U.S. Politics

[Tommy]

I don't know details, but muslim banks are prohibited from charging interest and somehow they survive. I would think there would need to be regulations in place to ensure schools didn't suddenly drastically increase prices, and to prevent students from taking far more than they need, but that's doable.

Lowering the required percentage of income for repayment is a good idea too. It would free up more of a young person's income for investment/expenditure, which benefits the overall economy.

It's already difficult for most students in low income brackets to obtain private loans since their parents acting as co-signors probably have bad credit, but making the banks look into their majors and grades to determine whether or not they're going to be able to find a job that can allow the student to afford to pay off the debt is just going to be another hurdle. Banks will just get stingier. Unless you want the government to force banks to lend to kids who want to pay $100k for an arts degree.

[dcm1602]

I hate when people bring up China when talking about US debt. We issue bonds when our expenditures are set to outpace receipts. And the vast majority of holders and people that take on US debt are US citizens and US funds. Probably a quarter of it is borrowed from foreign governments, and China represents about less than a quarter of a quarter of that.

Not saying we should keep issuing debt, but we can pretty much keep doing it because US debt is the safest form of investment in the world.

Regardless when we borrow money the government loses money. 0% interest student loans would effectively be an entitlement program costing hundreds of billions of dollars. I didn't realize China owns much less of our debt than the media makes it out to be, but the point was about losing money more so than who to lose it to.

We currently have well over 1 trillion dollars in outstanding student loans. If suddenly student loans were interest free and could be paid off over long periods of time (ie 30 years)  plus the expanding emphasis on college. That number could easily multiply several fold.

Which would just be monstrously expensive

And that's before even factor in the absurd amount of money we would lose from inflation as well, which would probably be even greater than our cost of borrowing that money to begin with.

Looking at the current student loan rates (4-6%)  I can't imagine them getting a whole lot lower than that. And the 6% numbers was only for graduate school

[AlioTheFool]

Sharia finance is interesting, they have ways around it. I believe the most common way is for them to assume asset ownership and effectively become the vendor. For example, let's say you needed to borrow $20K to buy a car. Rather than lending you $20K and charging you for the use of their money, the bank would actually buy the car for $20K and then agree to sell it to you for $24K, with an arrangement in place for you to make equal monthly payments of $400 for 60 months. This way the bank isn't charging interest, they're making profit on a capital sale and giving you an easy payment plan, neither of which are prevented by sharia. In practice it's exactly the same thing as a secured loan.

Again, I'm speaking from mostly ignorance of the subject, but isn't that more for commercial loans? They don't generally do that for individual debt I thought. I'm pretty sure there is no penalty for any missed or late payments either.

You realize the United States is at a deficit right?  Which means in order to lend out money were effectively borrowing it from somebody else (probably China)  and paying them interest on it. Then factor in the time value of money, plus a percentage of people that will default. And you're talking about losing hundreds of billions of dollars.

Now I don't think we should try to profit off them. I think its completely not the governments place at all. But making it lose absurd amount of money is not the solution. Cost neutral is the only way you could get significant support from both parties

Plus you also need to understand if there's 0% interest it would be financially STUPID for people to do anything other than borrow as much money as possible and pay it off as slowly and long term as possible

So we should repair the deficit by cutting back on unneeded items like nuclear missiles, no? I mean, if you have one or two of them, you're pretty much in the MAD club. The idea is to not use them. The US has an estimated 70 thousand of them. Again, you're not complaining about that money being flushed down the toilet--and there's zero potential for ROI with them. At least those the government pays to educate should become productive--tax paying--contributors to the American economy.

You're saying the government would "lose an absurd amount" on no-interest loans. First of all, if you read the article, it's proposing a standard (albeit lower) payroll percentage to be paid back. It would also mandate pre-tax payroll deductions. So your "pay it off as slowly and long term as possible" argument is void. It would be a standard payback--no defaulting. Sure, the individual could just not work to avoid it, but who does that hurt in the end?

And you keep saying "borrow as much money as possible" as if it were a reasonable argument. Today banks are willing to give you more than you need on a student loan because they profit from it. The government would disburse the exact amount you needed to cover your defined costs by the institution. It wouldn't be a free-for-all rush to refinance your parents' home or to buy you a new car.

[AlioTheFool]

It's already difficult for most students in low income brackets to obtain private loans since their parents acting as co-signors probably have bad credit, but making the banks look into their majors and grades to determine whether or not they're going to be able to find a job that can allow the student to afford to pay off the debt is just going to be another hurdle. Banks will just get stingier. Unless you want the government to force banks to lend to kids who want to pay $100k for an arts degree.

