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If you have federal student loans this is shitty advice. The loan payment programs are very generous. 10% of your income (minus 150% of the poverty level), whic

If you have federal student loans this is shitty advice. The loan payment programs are very generous. 10% of your income (minus 150% of the poverty level), which is probably more like 0-7% for most people, each year. If you default, hit your credit, and get your wages garnished, you'll be in a worse spot.

deleted 11y ago
[deleted]
chimeracoder 11y ago
> If you have federal student loans this is shitty advice. The loan payment programs are very generous. The author appears to have private loans, which are much more burdensome than federal loans for the debtor[0]. This is why federal loans are said to be subsidized and are counted as financial aid, even though people sometimes complain that it's "not really" aid because you have to pay money back. It's aid because the rates are well below market rate, which means the government (acting as a bank) would expect to make a loss on all loans issued, as the number of people who default would outweigh the amount of interest collected on the remaining loans. [0] Also, only undergraduate loans are subsidized - graduate loans are not usually (never?) subsidized.
- leereeves 11y ago
  What's the real risk of loss on student loans? The people I know who defaulted all paid in the end, plus interest and penalties.
- jonknee 11y ago
  The private loans were still backed by the feds which is why the DOE was coming after the author. Writing student loans was a nice guaranteed profit for a while (it changed in 2010 when they started cutting out the middle man).
- TomSawyer 11y ago
  > the government (acting as a bank) would expect to make a loss on all loans issued, as the number of people who default would outweigh the amount of interest collected on the remaining loans As far as I know, you can't get out of paying a federal student loan even if you file for bankruptcy.
- sjg007 11y ago
  Umm.. Fed loans are at 6% which is above market.
aplummer 11y ago
Very generous compared to what, any other federal student loan system? Its extortionate when you compare it to similar countries, think 30k for a 4 year engineering degree with interest at CPI - or in many places free.
- reustle 11y ago
  It isn't like he didn't know how much money he was borrowing when he took out the loan. He wanted something, so he took out a loan to get it. Regardless of what it is for, he made a deal.
jes 11y ago
I agree. I would also add that there are significant benefits that follow from keeping one's word, from not defaulting on the obligations one chooses.
- UnoriginalGuy 11y ago
  > I would also add that there are significant benefits that follow from keeping one's word, from not defaulting on the obligations one chooses. Tell that to companies. How many people, during the credit crunch, had their house defaulted on even in spite of never missing a single payment? The bank just decided the physical property was more valuable than the debt, and kicked them out. I will absolutely keep my word when dealing with other people. I don't care about companies and businesses, because they are amoral and I will be amoral towards them. You're a fool if you treat companies like they're people, they don't treat you that way...
  - runarb 11y ago
    > How many people, during the credit crunch, had their house defaulted on even in spite of never missing a single payment? The house just decided the physical property was more valuable than the debt, and kicked them out. > Are you saying people paid their debt, but the bank was still able to take property the borrower owned? Can that actually happen? Any sources where I can read more about this?
    - adebtlawyer 11y ago
      Generally, no, it can't. Mortgages are contracts. By their typical contract terms, the lender can't foreclose unless the borrower is in breach of the contract. That means falling behind on payments. Could you write a custom mortgage to allow the lender to foreclose anyway? Sure, but then the problem is whether it would be securitizable or in compliance with local law. Unlikely, thus, a bank would not do that. The average mortgage and note are form contracts with some variation, but not this 'steal your house' term. Parent post also implies that during the foreclosure crisis the value of houses increased. The opposite occurred.
  - 11y ago
UnoriginalGuy 11y ago
What is the APR on that "only 10% of your income?" It isn't really "generous" if 10% only ever pays the years interest without repaying the original sum. In the UK the interest rate is 1.5%. You're forced to repay a minimum based on your income. Below £17,335 (approx. $26,500) you pay nothing, and as your income grows as does the minimum repayment (so people making more repay faster). PS - UK University is also much cheaper. It varies by course, but £9K/year ($13.7K) is typical. If I look at the first State College on Wikipedia (University of Alabama) $19,652/year (based on 4x semesters, inter-state resident) is what they charge. Then there is other fees: $325 mandatory dining fee, $400 enrollment fee, $100 parking, and so on. I've also heard that a US student pays $1K in books (!) which is insane (I purchase three books total which cost about £200 over the entire course).
- bradleyjg 11y ago
  Interest over your payments are waived for the first three years, after that it is capitalized. After twenty years, ten if you work in the government or charitable sector, the remaining balance is forgiven. The current interest rate for new undergraduate debt is 4.29%.
  - thechao 11y ago
    You're taxed on the balance as income. It's easier to negotiate with the IRS, though.
    - bradleyjg 11y ago
      There are regulations that say the public service forgiveness (10 year) is not taxable income. The ordinary forgiveness (20 year) is taxable under current law, but IBR/PAYE hasn't been around long enough for anyone to have triggered it yet. There are proposals to exempt it.
kenrikm 11y ago
When the Fed is giving away money at 0%, charging 10%, 7%, 5%.. does not seem generous.

