4 ms·

Extending $100k to an 18 year old in general ought to be rethought.

Spivak 4y ago
Extending a 400k mortgage to a 27 year old should also be rethought. Jesus people, if you’re argument is that “but mortgages have collateral” then at least address why 20% of someone’s discretionary income over 20 years for federal loans or your lifetime income via non-dischargeability for private loans doesn’t count. I don’t give two shits about the financial solvency of the lender, if you have to repo the house the system has failed. Throwing a massive amount of money to someone who’s probably on their second big boy job ever betting 15/30 years of income stability to pay it off is insane.
- wodenokoto 4y ago
  If you think the house will appreciate and you have the money, I think it’s fine to extent the loan as long as you’re willing to take the risk on the appreciation you don’t really even need to risk assess the 27 year old.
  - Retric 4y ago
    Transaction costs offset significant appreciation in the short term. This makes such loans surprisingly risky even if homes are appreciating.
  - SOLAR_FIELDS 4y ago
    Right - this is fundamentally different than the education argument - the house is a tangible asset that can be repossessed. The education is not.
    - deleted 4y ago
      [deleted]
  - Spivak 4y ago
    So if, for you, the thing that makes a loan safe is the lender feeling reasonably confident in the value of the collateral then what makes 10% of a persons discretionary income for 20 years feel more risky?
    - wodenokoto 4y ago
      The ability to collect 10% and the size of their income. But I’m from Scandinavia so I do think 10% of income is a great way to pay for college. Have the government collect it and cut out the bank!
- _fat_santa 4y ago
  Extending a mortgage isn't that crazy, because you're going off the home value in addition to the repayment ability of the borrower. With student loans there's no collateral so everything rests with the borrowers ability to repay. Student loans are a wild financial product when you stop to think about it, a loan with no collateral, given to someone who often times has no credit, and enforced through it not being dischargeable in bankruptcy.
- phkahler 4y ago
  Mortgages should not be allowed longer than 15 years, maybe 10.
  - s1k3 4y ago
    This would kill the housing market overnight.
    - Spivak 4y ago
      Generally speaking I think people are aware that any significant change that drives housing prices down would destroy the market, collapse our economy, and all of western civilization would become as Mad Max. We can still think of what we wish the rules had been in the begging or what to do after unsustainable housing price increases cause Mad Max anyway.
      - nephanth 4y ago
        Not sure this would significantly bring housing prices down, it may simply bring homeownership down (in favor of rental), because only investors would be able to buy.
    - anoonmoose 4y ago
      The housing market being a core component of the US economy is a bug, not a feature.
      - twblalock 4y ago
        It is an intentional feature that has been pursued as such by government policy for decades.
    - phkahler 4y ago
      >> This would kill the housing market overnight. So does raising interest rates - see 2008. Look at the fed funds rate spike which set it off (not to say there weren't other problems to make it worse). Also look watch the housing market right now. Housing as a percent of income has been fairly constant for 50 years (there was a recent HN link on this). Lower interest rates mean you can borrow more dollars at the same monthly payment. This combined with an overall decrease in rates since 1980 have fueled the housing market. Long terms loans just mean building equity takes a long time, and people who sell within 5 years really don't have any (it will maybe cover moving costs). The problems with interest rates changing and putting people under water are really a problem of people not having equity in their home. Reducing the length of the loans will reduce that problem significantly.
- LatteLazy 4y ago
  Not as long as there is a house that can be repossessed on the other end of the loan...
- exabrial 4y ago
  Secured vs Unsecured credit
kube-system 4y ago
The article is about parent loans.
treeman79 4y ago
Allow bankruptcy for college loans. Don’t use tax payer money for loans. Colleges will become affordable again.
- managerclass 4y ago
  Don't know if it'll make Colleges more affordable, but it'll definitely deter lenders from giving out loans to applicants that aren't as academically inclined or going into majors that have a low earnings potential. The idea of banks having a risk free loans never really made sense to me...
  - lotsofpulp 4y ago
    > The idea of banks having a risk free loans never really made sense to me... They do not since 2010: https://en.wikipedia.org/wiki/Health_Care_and_Education_Reconciliation_Act_of_2010 https://en.wikipedia.org/wiki/Health_Care_and_Education_Reco... > Ending the process of the federal government giving subsidies to private banks to give out federally insured loans. Instead loans will be administered directly by the Department of Education.[23]
  - treeman79 4y ago
    Right now a college can offer useless easy degrees and charge anything they want, because 18 year olds have easy access to huge sums of money (government backed loans) and also tend to make poor financial sessions.
- ChrisLomont 4y ago
  >Allow bankruptcy for college loans. Making loans higher interest to handle increased risk, making it even harder for someone to pay for college.
  - exabrial 4y ago
    vs the current situation?
margarina72 4y ago
the pricing of degrees in the US should be re-evaluated too, if I may. There is no way the cost of knowledge transfer cannot be optimized. Private universities might have no incentive for change for obvious reasons left as an exercise to the reader, but it would in the interest of the government to support innovation in this area, instead of try to patch a loan mechanism that is only feeding the beast.
- exabrial 4y ago
  One does not need $100k to get a higher education unless going to a "Destination College." I was able to get a computer science degree using community colleges and finishing at a state school for far far less than that.
  - colinmhayes 4y ago
    If you’re not working during school borrowing 25k a year seems a bit low tbh. Most in state tuition is at least in the teens and the room and board are too, not super easy to spend less than 25k. Sure you could live at home and go to community college, but not doing that is hardly a “destination” college.

