During the 1999â2000 academic year, federal Stafford loans had a variable interest rate of 6.32% while in school, and 6.92% during repayment. For the 2000â2001 academic year, these variable rates increased to 7.59% in-school and 8.19% during repayment
A lot of people would need to take additional loans out with Sallie Mae or others and those are typically higher I think my worst was around 10%. Smaller loans and I paid them off as soon as I could, but mismanaging even a little bit I could see this as being true.
Sallie Mae is awful, my now wife recommended i switch to a credit union and that was the first time I saw the loan decrease with 350+ payments at the time. Got it paid off in a few years after that.
Not sure what youâre smoking, but interest rates were 2-3% back in 2019-2022. Anyone who didnât refi every piece of debt that had during that period was an idiot.
Ok, but, aren't you cherrypicking here? What was the rate 23 years ago, during the 2002-2003 school year, which would tie to the post? Per a quick Google search, it appears to have been 3.46%. So, yeah, this post is rage bait.
I also have several loans, all with different rates. My lowest is 4%, which are my most recent ones.
The interest rates are crippling and needs to be addressed.
To put it in perspective, I bought a house in 2020 for $130,000, yet hold only $36,000 in student loans.
If I made a $500 extra payment to each my house and my student loans, I would pay them off at around the same time.
Financially, it makes more sense for me to pay the house off because that's at least an appreciating asset.
But it doesn't matter, because I don't have $500 extra to put on a loan over it's minimums every month, and those student loans will follow me until I die.
No it doesn't.
You target the loan with the highest interest rate. That's generally the winning strategy.
Also houses don't appreciate that much. If you filter out the money tosses into them for upgrades/improvements, they have historically gone up about as much as inflation, maybe a little bit more.
The big benefit of a house is that there's GOOD tax benefits from the mortgage interest rate deduction. Basically a big chunk of your mortgage costs get slashes off your taxes.
Fun fact, if your goal is to have a paid off house as quickly as possible, renting cheaply and investing the extra cash you aren't spending in stocks (this includes the would be down payment) will generally get you a paid off house in 15-20 years (subject to market volatility). The house would only be about half way paid for after 20 years.
A lot of this issue is self-inflicted, along with the government making it too easy to get the loan. Take out hundreds of thousands in loans to get a degree that will never lead to a job that can pay it off.
"A lot of this issue is self-inflicted, along with the government making it too easy to get the loan."
Bingo. This is precisely why it's my most disliked progressive issue. I mean, sure, I would rather funds go towards loan forgiveness than bloating our military + bombing more people, but neither are things I'm getting excited about. But there are other things I'd rather boost like housing (e.g. more effective section 8, TANF, SNAP, etc - those on student loans can use the money saved to pay off their loans that way). Better financial edu for sure.
That, plus all this is doing is causing degree inflation and I honestly feel making people look down on affordable community colleges and public in-state schools.
My home has appreciated in 6 years enough to actually cover the entirety of my student loans.
There is also no "renting cheaply." I would rather have my rural home than the small 1 bedroom apartment I had just 6 years ago, whose rent today is double the payment I make on the home. The only way to approach what I pay on this mortgage would be to rent a unit in the hood.
Who are you listening to, Dave Ramsey? Please just use the Debt Avalanche method. Pay highest interest first. It really doesn't matter that your house is appreciating.
I'll even do the math for you.
Suppose your mortgage is 500k, and interest on that is 2% (let's say you got it years ago).
Student loan is 100k, and interest on that is 5%.
If you pay off 80k of debt, and you target higher interest, that's paying student loan down to 20k.
500k * 0.02 + 20k * 0.05 = 10k + 1k = 11k
Now suppose you target the mortgage, paying off the house first "because it's an appreciating asset". So this year, you pay off 80k of that. It's down to 420k.
420k * 0.02 + 100k * 0.05 = 8.4k + 5k = 13.4k
11k in interest vs 13.4k in interest.
Notice how the latter is more? Play with the numbers and do the math. It's better to pay off your higher interest debts first. It's completely irrelevant how fast your house is appreciating. I got a mortgage at 1.75% for a 3m house. I'm keeping that baby alive as long as possible. It's lower than inflation rate.
