Student Loan Interest Rankles College Grads 1259
theodp writes "Like many recent college grads, Steven Lee finds himself unemployed in one of the roughest job markets in decades and saddled with a big pile of debt — he owes about $84,000 in student loans for undergrad and grad school. But what's really got Lee angry are the high interest rates on his government-backed student loans. 'The rate for a 30-year mortgage is around 5%,' Lee said. 'Why should anyone have to pay 8.5%? The government has bailed out homeowners. It's bailed out big businesses. Why can't it also help students?' Not only that, federal student loans are the only loans in the nation that are largely non-dischargeable in bankruptcy, have no statutes of limitations, and can't be refinanced after consolidation, so Lee can forget about pulling a move out of the GM playbook. And unlike mortgages on million-dollar vacation homes, student loans have very limited tax deductability. A spokeswoman for the Department of Education blamed Congress for the rates which she conceded 'may seem high today,' but suggested that students are a credit-unworthy lot who should thank their lucky stars that rates aren't 12% or higher. Makes one long for the good-old-days of 3% student loans, doesn't it?"
It's cheap compared to India... (Score:4, Informative)
In India, student loans are 12% compound interest; while the borrowing rate in good banks is as high as 7.5% compunded quarterly.Money makes the world go round...
Typo in summary: detectability vs deductibility (Score:5, Informative)
Re:All mine were cheap! (Score:3, Informative)
Not sure where the mentions loans were from, but my loans have all been cheap too. My lowest interest rate was 4.5% and the highest was around 6%.
Hmm.. must be some difference (Score:5, Informative)
The rate for a 30-year mortgage is around 5%,' Lee said. 'Why should anyone have to pay 8.5%?
Because if you default on the mortgage, they can take your house. Education repossession technology is still in beta. Even when it works it and rarely returns anything of value.
Re:It's cheap compared to India... (Score:4, Informative)
But in India, education is also highly subsidized and in a lot of universities, the fee structure is merit-based (i.e. your ranking in your entrance examinations determine which stratum you fall under).
Mine are very cheap (Score:1, Informative)
I just consolidated my federal student loans, at 2.25%. I'm not sure where these people are getting the 8+% figures from.
Easily detected (Score:1, Informative)
My student loans were detected in my taxes and actually increased my refund.
Student Loan Forgiveness Plan (Score:5, Informative)
Pay your loan for 10 years... and the government will excuse the rest.
Some restrictions apply...
http://www.nextstudent.com/articles/student-loans-forgiven.asp [nextstudent.com]
Re:All mine were cheap! (Score:2, Informative)
this article is distorted (Score:2, Informative)
Unlike most other loans, student loans can get you a large tax deduction come April.
Re:As a college student (Score:3, Informative)
The worthlessness of "education" (Score:1, Informative)
Re:Tough Shit. (Score:2, Informative)
Re:All mine were cheap! (Score:5, Informative)
In Australia, an average degree costs about $20K to $30K (depending on arts vs science/law/engineering/etc) and there's no interest on the government loan. It is, however, indexed to inflation.
If you go overseas, you don't have to keep paying it until you return to Australia, and it is terminated upon death. That maximum rate it is taken from you pay at is 7% and that only starts when you hit about $30K to $40K per year.
This only applies to degrees taken at public universities, but most of the universities in Australia are public (certainly all the best ones are).
So to hear about this system America uses is quite disturbing. The university attendance rate over there must be exceptionally low?
Real world loans are going to really freak you out (Score:5, Informative)
There are two general type of student loans: direct and non-direct with a dirt cheap and a cheap interest rate. 8.5% is cheap for an UNSECURED loan that doesn't START accumulating interest until AFTER you graduate (actually Govt pays interest till you graduate).
Dude- you got $85K with ZERO collateral. The rate is NOT unreasonable. It is the best investment you can make for your future.
You can always become a teacher in the inner city or work 2 years for Peace Corps or any of the other methods the government has setup for most or all of your loan to be FORGIVEN.
Stop complaining about getting cheap money with no collateral and no limitation, except that you go to school.
Agreed (Score:3, Informative)
I'll be graduating next summer with a Masters in IT Management. (Undergrad in Simulation Design Engineering)
75k or so in loans, and the year I went to college they jacked up the interest rate to 6.8%.
And to everyone saying its unsecured debt needs to actually look into their facts. Student Loans can not be bankrupt on, if I don't pay, the gubmint will dock my pay. Which actually is a better deal that paying the loans, the max they can dock is 15% per check, and my loans will be way more than that to actually pay.
The loans are government backed, they should be no interest.
