Could it be that the actual price of college is too high and not the interest rate on school loans?
- Thread starter Hobo Hilton
- Start date
not sure if you're trying to be cute here
anything backed by the gov't is considered risk free so the loans should be have servicing rate on top of the risk free rate and no more. Instead, we've created a cashcow for the banks and made loans more expensive
private loans, have at it
that is a separate issue but one I'm also in full agreement on. College is way way too expensive
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There is a certain amount of risk that the loans would not be paid back. There must be a risk premium associated with it. The originator needs to be compensated to cover that risk, regardless of who it is. The current rate is far from usury.
A $1 loan with 7% rate is nothing. A 70,000+ cost of the education will generate a hard life to repay when most graduates are starting their careers and the interest rate only adds to it. It’s not the current loan rate, it is the principal that is the genesis of the issue.
no, loans backed by the gov't carry no credit risk. 30yr is under 5% so the rate plus servicing should price from there.
private loans I agree would let the mkt dictate the cost
no question but we're discussing the reality of the rate as applied in financial circles.
Absolutely they do. I think we are talking about two different things. I’m talking about the risk of them not being paid back. No loan is risk free. That is already happening.
Consumers trying to keep up with inflated prices and a shrinking USD... 
www.zerohedge.com
The Missing Piece Of The Puzzle: Behind The Inexplicable "Strength" Of US Consumers Is $700 Billion In "Phantom Debt"
The Missing Piece Of The Puzzle: Behind The Inexplicable "Strength" Of US Consumers Is $700 Billion In "Phantom Debt" | ZeroHedge
ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero
www.zerohedge.com please show where a us gov't backed loan is not being paid back or has been defaulted on by the US Gov't
No. Defaulted on by the student. This is what I mean that we are talking about different aspects of the same topic. What I am saying is that regardless of the lender they need to be compensated for the risk they take. 7-8% isn’t nearly enough for many of these degrees with little in the way of job prospects. I know I wouldn’t invest in a person who gets a shitty degree without a serious interest rate. It’s essentially a junk bond. The government should charge accordingly as well.
I actually went to a graduation at a major US university this weekend. There were some total bullshit degrees handed out. General Studies, art, etc. if their parents pay for it, fine. But the risk that they turn into car salesmen is too high for me to lend money across multiple decades to have it paid off, if at all. I would need north of 20% plus several provisions. Why? Because I’m not a financial fool like these people who take out these loans.
BTW, to answer your challenge: do you know how the government doesn’t default? It taxes you more to pay for the additional money it prints, which is still technically default since it is printing money to pay off debt it cannot satisfy with the current money in its possession. It’s just a sleight of hand version for the financially ignorant. Happens every year. But nobody seems to care. They will. The financial stability of the worldwide fiat monetary system isn’t nearly as rock solid as most want to believe. When people see their self created financial house of cards come tumbling down upon a governmental financial house of cards that also collapses they will finally understand, or not. It won’t matter either way because the insolvency steamroller gives zero fucks; it’s just math. This is the cliff we are approaching.
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no dog in this fight,but,seems to me the idea of the government "lending" for any private endeavor is the driver of the problem. student loans being the one here but home mortgages,bailing out banks and auto manufacturers is not even close to a legitimate function of same and should have never be happening or continued. the exorbitant cost of college is a rather separate issue which should be addressed. the presence of no risk loans to pay for it is retarded beyond comprehension. a mortgage lender has a shot at recouping loss by taking the property in a default. gonna garnish wages of a 20 something working at mickey d who got a degree in gender studies at a cost of 60-80K? good luck.
the role of the fed and gov regulation and socialist vote buying scams is really the big driver of inflation.
the role of the fed and gov regulation and socialist vote buying scams is really the big driver of inflation.
I would add to this to say that the government granting funds to any university is also a problem. Because grants come with hooks. Those hooks are never about protecting the Constitution or any kind of liberty. Nope. It’s a clue.
Agreed, take a loan pay it back. student loans are not an exception.
The answer to student loans is to get the interest rates to a realistic level. I know grads that are paying 7% interest (and more) on six figure loans but paying half that on home loans taken a few short years ago. The lenders have a loan that cannot be extinguished by bankruptcy, is insured by the government against default and has little service or origination responsibility. These should be low interest loans not a meal ticket for lenders.
I would like to see an investigation into how student loan lenders were able to get such a sweetheart deal.