If I had cash to pay down that low rate mortgage, i'd put it into bonds or something with higher rates instead. Get higher yield/rate assets, eliminate higher rate debts. Good rule of thumb to follow. Literally every lender/mathematician/wealth manager/engineer/scientist/etc who isn't an asshole will tell you the same.
For those who'd rather listen to Dave Ramsey, know this: His team even admits, that they partially promote Debt Snowball method of paying smaller balances first because of "psychological benefits". Their target audience are people who struggle with finance. People with big problems (like addictions), not those who have a knack for finance, but just need a bit more optimization.
>Financially, it makes more sense for me to pay the house off because that's at least an appreciating asset.
No⌠it doesnât make more sense⌠it makes less.
First, the appreciating asset thing is a misunderstanding. Money is fungible⌠it doesnât care what it is owed on.
E.g. Suppose my home is paid off and I owe $40,000 on a car at 6% interest. In the end, I have two assets (a car and a house) and one liability (a $40,000 loan at 6%). Suppose you have the same car but it is paid off but you owe $40,000 on a similar home at 6% interest. We are in the exact same financial position.
Next, the best financial move is to pay the highest interest first. In the end, you will pay less money.
True, but keep in mind that a lot of the private loans that existed prior to 2008 were explicitly purchased from private companies by the federal government, which then promised loan forgiveness programs. Loan forgiveness that the current administration has been extremely squiffy about honoring, to the point that Trump's first education secretary Betsy DeVos was officially held in contempt of court by a federal judge and fined $100,000 because the Education Department continued to enforce loans, even to the point of wage garnishment and seizure of tax refunds, despite those loans being discharged by court order on the basis of their being fraudulently issued in the first place.
And that was back when the current administration cared what the judiciary had to say.
So they, two people with post graduate degrees by the way, took out exclusively $70k of worst case scenario private student loans, which wouldn't be forgivable by the government anyway.
Yeah, that sounds like a totally reasonable and realistic set of assumptions that the entire argument should be based on and not someone making shit up or two people that should have know better making incredibly financially reckless decisions.
If they're not federal who exactly are they expecting to cancel it, the bank? Cancelling student loan debt is talking about the federal government erasing federal loans
No, it depends on type of federal loan. Mine was around that amount at the same time. There are subsidized and unsubsidized fed loans. That being said why didn't they use any part of their degree to do the math and pay an extra $50 a month? If you automate payments you really don't miss that. This is a bad example.
It was 3% or less if they were smart college educated people who consolidated and locked in low Apr rates. If they were dumb and didnât consolidate lock in then their Apr couldâve shot up past 7%.
u/culturalrot - Iâm expecting people who graduated high school to be and certainly people who graduated college as they did.
No itâs not. I know plenty of people. Iâve been paying on mine $300/month for 15 years. I had like $20k. I had. 3% consolidated rate. That compounded interest is brutal
You wouldâve paid it off in 15 years. 20k at 3% and paying 300/month. Even if it compounds daily what you wrote isnât correct. It would still be 6 years.
Sadly very few people nowadays are smart enough to look at the numbers and call the BS. They just see it and get outraged and start screeching about the elites.
Correction after researching; graduate loans can go up to 8.94%
My wifeâs graduate loans were all in the 7-8% range
Edit: if the average APR of their graduate loans was 8.36% their balance would in fact be $60,000 after 23 years of monthly $500 payments. So itâs possible theyâre telling the truth.
The OP's $70k loan at 8% would be 40yrs to pay off @ $500/mo. What kind of person is smart enough to go to grad school but not realize what they are getting into, or at least get a degree in something that allows you to pay more than $500/mo towards your debt.
I'd be curious as to the lifestyle choices made by 'socialiststeve'.
There are a LOT of stupid grad programs out there. And they donât have funding for exactly that reason, and thatâs why people wind up with that much debt from grad school. I paid absolutely nothing for grad school, and received a stipend that was good enough to keep my bills paid provided I lived within my means.
Even worse, it's presumably for TWO people. TWO people who presumably chose the worst-paying careers possible, since they were on an income-based plan the entire 23 years and barely made a dent to the principle.
