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View Diary: Federal student loan interest slated to rise back to 6.8% (43 comments)

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  •  To add salt to the student loan fiasco, (3+ / 0-)

    these loans could not be erased by declaring bankruptcy. A former student burdened with a crushing loan had no recourse in the bankruptcy courts; they were chained to these exorbitant loans for life.

    Pray tell, whose interest was Congress looking our for?  

    •  would you extend an unsecured loan to (1+ / 0-)
      Recommended by:
      Lasgalen Lothir

      a group of people who, later, could just walk away and say to you..."Sorry, Charlie?"

      _"Love is the rosebud of an hour; Friendship the everlasting flower."_ Brook Boothby

      by Keith930 on Sat Mar 30, 2013 at 07:13:45 PM PDT

      [ Parent ]

      •  Plenty of people extended that credit (1+ / 0-)
        Recommended by:
        jfdunphy

        Until defaulting on student loans was banned.  It's not as though finding lenders was hard to come by.

      •  At a high interest rate, sure. (2+ / 0-)
        Recommended by:
        Ramoth, Lasgalen Lothir

        That's the point of a high interest rate:  to make a profit despite the inherent risks of giving out the loan.  

        You can also mitigate risk by lending sensibly.  You can lend someone $20,000 to get a college degree, but if some kid wants to borrow $200,000 to go to a pointlessly expensive 1%er school, you can say no.  You can minimize risk of bankruptcy by giving people loans they can repay.

        On the other hand, if bankruptcy is disallowed, and the government backs me up, then I can extend an unsecured loan at a much lower interest rate and still profit.  Again, that's the point.  

        So tell me:  what's the point of a 7% interest rate AND a ban on bankruptcy protection?  Is there any legitimate argument for having both of these policies in place?

        Taking jokes seriously is the exact mirror activity of laughing if someone says they have cancer. --jbou

        by Caj on Sun Mar 31, 2013 at 08:56:51 AM PDT

        [ Parent ]

        •  Yeah, this is the part Kossacks refuse to get. (0+ / 0-)

          It's one or the other.  Bankruptcy or usurious interest rates.

          Unsecured loans (i.e., credit cards) run, at a minimum, at 11-12% interest, for people with excellent credit.  For people with not-so-excellent credit, you could run 30% or more (there's no actual legal limit, but practically, the banks seem to cap out at 30%).

          If you want bankruptcy protection, banks can--and absolutely will--price the interest out of the range of the middle class, shutting off the possibility college for virtually everyone in the middle class and lower.

          Can you imagine what peoples' student loans would look like if they had 30% interest rates?

          •  I'm not sure 30% is a fair comparison. (0+ / 0-)

            Were student loans at 30% interest before bankruptcy protection was removed?

            Credit cards are not the same thing as unsecured loans.  We got an unsecured loan at a much lower interest rate than our credit card.  Credit cards have terrible interest rates in part because of the nature of the credit, which is more fluid than a loan, and more susceptible to abuse.

            Taking jokes seriously is the exact mirror activity of laughing if someone says they have cancer. --jbou

            by Caj on Sun Mar 31, 2013 at 04:33:51 PM PDT

            [ Parent ]

            •  30%? Probably not. (0+ / 0-)

              ...but the student loan interest rate in 1988 was 10%.

              6.8% doesn't look so bad when put in its historical context (see http://www.finaid.org/...).  For several years after I graduated (1995), the student loan Stafford repayment rate was 8.25%.

              In 1976, federal law provided the first exceptions to allowing student loans to be discharged in bankruptcy.  I can't find any historical date for the interest rates that year, though.

              In fact, the historical data seems to show the opposite of what many Kossacks have argued with me.  Those of us who got our college degrees in the 1990s were a bit unluckier than students are today.  By comparison, students in the early 2000s were a bit luckier.

              Of course, this ignores student loan rates from private banks, and that's really what I was talking about, because you're just not going to get a $200,000 Stafford loan.  To get the amount that journalists write stories about, you have to have taken out private loans, and there you're at the whims of the banks.

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