The answer to student loans is to get the interest rates to a realistic level. I know grads that are paying 7% interest (and more) on six figure loans but paying half that on home loans taken a few short years ago. The lenders have a loan that cannot be extinguished by bankruptcy, is insured by the government against default and has little service or origination responsibility. These should be low interest loans not a meal ticket for lenders.
I would like to see an investigation into how student loan lenders were able to get such a sweetheart deal.
The answer is not to ring up six figure loans for college. At any interest rate. Even in today's world, there are still plenty of ways to obtain an (increasingly worthless) college degree. As my co-worker says, "my kids have two college funds: J-O-B, and A-R-M-Y."
“What you have right now is a situation where these high rates aren’t generating more braking power on the economy,” said Joseph Lupton, global economist at J.P. Morgan. “That would suggest that they either need to stay high for longer or maybe even higher for longer, meaning rate hikes might come into the conversation.”
They should have come out the gate at 20%.
They’d bring inflation to a screeching halt if the banks would turn off these 15%-25% vehicle and personal loans.
Yep... The FED Reserve should have gone "Paul Volcker" during 2022. Reminds me of a home owner getting a termite report saying there is a small infestation that needs to be eradicated. The mindset of "We will deal with it when it becomes an issue" seems to be the mindset of Americans".
Both the termites and inflation soon have the upper hand.
How the Fed ended the last great American inflation — and how much it hurt
Forty years ago, the Fed pushed the economy into a recession to stop inflation. Here’s how it played out.
www.vox.com 
Americans expect high inflation to stick around in latest NY Fed survey
A New York Federal Reserve survey published on Monday found that many American consumers expect inflation to remain abnormally high in the coming years.
www.foxbusiness.com 
I hope you’re correct.
If it dips back below $2K, I think you’ll see a lot of folks buying…incidentally increasing demand and raising prices.
That said, I honestly believe the true price is much higher than the current $2300 or so…and have been buying more every month; only an ounce or two at a time though. Of course all of us individual buyers combined worldwide are pretty low inputs on the global market where the big boys buy it by the ton…not insignificant, but not enough volume to seriously move the market.
Countries are buying gold lately. That should tell everyone what’s up.
History repeating itself. Amazing how the Government cooks the books and makes the USD appear "strong". The very countries that make up the "basket of foreign currencies" are stocking up on gold.
It's been 50 years since the gold in Fort Knox was inventoried.
The Dollar Index Formula
The formula for calculating the value of the U.S. Dollar Index includes the dollar’s relative value compared to a basket of foreign currencies. Initially, it included the Japanese yen, British pound, Canadian dollar, Swedish krona, Swiss franc, West German mark, French franc, Italian lira, Dutch guilder, and Belgian franc.
Following the creation of the euro in 1999, the number of currencies was reduced and the formula for the dollar index was adjusted. Today, the basket includes just six currencies: the euro (EUR), Japanese yen (JPY), British pound (GBP), Canadian dollar (CAD), Swedish krona (SEK) and Swiss franc (CHF).
ICE currently uses the following formula to calculate the value of the USDX:
The U.S. Dollar Index
The strong dollar has been getting a lot of attention lately. Some U.S. companies are blaming the strong U.S. dollar for lackluster earnings, while economists say it’s helping the Federal Reserve's ongoing fight against high inflation. But how do you know when the dollar is strong or weak? That's
www.forbes.com Fed should raise rates 100bps and tell the bank to double their reserves. that would put an end to the revolving debt spending
Wholesale prices jumped more than expected in April, putting up another potential roadblock to interest rate cuts anytime soon.
The producer price index, a measure of what producers receive for the goods they produce, increased 0.5% for the month, higher than the 0.3% Dow Jones estimate, the Labor Department’s Bureau of Labor Statistics reported Tuesday. However, the March reading was revised from an initially reported 0.2% gain to a decline of 0.1%.
The producer price index, a measure of what producers receive for the goods they produce, increased 0.5% for the month, higher than the 0.3% Dow Jones estimate, the Labor Department’s Bureau of Labor Statistics reported Tuesday. However, the March reading was revised from an initially reported 0.2% gain to a decline of 0.1%.
Is Jerome fueling the Revolution or working for the Chinese ?
Federal Reserve Chair Jerome Powell reiterated Tuesday that inflation is falling more slowly than expected and will keep the central bank on hold for an extended period.
Speaking to the annual general meeting of the Foreign Bankers’ Association in Amsterdam, the central bank leader noted that the rapid disinflation that happened in 2023 has slowed considerably this year and caused a rethink of where policy is headed.