deleted 11y ago

[deleted]

chimeracoder 11y ago

> If you have federal student loans this is shitty advice. The loan payment programs are very generous. The author appears to have private loans, which are much more burdensome than federal loans for the debtor[0]. This is why federal loans are said to be subsidized and are counted as financial aid, even though people sometimes complain that it's "not really" aid because you have to pay money back. It's aid because the rates are well below market rate, which means the government (acting as a bank) would expect to make a loss on all loans issued, as the number of people who default would outweigh the amount of interest collected on the remaining loans. [0] Also, only undergraduate loans are subsidized - graduate loans are not usually (never?) subsidized.

leereeves 11y ago
What's the real risk of loss on student loans? The people I know who defaulted all paid in the end, plus interest and penalties.
jonknee 11y ago
The private loans were still backed by the feds which is why the DOE was coming after the author. Writing student loans was a nice guaranteed profit for a while (it changed in 2010 when they started cutting out the middle man).
TomSawyer 11y ago
> the government (acting as a bank) would expect to make a loss on all loans issued, as the number of people who default would outweigh the amount of interest collected on the remaining loans As far as I know, you can't get out of paying a federal student loan even if you file for bankruptcy.
sjg007 11y ago
Umm.. Fed loans are at 6% which is above market.

aplummer 11y ago

Very generous compared to what, any other federal student loan system? Its extortionate when you compare it to similar countries, think 30k for a 4 year engineering degree with interest at CPI - or in many places free.

reustle 11y ago
It isn't like he didn't know how much money he was borrowing when he took out the loan. He wanted something, so he took out a loan to get it. Regardless of what it is for, he made a deal.

jes 11y ago

I agree. I would also add that there are significant benefits that follow from keeping one's word, from not defaulting on the obligations one chooses.

UnoriginalGuy 11y ago
> I would also add that there are significant benefits that follow from keeping one's word, from not defaulting on the obligations one chooses. Tell that to companies. How many people, during the credit crunch, had their house defaulted on even in spite of never missing a single payment? The bank just decided the physical property was more valuable than the debt, and kicked them out. I will absolutely keep my word when dealing with other people. I don't care about companies and businesses, because they are amoral and I will be amoral towards them. You're a fool if you treat companies like they're people, they don't treat you that way...
- runarb 11y ago
  > How many people, during the credit crunch, had their house defaulted on even in spite of never missing a single payment? The house just decided the physical property was more valuable than the debt, and kicked them out. > Are you saying people paid their debt, but the bank was still able to take property the borrower owned? Can that actually happen? Any sources where I can read more about this?
  - adebtlawyer 11y ago
    Generally, no, it can't. Mortgages are contracts. By their typical contract terms, the lender can't foreclose unless the borrower is in breach of the contract. That means falling behind on payments. Could you write a custom mortgage to allow the lender to foreclose anyway? Sure, but then the problem is whether it would be securitizable or in compliance with local law. Unlikely, thus, a bank would not do that. The average mortgage and note are form contracts with some variation, but not this 'steal your house' term. Parent post also implies that during the foreclosure crisis the value of houses increased. The opposite occurred.
- 11y ago

UnoriginalGuy 11y ago

What is the APR on that "only 10% of your income?" It isn't really "generous" if 10% only ever pays the years interest without repaying the original sum. In the UK the interest rate is 1.5%. You're forced to repay a minimum based on your income. Below £17,335 (approx. $26,500) you pay nothing, and as your income grows as does the minimum repayment (so people making more repay faster). PS - UK University is also much cheaper. It varies by course, but £9K/year ($13.7K) is typical. If I look at the first State College on Wikipedia (University of Alabama) $19,652/year (based on 4x semesters, inter-state resident) is what they charge. Then there is other fees: $325 mandatory dining fee, $400 enrollment fee, $100 parking, and so on. I've also heard that a US student pays $1K in books (!) which is insane (I purchase three books total which cost about £200 over the entire course).

bradleyjg 11y ago
Interest over your payments are waived for the first three years, after that it is capitalized. After twenty years, ten if you work in the government or charitable sector, the remaining balance is forgiven. The current interest rate for new undergraduate debt is 4.29%.
- thechao 11y ago
  You're taxed on the balance as income. It's easier to negotiate with the IRS, though.
  - bradleyjg 11y ago
    There are regulations that say the public service forgiveness (10 year) is not taxable income. The ordinary forgiveness (20 year) is taxable under current law, but IBR/PAYE hasn't been around long enough for anyone to have triggered it yet. There are proposals to exempt it.

kenrikm 11y ago

When the Fed is giving away money at 0%, charging 10%, 7%, 5%.. does not seem generous.