Brentastic Posted March 23, 2010 Share Posted March 23, 2010 Do people understand that the rate on these federal loans are the same no matter who the lender is (DOE or private)? Do people understand that only the private lenders offer interest rate reductions while the DOE offers no way to lower your fixed rate? http://www.washingtonpost.com/wp-dyn/conte...0030502972.html Oh, and when students have the choice between the DOE and a private lender, here is a telling stat In 2008, 15 million students voted with their feet and chose nongovernment lenders -- and only 4 million students chose to get their loans from Washington. Quote Link to comment Share on other sites More sharing options...
wiegie Posted March 23, 2010 Share Posted March 23, 2010 why would students choose private lenders? Because they pretty much just do what their school tells them to do (since they are going to pay the same interest rate no matter what). So why would schools encourage kids to take out loans from private banks? kickbacks. Why would banks pay kickbacks to schools to encourage students to take out private loans from them? Because these loans are profitable for the banks because the basically entail the government giving money to the banks. So what the government is doing now is saying, "instead of the government giving money away to the banks, we are going to keep it and use it to pay for health care." You are correct that from the students' point of view this is not as good as just lowering the interest rates to the students, but it is definitely better than just a pure giveaway to the banks. If the question were phrased as: "Should the government give away money to certain business for no reason or should it instead use this money to keep the deficit lower?" would you truly argue for the former and not the latter? Quote Link to comment Share on other sites More sharing options...
CaP'N GRuNGe Posted March 23, 2010 Share Posted March 23, 2010 I'm sure Brent is in no way biased on this issue from materials provided to him from his employer. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted March 23, 2010 Share Posted March 23, 2010 I'm sure wiegie is in no way biased on this issue from materials provided to him from his employer. Quote Link to comment Share on other sites More sharing options...
bpwallace49 Posted March 23, 2010 Share Posted March 23, 2010 Weigie, is this similiar to how major credit card companies have constant "sign ups" at colleges to get the oh . . ."Purdue credit card" for students and then the school gets a percentage of the profit off those cards? basically an agreement between banks/credit card companies and colleges? Quote Link to comment Share on other sites More sharing options...
I Like Soup Posted March 23, 2010 Share Posted March 23, 2010 If the question were phrased as: "Should the government give away money to certain business for no reason or should it instead use this money to keep the deficit lower?" would you truly argue for the former and not the latter? Initially, I was a bit put off by this part of the legislation. But when you look at it from that standpoint, how can you argue? Of course, I 'd like to see it used much differently... Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted March 23, 2010 Share Posted March 23, 2010 If the question were phrased as: "Should the government give away money to certain business for no reason or should it instead use this money to keep the deficit lower?" would you truly argue for the former and not the latter? [cough] stimulus bill [/cough] Quote Link to comment Share on other sites More sharing options...
Brentastic Posted March 23, 2010 Author Share Posted March 23, 2010 why would students choose private lenders? Because they pretty much just do what their school tells them to do (since they are going to pay the same interest rate no matter what). So why would schools encourage kids to take out loans from private banks? kickbacks. Why would banks pay kickbacks to schools to encourage students to take out private loans from them? Because these loans are profitable for the banks because the basically entail the government giving money to the banks. So what the government is doing now is saying, "instead of the government giving money away to the banks, we are going to keep it and use it to pay for health care." You are correct that from the students' point of view this is not as good as just lowering the interest rates to the students, but it is definitely better than just a pure giveaway to the banks. If the question were phrased as: "Should the government give away money to certain business for no reason or should it instead use this money to keep the deficit lower?" would you truly argue for the former and not the latter? Because they can get a lower interest rate, better education and superior service. As far as kickbacks, that was an issue in the past with the mammouth Sallie Mae but it certainly doesn't mean all private lenders do it. Our company does not and we have a very loyal following of schools because we are the best at what we do. Quote Link to comment Share on other sites More sharing options...
bpwallace49 Posted March 23, 2010 Share Posted March 23, 2010 [cough] stimulus bill [/cough] Bless you . . . Oh . . I am sorry. I thought you were sneezing . . . .[sneeze]TARP bailout [sneeze] Quote Link to comment Share on other sites More sharing options...
wiegie Posted March 23, 2010 Share Posted March 23, 2010 [cough] stimulus bill [/cough] not biting (as it has been discussed more than enough in other threads) Quote Link to comment Share on other sites More sharing options...
