Student loan rates double after Congress failed on fix

[fskimospy]

I have read what you said, and it's wrong. Which is exactly what I said in my post talking about making higher education more affordable. I've quoted you below, where you are completely oblivious to the impact of supply and demand on pricing. Else you would realize that the VERY REASON college was cheaper back then was because so many fewer students attended. What destroyed the affordability of college was the very policy of subsidizing student loans that began in earnest with the Economic Opportunity Act of 1964. And yet you stand in slack-jawed amazement about how higher education could cost so much more nowadays, and suggest for a solution making student loans even cheaper which is exactly opposite of what would work. And then are so oblivious to your own error that you can obliviously tell others that they're engaging in stupidity and ignorance.

Haha, what destroyed the affordability of college was the ability of more people to afford it. Well played. From this post it is still clear that you have not actually read my policy positions on college that are posted in this very thread and are now doubling down on your stupidity.

This isn't the only type of thread you do this in, so I'm guessing it's just a larger problem with how you process information and try to argue. I'm sure you're a real blast at Thanksgiving.

EDIT: I feel like you're probably behaving this way because I've made you angry. Maybe you should take a step back and return later when you've calmed down.

 

[glenn1]

Haha, what destroyed the affordability of college was the ability of more people to afford it. Well played. From this post it is still clear that you have not actually read my policy positions on college that are posted in this very thread and are now doubling down on your stupidity.

This isn't the only type of thread you do this in, so I'm guessing it's just a larger problem with how you process information and try to argue. I'm sure you're a real blast at Thanksgiving.

EDIT: I feel like you're probably behaving this way because I've made you angry. Maybe you should take a step back and return later when you've calmed down.

Let me give you the chance to try again. Is it your positon that improving the "ability of more people to afford" college and thus increasing demand (via higher enrollment) has no impact to the price of college? When someone suggests that lowered enrollment would lead to reduced tuitions, your response was

Except of course that colleges aren't going to magically cut their prices to 1/10th of what they are now. You aren't living in reality.

So again, is or is not Supply and Demand applicable in the case of higher education?


And I've read the rest of your policy positions and none would have a positive impact on affordability. I'll go through them one by one; so far you've mentioned:

1. Limiting for-profit colleges or disallowing student loans for these institutions and limiting the amount of institutions that qualify for student loans generally (post #88)
2. Making direct grants to public colleges (post #29)
3. “We should just switch to making college low cost or free” (post #80)
4. Limiting loans for students in a given year (post #29)
5. Capping interest rates for existing loans (post #29)
6. Higher fixed rates are preferred to lower variable rates (post #195)
7. It is “physically and logically impossible” to find jobs for those without college degrees (post #178).
8. Student loans should purposely not reflect default risk (post #221)

None makes higher education more affordable - in the first case you're limiting supply, in the second and third you're simply shifting the cost from student to federal government. In the fourth you're simply causing the student to take longer to obtain their degree at the same cost (or maybe higher). The fifth only applies to sunk costs of schooling already received, and the sixth makes future loans more expensive. The seventh would directly increase demand by discouraging people from entering the workforce before college. The eighth artificially inflates demand for higher education beyond what is a rational price as indicated by the very loan underwriting designed to price the economic value of the loan.

 

[fskimospy]

Let me give you the chance to try again. Is it your positon that improving the "ability of more people to afford" college and thus increasing demand (via higher enrollment) has no impact to the price of college? When someone suggests that lowered enrollment would lead to reduced tuitions, your response was So again, is or is not Supply and Demand applicable in the case of higher education?

Downward price rigidity makes it extraordinarily unlikely that colleges would somehow be able to slash their costs like that. It would lead to a massive degradation of the US higher education system. That's why it's a stupid idea.

