<p>Would this interest hike affect stafford loans that are currently in repayment or just new loans? I have gotten a few emails trying to lobby my support towards protesting this and I am not clear on that. Probably a stupid question but I was under the impression that I only had to worry about the interest rates on my private loans, just want to make sure…</p>
<p>I think if we stop promising bailouts to any private company, then it will be perfectly fine to have non-dischargeable loans. Banks will know that if they are not able to collect the money, uncle Sam is not going to bail them out. Good luck collecting from those who don’t have any income or assets. </p>
<p>Combination on non-dischargeable loans and no taxpayer sponsored bailouts will encourage more responsible lending and more responsible borrowing.</p>
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<p>Sorry, I was working off of faulty memory. It’s the grad students loans that are helping to offset Pells.</p>
<p>[Debt</a> ceiling deal to hit grad students hard - Aug. 1, 2011](<a href=“http://money.cnn.com/2011/08/01/news/economy/debt_ceiling_students/index.htm]Debt”>Debt ceiling deal to hit grad students hard - Aug. 1, 2011)</p>
<p>“Sorry, I was working off of faulty memory. It’s the grad students loans that are helping to offset Pells.”</p>
<p>I don’t know if that is any better. Grad students are going to be massively indebted, if they have undergrad debt too.</p>
<p>I don’t know why this concept is so difficult to address here in the U.S.
The FAIR way to assess interest on student loans is one point above prime, but you’d have to allow that to float. </p>
<p>Today, that would be 4.25% since prime is roughly 3.25 given that the fed is .25.</p>
<p>The more you know about the way these programs run, the more you wonder who on earth thought THAT would be a good idea?</p>
<p>I think the amount up to the stafford loans should be undischargable. This garuantees that all kids, no matter what thier economic situation can get these loans.</p>
<p>And, frankly, I think all states, if they want to recieve federal funds, should be required to keep costs in line with what kids can borrow on the staffords + pells. I mean, maybe they could set the flagship higher to what the market would bear? Or not.</p>
<p>Public education should be affordable without spending away five or ten years of your future.</p>
<p>Then, beyond the stafford amount, which would obviously change with inflation, the loans should be subject to bankruptcy laws. for undergrad.</p>
<p>Poetgirl,</p>
<p>so should I encourage my son to go NYU to study anthropology. I am sure his income potential with that degree will allow him discharge all but 27K of that 200K+ he will have to borrow.</p>
<p>I am aware that I am stretching here (he will need a cosigner to borrow that much and I am not sure NYU even offers anthropology). I just think that in addition to curbing irresponsible lending with should curb irresponsible borrowing too.</p>
<p>Lerkin, don’t misunderstand me. I agree with you.</p>
<p>However, unethical lending practices got us into the most recent economic debacle, and I don’t know exactly why we ought to believe that the same population who believed it was a good idea to borrow the entire amount to buy a house is going to see the foolishness of borrowing all that money for an education.</p>
<p>Also, and here is where I, personally, think it gets really tricky. When kids are presented with financial aid packages, and I did not know this until I started to have the finaid posts pop up in the front and opened some up and read them, they are presented with LOANS, above the stafford loans, as if this is financial AID. So, I question the full understanding on this issue.</p>
<p>Should there be a full understanding? Sure. But, should there be consumer protection in place, also? Absolutely. We have laws against loan sharking for a reason. There should be laws to protect the lenders, and it isn’t easy to go bankrupt. It’s not just something someone does without consequences, either. Regulation should protect both sides of the equation, not just one.</p>
<p>There’s been some discussion about responsible lending practices and disclosures. As far as I know, there are no lenders for these subsidized stafford loans. Doesn’t the money come directly from the US government and isn’t eligibility based solely on need. As a result, I don’t think there is any traditional lending being conducted here.</p>
<p>I understand why parents and students want the rate as low as possible. The question I have has to do with the costs of the program. Does anyone know whether the current interest rate of 3.4 is enough to cover the cost of the defaults on the loans being made. In other words, I would think the interest rate should be set so that the government is not losing money on administering the program and on having to write off a percentage of the loans. Has anyone seen an analysis along these lines.</p>
<p>[FinAid</a> | Loans | Student Loans](<a href=“http://www.finaid.org/loans/studentloan.phtml]FinAid”>http://www.finaid.org/loans/studentloan.phtml)</p>
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<p>I’d be more worried about loans if I was getting a degree in Comparative History of Ideas or something like that.</p>
<p>There are plenty of times where the cost of the loan or education are worth whatever you paid for it. I’m sure William H. Macy would have paid 3 times as much as long as he still could get in tight with David Mamet. #justsaying</p>
<p>Understandable that the govt. is worried about debt repayment. Can someone tell me why there is no concern about the billions loaned and given to GM, AIG, most of our too big to faill banks, administration pet projects (wind, solar) etc…My biggest gripe is offloading the billions in mortgages to the government and now starting to package the foreclosure and loans to the banks, hedge funds and accredited speculators. The problem is we don’t question the destruction of the middle class.