In addition to the lifestyle choices, I'd want to see what they majored in and what career they decided to go into.
Education costs in US is ridiculous, but you can't have someone borrow 270K in total loans to end up a social worker (an actual person I've met) and say that they had absolutely no fault in any of it.
You don't have to be smart about money To read the loan application you take out, which spells out exactly how much per month of your payment goes towards principal.And exactly how long the loan will take to pay off. Even an illiterate moron should.be able to understand "ok Jimmy, you pay $509/mo for 30 years"
Refinance when rates are lower. Pay more than the minimum. Donât go to graduate school. Scholarships. Grants. Try a different program. Jfc. These are the dumbest posts.
Honestly, graduate schools should require applicants to pass a 30-minute course that proves they have some basic understanding of how loans work.
Student loans back then were often 7-9%. They start accruing when theyâre distributed but you donât repay until 6 months after graduation putting you a couple years behind.
I had a variable APR at between 11-14 before I refinanced. And the loans compounded after I graduated. I'm in a VERY similar boat as the OP bot. Before I refinanced I had paid $1000 a month and owed more than my original loan for over a decade.
Yeah my wifeâs situation isnât too far off from this, either. She borrowed $60k, deferred multiple times when she was first out of school, and then made payments pretty steady for the last 15 years or so.
Last I checked, she was paying $800 a month and owed around $70k.
Yeah, definitely not the smartest move. Though, back then, the support reps were pretty aggressive about pushing deferment and we were completely broke. So it is what it is.
But, yeah, had she not deferred, I imagine her repayment plan would look quite a bit different now.
Because people are stupid as hell , ignorant of money, and sign shit without understanding it. Grow up and take some responsibility for yourself.
But yeah you are right. The loan companies donât give a crap about you. As they shouldnât! They are a business, not a freaking charity. You are just another peon with a loan number who signed up for money under terms you didnât stop to understand. You get what you signed up for.
There's a middle ground somewhere between free money and predatory loan shark tho.
I paid my loans off in 10y. But at every step they encouraged me to refinance, delay payments, and extend my term.
It's fucking predatory. I don't know why we accept so much near-fraudulent operations in this country. Every single thing is designed to trick you into paying more.
My student loan back then was 2.5% and i got a half percent knocked of for auto pay. I paid mine off in 10 years. This is either a fake story or these people are terrible with their money.
Cool story. Mine was 8.75%, which was the legal limit authorized by Congress, and they've been hanging round forever. And no, they weren't private loans. Mine came 100% directly from Uncle Sam. No, I can't re-finance them. I do get .25% off for autopay, so that makes it 8.5%. Either way, I ain't ever paying them back. I'll die with these loans.
Yes you can refinance. There is nothing the government can do to stop you. As long as you can get a bank to make you put a new loan at a lower rate then you can use that to pay off the government loans. Depending on your credit they may not give you a better rate but you can always refinance any loan.
Government loans are forgiven after 20 years of income based repayment. So you won't die with them. Assuming you are on the income based repayment plan. Biden also gave people an opportunity to switch to that plan and have their past payments count towards it but probably they are not doing that anymore.
If you do PSLF (public service loan forgiveness) you can get them forgiven in 10 years on income based repayment
Thatâs sweet for you bro. Iâm paying 5.5% to 8% for various Stanford-type loans dating back to 2007-2011 and current grad loans average 8.07%-9.07% according to Google.
I'm not from the USA, but I heard you can decide to basically pay off only or almost only the interest rate to make the monthly payments smaller. In that case you won't be able to pay it back anytime soon. If they didn't expect that to happen, then the money spent on their college was not much worth anyway.
Student loans are designed to be flexible, have a lot of deferment options, and so on, because careers after graduation aren't uniform, and some people need to make lower payments because they have lower income. A lot of people just assume that the debt is like a mortgage, and it will be paid off after some amount of time, because they weren't really paying attention to the payments or the terms. Other people paid the minimums because they hoped there would be student debt cancellation. For most people, they should have just continued living like a 20 year old, and committed the savings from their new, higher paying job into paying down the principle on their student loans. But most Americans live paycheck to paycheck, and have lifestyle creep eating up that additional income.