And I've read the rest of your policy positions and none would have a positive impact on affordability. I'll go through them one by one; so far you've mentioned:

1. Limiting for-profit colleges or disallowing student loans for these institutions and limiting the amount of institutions that qualify for student loans generally (post #88)
2. Making direct grants to public colleges (post #29)
3. “We should just switch to making college low cost or free” (post #80)
4. Limiting loans for students in a given year (post #29)
5. Capping interest rates for existing loans (post #29)
6. Higher fixed rates are preferred to lower variable rates (post #195)
7. It is “physically and logically impossible” to find jobs for those without college degrees (post #178).
8. Student loans should purposely not reflect default risk (post #221)

None makes higher education more affordable - in the first case you're limiting supply, in the second and third you're simply shifting the cost from student to federal government. In the fourth you're simply causing the student to take longer to obtain their degree at the same cost (or maybe higher). The fifth only applies to sunk costs of schooling already received, and the sixth makes future loans more expensive. The seventh would directly increase demand by discouraging people from entering the workforce before college. The eighth artificially inflates demand for higher education beyond what is a rational price as indicated by the very loan underwriting designed to price the economic value of the loan.

I'm happy that you have finally gone and read my posts. This should hopefully show you how stupid your earlier post was. Your understanding of public policy here is pretty embarrassing though.

1.) That is an incredibly naive way of looking at it. Those schools are many times more costly in total expenditures per student than comparable methods of achieving the same result. Culling inefficient operators may reduce supply, but it also increases systemic efficiencies. You can then reallocate those funds to more efficient forms of education. If you can't understand how that reduces costs, back to economics class with you.

2/3.) This is related to #1.

4.) No it doesn't. First that presumes that all students would choose to take fewer classes per year as opposed to going to a more affordable school. Secondly, lifetime caps or degree caps on loan expenditures are part and parcel there.

5.) You didn't understand what I wrote.

6.) Research on student loan policy supports this as an overall superior solution.

7.) Strawman. It is a simple description of reality as it stands.

8.) Strawman or basic reading comprehension failure.

This is getting embarrassing for you.

 

[glenn1]

This is getting embarrassing for you.

Yeah, okay mate.

 

[werepossum]

Bipartisanship is not inherently useful, by itself it means nothing. There is in fact strong bipartisan support for the NSA programs as they currently exist, do you care about that?

Your attempts to straw man my position are absurd. I prefer a low fixed rate above all and a higher fixed rate as opposed to an adjustable one. How is this difficult to understand?

Please remember this post when you again try to point out how I am extreme. When one not only always takes only one party's side, but also rejects any compromise, that this the definition of political extremism.

I tend to agree with you on the adjustable rate loans on principle, but remember that this is money the federal government must borrow. Tying the rate to the federal government's cost of borrowing money seems fair to me.

Mortgages and auto loans are a terrible gauge of what student loans would be on an open market. Go try to buy a porsche with nothing down as an 18 year old with no job.

There is a semi-analogous market to what student loans would be: unsecured lines of credit. Go see what rate you'd get for an unsecured LOC at 18 in the range of $100k. I imagine no bank would offer it, and if they did the rates would be WAY higher than 7%.

Not quite the same thing. Obama federalized the student loan program. Even before that, student loans were federally guaranteed, so the loans in effect were secured. The bank could lose little if the student defaulted. This was the argument for federalizing the program; if the federal government is the guarantor, the banks should not be involved. I have absolutely no problem with the profit motive, but unless the banks can administer the loans more cheaply than can the federal government then it's a valid point.

Haha, what destroyed the affordability of college was the ability of more people to afford it. Well played. From this post it is still clear that you have not actually read my policy positions on college that are posted in this very thread and are now doubling down on your stupidity.

This isn't the only type of thread you do this in, so I'm guessing it's just a larger problem with how you process information and try to argue. I'm sure you're a real blast at Thanksgiving.

EDIT: I feel like you're probably behaving this way because I've made you angry. Maybe you should take a step back and return later when you've calmed down.

But he's absolutely correct. There is no more basic economic law than supply and demand; by artificially increasing the demand by increasing the number of people who can afford college, those who supply that service can charge more for it. And by allowing people (especially young people) to put off the pain of repayment, those who supply education services can charge much more for it. That's just human nature. It doesn't make the student loan program bad; very few things are purely good with no adverse effects.