Extending a 400k mortgage to a 27 year old should also be rethought. Jesus people, if you’re argument is that “but mortgages have collateral” then at least address why 20% of someone’s discretionary income over 20 years for federal loans or your lifetime income via non-dischargeability for private loans doesn’t count. I don’t give two shits about the financial solvency of the lender, if you have to repo the house the system has failed. Throwing a massive amount of money to someone who’s probably on their second big boy job ever betting 15/30 years of income stability to pay it off is insane.

wodenokoto 4y ago
If you think the house will appreciate and you have the money, I think it’s fine to extent the loan as long as you’re willing to take the risk on the appreciation you don’t really even need to risk assess the 27 year old.
- Retric 4y ago
  Transaction costs offset significant appreciation in the short term. This makes such loans surprisingly risky even if homes are appreciating.
- SOLAR_FIELDS 4y ago
  Right - this is fundamentally different than the education argument - the house is a tangible asset that can be repossessed. The education is not.
  - deleted 4y ago
    [deleted]
- Spivak 4y ago
  So if, for you, the thing that makes a loan safe is the lender feeling reasonably confident in the value of the collateral then what makes 10% of a persons discretionary income for 20 years feel more risky?
  - wodenokoto 4y ago
    The ability to collect 10% and the size of their income. But I’m from Scandinavia so I do think 10% of income is a great way to pay for college. Have the government collect it and cut out the bank!
_fat_santa 4y ago
Extending a mortgage isn't that crazy, because you're going off the home value in addition to the repayment ability of the borrower. With student loans there's no collateral so everything rests with the borrowers ability to repay. Student loans are a wild financial product when you stop to think about it, a loan with no collateral, given to someone who often times has no credit, and enforced through it not being dischargeable in bankruptcy.
phkahler 4y ago
Mortgages should not be allowed longer than 15 years, maybe 10.
- s1k3 4y ago
  This would kill the housing market overnight.
  - Spivak 4y ago
    Generally speaking I think people are aware that any significant change that drives housing prices down would destroy the market, collapse our economy, and all of western civilization would become as Mad Max. We can still think of what we wish the rules had been in the begging or what to do after unsustainable housing price increases cause Mad Max anyway.
    - nephanth 4y ago
      Not sure this would significantly bring housing prices down, it may simply bring homeownership down (in favor of rental), because only investors would be able to buy.
  - anoonmoose 4y ago
    The housing market being a core component of the US economy is a bug, not a feature.
    - twblalock 4y ago
      It is an intentional feature that has been pursued as such by government policy for decades.
  - phkahler 4y ago
    >> This would kill the housing market overnight. So does raising interest rates - see 2008. Look at the fed funds rate spike which set it off (not to say there weren't other problems to make it worse). Also look watch the housing market right now. Housing as a percent of income has been fairly constant for 50 years (there was a recent HN link on this). Lower interest rates mean you can borrow more dollars at the same monthly payment. This combined with an overall decrease in rates since 1980 have fueled the housing market. Long terms loans just mean building equity takes a long time, and people who sell within 5 years really don't have any (it will maybe cover moving costs). The problems with interest rates changing and putting people under water are really a problem of people not having equity in their home. Reducing the length of the loans will reduce that problem significantly.
LatteLazy 4y ago
Not as long as there is a house that can be repossessed on the other end of the loan...
exabrial 4y ago
Secured vs Unsecured credit

kube-system 4y ago

The article is about parent loans.

treeman79 4y ago

Allow bankruptcy for college loans. Don’t use tax payer money for loans. Colleges will become affordable again.

managerclass 4y ago
Don't know if it'll make Colleges more affordable, but it'll definitely deter lenders from giving out loans to applicants that aren't as academically inclined or going into majors that have a low earnings potential. The idea of banks having a risk free loans never really made sense to me...
- lotsofpulp 4y ago
  > The idea of banks having a risk free loans never really made sense to me... They do not since 2010: https://en.wikipedia.org/wiki/Health_Care_and_Education_Reconciliation_Act_of_2010 https://en.wikipedia.org/wiki/Health_Care_and_Education_Reco... > Ending the process of the federal government giving subsidies to private banks to give out federally insured loans. Instead loans will be administered directly by the Department of Education.[23]
- treeman79 4y ago
  Right now a college can offer useless easy degrees and charge anything they want, because 18 year olds have easy access to huge sums of money (government backed loans) and also tend to make poor financial sessions.
ChrisLomont 4y ago
>Allow bankruptcy for college loans. Making loans higher interest to handle increased risk, making it even harder for someone to pay for college.
- exabrial 4y ago
  vs the current situation?

margarina72 4y ago

the pricing of degrees in the US should be re-evaluated too, if I may. There is no way the cost of knowledge transfer cannot be optimized. Private universities might have no incentive for change for obvious reasons left as an exercise to the reader, but it would in the interest of the government to support innovation in this area, instead of try to patch a loan mechanism that is only feeding the beast.

exabrial 4y ago
One does not need $100k to get a higher education unless going to a "Destination College." I was able to get a computer science degree using community colleges and finishing at a state school for far far less than that.
- colinmhayes 4y ago
  If you’re not working during school borrowing 25k a year seems a bit low tbh. Most in state tuition is at least in the teens and the room and board are too, not super easy to spend less than 25k. Sure you could live at home and go to community college, but not doing that is hardly a “destination” college.