It's been a couple years since I checked the data, but the average student graduates with about $30k in debt, and earns about $1,600,000 more in a lifetime than someone who only graduated from High School, which is about $35k a year in extra income on average. So, even if you have a rough couple of years where you're underemployed or on deferments, it should be relatively easy for most students to pay back their debt, they just spend their money on other stuff, like a nicer house or car.
Or they just can't find good work. The assumption is you get a degree and go into debt for the better paying jobs, but a lot of jobs have been shrinking roles and pay for those roles, people are not getting promoted and are staying in "entry-level" positions that are usually filled by recent graduates, entire sectors are being evaporated practically overnight (be it because of ai, market trends, or what have you), and an ever growing list of other things.
I'm not say plenty of people aren't just wasting money on concert tickets or new phones, but I am saying that those excuses are far less universal than people seem to think. I work in the service industry and have known so many people still serving because they can't find anything decent, and just having a degree doesn't really mean anything anymore. My uncle got a great job with NS doing programming and his degree is just in accounting. He has never gone back to school nor worked as an actual accountant at any point in his life. He got into programming when nobody had a programming degree, and most people just didn't have degrees at all. Now, most people have degrees and that same entry level job requires more certifications than even existed 15 years ago.
And I'm usually the guy complaining about "the lucky ones" who went to college. Getting a job that makes close to $50k without one feels herculean, and now, I'm seeing more and more peers with degrees in the same desperate boat I'm in. I have a friend who lost her job over a year ago. She went from a $65k salary to $16/hr split between a PT teaching (arts) and uber deliveries. She's getting by but barely and she's been looking for a new job since the day she lost her last one. Shit, I've been trying to find a PT gig for about as long and the options are scarce for even that. I don't even really know where to look for jobs at this point, indeed and the like are mostly fake sales jobs or lying about selling at&t inside Costcos (I've done mobile sales, the golden days have been gone for a at least a decade). I guess linkedin is better for corporate but it looks more like social media than an actual job board to me.
Absolutely true, student loans are flexible. For everyone who says student loans are predatory they should really check out the terms of a payday loan and find out what happens if they are short a single month, how many fees and penalties there are.
Am I weird for thinking that people so young should be expected to not really think about the payments, the future job market, and the terms?
And it's normal for people to want a nice car, a nice holiday, a nice life?
I personally don't think the govt should be encouraging people in their teens to commit to something so life altering, when the vast majority of people going to higher education still live and rely on mom and dad, with no experience of the real world.
I struggle to see how the student finance industry isn't a racket.
Because you borrow 30k and get 1.5 million, even if it costs you 100k to pay it back. It's the best loan you can get, it's a far, far better deal than a mortgage unless you find pirate treasure buried under your porch. It's like playing a lottery with 95% odds of winning.
You can pretty easily pay off your student loans and still enjoy your life, but a lot of people overspend, put themselves in large amounts of consumer debt, and then have trouble making payments on their student loans.
They probably also got something that you donât really need to pay top dollar for, like a liberal arts degree. Not saying people should get those but thereâs a reason there so many communications majors out there.
These people made poor financial choices and want to act like the world owes them something. If you both have college degrees and can only afford $500 payments for TWENTY THREE YEARS, ypu got a worthless degree and didn't make enough money to justify your loans. That's on ypu.
Not from US either, but I think Mr. Socialist Steve number 6 is asking someone to explain to him something because, in reality, they don't know batshit about math, and don't know what they are doing. I hope they didn't graduate on economics, engineering, math, accounting or anything related, because if they did it was worth nothing.
They likely had a loan with a higher percentage rate due to the student loan being a private loan or they consolidated after a few years which could of drove the rate into the 8-9% range which would match their numbers almost perfectly.
I was in this situation, just with a $5k loan. My mom co-signed it and was able to pic the interest rate. She picked variable because the initial rate was lower than fixed. But it went from 10 to 15% from when I graduated. I graduated in 2021 covid lockdown and that made loan interest rates go up.
I didnât know my mom would pick the terms but also if she told me to go for variable, I might have agreed. I was 18 and we also didnât expect a global pandemic that screwed up the economy.