I'm advocating removing banks from the process completely.

[dcm1602]

Again, I'm speaking from mostly ignorance of the subject, but isn't that more for commercial loans? They don't generally do that for individual debt I thought. I'm pretty sure there is no penalty for any missed or late payments either.

So we should repair the deficit by cutting back on unneeded items like nuclear missiles, no? I mean, if you have one or two of them, you're pretty much in the MAD club. The idea is to not use them. The US has an estimated 70 thousand of them. Again, you're not complaining about that money being flushed down the toilet--and there's zero potential for ROI with them. At least those the government pays to educate should become productive--tax paying--contributors to the American economy.

You're saying the government would "lose an absurd amount" on no-interest loans. First of all, if you read the article, it's proposing a standard (albeit lower) payroll percentage to be paid back. It would also mandate pre-tax payroll deductions. So your "pay it off as slowly and long term as possible" argument is void. It would be a standard payback--no defaulting. Sure, the individual could just not work to avoid it, but who does that hurt in the end?

And you keep saying "borrow as much money as possible" as if it were a reasonable argument. Today banks are willing to give you more than you need on a student loan because they profit from it. The government would disburse the exact amount you needed to cover your defined costs by the institution. It wouldn't be a free-for-all rush to refinance your parents' home or to buy you a new car.

National security is a vastly more complicated issue I'm not going to pretend to grasp. But of course I agree we should reduce expenditures there as well.

The standard payback was more so a limit on how much of your salary they could make you payback. Up to 4% of your check (or rather at minimum you had to pay back 4% of your check) so if you're making 50k a year and you have 50k in student loans it'll take you 25 years to pay it off (assuming that's pretax money like we mentioned) that's an extraordinarily long time for interest free money to be loaned out.

Not to mention the government would lose even more money on it since that income isn't be taxed as well.

In this scenario it would effectively be a massive entitlement program costing the government hundreds of billions of dollars, if not more.

And yes if interest was lower people would borrow more. It's the most basic of economic theories.

I understand they wouldn't be able to refinance their homes or anything. But they would be more willing and abled to borrow absolutely everything possible. They could go to much more expensive schools, borrow 100% of the costs of school (instead of pay for some of it when possible)  borrow loans for 100% of the books etc etc. People would lose out by not taking advantage of this 0% loan.

I agree with you the government can make it much better for students, I do. But 0% student loans is so ridiculously absurd and terrible  that I can't imagine a single person with a background in economics not laughing st it. (im not pretending to be an economic or financial expert by any means, but it's so insanely bad that I can even see that plain as day)

[Tommy]

I'm advocating removing banks from the process completely.

So you want us to all pay for all those $100k art degrees? Or would you rather have the government act as a bank and do the lending?

[AlioTheFool]

National security is a vastly more complicated issue I'm not going to pretend to grasp. But of course I agree we should reduce expenditures there as well.

The standard payback was more so a limit on how much of your salary they could make you payback. Up to 4% of your check (or rather at minimum you had to pay back 4% of your check) so if you're making 50k a year and you have 50k in student loans it'll take you 25 years to pay it off (assuming that's pretax money like we mentioned) that's an extraordinarily long time for interest free money to be loaned out.

It would be 4% of your gross income. Period. Yes, it would be a long-term loan. So what? That money can be de-funded elsewhere (like 69,999 nukes that'll never have an opportunity to be used) and re-invested in our nation's long-term workforce.

Not to mention the government would lose even more money on it since that income isn't be taxed as well.

In this scenario it would effectively be a massive entitlement program costing the government hundreds of billions of dollars, if not more.

That $50k-making young person may not be paying taxes on that 4%, but s/he's paying taxes. And buying goods.

Stop calling it an entitlement program. I won't argue over those, but this isn't a handout program in the least. It's still a loan that needs to be repaid--and will be, forcibly.

And yes if interest was lower people would borrow more. It's the most basic of economic theories.

I understand they wouldn't be able to refinance their homes or anything. But they would be more willing and abled to borrow absolutely everything possible. They could go to much more expensive schools, borrow 100% of the costs of school (instead of pay for some of it when possible)  borrow loans for 100% of the books etc etc. People would lose out by not taking advantage of this 0% loan.

Yes, they would finance whatever they were not issued in scholarships. Like they do now. So what?

No one would be borrowing "more" than they need. The people who would pay some cost up front to avoid paying it back later would either continue to be those people or they'd invest that saved money.

