I recently read the following article about a bill being introduced trying to regulate student loan interest rates: http://www.cnn.com/2013/06/06/opinion/jones-student-loans/index.html?iref=allsearch
Although I agree with the writers point of view that student loan interest rates are on the rise, unfairly burdening the American public while banks are able to lend to huge institutions at insanely reduced rates. I think there’s a little bit of responsibility that is lacking in regulation of how and when banks can loan money.
For example, if you buy $100 worth of merchandise from J Crew, they might offer you 10% off. But if you purchase $500 of merchandise, you would get 30% off. The same principle applies in the lending world. If you borrow $100,000 in student loans, you might get a 5% interest rate, but if a huge corporation borrows $1,000,000,000, isn’t it the American way for the lender to have the right to decide what interest rate they offer that individual in order to get their business?
I often have clients who owe tens of thousands, sometimes hundreds of thousands of student loan debt. The first problem that comes to mind with these individuals is, “What we’re you thinking in borrowing this money?” “How did you expect to pay this money back?” I have encountered instances where students borrowed money to “study” abroad or obtain a doctorate. Did the borrower really evaluate the cost/benefit of borrowing for these purchases? Are you going to be paid more as an employee if you spent the summer drinking beer in Costa Rica? Was obtaining your doctorate financially lucrative if you paid $40,000 for it only to make $5,000/yr more than you would otherwise? The amount of the monthly payment to obtain the degree is going to eat up the amount of money you’ll have to pay out in student loans, leaving us with a bunch of “smart” people who earn $30,000/yr and will live paycheck to paycheck trying to keep up with the Joneses.
In my opinion, the government should get out of the way and figure out a way to incentivize banks and colleges to offer affordable loans to pay for affordable education. It would be nice to see fewer students in my bankruptcy office after graduation day because they are unemployed and have no dischargeable student loans coming due…
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