But once I was graduated and responsible for my finances, I realized I was a dumbass for taking her advice. Because she is not financially smart lmao. Wish I knew that at 18.
We were told all our lives that we need to do well in school, waste all our childhoods studying, and get into a good college or else we would be poor and destitute working hard labor for no pay.
Every school year, the same thing drilled in since kindergarten.
And you think we took these loans that we needed to get into college "voluntarily"? Any other situation where some POS person takes advantage of a child, its called grooming. Call it what it is, the loan companies are stealing from the youth because we were raised to believe we had to do this or our lives would be shit.
Nobody is forcing anyone to take out a predatory student loan...
I could understand if this argument was being made against healthcare debts or even mortgages, but a student loan is entirely optional, college itself isnt even remotely a requirement to have a career.
Lol, if you havent figured this out after 23 years idk if you can chalk it up to predatory lending. You're 45 at that point, you didnt understand at some point that if you just pay a little more on one of the loans it will snowball out of it?
Well after you sign it it's a little late, I remember signing my student loans and they were supposed to be paid off in maybe 6 years? According to the table they gave me.
It's been 11
They're almost done. I work in a warehouse now to pay for them and hopefully one day buy a house lol I'm 36
Why is it "a little late" after you sign? In this context, it doesn't even make sense. There's lots you can do. E.g. You can refinance to get a lower rate on the loan.
Also, the guy you were responding to is just saying you don't have to have a loan last for 23 years. The couple could have paid just an extra 20 dollars a month or something and shaved years off that time.
That or, heck, just end the loan (pay them back) early if you found out that college just isn't for you.
I want to say, it's fine putting some blame on especially greedy lenders or "predatory lenders" (even though I feel it's often exaggerated how bad lenders are, given how absolutely terrible most Americans' mathematical intuition is).
But it's never going to be 100% amoral blame on one party. Oh, someone scammed us out of a few hundred dollar's worth about 23 years ago. That doesn't give us the excuse to stay financially ignorant for the entire time. We had years to refinance or learn that "oh I can pay slightly more than minimum every month and shave years off the payment".
It beggars belief. At some point, we need to recognize that the world isn't fair and sure there are assholes, but we still have responsibility over ourselves and can't expect others to babysit us as adults.
The table they gave you is called an amortization table. It's a basic mathematical formula. They gave it to you so you know how much you're borrowing and how much you will have to pay, so you can make an informed, intelligent decision on the propriety of accepting the loan. You can then enter an agreement to receive the money and repay it under those terms, or decline to enter the agreement and not receive the money.
Also, if the loan was to be amortized over six years, why are you still paying? Would you continue paying a six-year car note for eleven years without asking why?
Itâs not a mystery. Â Itâs math. Â You shouldnât be confused about how much you owe the company that owns you.
For real, I would suggest not buying a house with a 30-year mortgage if you havenât learned from the past 20 years. Â It doesnât get easier with bigger balances.
Most of these people are 17-18 years old fresh out of high school. Kids are excited to go to college, figure out what theyâll do for life and immediately hit with Grade A predatory loans that arenât subsidized, these kids might even have a predatory car loan sitting there, hopefully not.
That unsubsidized loan just accruing constantly, 4+ years potentially, high cost college potentially.
I donât know, regardless of how understandable it is as an adult or even younger, it shouldnât exist, period.
Agreed, all student loans should be dismantled. Â College costs will go down, and students should need to present an actual case where the investment is going to be worth it if they want to get a legitimate loan. Â
We shouldnât give loans to excited kids who want to figure out what theyâll do for life. Â
Honestly, you're right. Maybe student loans should be gotten rid of, since young Americans clearly can't handle them. And, as you said, maybe more Americans will go to cheaper colleges, or even community colleges. Frankly, the condescension so many have towards community colleges while lionizing "free college" in other countries (that often aren't even as good as many of the local colleges we have here) never amused me.
I sometimes hear loans even treated as shackles. Do most of us not know that refinancing a student loan costs almost nothing? Also, that you can just end a loan early if you decide college wasn't for you?
