I think the major problem with student loans is the misconception regarding the interest rates.
Students are given “low interest” loans but the way the interest is compounded, the reality is that if one pays off the loan according to the ten year plan, one actually pays back more than fifty percent to the lender.
I learned this the hard way when I agreed to take out a parent loan for my daughter to attend an out of state university. The loan was for $13,000 at 7.25% which seemed okay, but when I got the payment plan the amount I will pay back, if I maintain the standard payment for ten years is more than $19,000!
Last year, of the $1650.00 I paid toward the loan, nearly $900.00 of it was in interest.
That is the information that students and parents need before they take out such large loans. Informed consent is what is needed, not forgiveness or the ability to default on what is a personal choice. No one forced me to take that loan, just as no one forced this young woman and her parents.
We must stop allowing people to borrow all kinds of money with the thought that they can just walk away from it later. Making it harder to default will hopefully make them more cautious about taking on debt.
“Informed consent is what is needed, not forgiveness or the ability to default on what is a personal choice. No one forced me to take that loan, just as no one forced this young woman and her parents.”
No one is contesting that. The problem is by making it impossible to discharge extensive education debt, the economy is denied the consumptive benefit that it would receive if said students were spending their money on consumer goods. Which is precisely what some of us argued back in 05 when Dubya signed off on this nonsense.
That's right. The "ten year" plan is a gamble. You are paying back in progressive (future dollars) dollars estimated across those years. You seriously think you should get a loan today and pay back "today's" amount ten years into the future? What would be the purpose of the loaning party? Take it in the shorts and at a loss?
If you are shocked by this, I can only imagine your chagrin at your mortgage agreement...