“We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected,” Powell said. “What that has told us is that we’ll need to be patient and let restrictive policy do its work.”
While he expects inflation to come down through the year, he noted that hasn’t happened so far.
“I do think it’s really a question of keeping policy at the current rate for longer than had been thought,” he said.
However, Powell also repeated that he does not expect the Fed to be raising rates.
Federal Reserve Chair Jerome Powell reiterated Tuesday that inflation is falling more slowly than expected and will keep the central bank on hold for an extended period.
Speaking to the annual general meeting of the Foreign Bankers’ Association in Amsterdam, the central bank leader noted that the rapid disinflation that happened in 2023 has slowed considerably this year and caused a rethink of where policy is headed.
“We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected,” Powell said. “What that has told us is that we’ll need to be patient and let restrictive policy do its work.”
While he expects inflation to come down through the year, he noted that hasn’t happened so far.
“I do think it’s really a question of keeping policy at the current rate for longer than had been thought,” he said.
However, Powell also repeated that he does not expect the Fed to be raising rates.
BlackRock is playing the Lotto with other people's money / retirement fund.
it's a combination but she is not wrong. need to really raise rates, force higher reserve requirements on banks and cut gov't by about 30% because if not, we could be looking at persistent 3.5% inflation floor
insane right!!!!!!! how anyone could be happy about this and the mkt going higher is absolute bonkers
It will never happen but what banking fallout around the world if people simply put plastic away and use cash for a few months. Passively resisting against the system by using cash!
Because the big bursting bubble is being set up. The big guy's are hedged and the little guys with retirement money in BlackRock and the big banks are going to take a beating. We talk about meme stocks.... Let's talk about meme markets of the world.
GameStop X 1 billion accounts
It is much worse then they projected. This is what the Clown Circus see when their heads is so far up their asses! Pure bullshit just saying.
Could probably cut .gov by 70% and have it run more efficiently.
May 17 (Reuters) - U.S. Federal Reserve Governor Michelle Bowman on Friday repeated her view that inflation will fall further with the policy rate held steady, but said she has seen no improvement on inflation this year and remains willing to hike rates should progress stall or reverse.
"After seeing considerable progress on slowing inflation last year, we have not yet seen further progress this year," Bowman said in remarks prepared for delivery to the Pennsylvania Bankers Association in Nashville, Tennessee. "While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed."
"After seeing considerable progress on slowing inflation last year, we have not yet seen further progress this year," Bowman said in remarks prepared for delivery to the Pennsylvania Bankers Association in Nashville, Tennessee. "While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed."
I think they should raise rates
We're still at 3.5% and I don't believe it's that low.
I agree.
The FED's plan has been to allow inflation to increase (at it's own pace) until a recession begins.
This is by far the most financially painful route to take. However, it holds down the interest rate on the national debt. America 'borrowing it's own money".
The tip from Jerome was when he said "there will be no soft landing" a few months ago.
I think the member's of Congress were told this 3 years ago so they could park their money in the right places. Some just got plain greedy.
The Fed uses PCE when talking about a 2.0% inflation target. The news media confuses us with CPI because that shows a higher number, which is better for clicks and ratings, but distorts things to the point that the average American has no clue what is going on. But, hey, at least the news media sold some more ads.
PCE is the Personal Consumption Expenditures index.
PCE is at 2.7%
I am just pointing this out so that when you hear the Fed folks talk, you will at least be on the same page enough to understand what they are saying. They are not looking at a 3.5% number that they are trying to lower to 2.0%. They are looking at a 2.7% number that they are trying to lower another 0.7%
CPI index has been treated like a two dollar whore. The amount of things the Gov keeps putting in and taking out to manipulate the numbers; for a lower inflation rate is ridiculous.
yes correct however, the cpi data drives the narrative and often diverges from pce. yes they usually go hand in hand but not always. If CPI continues to flatline or trend up with summer spending, Fed won't give a shit about pce as the narrative is all that is discussed by the talking heads
They also just changed the actual formula changing the time period. You can't even compare historical values.
You'll own nothing and you'll be happy.
How many stores still take cash? Will be a long line at the checkout.
Didn't know about the changing the formula/time period.. been a while since I dissected the CPI
This will drive their "calculated" value down faster as consumers are forced to adjust their spending habits of real inflation. So weight adjustment and only 1 year look back.
Once everyone switches to eating bugs, inflation will look great.
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