Why is there a debate that we should NOT increase the interest rate on students loans from 3.4% to 6.8% in these times of ultra-low interest rates?
My bank gives me a whopping 0.10% on savings. ING Direct gives less than 1%. On a loan that can never be bankrupted, why is 3.4% not a great interest rate for the government?
For a point of comparison, my variable-rate private student loans are currently at 3.8%. Fixed rates tend to be a bit higher; so perhaps if you went out to get a private fixed rate loan it’d be more like 4.5%-5%. Anything above that is essentially price gouging, especially since government loans are supposed to be lower-cost.
They’re difficult to discharge in bankruptcy, but not impossible. I’m in much the same boat as you, but I’m far more upset that graduate students will no longer be eligible for any subsidized loans. You and I will already be paying 6.8%, because the 3.4% rate is not available to graduate students.
It does seem ridiculous that student interest rates are going to increase at a time when my wife is being offered a refinance on our house at 3%, from an original rate of 6%, despite the fact that our house is now worth approximately two thirds what we paid.
Does that apply retroactively to the money we’ve taken out in the past couple of years, or does it only apply to the money we borrow going forward?
I’m not sure, but I think that change applies to new loans. Here’s what one official page on the topic has to say:
Your old loans will still remain subsidized. (I hope… else my next five years of grad school are going to be a lot more painful than I expected…)
It’s political so there’s no rational connection to what rates should actually be. Bohner is already on the record saying they all want to keep the rates low. But they are automatically set to increase so that necessitates extorting something else in exchange for keeping them low.
It doesn’t really matter which side you’re on - nobody is arguing from the side of what rate rationally makes sense.
Existing subsidized borrowing remains subsidized. New borrowing post-7/1/12 will be unsubsidized. I borrowed the maximum subsidized amounts ($8500) for each of my first two years of law school, so at least there’s that.
What really sucks is that the new subsidy rule and interest rate spike will hit me at the same time as a 40% increase in tuition. :mad: You’re in private school, IIRC, so you don’t have to worry about that, at least.
Student loans should have 0% interest, with caveats on who gets them and what they can be used for. But there is no justification in the government charging interest for these loans. The only problems with student loans are the lack of availability, using them for useless education, and using them to pay exhorbitant tuitions from schools who don’t even need the money.
What education is useless? What’s useful?
I just heard someone complaining that they had $65,000 in student loans, and four years after graduating with a degree in English Literature, he only had a job as a legal assistant paying $36,000 a year, which was more than he was making a couple years ago, but still not enough for him to make payments on his student loan.
He would be a lot better off if he got an accounting degree. Both my company and its auditors are still trying to fill entry level spots with people with accounting degrees (and who have passed the CPA exam, in the case of the auditing firm)
I don’t know if the education is useless, but it was largely recreational in my opinion. Of course the reason he went into English Lit was that it was easier to get into that program than Accounting or even generic Business Administration.
Unless, he is a terrible accountant. I promise you that no matter how much your company wants to hire accountants, they would never want to hire me as an accountant.
It took me a solid year of studying 2-3 hours a day to get to the point where i could pull a minimally acceptable GRE score. Clearly that wasn’t laziness. Some people are not strong enough at math to make a living out of it, just like some people are not strong enough at writing or painting or playing football to do so.
Isn’t the proportion of people going to four year colleges in the US much higher than in other developed countries? I work for a company that is headquartered in Europe and has operations in two very well off Western European countries, as well as two middle income Central European countries. Most of the entry level accountants in Europe do not have the equivalent of four year degrees. But almost all of the ones in the US do. I don’t think you really need a four year accounting degree to process invoices, maintain simple spreadsheets etc. But because so many more people go to university in the US, employers will require a four year degree for a $30k-$40K entry level job, and there will be a queue going round the building.
And a lot of people with accounting degrees are bad accountants. My wife was an accounting graduate student at a distinctly second rate university. Some of her classmates weren’t really learning Accounting as much as learning how to pass accounting exams. The school was basically engaged in the tertiary level version of social promotion.
I shudder to think what the students who couldn’t get into the business school were learning. I got a Comp Sci Masters degree from the same school. It is possible to get a Comp Sci undergraduate degree without being able to write code that writes!
Even though English lit is pretty useless, I wasn’t talking about that. Useless education comes from substandard schools, or programs that don’t lead to a degree or useful skill. So an English lit degree program, that provides the kind of rounded education that is supposed to come with a liberal arts degree would be fine, even if it is otherwise useless.
Well, it’s a good thing we’ll have you sitting on the student loan board to make these weighty decisions, and not a bunch of politicians who will set up who knows how many rules to pander to whichever interest group is either the squeakiest wheel or has the deepest pockets.
All I’m saying is that there is a way to distinquish between schools that work on a pure for profit basis without regard for the value of the service they provide and those that don’t. It is possible to distinquish between a school with a progran designed to generate profit from government dollars and one based on educational value whether or not you believe in the educational value of any particular field of study. I don’t care if you study Engilish Lit if it’s part of a program based on advancing education instead of a program designed to extract the maximum amount of government dollars available. Any such program will be subject to arbitrary standards, but taxpayers should know if there’s been an examination of the underlying field of study and a determination of the relative value. YMMV.
To be clear, I’m paying for the costs of putting two kids through bachelors program and my wife through a master’s program without incurring a penny of debt or public funds for my own post high school education, which may bias my opinions.
There is? How? Remember, this isn’t going to be a static environment.
I fail to see the controversy here. There are already accreditation processes. You can look at graduation rates and set standards for the teaching staff based on experience and education. You can look to existing organizations like the ACM to judge the value of a degree in computer science. You may end up with a school that believes it’s Holistic Medicine degree is worthwhile, but can’t meet the required standards. That’s what happens when you want to live on the taxpayer’s dime. And if you want to buy your way into the old boy’s network at one of the major clown colleges in Boston or Philadelphia, do it with your own money, or the same amount available to the guy who gets the same actual education at state schools.
You’re whole analysis assumes the schools are distributed in some bimodal distribution with an easily determined demarkation between the two peaks. Where does an institution like The University of Phoenix lie on your scale?
Don’t know enough about it. What’s their graduation rate? Do technical degrees from there qualify someone for a job in that field? I still don’t see how this can be difficult to determine. There are standards now for institutions that student loans can be used for. It wouldn’t hurt to tighten up those standards. One of the big problems with student loans now is the number of students who don’t graduate and then have difficulting paying off those loans. The schools have to be held responsible for this as well as the students.
Why are they automatically set to increase - was this some deal made previously? It seems out of the blue to me.