I agree with you the government can make it much better for students, I do. But 0% student loans is so ridiculously absurd and terrible  that I can't imagine a single person with a background in economics not laughing st it. (im not pretending to be an economic or financial expert by any means, but it's so insanely bad that I can even see that plain as day)

You admit to not being an expert, yet you use "ridiculously absurd and terrible" hyperbole simply because you don't like the idea.

Let me pose a question to you. If the money for a "0% student loan" program came directly out of welfare and was completely funded with money otherwise dedicated to that program, would you be amenable to it?

So you want us to all pay for all those $100k art degrees? Or would you rather have the government act as a bank and do the lending?

I'm not at all saying it should be a handout. I wouldn't even advocate free degrees for rocket scientists and doctors (though I'd be okay if there was a program that allowed them to provide service in exchange for debt-reduction). I'm saying the government should do the lending as a pseudo-bank, granting those loans without any interest attached--but still requiring 100% repayment of every dollar.

[dcm1602]

It would be 4% of your gross income. Period. Yes, it would be a long-term loan. So what? That money can be de-funded elsewhere (like 69,999 nukes that'll never have an opportunity to be used) and re-invested in our nation's long-term workforce.

That $50k-making young person may not be paying taxes on that 4%, but s/he's paying taxes. And buying goods.

Stop calling it an entitlement program. I won't argue over those, but this isn't a handout program in the least. It's still a loan that needs to be repaid--and will be, forcibly.

Yes, they would finance whatever they were not issued in scholarships. Like they do now. So what?

No one would be borrowing "more" than they need. The people who would pay some cost up front to avoid paying it back later would either continue to be those people or they'd invest that saved money.

You admit to not being an expert, yet you use "ridiculously absurd and terrible" hyperbole simply because you don't like the idea.

Let me pose a question to you. If the money for a "0% student loan" program came directly out of welfare and was completely funded with money otherwise dedicated to that program, would you be amenable to it?

I'm not at all saying it should be a handout. I wouldn't even advocate free degrees for rocket scientists and doctors (though I'd be okay if there was a program that allowed them to provide service in exchange for debt-reduction). I'm saying the government should do the lending as a pseudo-bank, granting those loans without any interest attached--but still requiring 100% repayment of every dollar.

Yes because defunding the money elsewhere is so simple. We have a ridiculous amount of debt we can't pay off.

Have a huge looming healthcare crisis which is going to cost a ton to fix.

Social security on the path to bankruptcy,  again going to cost a ton.

We just got out of a housing crisis where people couldn't afford their homes

Around half a trillion dollars in student loans the government will probably have to eat from students defaulting

But pulling money out of our derriere to fund a huge entitlement program should be easy.

This is absolutely an entitlement program, because the government would be eating the bill of hundreds of billions if not trillions to fund it. I understand it's very different from a typical entitlement program as it requires people to hold some accountability for themselves, but long term 0% APR loans have significant economical value.

You're completely ignoring the time value of money and just how expensive this is.

The government offers mortgages which I think most  people could argue a place to live is more important than extra education. Yet the government doesn't offer 0% APR mortgages, despite the house that a mortgage is a much safer loan since there are tangible assets as collateral.

And I don't need to be an expert to point out how absurd 25 year 0% loans are, because it's thst stupid.

And no I wouldn't be amenable to it if it came out of welfare. Because those people on welfare "need"  it. And one way or another they would end up getting services which would have a financial impact.

I don't see why you find low APR student loans so objectable. It's the only way you could keep government loans cost neutral and attempt to encourage potential students to be financially responsible.

0% APR is an extremely sloppy and ineffective fix.

[Badger]

dcm is right, tuition-free public universities are a much better solution than the government issuing interest free student loans.

[dcm1602]

dcm is right, tuition-free public universities are a much better solution than the government issuing interest free student loans.

It would definitely  be cheaper

[Tommy]

dcm is right, tuition-free public universities are a much better solution than the government issuing interest free student loans.

Yeah I wouldn't mind my tax dollars being spent on more federally funded community, technical, and state schools. Having the government acting as a bank for student loans for private colleges is just dumb.

[Tommy]

How the freak is my new avatar even remotely SFW?

[insanity]

How the freak is my new avatar even remotely SFW?

Because you have a baby dick

[Miamipuck]

How the freak is my new avatar even remotely SFW?

It may not be but it's freaking fantastic.

[Ignatius J Reilly]

It may not be but it's freaking fantastic.

x2

I couldn't stop laughing.