were back then. It's just way more expensive.