<p>I am tempted to say it is almost like loan shark. The program has captive audience on certain section of the population who has no other ways to turn to get funding due to credit history requirement. A lot of students who can turn to other sources that is less expensive will do so if the rate is raised to 6.8%. Like many suggested, maybe we should do away with the program entirely, then maybe the schools will be forced to be more reasonable with price increase. The way it looks at the moment, the students especially the not so fortunate ones are being screwed from everyone including the government.</p>
<p>A quick check at a premier commercial bank quotes “Personal loan rates as low as 10.99% APR for a 48-month term”. A student loan is essentially a personal loan, as there is no collateral with which to secure it. Thus, if the federal government is lending you an unsecured loan at below market rate, it is a subsidized loan, one financed by the taxpayers. I am all for it, as it is good public policy, but I am also one indirectly funding it.</p>
<p>How is it financed by the taxpayers though? That’s what I don’t understand. Who is the government “financing” with our money?</p>
<p>tt, I really, REALLY don’t think the price will go down any significant amount. All that would be doing would be further screwing over the low income kids who rely on stafford loans to get through school because they can’t pay out of pocket and neither they nor their parents would qualify for private loans.</p>
<p>The federal government is financed by taxpayers. So, if you’re getting any sort of benefit from the federal government, you’re being financed by taxpayers. :D</p>
<p>Ahem, you cannot default on a student loan. It is entirely different beast. I will let you call it a subsidy if you can somehow convince me that the government is losing money on this program even with 2-3 years interest free. Note that not all $20k is interest free, on average only half of it is interest free for about 3 years. The grace period is gone and was voted out recently I believe.</p>
<p>ttparent, i will stop calling it a subsidy when you’re able to go out and get a commercial student loan without government guarantees at a rate below market. Until then, a subsidy it is and will be subject to legislative whim.</p>
<p>And, yes, a person can (and many do) default on student loans. Yes, they can garnish wages, withhold federal tax returns,etc., but if a person has no income or assets, there is not way for the government to collect. The fact is there is default, and that drives up the cost.</p>
<p>Well 6.8% is not below market and I can get student loan way below that rate right now. To me being an enabler is not necessary providing a subsidy when you get more money back in return.</p>
<p>ttparent, great. If you’re able to get a student loan at below market rate, take it! I am no expert on that and didn’t think it was possible, but at that rate I would even take it myself.</p>
<p>Caveat, I am assuming, of course, that they are fixed rate loans.</p>
<p>I have been quoted below 4% for student loan rate. If you have good credit, that is definitely the range right now. There is no government backing involved but it does have no default commitment attached.</p>
<p>Yes it is fixed, 10-year term or more if you want. Rates changes with length of term, of course.</p>
<p>tt, again, great! When we considered loans 3 years ago, we did not see anything in that range, and we have good credit. Granted, we didn’t look too much because we had other options, but we would have taken some at that rate. In any event, I am not a big fan of loans if you can avoid them, but I support financing them via government subsidies or guarantees as good public policy.</p>
<p>The rhetoric from both political parties over this issue is ridiculous. Claiming that this interest rate hike makes college “unaffordable” is an idiotic statement. For those that stay at or below the maximum Stafford limits of roughly $27K this would make a total difference in interest incurred of about $5,400-ish and would make a difference in the monthly payment of about $44. Many college students spend more than that at Starbucks every month, so everyone from the President on down needs to quit screaming that the sky is falling. I don’t recommend student loans for ANY student that doesn’t ABSOLUTELY need them, and even then never in excess of the Stafford limits. If they can’t come up with a means to scrounge an extra $44 per month, what does that say about their decision to borrow money in the first place?</p>