The kids and the parents today are finally learning that this administration and previous administrations don’t care how we fare, unfortunately its the fault of the populace that have acquiesced to bread and circuses.</p>
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<p>Two things: first a mortgage is a security-backed loan. If you default, they take your home to limit their loss. Try to get an unsecured loan right now. It’s around 7%. The inability to discharge a loan makes it more secure (i.e. closer to the 4% loan than the 7% loan). Your future earnings secure the loan.</p>
<p>Second, you can get a mortgage at around 4% right now if you have excellent credit. With good credit, it’s around 6 or 7%. With fair credit it’s around 8-10%. And with poor credit and you can’t get a loan. If the government forced lenders to set the same rate for everyone and the lenders were not allowed to turn anyone down, they’d probably set a rate close to 7%. People with good credit would subsidize people with poor credit.</p>
<p>"The problem is we don’t question the destruction of the middle class. "</p>
<p>Exactly. Jack up tuition for some to give generous financial aid to some. Many people learn to game this system. The honest people got hosed.</p>
<p>Mortgage is a security backed loan, hello, how many billions did we give for first time buyers a few years ago that are upside down today. How many of these secured mortgage loans are now in the govt. hands and about to be sold at 25cents on the dollar. How many billions does this govt have in forfeitures and their subsidiary’s the banks. Unfortunately the sheeple listen to the media and provide the same canned bs of secured vs unsecured loans. Perfect “they take your home to secure loss” , at least in most states your secured loan means 8-10 months of a free ride, as well as it should be. Wake up, the system is broken and corrupt.</p>
<p>What happens if you declare bankruptcy on a personal loan? The bank gets nothing. What does the bank get on a foreclosure? About 80% (which results in an overpayment that’s redistributed back to the defaulters, in many cases).</p>
<p>The fundamentals of the system (what’s germane to this discussion) are sound. The problem was the the banks underestimated the risk on subprime mortgages and extremely low down payment mortgages because of some nifty bundling to hide the risk, leading to more high risk-loans than should have happened with shoddy oversight. That’s not relevant to the comparison between student loan rates and mortgage rates.</p>
<p>And the best and brightest young people will end up as indentured servants/slaves to the system----slaving away and putting off life’s milestones like marriage, children and home ownership. Meanwhile, the nonproductive moochers and underachievers will continue to get a free pass in the name of fairness and diversity, being subsidized by the productive.</p>
<p>You guys are making this too political. Interest rates for mortgages should be lower than student loans because 1) mortgages have tangible assets backing the loan and 2) lenders can discriminate based on ability to repay and credit.</p>
<p>If you really want to make student loans fair, allow lenders to discriminate (rates and amount of loans allowed) based on major. Chemical Engineers who start in the $70,000 / year with 80% employment are a safer bet for a lender than a Puppetry Arts major who might struggle to make $30,000 / year and is very likely to be unemployed. Then, in later years, lets the banks discriminate based on GPA. The 4.0 students are more likely to graduate with high paying jobs than the 2.0 students. Also, adjust for school based on the school’s historic placement (Harvard students get more loans at lower rates that University of Phoenix students).</p>
<p>The cause for subprime mortgages was the easy money created by the Feds, with the tacit approval of the US government. Lackadaisical rules and regulations with no oversight created a bubble in real estate, let’s face it if you give almost free money to anyone they will take advantage (including realtors, builders, banks, and the population). Unfortunately the govt is so short sided, not to consider education loans as a plus for the future of this country. Instead they perpetuate the travesty of home ownership and unequal rates between real estate and education.<br>
Does the fact that you are in an overpriced house with dead equity , a depreciating asset, ludicrous perks with schedule A have any bearing toward a better future of this country. Granted there has been a great deal of waste with these educational loans, but at last count , we are still subsidizing and warehousing trillions of mortgage paper that will make any educational default seem trivial in comparison.</p>
<p>You’re take this out of hand. This isn’t a “home loan” vs. “student loan” debate. It’s a comparison. People complained that home loan rates for those with the best credit scores and ability to repay are around 4%, therefore student loans should be around 4%, not around 7%. That’s an incorrect conclusion because of how the government regulates student loans.</p>