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Old May 12, 2013, 10:35 AM   #1
xShane
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Should Students Get the Same Loan Rate That Banks Do?

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“Some people say that we can’t afford to help our kids through school by keeping student loan interest rates low,” said Senator Warren. “But right now, as I speak, the federal government offers far lower interest rates on loans, every single day–they just don’t do it for everyone. Right now, a big bank can get a loan through the Federal Reserve discount window at a rate of about 0.75%. But this summer a student who is trying to get a loan to go to college will pay almost 7%. In other words, the federal government is going to charge students interest rates that are nine times higher than the rates for the biggest banks–the same banks that destroyed millions of jobs and nearly broke this economy. That isn’t right. And that is why I’m introducing legislation today to give students the same deal that we give to the big banks.”

“Big banks get a great deal when they borrow money from the Fed,” Senator Warren continued. “In effect, the American taxpayer is investing in those banks. We should make the same kind of investment in our young people who are trying to get an education. Lend them the money and make them to pay it back, but give our kids a break on the interest they pay. Let’s Bank on Students… Unlike the big banks, students don’t have armies of lobbyists and lawyers. They have only their voices. And they call on us to do what is right.”
Full article: http://www.dailykos.com/story/2013/0...big-nbsp-banks

She definitely has an interesting point here. Why are private corporations, banks, getting far lower loan rates than the students and people of our future

What are your thoughts on this? Discuss.
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Old May 12, 2013, 10:44 AM   #2
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Ok, let my start by stating I'm not fan of big banks...

but big banks are more likely to repay their loans than students.

Lower risk, lower rates. Higher risk, higher rates.
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Old May 12, 2013, 10:46 AM   #3
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Originally Posted by noisycats View Post
Ok, let my start by stating I'm not fan of big banks...

but big banks are more likely to repay their loans than students.

Lower risk, lower rates. Higher risk, higher rates.
Source for such a claim?
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Old May 12, 2013, 10:57 AM   #4
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Students shouldn't get ****. I find it disheartening they're given so much and yet they still feel the need to riot in the centre of London because things don't always go their way.

Regardless of how misinformed my opinion may be (and I understand that it probably is), I don't have a very high opinion on students.
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Old May 12, 2013, 11:22 AM   #5
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I find it disheartening they're given so much
To be honest what do students get in the UK these days? They pay nearly the same fees as foreign paying students and overall they pay a lot more in taxes than non-graduates over their lifetime.
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Old May 12, 2013, 11:25 AM   #6
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Quote:
Originally Posted by noisycats View Post
Ok, let my start by stating I'm not fan of big banks...

but big banks are more likely to repay their loans than students.

Lower risk, lower rates. Higher risk, higher rates.
Banks would have utterly collapsed in on themselves if the government didn't bail them out only 4 years ago. Students can't even declare bankruptcy on their loans.
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Old May 12, 2013, 11:30 AM   #7
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Originally Posted by roadbloc View Post
Students shouldn't get ****. I find it disheartening they're given so much and yet they still feel the need to riot in the centre of London because things don't always go their way.

Regardless of how misinformed my opinion may be (and I understand that it probably is), I don't have a very high opinion on students.
You mean they're given so much in debt and it's hard for many of them to find a job, right?
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Old May 12, 2013, 01:10 PM   #8
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Quote:
Originally Posted by noisycats View Post
Ok, let my start by stating I'm not fan of big banks...

but big banks are more likely to repay their loans than students.

Lower risk, lower rates. Higher risk, higher rates.
History would say otherwise. They tend to pay just a fraction of the total amount, simply because the actual amount is well hidden from the public.

Example: The Bank bailouts cost far and away more than the $700 billion bailout. Trilions have been handed over, literally billions a day. What does the industry do? Pay back the publicly disclosed money quicker than required so we as a whole can go "what nice banks, upstanding citizens!". Then they get to pocket the rest (mostly used to buy back their own stock, inflate stock prices, and payout out bonuses/merge with other way too big institutions).

We subsidize banks in this country. I'd rather subsidize our future, our students.

