I didn't even know it existed until someone at ed-financial told me about it about a year ago. I left bedside care (psych) as an RN 15 years ago and am still licensed but work in healthcare IT as an analyst. Didn't think I'd be eligeable but they don't differentiate between what type of RN you are, and it's more based on your employer being not-for-profit and public service based.
Student Loans: Who's got em, and who thinks its a bubble
- Thread starter IronSnake
- Start date
Got mine paid off earlier this year. I have a civil engineering degree from a smaller public university. With having a part time job and parents coving some expense, I got out with only $12k in debt in 2008. My interest rate was variable and was as high as 4% when I graduated down to and as low as .1% during the recession so I wasn't in any huge hurry to pay off the debt. My wife went to the local technical college for her degree so that didn't cost her too much so we are free and clear as far as student loan debt.
Given that combined student loan debt is now well past a trillion dollars, I can't imagine the federal government coughing up that much money to cover the debt. Also as mentioned before, since the interest rate on government backed loans is over the inflation rate, the government makes money on loans.
Given that combined student loan debt is now well past a trillion dollars, I can't imagine the federal government coughing up that much money to cover the debt. Also as mentioned before, since the interest rate on government backed loans is over the inflation rate, the government makes money on loans.
I'm very grateful I didn't have to go into any debt. I got a scholarship through the lotto that paid 75% of an in-state public university (or equivalent if you went private), that with my pre-paid college fund from my parents paid for my classes and books with money left over most semesters. My first 2 years were a private school but I had a scholarship, my grandparents took care of what little was left.
my wife has her loans down to 15k or so I think, she got 5k forgiveness through her job which helped.
I know several people with high 5 figure into 6 figure student loan debt and aren't even working in the same field as their degree, they'll damned near take that debt to the grave. I don't understand it if you're not going into a very high paying field and I have a hard time believing all these loans will just be forgiven
my wife has her loans down to 15k or so I think, she got 5k forgiveness through her job which helped.
I know several people with high 5 figure into 6 figure student loan debt and aren't even working in the same field as their degree, they'll damned near take that debt to the grave. I don't understand it if you're not going into a very high paying field and I have a hard time believing all these loans will just be forgiven
I image we could save lots of money if college goes free. I know lots of people who get Pell Grant or other hardship scholarships from the government by pretending to go to school only to withdrawal and use that money to party and have fun. Book and computer money goes to drugs and alcohol. If it is free these people who should not be in school wasting time may not try to get in school because they will not get a check anymore. Assuming the new plan keeps from sending any overage to the student.
?
What effect does inflation have on the profitability of federal student loans? In fact, the relationship is negative since increase in inflation -->> increased unemployment -->> increased defaults. Defaults are already running at >10% w/ <4% unemployment, it is hard for me to see how this program does anything but lose shitloads of money.
I think you are looking into it too deeply, that or I'm missing something myself. The (obvious) reason why banks/government loan money is because they earn a rate of return on it, otherwise there would be much less incentive to lend. Currently the federal student loan rate is 5.05%. If inflation is less than that, which it is as it's recently been around 2% annually, the lender makes money assuming 0 defaults.
Of course we know there still are defaults even though unemployment is low so the profitability cushion is reduced. Its not easy to get rid of student loan debt though so most of the time the lender gets their money one way or another.
I thought it was common knowledge the government makes a net profit on student loans - Is the government making money off your student loans?
Eh? Very simply, this is the equation for making money as a lender
Yield on Earning Assets
Less: Cost of funds
Less: Cost of origination
Less: Defaults
= Profit (Loss)
Notice that inflation is not one of the items in the equation.
Signed,
Someone who does this
I think there might be quite a few things Ocasio-Cortez is unaware of.......how can someone so uniquely unqualified get elected? Strange times indeed.
Big +1 on that. Unfortunately, it's terrible how much school debt a kid can rack up. It seems to me that a lot of the best might just opt out and not bother with university. Not saying they can't succeed without it but there are some opportunities where a degree gives credibility and opens doors. I hate the idea that we waste potential in any kid just because they are not born into money. I hate even more that a smart and hard working kid can do all the right things and upon graduation owe the equivalent of the value of a house.
We are pretty fortunate here. Education is not free but it's pretty heavily subsidized. Enough to make the parents and kids value it but not enough to stop very many from attending university if they qualify and are accepted. I'm not big on government running much at all but I can sure get behind it where it comes to education. A better educated and trained population lifts the entire society.
As a comparison, we had some friends visit from Norway. They couldn't believe how much a Canadian university education cost. Their kids were FULLY covered even down to room and board when living away from home. They could not believe our kids had to pay anything and that some could potentially owe money at the end of it. And when they heard that many American kids paid 4 or 5 times what ours cost they almost crapped themselves. One extreme to the other I guess.
Hope they cancel all your loans. Good luck.
Ya, that make sense of course and gives you your profit (or loss) in dollars.
Doesn't a lender have to consider the inflation adjusted future value of money to see if it's worth lending the money in the first place?
You are in finance, I'm not, but if you lent me $100 at 1% annual (simple) interest and I paid the balance at the end of one year, I would have to pay you $101 to satisfy the terms of the loan. If inflation was 2% for the year I had that loan, your $101 would have a real spending power of less than $100 in today's dollars.
No I don't have student loans. Yes it's a massive bubble just like damn near everything in modern life. When I graduated a second time in 2012 4 years cost about $7,300. The same degree costs $87,000 now. I want to go back to school and change my career path but it doesn't make financial sense to do so now.
The relationship is the opposite of what you think. It is not future value that matters, it is present value. The way you figure this out is that you take all cash flows of an asset and discount them to the present using your cost of capital. If inflation picks up, your cost of capital increases and the discount will be greater not smaller.
That said, inflation is like kryptonite to a fixed income portfolio, which is what a loan portfolio is. Why? Because as a lender you get the same coupon no matter what. If inflation picks up your payments are worth less than they would be if inflation stays the same or falls. This sensitivity to interest rates is known as the duration. Here is link if you are interested.
Advanced Bond Concepts: Duration
Not to mention that late payments and defaults increase when inflation increases because unemployment rate goes up when inflation goes up.
An spike in inflation is the the second worst possible thing for a lender behind a spike in defaults.
Wait, what? One time wasn't enough?
X10.
If you get a loan for anything in life, you should honor your end of the bargain and be held to account for its full repayment.
Bubble!? Loan forgiveness?
Bernie’s got your vote OP!
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Maybe You Tube should offer a free College degree program.
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My wife has like 40k left...she started a hair north north of 100k in loans.
Uncle Sam paid for my degree...thankfully
It's silly how much school costs...and for what? A damn safe space and shitty lab gear that's 30 years old?
Uncle Sam paid for my degree...thankfully
It's silly how much school costs...and for what? A damn safe space and shitty lab gear that's 30 years old?
This... my wife worked, and went to a smaller school. She finished her BA with less than 7k in debt. Finished her MBA with no debt thanks to ta from ger job. And makes more money than most.
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