College loan question

[mousehockey37]

I think it happens a lot. Kids don't realize the implications, and sometimes neither do parents.

Anyway, it's just food for thought.

That's the problem. No one is taught this stuff ahead of time. There's normally a few nights during the year where they have an "understanding college finances" night and try to shove everything into 1 slideshow while giving the illusion that it's just "oh so easy and affordable!". I remember sitting with my parents in the high school cafeteria for it, I just about fell asleep, my dad was the "understanding money stuff" guy... lol.

College education isn't cheap, nor is it for everyone and I think with the federal monies that schools get for pushing kids to colleges, it's almost like trying to buy from a used car lot. They'll show you everything there is that's nice and shiny and new and hide the problems for later.

In the age of the internet, it's up to parents of kids in grades 9-11 to start knowing what lies ahead and doing the research. If you wait til your kid is a senior in high school to see what they "think" they want to do and make a plan, it's already too late.

 

[scrapquitler]

Student loan rates are higher because there are lots more defaults/losses on student loans than mortgages. At the height of the housing bust, mortgage defaults briefly touched a 'normal' level for student loans. Usually, student loans default 6 to 10 times more frequently than a mortgage.

Student loan rates are higher than other types of loans like mortgages and car loans because there is no collateral. If you fail to pay the mortgage or car loan, the finance company will repossess your car or home. There is no physical asset to repossess if someone fails to pay back a student loan. Therefore it is riskier for the lender and merits a higher interest rate.

 

[FINFAN]

What do you think is a fair rate?

more in line with mortgage rates, as these kids are paying just about as long. It's not like a credit card, this is for education. this article is from 2014 but I agree with it.
http://www.forbes.com/sites/maggiem...-rates-set-to-rise-for-2014-2015-school-year/

 

[mousehockey37]

Student loan rates are higher than other types of loans like mortgages and car loans because there is no collateral. If you fail to pay the mortgage or car loan, the finance company will repossess your car or home. There is no physical asset to repossess if someone fails to pay back a student loan. Therefore it is riskier for the lender and merits a higher interest rate.

No, there isn't a physical asset to repo if someone defaults on a student loan, but be it a Federal loan, they can/will report monthly to the credit bureaus, garnish wages, if it defaults they can place an I-9 on your credit. If you are on gov't assistance, whether it be SSI or whatnot, they can collect a certain portion of it to pay your debt (it is gov't money and they will move it around so they get it back). Also, if defaulted, the entire balance of the loan becomes due in full, no more payments, they want it all, as well as they can withhold your tax refunds. The biggest kicker is that should you default, you're ineligible to go back to school.

 

[teller80]

The biggest kicker is that should you default, you're ineligible to go back to school.

You CAN go back to school, you just can't borrow more money. Do you think if someone is in default they should be able to borrow MORE?

 

[mousehockey37]

You CAN go back to school, you just can't borrow more money. Do you think if someone is in default they should be able to borrow MORE?

If someone's able to pay OOP for their classes, they should be able to keep up their payments, no?

 

[teller80]

If someone's able to pay OOP for their classes, they should be able to keep up their payments, no?

If they are able to keep up with their payments why aren't they paying off their previous loan instead of defaulting?

 

[OhMari]

I didn't think you could default on a student loan. Or am I confusing that with not being able to bankrupt them.

Your right, the government will never let you out of your loan. The interest just keeps piling up.

 

[mousehockey37]

If they are able to keep up with their payments why aren't they paying off their previous loan instead of defaulting?

I worked collections for one of the top student loan companies... I heard every excuse in the book as to why they weren't paying There are some real winners out there, let me tell ya.

Your right, the government will never let you out of your loan. The interest just keeps piling up.

You can default on government loans. They just then take it into their own hands on how they get the money back ( I detailed that a few posts back). You are also correct that you cannot put student loans in a bankruptcy. If you do go through with a bankruptcy, you report it to your student loan company (if the attorney doesn't already) and they put your loans on a bankruptcy forbearance from the date of the filing (I forget how long it lasts, maybe 6 months).

 

[teller80]

I worked collections for one of the top student loan companies... I heard every excuse in the book as to why they weren't paying There are some real winners out there, let me tell ya.

Now THAT would be an interesting thread!