----------

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Students can't even declare bankruptcy on their loans.
Exactly. That's by federal law enacted in 2005, a strengthening of the same rule enacted in 1998. That should really say it all.
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Old May 12, 2013, 01:25 PM   #9
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Originally Posted by xShane View Post
She definitely has an interesting point here. Why are private corporations, banks, getting far lower loan rates than the students and people of our future

What are your thoughts on this? Discuss.
Banks are getting a lower rate because that will be paid back.

Students are less likely to repay on the scheduled terms.

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Originally Posted by xShane View Post
You mean they're given so much in debt and it's hard for many of them to find a job, right?
That can be affected by personal decisions. Go into a marketable field. Learn a trade. I'm a CPA, and there are plenty of plumbers out there who make more than me. People still tend to "look down" on service providers and trades because it's not white collar.

Our country NEEDS people to do those sort of jobs. It doesn't need more liberal arts grads as much as people think.

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Originally Posted by NT1440 View Post
Exactly. That's by federal law enacted in 2005, a strengthening of the same rule enacted in 1998. That should really say it all.
If you could have student loans discharged in bankruptcy, why not go to a college you can't afford, get a great degree, and then file bankruptcy?

Free degree!

No, of course it's not that simple, and yes I'm being facetious. But you get the point.
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Old May 12, 2013, 01:28 PM   #10
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Originally Posted by gsugolfer View Post
Banks are getting a lower rate because that will be paid back.

Students are less likely to repay on the scheduled terms.



That can be affected by personal decisions. Go into a marketable field. Learn a trade. I'm a CPA, and there are plenty of plumbers out there who make more than me. People still tend to "look down" on service providers and trades because it's not white collar.

Our country NEEDS people to do those sort of jobs. It doesn't need more liberal arts grads as much as people think.



If you could have student loans discharged in bankruptcy, why not go to a college you can't afford, get a great degree, and then file bankruptcy?

Free degree!

No, of course it's not that simple, and yes I'm being facetious. But you get the point.
Again, source?

And do you think a student is more likely to pay back less debt or more debt? Hmm...
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Old May 12, 2013, 01:36 PM   #11
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well, personally, i think that as a society, having more students (read: educated people) is our interest. we want these students to be able to get through college and uni', without placing more difficulties, like higher interest rates. when we have people who are more educated (be that an engineering degree, or a diploma in car mechanics - we need them all, much more than we need liberal arts students) they get paid more, and thus, they are able to spend more. as a society, we want people to spend more, because it helps small business, and generally speaking, drives the economy forwards.
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Old May 12, 2013, 02:42 PM   #12
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Originally Posted by xShane View Post
Again, source?

And do you think a student is more likely to pay back less debt or more debt? Hmm...
Common sense is the source. Bank's can't leave the Fed hanging on a loan because it's secured. Student loans, however, are unsecured. Yet another reason for a higher rate.
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Old May 12, 2013, 02:44 PM   #13
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Quote:
Originally Posted by gsugolfer View Post
Common sense is the source. Bank's can't leave the Fed hanging on a loan because it's secured. Student loans, however, are unsecured. Yet another reason for a higher rate.
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Old May 12, 2013, 02:52 PM   #14
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In my opinion, the real issue resides in the federal government's policy of paying up to COA without setting limits. This leaves a loophole where schools can charge essentially whatever they want and students will be able to secure student loans to pay it.

My schooling will cost me nearly $500K
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Old May 12, 2013, 02:53 PM   #15
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Originally Posted by xShane View Post
You ignored another reason for a difference in rate.

Why should the same rate be charged for secured and unsecured loans?
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Old May 12, 2013, 02:56 PM   #16
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Originally Posted by SLC Flyfishing View Post
My schooling will cost me nearly $500K
Whoa!

What are you doing, endowing a Chair to get through school!?

C'mon, just take the tests like everyone else.

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Old May 12, 2013, 03:36 PM   #17
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Originally Posted by gsugolfer View Post

If you could have student loans discharged in bankruptcy, why not go to a college you can't afford, get a great degree, and then file bankruptcy?

Free degree!

