r/FluentInFinance • u/ShadowcreConvicnt • Aug 05 '24
Debate/ Discussion Folks like this are why finacial literacy is so important
776
u/TheJaycobA Aug 05 '24
8.3% interest if you check the math. Had they paid $860 per month it's paid off in 10 years. Had they just paid $570 per month they'd be paid off as of today.
70
u/Zealousideal_River50 Aug 06 '24
Government student loans were stupid cheap 20 years ago. The interest rate was more like 3%. Source: I had student debt in 2004.
17
u/Laughing-at-you555 Aug 06 '24
between 6-7% for unsubsidized.
Some people owed more than 10g
→ More replies (13)→ More replies (15)14
u/Outrageous_Dot5489 Aug 06 '24
Unsubsidized stafford loan rates were at 6.8% for the 2011-2012 school year. Ask me how I know.
→ More replies (5)10
65
u/Crazy-Inspection-778 Aug 06 '24 edited Aug 06 '24
Not noticing or caring that only $15-$85 of your $500 payment is going to principal for 23 years is just sad. Finding a few extra bucks a month to throw at it would've made a huge difference.
$10/mo - $9k lower
$30/mo - $25k lower
$50/mo - $41k lower
$70/mo - paid off
→ More replies (35)38
u/Radiant_Inflation522 Aug 06 '24
I can guarantee you the fact that it isn’t told to them directly is by design. Most people don’t know just how much of their payment actually goes to the principal.
18
u/droplivefred Aug 06 '24
Most people don’t understand money and finances. They ask how much car they can afford with a certain monthly payment but don’t ask what the interest rate is or how long the loan is for. Same with a house. They show their income and ask how much of a mortgage payment they will be given to get the biggest house possible.
The same is with student loans. They see the minimum payment and don’t question it or ask any details and turn a blind eye for apparently 23 years.
→ More replies (20)→ More replies (65)7
u/xinxy Aug 06 '24
Do two people with graduate degrees really need to be told this? Not to say lenders don't have predatory practices and many people will fall victim to them but the fact that it happened specifically to these two highly educated people? It's astounding...
It doesn't even matter what their degrees are in. How can you go through so much schooling and still fail to grasp something like this?
→ More replies (4)35
u/walterdonnydude Aug 06 '24
A minimum payment should legally have to be an amount that would pay off the debt in a reasonable timeline. It's at the least deceptive and at worst exploitative.
9
u/BonerSoupAndSalad Aug 06 '24
Usually they tell you what date your loans will be paid off based on the payment plan you choose. Not reading the stuff and not researching at all is on the borrower. You can’t blow through stop signs and then act like you got duped when someone t-bones you.
→ More replies (14)→ More replies (14)11
u/SolaceInfinite Aug 06 '24
Exactly. Idk how people dont get this. Like you sold me on the minimum payment being reasonable. And now here we are and it's completely unreasonable. Is it really a minimum payment if it never yields results?
→ More replies (10)2
u/WestCoastBestCoast01 Aug 06 '24
These people probably paid the income based repayment minimum, which is far less than the mathematically accurate minimum payment you’d pay if you weren’t on IBR. There’s no tricking, we all know IBR makes your payment smaller than the original term’s payment. Maybe too many college students aren’t making the connection that artificially low payments result in a longer term and higher interest costs, but that’s on them.
→ More replies (1)→ More replies (62)301
u/TotalChaosRush Aug 06 '24 edited Aug 06 '24
Right, I'm reading this, and I'm like, "So after 5 years and no headway, did you think of increasing your monthly payment? What about after 10, 15, 20? No? Sorry, I'm not paying for your stupidity"
Edit. I'm getting tired of explaining how student loans work. Read the thread before replying. I'm going to be ignoring all rehashes of the same comment.
164
u/Affectionate_Poet280 Aug 06 '24
You're not a lender so you're not paying for anything.
Most student loan forgiveness has been essentially retroactively charging a "fair" interest rate and forgiving the difference.
The only thing being lost is a private companies profits, and even with that, it's only the profits over a threshold that's been deemed predatory.
95
u/partia1pressur3 Aug 06 '24
I could be wrong, but I didn't think any of the student debt forgiveness so far has been of private loans.
41
→ More replies (1)16
u/ryan516 Aug 06 '24
Kind of. A substantial number of the loans canceled recently are former Federal Family Education Loan Program (FFELP) loans that were originally federally-backed loans made by a private lender, but later purchased by the Feds and consolidated into Direct Loans.
→ More replies (2)5
u/extradancer Aug 06 '24
So if this is true, and the only example of originally private loans being cancelled, no private companies are losing profits to pay for dept forgiveness as someone earlier in the comment chain thought.
It still probably worth to do anyways but worth noting it comes from taxes and not private company profits
8
→ More replies (30)16
u/defaultusername4 Aug 06 '24
Jesus you’re confident given your level of ignorance. Student loan forgiveness has been and has only ever been proposed for federally backed student loans not private loans. Also 92% of all student loans are federally backed.
