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which is, iirc, why it was even made to be this way ("un-bankruptable") in the first place. The "risk premium" on these loans likely would've been FAR higher (

which is, iirc, why it was even made to be this way ("un-bankruptable") in the first place. The "risk premium" on these loans likely would've been FAR higher (or rather, people might've just stopped making loans altogether) if people were just allowed to declare bankruptcy right after getting the education.

prepend 3y ago
The “risk premium” is already jacked. I’m paying 6% on 10 year old debt that cannot be discharged. Shouldn't the risk be very low to lenders and have a much lower rate? Why would the most secure debt have such a high interest rate? (Treasuries at the time were 2-3%)
- janejeon 3y ago
  I'm arguing that the current rate is without the additional percentages that the insane risk premium that would be attached to these loans, if they were made at all. > is already jacked If you're arguing why it's not the same rate as treasuries, I'm not sure what more I can say. There's more that goes onto pricing loans than just the risk premium. It's a part of it, but not the whole story ("why are government-backed MBSes not the same interest rate as treasuries?"). Furthermore, just look around: you sure there's no "risk" with these loans? You cannot in honesty argue otherwise.
  - prepend 3y ago
    I’m arguing that the rate is already artificial and borrowers are paying more than they should. So increasing lender costs would not necessarily increase rates since rates are set by something other than the market. When I took out student loans in 2013, I got a 6.5% rate for 25 years. It can’t be discharged and any default is guaranteed by US Department of Ed (eg, I die, or use income based repayment for 25 years and discharge the balance). So to the borrower, the “risk” is that the USG defaults. For comparison, I bought a house that year and got a 4.25% 30-year mortgage that has my house as collateral. Why would a student loan that can’t be discharged have a higher rate than a mortgage?

prepend 3y ago

The “risk premium” is already jacked. I’m paying 6% on 10 year old debt that cannot be discharged. Shouldn't the risk be very low to lenders and have a much lower rate? Why would the most secure debt have such a high interest rate? (Treasuries at the time were 2-3%)

janejeon 3y ago
I'm arguing that the current rate is without the additional percentages that the insane risk premium that would be attached to these loans, if they were made at all. > is already jacked If you're arguing why it's not the same rate as treasuries, I'm not sure what more I can say. There's more that goes onto pricing loans than just the risk premium. It's a part of it, but not the whole story ("why are government-backed MBSes not the same interest rate as treasuries?"). Furthermore, just look around: you sure there's no "risk" with these loans? You cannot in honesty argue otherwise.
- prepend 3y ago
  I’m arguing that the rate is already artificial and borrowers are paying more than they should. So increasing lender costs would not necessarily increase rates since rates are set by something other than the market. When I took out student loans in 2013, I got a 6.5% rate for 25 years. It can’t be discharged and any default is guaranteed by US Department of Ed (eg, I die, or use income based repayment for 25 years and discharge the balance). So to the borrower, the “risk” is that the USG defaults. For comparison, I bought a house that year and got a 4.25% 30-year mortgage that has my house as collateral. Why would a student loan that can’t be discharged have a higher rate than a mortgage?