 

[chucky2]

Maybe they should tie amount loaned out to high school degree + GPA. Got a 2.0? Sure, we'll loan you money. Here's $5k for the year. Don't like that? Should have got better grades kid. Oh, next kid got 4.0? You can borrow $20k. Incentivize good grades in high school.

Then again, need to make sure the high schools are teaching at proper levels and grading properly, else you'd have high schools pumping out high GPA students on weak ass ciriculum via turn in blank homework assignment, that's a low C. Still, potential exists...

 

[OverVolt]

I know. I say it more tongue-in-cheek because my real beef is with the outrageous cost of colleges themselves. Sort of like in the housing market, when rates are high, houses sell for less. If rates go higher for students, colleges should bring their costs back down to reality.

This, of course, is my opinion. Maybe colleges aren't completely ripping off students or artificially inflating the costs because they know students can get federal grants and loans easily. I will be honest here and admit my bias on this subject.

Eh colleges are in competition with each other. The buildings they have now to attract students are insane.

 

[JockoJohnson]

Please remember this post when you again try to point out how I am extreme. When one not only always takes only one party's side, but also rejects any compromise, that this the definition of political extremism.

I tend to agree with you on the adjustable rate loans on principle, but remember that this is money the federal government must borrow. Tying the rate to the federal government's cost of borrowing money seems fair to me.


Not quite the same thing. Obama federalized the student loan program. Even before that, student loans were federally guaranteed, so the loans in effect were secured. The bank could lose little if the student defaulted. This was the argument for federalizing the program; if the federal government is the guarantor, the banks should not be involved. I have absolutely no problem with the profit motive, but unless the banks can administer the loans more cheaply than can the federal government then it's a valid point.


But he's absolutely correct. There is no more basic economic law than supply and demand; by artificially increasing the demand by increasing the number of people who can afford college, those who supply that service can charge more for it. And by allowing people (especially young people) to put off the pain of repayment, those who supply education services can charge much more for it. That's just human nature. It doesn't make the student loan program bad; very few things are purely good with no adverse effects.

That sounds exactly like what happened with the housing bubble. So when does the college bubble pop?

 

[Tsavo]

So when does the college bubble pop?

Never.

Student loans have to be repaid; there's no way of removing the debt other than to repay it.

 

[Dr. Zaus]

Never.

Student loans have to be repaid; there's no way of removing the debt other than to repay it.

And you can't have your education repossessed, thus leading to greater availability of education if you fail to repay.

A service bubble w/out ability to default... ingenious!

 

[Doc Savage Fan]

There is nothing wrong with the government providing money to subsidize the interest, it doesn't need to be neutral.

I agree...but how are we going to pay for administrative costs if the solution isn't revenue neutral?

 

[OverVolt]

Haha, what destroyed the affordability of college was the ability of more people to afford it. Well played. From this post it is still clear that you have not actually read my policy positions on college that are posted in this very thread and are now doubling down on your stupidity.

This isn't the only type of thread you do this in, so I'm guessing it's just a larger problem with how you process information and try to argue. I'm sure you're a real blast at Thanksgiving.

EDIT: I feel like you're probably behaving this way because I've made you angry. Maybe you should take a step back and return later when you've calmed down.

Hmm? Cheap credit will raise the tuition price.

 

[werepossum]

That sounds exactly like what happened with the housing bubble. So when does the college bubble pop?

I'm not sure it does. The housing bubble was a bit different in that housing prices were ramped up very steeply and then collapsed, leaving people with house loans way under water. Disreputable lenders also made loans that people could not possibly afford with the promises that later the buyer could refinance - only because they loan was for far more than the house was worth (due to an insanely inflated market but also to pet appraisers) - leaving little option but default.

