

Should the U.S. Make Billions from Student Loans? - peterkrieg
http://www.bloomberg.com/news/articles/2015-02-27/should-the-us-make-billions-from-student-loans-

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rayiner
Yes. The new federal student loan programs are great. The total repayment is
capped at 10% of discretionary income, and forgiven after 20 years. Having the
system yield a profit will keep the program viable and reduce the temptation
to cut the benefits under the program. It's also fair--people who need loans
for school (I.e. Who aren't so rich to begin with they can afford school out
of pocket) are pooling the risk amongst each other.

~~~
JonFish85
For such a heavy lede, the article is missing a LOT of information. How much
profit does the government make? Profit, not revenue.

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leereeves
I've heard a plausible argument that federally guaranteed student loans fueled
a huge increase in the cost of college
([http://nces.ed.gov/fastfacts/display.asp?id=76](http://nces.ed.gov/fastfacts/display.asp?id=76)),
and much of the increased income went to administrator salaries and new
construction, rather than faculty.

Perhaps it's time to force colleges to compete on price.

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jobu
That's a difficult question to answer. In the long term it's in the country's
best interest for the government to subsidize college education, but perhaps
not all degrees should be eligible.

The basketweaving degree mentioned here is a terrible example because there
are legitimate degrees in fields where the average income makes it difficult
or impossible to pay back the student loans to get it (Psychology, Early
Childhood Education) -
[http://www.npr.org/blogs/money/2013/09/10/219372252/the-
most...](http://www.npr.org/blogs/money/2013/09/10/219372252/the-most-and-
least-lucrative-college-majors-in-1-graph)

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hnnewguy
It's just as crazy in Canada. The fixed interest rate on government backed
student loans is prime +5%! That means that during a period of historically
low interest rates, students are paying nearly 8% on their loans.

Why not prime? This is non-dischargeable debt, what is the risk to the lender?
It's absurd.

~~~
fennecfoxen
Hmm. You get prime rates on a house -- where the asset's value fully covers
the liability -- if you have a decent credit score and a source of income to
cover the monthly payments.

Are non-dischargeable debts are just as good as having that asset there, and
if not, how much worse are they? What's the additional risk added by having
people with nil credit score and little or no sources of income -- more or
less than 5%?

If this were really some sort of competitive market we could probably find out
empirically by working backwards from extant rates, but apparently it's
government-backed, so who knows :P