Re:Hmm.. must be some difference (Score:3, Informative)
College student; Please help. Won't work for food (Score:3, Informative)
'The rate for a 30-year mortgage is around 5%,' Lee said. 'Why should anyone have to pay 8.5%? The government has bailed out homeowners. It's bailed out big businesses. Why can't it also help students?'
Angry? You just got a "free" education, dummy. Sure, you have to pay the money back, but you didn't have to work and go to school intermittently for 10+ years hoping that you can finish your first degree before your credits are too old to apply. Your 401k/403b/457b/whatever will also have a 5-6 year head start, which will be amazing. College students from every previous generation have had a reputation for being poor. The subject of this post is a joke from a while back. Same as "Can you spare a dime? Working my way through med school."
I wonder why you're not considered credit-worthy? (Score:5, Informative)
Maybe it's because you're borrowing over 80,000 dollars for a college education.
5 minutes with a spreadsheet would tell you how much and for how long you have just screwed yourself, and by borrowing that kind of money you prove that you can't or won't spend even that much effort to think before borrowing.
I think part of the problem is cultural: I was broke back when I went to college, and I needed loans; but I also knew that you should never borrow anywhere near enough to pay your whole tuition bill. That's far too much money to borrow even if you aren't dead broke. Poverty forces you into indebtedness, but it also makes you paranoid about accumulated debt, and you understand that something that costs tens of thousands of dollars will require you to eat Ramen, work multiple jobs, and make affordable choices even if someone will extend you credit.
But now I hear horror stories about students who borrow enough money to buy a house in much of the USA, and use that to pay for an entire four-year degree plus graduate school. It's like the kids don't understand that they're poor; they get a credit line and stop acting like people who have to work for a living.
Re:Grad student with huge loans (Score:4, Informative)
Re:Experience from academia (Score:3, Informative)
Re:Tough Shit. (Score:3, Informative)
Are the doctors and lawyers the ones who can't repay their student loans?
Re:Grad student with huge loans (Score:5, Informative)
Re:this article is distorted (Score:4, Informative)
Skilled trades are not morons (Score:5, Informative)
There's a vast difference between the skilled tradesman and what you call morons. Give me a licensed master plumber, master electrician, mechanical contractor, etc and I'll show you someone that truly understands their field and has years of experience under their belt. Sure the variety of assistants range in ability like any job, but to label the actual skilled person as a moron shows you don't understand the field. That'd be like comparing someone who flips burgers to a skilled chef. Also the skilled trades are very strongly union in every major city, unions being one of the strongest backers of the Democrats.
As for continuing education much of the green movement is powered by installation of ultra high efficiency equipments. Pull up a wiring schematic for a 96% boiler and the various pumps and zone valves - it's anything but moronic work.
So what's up with the trades bashing? Watch a few episodes of Dirty Jobs and you'll see some examples of problem solving at the finest.
Re:All mine were cheap! (Score:3, Informative)
[ Disclaimer: I work for a non-profit company in the Student Loan business who has been around for 25+ years ]
The reason loans rates were low had nothing to do with DIRECT loans. The FFEL (ie; non-DIRECT) program has exactly the same rates, and existed long before DIRECT was even a thought. These rates are determined by Congress, and are a supposedly based on the governments cost of getting loans from the private sector (T-Bills, etc...) DIRECT loans was an attempt to remove private enterprise from the student loan arena, and for the most part it has succeeded. Companies are no longer motivated to give benefits to students (interest rate reductions, forgiveness of debt, etc...). Any 'profits' made from student loans for a FFEL lender must be given back to the students and/or given back to the government. With DIRECT, this is no longer the case, since DIRECT *is* the government. Congress still will set the rates, and you'll still pay the same amount you always paid, and you'll get the same wonderful service you get from the IRS and other government agencies.
As we all know, when government gets involved, effeciencies and such go through the roof. People's motivation to do a good job skyrockets, and for the most part everything will be well. (BTW, the former is sarcasm...)
As others have stated, the problems is NOT about student loans, the problem is the cost of education. (Unfortunately, the cost of not getting an education is much worse.. 'Would you like fries with your burger?')
Re:It's cheap compared to India... (Score:3, Informative)
Your inflation in the long run (10+ years) is 8%. I think the US is 3%.
Re:All mine were cheap! (Score:5, Informative)
Re:All mine were cheap! (Score:3, Informative)
$20k to $30k sounds about right for a the average undergrad who isn't full fee paying. For most undergrad degrees where the students qualified through one of the standard mechanisms (and isn't an international student), the government still pays a good 2/3rds of the cost.
Re:Experience from academia (Score:3, Informative)
Not to mention that the Australian system also pays students fortnightly payments if they're in a position to not be able to afford shelter and food while studying. Note that there is no long term obligation attached to that money (you don't have to pay it back).