Brentastic Posted March 23, 2010 Author Share Posted March 23, 2010 I'm sure Brent is in no way biased on this issue from materials provided to him from his employer. I'm seriously offended that you think I'm passing on propoganda provided by my employer. What, you think they are asking employees to convince random people on message boards that this bill should not have been passed? Quote Link to comment Share on other sites More sharing options...
I Like Soup Posted March 23, 2010 Share Posted March 23, 2010 Because they can get a lower interest rate, better education and superior service. I would agree with you if the government wasn't giving them the funds in the first place. Isn't that the crux of the argument? Quote Link to comment Share on other sites More sharing options...
bpwallace49 Posted March 23, 2010 Share Posted March 23, 2010 Because they can get a lower interest rate, better education and superior service. Ok I will bite. How does a loan from a private lender versus the gubmnet result in "better education"? Isnt the money going to the same school for the same classes? Quote Link to comment Share on other sites More sharing options...
CaP'N GRuNGe Posted March 23, 2010 Share Posted March 23, 2010 I'm seriously offended that you think I'm passing on propoganda provided by my employer. What, you think they are asking employees to convince random people on message boards that this bill should not have been passed? No, don't be offended. I'm just razzing you. Obviously when you work in an industry affected by legislation you are going to have a bias and that bias will be fed by how it affects your employer. Case in point, I work in the healthcare industry. Obviously there are alot of opinions shared on how legislation is going to affect us down the road... Quote Link to comment Share on other sites More sharing options...
wiegie Posted March 23, 2010 Share Posted March 23, 2010 Initially, I was a bit put off by this part of the legislation. But when you look at it from that standpoint, how can you argue? Of course, I 'd like to see it used much differently... I too would have liked to have seen this issue dealt with outside of the health-care reform bill. I would have prefered that the subsidization have primarily have gone to students. But I am happier with the subsidization going to healthcare than I am with it going to banks. Quote Link to comment Share on other sites More sharing options...
Brentastic Posted March 23, 2010 Author Share Posted March 23, 2010 If the question were phrased as: "Should the government give away money to certain business for no reason or should it instead use this money to keep the deficit lower?" would you truly argue for the former and not the latter? Dude, you can't be serious. Govt subsidies occur in many industries (farming, utilities, airlines, Ginnie Mae, Fannie, Freddie and many more). According to your logic, the govt should just takeover those industries as well. Great idea. Hell, remove the subsidy which is a benefit to the student, not the lender but don't remove the private sector. Quote Link to comment Share on other sites More sharing options...
Brentastic Posted March 23, 2010 Author Share Posted March 23, 2010 I would agree with you if the government wasn't giving them the funds in the first place. Isn't that the crux of the argument? Not at all. I've stated this in another thread, but I'll do it again. These 'subsidies' that they keep talking about is the accrued interest on the subsidized loan. The government has given an entitlement to students (not lenders as most believe) where the interest accrued while in school on the sub stafford loan, will be paid for by the government. The lenders are still paying interest on this, however, so the government reimburses the lender, who in turn, pays the interest on the student's loan. What's not being said, is that the government only allows a profit margin of less than 1% for private lenders - the rest gets paid back to the government. For instance, lender bwrs money to fund student at 2% - BUT the rate to the student is 6.8%. The lender collects 3% of the 6.8% (2% to cover their cost and the additional 1% for profit) and makes a payment back to the government for the remaining 3.8%. And the lender does all the work of originating and servicing the loan. Quote Link to comment Share on other sites More sharing options...
Brentastic Posted March 23, 2010 Author Share Posted March 23, 2010 Ok I will bite. How does a loan from a private lender versus the gubmnet result in "better education"? Isnt the money going to the same school for the same classes? What I meant was better education on the financial aid process. Quote Link to comment Share on other sites More sharing options...