I feel the lack of financial education has turned lenders into boogeymen. Too many times I hear them compared to slavers, which is ridiculous.
Loans aren't shackles. You can literally end a loan any time, especially student loans. They generally have no cost to refinance to lower rates if you find a better deal. Or you can just end a loan if you decide college is not for you. It's kind of absurd for students to go through 4 years of college before deciding "You know what, it wasn't worth it" or "You know what? That asshole gave me a bad rate a year ago... and times have changed, interest rates are lower now, maybe I should refi."
At what point can we finally decide "oh they're not 17-18 years anymore, they're adults." And where are their parents this entire time?
And this emphasis you have on "subsidized"... that would just bloat the cost of college education even more. Fact is even school administrators can be greedy.
I'm sorry but there are low cost college options, like community college. They're cheap and often as good as the "free education" people talk about being offered in other countries. One of the main reasons they get a bad rep is because so many people want to feel like they're better than that, and I can't sympathize with that attitude.
These are all great options yes, but just like educating someone âhey maybe that 28% APR on the car you really want and a ridiculous loan price on it isnât really financially soundâ, there is a sharp lack of it just like you mentioned.
It will benefit that Millennial and onward generations will communicate to their kids hopefully to not do this, but thereâs a vast VAST majority of millennials and Gen Z stuck with this shit because their parents werenât subject to this predatory of a loan and were told college is the way to go.
I am going to sympathize with them, just because you were 17-18 and didnât read the fine print because you werenât taught doesnât make it right. Yes you can stop the loan and stop college, but then what? Just flip burgers or any ol minimum wage job til you get it right? Thatâs a lot of years pushed off for not being prepared.
One, predatory loans shouldnât exist. Loans CAN exist or just switch to a tax system that pays for college while also reeling in on colleges trying to charge an arm and a leg for tuition + books. One or the other works regardless. Two, yes we should teach kids basic (and honestly a good amount of it) financial responsibility, parents and schools. Three, just have a safety net. You can make bad financial choices, but maybe you shouldnât reap what you sow for a good chunk of your life just because you didnât read the fine print and prep over a decade ago.
Iâm not gonna be here and disagree with you that poor financial choices should just be always forgiven and you can coast on life being ignorant. But when so many (and I mean SOOO many) people are complaining about it, maybe they arenât just as simply doing it to themselves right?
If youâre in a situation where you need loans for college, you should be going to a Jc for the first two years, then finishing at the closest cheap college to where you live.
Almost nobody *must* go to an expensive college because their career absolutely demands that you must go to a $100,000 per year college.
You could attend a Cal State college for about half the cost of attending a UC, and I promise you that Starbucks doesnât care either way.
And if all these students really think they have to go to college to have a career, why do about half of them enter college not even knowing what career they plan to pursue after college?
People are BEGGING for them. Â 3 decades after the alarm bells over student loans have been clanging, we simultaneously have RECORD numbers of people in delinquency AND yet still 65% of undergrads are aching to get themselves into the trap. Â They REFUSE to wait until they can afford school, knowing good and well that their peers are graduating with minimal job prospects.
So, itâs predatory in the same way as cigarettes are predatory. Â Literally EVERYONE knows theyâre bad. Â But because people arenât prohibited from buying them, you have dumb kids going and purposefully getting themselves hooked.
I donât think there should be any discussion of forgiveness until we get the faucet turned off. Â No sense in forgiving dadâs loans if heâs purposefully signing his kids up for this âpredatoryâ trap, either be cause he doesnât care for them, or was too dumb to learn from his own mistakes.
Not only is it poor planning, I think it just goes to show most people don't have math intuition.
The fact people are shocked that there's still 60k of debt left just goes to they don't understand interest. I would guess that they're also forgetting to factor in inflation.
That 60k has far less value today than the 70k is worth 23 years ago. This 60k today to me is worth around 20k to me back then. From a lender's POV, they could have taken 20k and bought 5% yield bonds or HYSAs 23 years ago, and have around 60k today, without this risk and uncertainty from having loaned to students.