Student loans are a bit different. First, as Tsavo points out, default is not currently an option, although Obama is working to change that and also to allow federal government employees to not pay them back. But either way, government is the guarantor, and these loans of borrowed money will be paid back to the banks with more borrowed money. Also, the value of an education is even more intangible than the value of a home, so there is no easy way to suddenly realize that an education is over-valued. More importantly, the housing market collapsed largely because people stopped paying the inflated prices and banks stopped lending as they realized the stupidity of lending more money than the collateral is worth to people who can't pay it back and assuming the government will make you whole. As long as the federal government can borrow or print money, we aren't going to stop our student loan program. We may and probably should cut it back, but a wholesale abolition would be national suicide, especially after we've so inflated tuition.

Granted I'm not a financial guy, but I see no looming mechanism for a student loan bubble crash.

 

[fskimospy]

Please remember this post when you again try to point out how I am extreme. When one not only always takes only one party's side, but also rejects any compromise, that this the definition of political extremism.

You missed the point of what I wrote. Bipartisanship is not valuable in and of itself. That doesn't mean to reject the idea of compromise, it means that some compromises aren't worth it.

By the way, I don't think of you so much as extreme in a policy sense. I find you to be delusional and paranoid, overwhelmingly fearful of a progressive conspiracy that has no basis in reality.

I tend to agree with you on the adjustable rate loans on principle, but remember that this is money the federal government must borrow. Tying the rate to the federal government's cost of borrowing money seems fair to me.

It's money the government must borrow at the date that it is issued. Why not tie it to that rate as opposed to future rates?

But he's absolutely correct. There is no more basic economic law than supply and demand; by artificially increasing the demand by increasing the number of people who can afford college, those who supply that service can charge more for it. And by allowing people (especially young people) to put off the pain of repayment, those who supply education services can charge much more for it. That's just human nature. It doesn't make the student loan program bad; very few things are purely good with no adverse effects.

Of course increasing demand can increase prices, but that wasn't what we were talking about. He thought that refusing to provide student loans to highly inefficient operators would also lead to increasing prices, which is a dubious statement at best.

 

[werepossum]

You missed the point of what I wrote. Bipartisanship is not valuable in and of itself. That doesn't mean to reject the idea of compromise, it means that some compromises aren't worth it.

By the way, I don't think of you so much as extreme in a policy sense. I find you to be delusional and paranoid, overwhelmingly fearful of a progressive conspiracy that has no basis in reality.

It's money the government must borrow at the date that it is issued. Why not tie it to that rate as opposed to future rates?

Of course increasing demand can increase prices, but that wasn't what we were talking about. He thought that refusing to provide student loans to highly inefficient operators would also lead to increasing prices, which is a dubious statement at best.

Riiiiight. I'm paranoid and delusional for believing that the mainstream press is overwhelmingly liberal, but believing that Republican leaders oppose Democrats because they are evil and that Republicans and all Southerners as a group are evil and/or ignorant is just keen observation. Gotcha.

Government now borrows money in short term bonds. Clinton started this, and as long as interest rates stay low it's good financial policy. (Granted, I disagreed with taking that risk at the time, preferring to lock in slightly higher but still low rates, but events have proven me wrong.) Student loans will be paid back over a much longer period than the initial bonds cover, which means government will need to issue bonds several times over the life of the loan to borrow the money until it is paid back. Therefore it makes sense to tie student loans to the continuing cost of borrowing money. I don't think it's a huge issue either way as I don't see our cost of borrowing money going back to Carter-era rates any time soon, but I do think it's fair to tie student loan rates to the continuing cost of borrowing money. It's one thing to ask a banker to take the risk against interest rates rising on your behalf, because he's looking to earn a profit. It's quite another to ask taxpayers to do the same when we aren't looking to earn a profit on the loan, merely to break even and ensure the programs stays solvent for future students.

 

[fskimospy]

Riiiiight. I'm paranoid and delusional for believing that the mainstream press is overwhelmingly liberal, but believing that Republican leaders oppose Democrats because they are evil and that Republicans and all Southerners as a group are evil and/or ignorant is just keen observation. Gotcha.