Re:Real world loans are going to really freak you (Score:2, Informative)
Not all direct loans have subsidized interest. Most of my loans are of the unsubsidized type, and while not due while in school, accrued interest from the date of issue. Some of my loan money is subsidized, and is not accruing interest while in deferment.
The first chunk of my loans, issued pre-Fall 2006, are at ~1.8% and is a variable rate. My loans issued Fall 2006 and onwards are at 6 and change. My only complaint is that they refuse to let me pay back the higher interest loan first, telling me that federal law prohibits it.
Loans for graduate school are higher, my wife has graduate PLUS loans at the 8.5%.
2 years in the Peace Corps will not forgive any of your loans, it will just get you a two year deferment. Those PLUS loans of the OP are going to sit and accrue interest at 8.5% for two years. The $6,000 "resettlement" cash PC gives you when you return won't cover the interest on his loans. Not withstanding any other benefits (increased employability, personal growth, ect), the PC is a poor economic decision for recent graduates with unsubsidized loans.
outrage noted :-) (Score:5, Informative)
That just got modded "flamebait" by somebody who clearly resents being reminded that some degrees (his own most likely) have nearly zero economic value.
It's an annoying way to stifle debate, but at least I find it amusing. :-/
default rates by degree (Score:4, Informative)
According to http://www.springerlink.com/content/u380751518251x56/ [springerlink.com]
"Majoring in a scientific or technological discipline, earning good grades, persisting to degree completion, getting and staying married, and not having dependent children are all actions that substantially increase the likelihood of repayment and lower the likelihood of default."
You have to pay to get the full publication I guess, but that first part says what should be obvious: people with nerd degrees don't default.
Re:All mine were cheap! (Score:3, Informative)
Re:Education should be a national right and pride (Score:2, Informative)
Free education? Excellent!
I'm off to earn fifteen PhDs, now.
What, actually get a job? No way, you're paying for my room and board. Forever.
That's already solved. In Mexico public Universities are completely free (well, only about 50 US Dollars every 6 months). Now, how do you get your food and roof while you study is your own problem.
Re:I hate to break this to you (Score:1, Informative)
To be accurate, Czech Republic is not Czechoslovakia either...
Things are far from perfect here (is there some "perfect"?), but we've moved a lot since old "soviet satellite" era. It's not that different from Austria, for example (except you can go shopping when you want, not when the goverment decides you should) - this is EU we're talking about (and not even "romania-type EU", just in case).
I consider general, public healthcare one of advantages compared to USA.
Re:All mine were cheap! (Score:3, Informative)
It's the same way here in the US. People just don't want to mention that because it implies paperwork for them. All 5 minutes worth of paperwork.
Re:bad deal (Score:3, Informative)
FYI: The 'forgiveness' only kicks in if you are working in certain 'public service' areas... an area I’d wager your average /.er does not... and again, only on federal loans (only ~2/5ths of my student loans are federal for example).
Re:All mine were cheap! (Score:1, Informative)
"Lennon/McCartney" (the songwriting duo)
"Lenin/McCarthy" (politicians who gained power by exploiting Communism)
I can see why you might confuse Lennon with McCartney or Lenin with McCarthy. So intertwingled. And you have to be an expert to know the difference between a John song and a Paul song since they always had joint attribution.
Anyway, Wikipedia (which is never wrong) says the "useful idiot" quote is mis-attributed to Lenin (the Russian):
Re:All mine were cheap! (Score:3, Informative)
You can get forebearance on student loans, but interest still accumulates.
Best I can see, since student loans aren't dischargable in bankruptcy, if you're largely without assets and without sufficient employment, the sensible thing is just plain default on them and take the hit on your credit record. If you try to pay them and end up behind on your rent as a result, you'll find yourself out in the cold and _still_ unable to pay your student loan.
Re:Experience from academia (Score:3, Informative)
Yeah, that's what happened. A guy asked a question at a debate, and Obama's team instantly attacked him, and which point the Republicans showed up.
Which is a bit different from the way everyone else remembers it, where he asked a question, Obama tried roughly to answer it despite him clearly disbelieving it, and that was all.
Frankly, I don't mind asking politicians questions that are hypotheticals, even posed as if you're the guy in the hypothetical...but I do mind when the media doesn't do its job and explain why the question everyone's talking about is based on incorrect premises, and here's how taxes actually work for small businesses, and if Joe's hypothetical was true here is how his taxes would change, etc.
This would require some sort of actually functioning media in this country, so that's probably too much to hope for, though.
1) Is it just me, or have the Republicans gotten really bad at researching their own people recently? Forget Joe the plumber, Palin's kid was pregnant and they didn't manage to figure that out in advance either.
Re:I hate to break this to you (Score:3, Informative)
Simon