No, of course it's not that simple, and yes I'm being facetious. But you get the point.
That assumes that humanity is comprised entirely self serving *******s. I'm not that cynical about the human condition (while being cynical about everything else).

Although, if you think everyone could manage their own bankruptcy maybe there is hope because that means you assume everyone will basically become qualified bankruptcy lawyers.

Yes, I get the point, but I find it not to apply in reality.


At the end of the day, all we are really doing by having schooling cost this much with such pitiful returns on investment en masse, is ensure the destruction of our middle class.
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Old May 12, 2013, 03:54 PM   #18
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Whoa!

What are you doing, endowing a Chair to get through school!?

C'mon, just take the tests like everyone else.

$43K per year plus living expenses and some undergraduate student loan debt will creep up on you like that.

My school's tuition is about average, but it goes up every year without fail. I wonder if the federal Gov. would ever refuse to fund the increase with increased loan eligibility?
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Old May 12, 2013, 03:54 PM   #19
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At the end of the day, all we are really doing by having schooling cost this much with such pitiful returns on investment en masse, is ensure the destruction of our middle class.
Nowhere in that post did I say that college is reasonably priced, so I'm not sure where this is coming from.
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Old May 12, 2013, 03:55 PM   #20
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Originally Posted by gsugolfer View Post
Bank's can't leave the Fed hanging on a loan because it's secured.

You must have been hibernating the past 7 years than ......


They might not just simply default on it, but "socialize looses, privatize profits" can (and has been) achieved in many ways.
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Old May 12, 2013, 04:16 PM   #21
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Nowhere in that post did I say that college is reasonably priced, so I'm not sure where this is coming from.
That section wasn't in response to you, I tried to separate it from the rest with a double return. I apologize I should have made it clearer, I was using your post as a springboard for the rest of my stream-of-thought post.
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Old May 13, 2013, 01:39 AM   #22
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Interest rates should be set by major and the likelihood of gainful employment (and thus successful payoff).

English, Anthropology, or Sociology major? Hello 8.5% loans.

Engineering major? Mathematics major? Hello 2% loans. Then throw everyone in between. Update rates every couple years as necessary.

Not every major is as likely to find a well paying job. It's not saying you can't go to school for a certain major, but it is making it clear that getting a major in one major is much more of a financial risk than others. That combined with more substantial pre-admission loan counseling might give students a clearer picture as to what taking 'x' amount of dollars out means to them after graduation.

I never got a really sound overview until I went to a sparsely attended pre-graduation student loan seminar that showed exactly what my loan balance and rate meant when it came to that payoff 6-9 months after graduation. My per month payoff estimate wasn't far off, but it was good to see that in writing and could have maybe used that sooner.
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Old May 13, 2013, 03:03 AM   #23
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Originally Posted by noisycats View Post
Ok, let my start by stating I'm not fan of big banks...

but big banks are more likely to repay their loans than students.

Lower risk, lower rates. Higher risk, higher rates.
Do banks ever repay their loans?
Seems pretty plausible they are like countries and just accumulate bigger and bigger debts.
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Old May 13, 2013, 06:37 AM   #24
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Again, source?

And do you think a student is more likely to pay back less debt or more debt? Hmm...
How about they pay back no debt?

Personally I see no good reason to incentivize the acquisition of debt. Lower rates will just make it easier for people to justify bigger loans.

Country would be in a much better place if we all, our government included, would stop relying on credit to function.
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Old May 13, 2013, 06:55 AM   #25
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Again, source?

And do you think a student is more likely to pay back less debt or more debt? Hmm...
I take it you haven't taken out many loans in your life have you? My home mortgage is 4.5% and a mortgage on some land I bought is 5%. I have a car loan for 3.9%. Now with that said, why in the world are my credit cards 10-18%?

The difference is the mortgages and car loan are "secured" and the credit cards are not secured. Student loans are also not secured so interest will typically be higher. To be honest interest is cheap on student loans considering they are unsecured.

Guess what type of loans the banks have?

Now what is my source? Nothing. Just a slight understanding of how things work in the financial world.
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