A Quote by Bernie Sanders
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.
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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.
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.
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.
The fact that you have government-guaranteed student loans has created a whole new sector in the American economy that didn't really exist before - private for-profit universities that sell junk degrees that don't help the students. They promise the students, "We'll help you get a better job. We'll arrange a loan so that you don't have to pay a penny for this education." Their pet bank gets them the government-guaranteed loan, and the student may get the junk degree, but doesn't get a job, so they don't pay the loan.
If lenders are forced to scale back student lending because private student loans are subject to bankruptcy discharge, many students will be denied access to higher education.
When SoFi launched in 2011, it focused squarely on the burgeoning student loan market - a market that, unlike housing, had no viable option to refinance both federal and private student loans from higher interest-rate eras.
The higher amount you put into higher education, at the federal level particularly, the more the price of higher education rises. It's the dog that never catches its tail. You increase student loans, you increase grants, you increase Pell grants, Stafford loans, and what happens? They raise the price.
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.
Pell grants are critical tools for lower- and middle-income students to access higher education, and by expanding access to year-round courses, we can help non-traditional students complete their education sooner, allowing them to start their careers and pay off their loans.
So we are in for years of debt deflation. That means that people have to pay so much debt service for mortgages, credit cards, student loans, bank loans and other obligations
that they have less to spend on goods and services. So markets shrink. New investment and employment fall off, and the economy is falls into a downward spiral.
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?
The rising costs of higher education coupled with the stress of paying student loans are putting increasing pressure on students.
Our focus is more on secured retail business like housing and car loans. While we will do some unsecured loans - credit cards and personal loans - we will do it primarily with existing customers.
The art of banking is always to balance the risk of a run with the reward of a profit. The tantalizing factor in the equation is that riskier borrowers pay higher interest rates. Ultimate safety - a strongbox full of currency - would avail the banker nothing. Maximum risk - a portfolio of loans to prospective bankrupts at usurious interest rates - would invite disaster. A good banker safely and profitably treads the middle ground.
Increasing access to federal student loans has been a bipartisan effort in Washington, one that I have supported. But it has created what many experts believe is a bubble in higher education, not unlike the housing bubble that preceded the financial crisis.
Ending up-front fees should make it far easier for all students to go to university as they will no longer have to pay up to /1,125 out of their loans at the start of each year. Student loans will also rise to meet average living costs.
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