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this post was submitted on 20 Sep 2024
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Most of these loans are interest paying first. Which means the principle (which the interest is being calculated from) doesn't go down. No other major loan is this fucked.
You get a car loan or mortgage, it's set up so that you pay it off in X number years.
Good luck finding a student loan that you could do that with, especially when 75+% of your income goes to rent.
Isn’t that how all loans work though? It’s just that the lenders insist I pay enough to cover the interest and some principal, otherwise I’ll never pay it off. If I made a payment for a car loan and it wasn’t enough to cover the interest, my principal would never go down (in fact it’d go up if I didn’t cover the interest). I can actually get an interest only home loan (or at least you used to be able to) but I think those are insane. The difference with car and house loans is if you miss enough payments they’ll come take whatever collateral you have. School loans are a bit different in that there’s no collateral for them to collect
I’m not arguing that the situation isn’t fucked. It is. School is way too expensive for the value you get. People who haven’t been paying these loans for the last decade also probably owe way more than they originally took out and you can’t default on them… but the fact that they’re earning interest isn’t any different than any other loan.
The biggest differences are that the interest rate is so jacked up, there's no actual end date for the loan, and there's little regard to the person's ability to pay the loan back when getting it.
They're more akin to sub prime mortgages than regular mortgages or auto loans in that last respect which were insanely predatory
Yeah I remember getting calls for my student loans asking me to consolidate my federally backed loans and claiming I was going to save a bunch of money. In reality they were lowering my monthly payment but at a higher rate and with a longer term, which would have caused me to spend a significant amount more in the long term . Bunch of scams that should have never been legal. Looking at the source, it looks like consolidated loans for folks who owe more than when they started are covered as part of the forgiveness. Hopefully that goes through someday.
The federally backed ones I remember having good to reasonable interest rates (looking at historicals they were pretty low most years) and being much lower than I could get anywhere else.
I’d love to see higher education being affordable for everyone. (If not free)