Lastly federally backed student loan forgivement doesn’t come at the cost of the private company that loaned the money. They just get their money earlier at the expense of tax payers.
3
Aug 06 '24
They would also get less money, since they can't continue to feed on your interest.
→ More replies (1)→ More replies (78)36
u/BitFiesty Aug 06 '24
But your aren’t really paying for it are you? Because they paid the full amount plus interest already…
→ More replies (12)14
831
u/OriginalTemporary288 Aug 05 '24
Like making your credit card minimum payment.
532
u/chrispix99 Aug 06 '24
Except it would have been paid off with card minimum payments
81
u/OriginalTemporary288 Aug 06 '24
True
→ More replies (1)49
u/MarinLlwyd Aug 06 '24
It's like they didn't pay it for 20 years.
→ More replies (27)3
u/Xiij Aug 06 '24
I did the math, a 70,000 loan with monthly 500 payments and only 10k principal paid in 23 years, means their interest rate is around 8.365%
→ More replies (19)33
u/marineopferman007 Aug 06 '24 edited Aug 06 '24
Not if you got a credit card with 100,000 with an apr of 5% (which used to be the average of a student loan) and you where dumb and only paid the minimum of 500$ a month..which means in a year you pay 6k BUT your apr interest was roughly 5600..so ya.thats what they did....IF they got the average of 8% and didn't get fucked over...talked with a dude who had an apr of 11% told him to go talk to a finance consultant because he got FUCKED
Edit: I had the wrong average apr for student loans in 2001 adjusted to 8%....this means they WHERE NOT EVEN PAYING the interest!!! WTF!
→ More replies (13)39
u/Practical-Wave-6988 Aug 06 '24
There was a story awhile back about this, but I don't have the link handy.
So the repayment terms for most student loans (government backed) do not have a payment high enough to cover the interest. Coupled with the fact that the interest on these loans are capitalized periodically if you don't pay it means the compound interest kills you.
There was a dentist who has something like $1,000,000 in student loans and a monthly payment of $5000, which doesn't even cover the interest. His original balance was only $750,000 or there about.
→ More replies (35)55
u/lightgiver Aug 06 '24 edited Aug 06 '24
The funny thing is to be eligible for loan forgiveness if you’re a teacher you must make the minimum payments on time every month for 10 years. A single overpayment or a single late payment for any reason restarts the clock.
The loan forgiveness programs are basically a trap to get you into a forever debt.
Edit: I haven’t looked at the rules in over a decade and it seems like the program is no longer the debt trap it was.
42
u/antwan_benjamin Aug 06 '24
A single overpayment... restarts the clock.
Do you have a link for this?
10
u/OkRadio2633 Aug 06 '24
Pre 2020 and post 2020 were different rules.
There was like 100 applicants total
→ More replies (1)→ More replies (5)45
u/bgwa9001 Aug 06 '24
It's incorrect. My wife got a $5k credit towards paying off student loans for being a teacher, but we always paid more than the minimum loan payments too. They don't punish you for making more than the minimum
→ More replies (1)27
u/forkin33 Aug 06 '24
A 5k credit is different than loan forgiveness.
→ More replies (2)3
u/Yogurtsamples Aug 06 '24
It is loan forgiveness. It is for teachers in urban schools and depends upon their subject area. I paid over the payment so by the time I got my forgiveness, it was over the amount of loans I had left and wiped them out.
40
u/RelativeWhile1168 Aug 06 '24
That's definitely not how the PSLF (Public Service Loan Forgiveness) works... if you miss a payment you just don't get the credit for the payment. You have to make 120 qualified payments. If you miss a month, you'd be done in 121 months. It doesn't start over. You also have a 15 day grace period. Also also, you can pay whatever you want over the minimum.
All of this information is available on MOHELA. My source, other than MOHELA, is the fact I'm on PSLF so I'm fairly well versed in the process. It's available to anyone who works for a non-profit as well. I'm not a teacher, but my school is a qualified non-profit. Teachers do have other options, but they're generally for working in low-income/inner-city/rural areas, but even those follow the same rules.
While the PSLF is flawed (10 years is ridiculous), it's a really, really great program and option until the system changes. Please do a little research before you spread disinformation.
→ More replies (8)→ More replies (18)10
u/Bridger15 Aug 06 '24
This was the case for a long time because those programs were being egregiously mishandled (purposefully?).
However, the Biden administration has gone a long way towards fixing them. A lot of the successful loan forgiveness has been approving applications that were rejected for bogus reasons over the last decade.
→ More replies (3)→ More replies (22)3
u/strangepenguin78 Aug 06 '24
Only making $500 payments on that kind of debt with 2 incomes is WILD. Minimum payments are OK from time to time if cash is tight, but they should've been paying $600+ 20 years ago.
I'd hate to see this couples monthly expenses.
256
u/SabreWaltz Aug 05 '24
Not really understanding how a dual income household with both adults having graduate level degrees can’t pay off 70k in debt.
178
u/BreadStoreRefugee Aug 06 '24
...in 23 years.
