| Wednesday, October 14, 2009 |
| How about a bailout for student debtors? |
LA Times asks How about a bailout for student debtors? Like many recent college grads, Los Angeles resident Steven Lee finds himself unemployed in one of the roughest job markets in decades and saddled with a big pile of debt. He owes about $84,000 in student loans for undergrad and grad-school costs.
But what Lee's angry about isn't the slings and arrows of an outrageous economy, and it isn't the idea that he owes a ton of money for all the schooling he's received.
It's the interest rates on his government-backed student loans, which range from 6.8% to a whopping 8.5%.
"That's just ridiculous," Lee, 35, told me. "The rate for a 30-year mortgage is around 5%. Why should anyone have to pay 8.5%?"
Well, because a deal's a deal, and that's the rate Lee accepted when he received his loan.
"I disagree," he replied. "The government has bailed out homeowners. It's bailed out big businesses. Why can't it also help students?" |
| posted by Boston Gal @ 10:02 AM *
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| 7 Comments: |
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I am not looking for a bailout or even a reduction in rates on my loans (over $65,000 for grad school). I believe in personal responsibility and a deal is a deal. How about letting my loan interest be tax deductible? Currently, tax deductible student loan interest phases out about $50,000 in AGI. I say why? and frankly if youwent to school and grad school, you should be making more than this meaning you get non deduction for you investment in your future. With homeownership you can duduct much more.
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I hate that an 18 year old can get sucked into such a massive debt. I'm not sure if a bailout would be the solution, but just like with mortgages, there should be some regulation as to the amount of debt that a young person can sign on to. There is a point (especially with private universities) where a student just can't afford that type of bill.
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Those interest rates will take a toll on him. I would suggest to him is to consolidate the loans. Consolidation also helps one to save a little as well.
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Consolidation is a tricky solution. A student is only allowed to consolidate once. Whatever the going interest rate at the time is set for the reminder of the time the loan is being repaid. I know because I consolidated back in 1999 when the rate was 8.25 percent. the good news is that the consolidation rate is around 4% which is better than any of the rates being paid now.
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As a graduate student who is piling on more student loan debt, I'd be all for this idea!
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As law student, I have many friends with $100K dedts and they're sure going to be making more than $50K. The AGI limit that allows for tax deduction of student loan interested should be readjusted. While I am not for a student bailot the person profiled makes a good point that its cheaper to take money out to buy a home now than to be a student.
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Mortgage rates are low because it is a secured loan. Meaning, if you default, then the lender gets possession of a real property. Student loans (like credit cards) is an unsecured loan. Meaning, if you default, they are pretty much out of luck, other than to put a collection record on your credit history.
As for getting tax breaks, well, that's just flat out politics. If you want to change the laws, then organize a few of your rich friends, form a PAC, contribute tons of money to get time in front of congressmembers, and deliver votes. There's nothing about our tax law that is logical; it is purely political.
One of the things you will realize is that young people (a.k.a. students) have almost NO political clout. The real estate industry (lenders, realtors, home owners, etc) are one of the most powerful constituents. The reason: young people don't vote and have no money.
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I am not looking for a bailout or even a reduction in rates on my loans (over $65,000 for grad school). I believe in personal responsibility and a deal is a deal. How about letting my loan interest be tax deductible? Currently, tax deductible student loan interest phases out about $50,000 in AGI. I say why? and frankly if youwent to school and grad school, you should be making more than this meaning you get non deduction for you investment in your future. With homeownership you can duduct much more.