Brentastic Posted March 23, 2010 Author Share Posted March 23, 2010 I too would have liked to have seen this issue dealt with outside of the health-care reform bill. I would have prefered that the subsidization have primarily have gone to students. But I am happier with the subsidization going to healthcare than I am with it going to banks. Dude - the subsidy DOES go to the student. Have you never had a sub stafford loan? Get your facts straight. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted March 23, 2010 Share Posted March 23, 2010 (edited) I would agree with you if the government wasn't giving them the funds in the first place. Isn't that the crux of the argument? soup, you should read through the posts on this subject in this locked thread, starting around page 4. especially this post and this post. edit: oh, and I kinda like my illustration here: should the government take over all car dealers because their sales were subsidized by "cash for clunkers"? so let's say the government took $3 billion of taxpayer money to offer $5000 cash back on every new car purchase, then they calculated that this subsidy resulted in $100 million more in profit to the car dealers. so then the government says hey, no fair, we should get that money, and they set up their own crappy government car dealerships and say OK, you can only get the $5000 rebate if you buy the car at our government dealership. then they say "hey, taxpayer, check it out -- we just saved you $100 million by cutting out the middle man!" Edited March 23, 2010 by Azazello1313 Quote Link to comment Share on other sites More sharing options...
CaP'N GRuNGe Posted March 23, 2010 Share Posted March 23, 2010 Dude, you can't be serious. Govt subsidies occur in many industries (farming, utilities, airlines, Ginnie Mae, Fannie, Freddie and many more). According to your logic, the govt should just takeover those industries as well. Great idea. Hell, remove the subsidy which is a benefit to the student, not the lender but don't remove the private sector. Again, who is "taking over" an industry here? Are lenders barred from giving loans to students, or are they merely removed from receiving the benefits of being the middleman with guarantees from the government and subsidization of interest payments? Quote Link to comment Share on other sites More sharing options...
CaP'N GRuNGe Posted March 23, 2010 Share Posted March 23, 2010 Dude - the subsidy DOES go to the student. Have you never had a sub stafford loan? Get your facts straight. And the student turns around and gives it to the lender. Quote Link to comment Share on other sites More sharing options...
wiegie Posted March 23, 2010 Share Posted March 23, 2010 Dude - the subsidy DOES go to the student. Have you never had a sub stafford loan? Get your facts straight. I am talking about the additional subsidy that is currently going to the banks. Quote Link to comment Share on other sites More sharing options...
wiegie Posted March 23, 2010 Share Posted March 23, 2010 Not at all. I've stated this in another thread, but I'll do it again. These 'subsidies' that they keep talking about is the accrued interest on the subsidized loan. The government has given an entitlement to students (not lenders as most believe) where the interest accrued while in school on the sub stafford loan, will be paid for by the government. The lenders are still paying interest on this, however, so the government reimburses the lender, who in turn, pays the interest on the student's loan. What's not being said, is that the government only allows a profit margin of less than 1% for private lenders - the rest gets paid back to the government. For instance, lender bwrs money to fund student at 2% - BUT the rate to the student is 6.8%. The lender collects 3% of the 6.8% (2% to cover their cost and the additional 1% for profit) and makes a payment back to the government for the remaining 3.8%. And the lender does all the work of originating and servicing the loan. So, you are then agreeing that the government is giving the banks a pure subsidy of 1% of every student loan that they make. Quote Link to comment Share on other sites More sharing options...
Brentastic Posted March 23, 2010 Author Share Posted March 23, 2010 Again, who is "taking over" an industry here? Are lenders barred from giving loans to students, or are they merely removed from receiving the benefits of being the middleman with guarantees from the government and subsidization of interest payments? Correct, private lenders can no longer provide FFELP loans which were initiated for ALL students regardless of financial background. FFELP loans have lower fixed rates and require no underwriting and they also offer the govt entitlement of no interest accrual (only on sub staffords) while in school or deferment. Quote Link to comment Share on other sites More sharing options...
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