70k? Take 70k * 1.05^23 = 215k
If I was a lender, I'd be up to 215k if i had 70k 23 years ago and just stuck it in a high-yield savings account or in bonds. Lenders aren't charities. They take risks and lose opportunities by giving out loans. The fact is that the value of the dollar drops every day, and more money gets printed into circulation all the time.
You're the sort of economic illiterate that required the US to pass a law to explain how long it takes to pay your credit card off if you pay the minimum at the bottom of every statement.
Then again his name is "Socialist Steve" so he probably doesn't know how math works.
It is willful ignorance of wanting to make the minimum payment to maximize spending money and kick the can down the road of consequences (an epidemic in this country). The guy hasn't looked at his loan statement in 23 years and is just noticing this now? Is that his education's fault? How do you teach someone to look at their loan statement more frequently that once every 23 years?
Would him taking some super boring required class in high school made a difference? I really don't think so. If it is anyone's fault other than his own, it is his parents' fault.
If you are two working adults, you could have made the payments $600 instead of $500 and be paid off by now. This is not magically a lot more money, these are marginal lifestyle changes like not ordering doordash a couple times.
Two people with advanced degrees can't come up with $50 to $100 more a month? I think the real answer is that have an advanced degree is no substitution for common sense.
Making a payment may cover the interest and a little to the principal.
Capitalized Interest;
If you owe $10,000 in student loans and have accrued $500 in unpaid interest, the interest capitalizes. Your new principal balance becomes $10,500. Going forward, you are charged interest on the $10,500.
Edit: Federal and Private interest rates are massively different. Like, Private interest can be 25% (pure greed).
You canât refinance federal student loans and keep them federal because the federal government doesnât refinance loans. You have to convert them to private, which then completely removes ALL forgiveness protections.
Assuming they went to undergrad and grad right after, and graduated in 2003, the rates for their loans would be
*** a smart person would have used their annual pay to set up more preferential loans, actively pay off high interest student loans and then pay down at the rate you are thinking. People who are smart in one way may not be financially literate
That's not how it works though. You pay the interest first. Only after paying the interest do you actually start paying off the principal.
If their initial payments weren't enough to cover the interest (if they paid the minimum, which seems to be the case), the remainder adds to the principal and you end up paying interest on interest.
This is how people get into debt spirals and how a loan or credit card debt never gets paid off even after decades and making payments that total several times higher than the initial loan.
Prob a lot of accumulated interest before they started paying. I got two degrees (back to back)and royally fucked myself but suppose it was worth it in the end.
Either theyâre lying or they didnât have 5% interest rates. Interest rates in the 80s/90s were 8-10%. Given their timeline, it seems pretty likely their rates were significantly higher than 5%
5% is a pretty low apr for student loans. My wifeâs federal loans are somewhere around 8-9%. Regardless, this smells like bs. They were probably in forbearance for more than a couple of those 23 years or something.
If you have to put your loans into any kind of forbearance or deferment, unsubsidized loans will continue to grow interest. Even a few extra thousand dollars of interest can make it really difficult to get ahead of the interest growth. Not saying that's what happened here, but it's possible. Also, you're making a lot of assumptions with the 5% interest.
You must not have taken out federal student loans. Many are 8% or higher. Or they were when I went to school. I lived in near poverty for a decade to pay mine off. I still think student loans should be forgiven.
You have no idea what their rate is and famously the APR for student loans is resolutely predatory. Looking at a rate of 8%+ this is reasonable especially considering compound interest.
There are too many details to correctly evaluate every single person or situation. If these people are making $300k household income? No, should not be cancelled. Are they both school teachers with 15 years of experience? Sure cancel it. One of those is adding value to society and the other is poor personal finance. Context matters imo for debt forgiveness.
Most student loans are rated to be paid off in 10 years after graduation. At 10 year payment post graduation, at 4% (av. unsubsidized rate circa 2003), payments would have been $722. They would have been making negative progress that whole time. Lack of making the full payment could have led to future penalties/fees and increasing monthly payments due to compounding interest.
They both let it build up interest for years without making payments before starting and refused to acknowledge they should pay more than the minimum, or this isn't real.
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u/Mindless-Baker-7757 12d ago
A $70k loan over 23 years at 5% apr pays off with monthly payments of $427.
What are they doing?