See, there you go again! You really really need to read the paranoid style in American politics. It might hit a little close to home, but that's a sign of progress.

Government now borrows money in short term bonds. Clinton started this, and as long as interest rates stay low it's good financial policy. (Granted, I disagreed with taking that risk at the time, preferring to lock in slightly higher but still low rates, but events have proven me wrong.) Student loans will be paid back over a much longer period than the initial bonds cover, which means government will need to issue bonds several times over the life of the loan to borrow the money until it is paid back. Therefore it makes sense to tie student loans to the continuing cost of borrowing money. I don't think it's a huge issue either way as I don't see our cost of borrowing money going back to Carter-era rates any time soon, but I do think it's fair to tie student loan rates to the continuing cost of borrowing money. It's one thing to ask a banker to take the risk against interest rates rising on your behalf, because he's looking to earn a profit. It's quite another to ask taxpayers to do the same when we aren't looking to earn a profit on the loan, merely to break even and ensure the programs stays solvent for future students.

This is factually incorrect.

The government borrows money using many different types of bonds, including bonds up to 30 years, which is generally the maximum repayment time for a student loan.

 

[Exterous]

Never.

Student loans have to be repaid; there's no way of removing the debt other than to repay it.

IMO it will slowly drag more and more on the economy and will be a persistent issue for decades as many of the problems are compounding but won't be felt for decades. People will be too saddled with debt to take on new debt like car loans and mortgages or save for retirement. Those number of those under 35 taking on car loans or mortgages is rapidly declining as their burden of sutend loans increases. These people are waiting longer to buy a house or car and will almost certainly put off saving for retirement during the best years to do so. I expect we will see a generation of Americans who have almost 0 retirement savings just when SS becomes unable to payout the promised amounts.

I doubt there will be a pop but I think the cumulative pain will be worse over the long term than the housing bubble

 

[werepossum]

See, there you go again! You really really need to read the paranoid style in American politics. It might hit a little close to home, but that's a sign of progress.



This is factually incorrect.

The government borrows money using many different types of bonds, including bonds up to 30 years, which is generally the maximum repayment time for a student loan.

I believe the vast majority of government borrowing is five years or less, but I'd have no objection to basing student loan rate on the prevailing 30 year bond rate and financing the student loan program exclusively with 30 year bonds. That way the student knows the rate going in and the rest of us don't have to subsidize him.

 

[Atreus21]

Eh, the sooner the student loan bubble bursts the better.

 

[DCal430]

Never.

Student loans have to be repaid; there's no way of removing the debt other than to repay it.

Actually this isn't true.

If you are a public servant and borrowed more than 30,000. You can get most of your student loan amount forgiven if you are a pubic servant.

If you become disabled all of your student loan is also forgiven.

 

[zanejohnson]

i dont know how people rack up so much debt.. it's called COMMUNITY COLLEGE and then TRANSFER.

i took out like 2000 dollars total in stafford loans.

 

[sze5003]

i dont know how people rack up so much debt.. it's called COMMUNITY COLLEGE and then TRANSFER.

i took out like 2000 dollars total in stafford loans.

2 years at a state school where I am is around 25k total. Community college definitely helps but it doesn't make it anywhere near loan free.

 

[OverVolt]

I love these people giving 5, 10, 15, 20, 25, etc. year old advice.

 

[Vic Vega]

OMG, graduates past 6 months will need to scale back their cell plan, forego buying a new cell for another year when their current one works fine, and not be able to afford everything the cable company offers on their TV menu? The horror!

LMAO - essentially this.

 

[Vic Vega]

i dont know how people rack up so much debt.. it's called COMMUNITY COLLEGE and then TRANSFER.

i took out like 2000 dollars total in stafford loans.

They rack up debt and it goes like this:

Classes, books, labs, etc for the semester cost: $5K.

Student receives $15K in student loans.

Students pays for classes, books, labs, etc and pockets the rest.

Student does not WORK at all.

Do this for 4, 6 or 8 years and hilarity ensues.