A Quote by Dan Ariely
Imagine you have six loans, small to huge. People want to close loans and because of that, they try to pay off the small loans, but that's not the right strategy. The right strategy, of course, is to pay the loan with the highest interest rate. People make this mistake and it costs them lots and lots of money, it's a very expensive mistake because interest rates accumulate and become very, very expensive very quickly.
Related Quotes
What people do is they pay the small loans first. Why? Because they enjoy making the number of loans smaller. But of course it is a very ineffective way to pay debt down.
A consolidation makes sense only if you can lower your overall interest rate. Many people consolidate by taking out a home equity line loan or home equity line of credit (HELOC), refinancing a mortgage, or taking out a personal loan. They then use this cheaper debt to pay off more expensive debt, most frequently credit card loans, but also auto loans, private student loans, or other debt.
We must fundamentally restructure our student loan program. It makes no sense that students and their parents are forced to pay interest rates for higher education loans that are much higher than they pay for car loans or housing mortgages.
Remember that in most cases, student loan debt is not dischargeable in bankruptcy. So you continue to pay it off anyway. Those who have very low interest rates (2-2.5 percent) on student loans and know everything is secure, great.
If you have loans, the first thing you want to do is say, "Okay, look I have a credit card, if I really need to borrow, I have this emergency money that I can get, but for now there is no reason for me to keep cash at zero percent interest rate and at the same time, pay all of this money out. So, I think people need to figure out quickly how to pay loans and how much cash they should really keep.
When students have access to low-interest loans and government aid, colleges have no incentive to cut costs. Why should a college lower tuition if more students are able to pay with subsidized loans from the government?
If there were not derivatives, there would be no bank loans at all today, because people want to get fixed-rate 30-year loans, but banks don't want to keep 30-year loans on their books.
I was definitely planning to go to college, but I deferred my admission to Carnegie Mellon to be in a non-equity tour of 'The Sound of Music.' But I made very little money in the tour, and college is really expensive, and I thought I'd never be able to pay off those loans.
I was absolutely astonished and could not believe my eyes at the outrageous interest rates that people in need have to pay to get loans.
Student debt is crushing the lives of millions of Americans. How does it happen that we can get a home mortgage or purchase a car with interest rates half of that being paid for student loans? We must make higher education affordable for all. We must substantially lower interest rates on student loans. This must be a national priority.
If I'm a bank, and I'm making risky loans, I have an incentive, if I can, to make those loans using other people's money: in other words, to make highly leveraged loans.
Homeowners refinance their loans when interest rates go down. Businesses refinance their loans.
When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans, and investments to create jobs.
When I went back to New Hampshire after graduating from law school, my plan was to go work for a private firm because I had to pay some student loans off and make money and really just be in the private practice of law. Which can be very rewarding.
The federal government requires that its loans be paid back within 10 years of graduation, and Harvard has pegged its loans to the same 10-year timetable. Yet despite Harvard's low default rate, the idea of years of loan debt is daunting for some students even before it's time to pay back.
The loans I took out for my undergraduate degree were manageable. But my legal education was more expensive, and I paid for it almost entirely through public and private loans.
Related Authors
Adam Smith Quotes
Scottish
Economist
Alan Greenspan Quotes
American
Economist
Benjamin Graham Quotes
American
Economist
Friedrich August von Hayek Quotes
Austrian
Economist
John Kenneth Galbraith Quotes
American
Economist
John Maynard Keynes Quotes
English
Economist
Joseph Stiglitz Quotes
American
Economist
Ludwig von Mises Quotes
Austrian
Economist
Milton Friedman Quotes
American
Economist
Muhammad Yunus Quotes
Bangladeshi
Economist
Murray Rothbard Quotes
American
Economist
Paul Krugman Quotes
American
Economist
Richard Thaler Quotes
American
Economist
Robert Reich Quotes
American
Economist
Thomas Sowell Quotes
American
Economist
Walter E. Williams Quotes
American
Economist