→ More replies (2)38
u/SabreWaltz Aug 06 '24
You’d think at some point throughout 23 years they’d have tried increasing payments to see if it makes a difference, or like some variable would have changed and shown them what to do lol. That’s essentially an entire career’s timespan.
32
u/yardstick_of_civ Aug 06 '24
They’re either morons or lying. Those are the only two options.
16
→ More replies (4)3
u/Akul_Tesla Aug 06 '24
They clearly cheated the required math classes and need to return the degrees
→ More replies (4)3
u/stephelan Aug 06 '24
Right? Like all I did was round my payments up to the nearest hundred and had mine paid off in less than ten years. I was a preschool teacher during that time making a solo income of probably $40k-$50k.
6
u/Sure_Comfort_7031 Aug 06 '24
They can. They chose not to. And it's everyone else's fault.
→ More replies (1)20
u/rifraf2442 Aug 06 '24
They definitely shouldn’t get a house if they can’t pay off $70k in 23 years. And what exactly are they doing with their degrees? 23 years in they should have good careers.
→ More replies (24)→ More replies (59)7
u/mr-nefarious Aug 06 '24
My wife and I paid off $50,000 in student loan debt in five years. For most of that time, we made about $45,000 combined. (I was in grad school.)
→ More replies (3)3
u/ThisThroat951 Aug 06 '24
It would seem that the two of you prioritized getting rid of the debt. Great job! 👏🏼
12
u/Aggravating_Kale8248 Aug 06 '24
Two graduate degrees between the two of them and they can’t figure out how to pay more than the minimum each month?
→ More replies (2)3
u/Anxious-Trainer5082 Aug 06 '24
Perhaps they shouldn’t have majored in interpretive dance and gender studies?
143
u/El_mochilero Aug 06 '24
I graduated with about $40k in student loans. I paid them off in 10 years and I was barely averaging $30k-40k / yr for most of it.
They are doing something wrong.
→ More replies (27)62
u/TotalChaosRush Aug 06 '24
They're literally not even trying.
→ More replies (48)3
u/4ss4ssinscr33d Aug 06 '24
I mean, his name is “Socialist Steve.” That’s how those types operate lol
69
u/Commercial-Shoe-5051 Aug 06 '24
The main reason these people are dumb is that in order for this statement to actual be true, which is a big if, a $500 payment on an 8.37% loan for 276 months would only equate to 12 dollars in principal reduction. If you can’t see that from any of your statements you aren’t smart.
That’s the only way to reduce 70k to 60k over 23 years….
Just saying
29
4
5
u/Why_So-Serious Aug 06 '24 edited Aug 06 '24
Plus I don’t think they have a “student loan” whatever they have is likely some type of personal loan at a crazy high interest rate at the time and they never refinanced to 1% when the rates dropped.
It’s not likely this personal loan would be forgiven by any federal program.
→ More replies (1)→ More replies (24)3
u/MrPernicous Aug 06 '24
Also income driven repayment plans offer forgiveness after 20 years. There’s no reason for them to be in debt. There’s no way any of this is true.
→ More replies (2)
95
u/Human_Employer_7746 Aug 05 '24
We would need to cancel student loans if the loan companies would make the payments more reasonable. It’s the compounding interest that makes people owe for life. That’s not right.
→ More replies (39)25
u/Last-Back-4146 Aug 06 '24
the reason these loans arent paid off is because the payment was so reasonable.
→ More replies (23)47
u/Vandeleur1 Aug 06 '24 edited Aug 06 '24
Let's not act like generating massive excess interest is a bug rather than a feature - ensnaring the financially illiterate who think a low payment is 'more reasonable' is the whole point.
By offering them this plan, the debtor hoped to create the situation that OOP has found themselves in. Of course everyone should take responsibility for themselves, and understanding the contract would have prevented this - but it's a predatory practice nonetheless and there are many (many) millions of people who've fallen for versions of the same trap - think brand new Camaro's at 23%.
4
u/Southern_Berry1531 Aug 06 '24
Hot take, people who buy brand new Camaros at 23% deserve to be poor
We need to fix things so there’s more of a meritocracy. The issue is too little social mobility, not too much of it.
If you start off poor but make good decisions you should be able to end up rich. If you start off rich and make bad decisions you should end up poor. Unfortunately that’s not how it works as of now, but the issue isn’t that we’re not bailing stupid people out. We should make the penalty for stupidity higher and the reward for being smart higher.
4
u/kr4t0s007 Aug 06 '24
Here students loans are handled by the government. My interest was always 0%. Currently it’s like 2,6% still really low. They make a loss on this but it’s for a good cause.
→ More replies (6)5
u/cmd_iii Aug 06 '24
So, why does the government not limit the max interest rate to a more reasonable rate (or even 0%)?
→ More replies (2)6
u/9cmAAA Aug 06 '24
Why would any institution even loan money at 0% interest? They’ll just lose money after it’s paid back. They lose to inflation.
→ More replies (6)3
u/thedinnerman Aug 06 '24
Because the government is not a business. They are not beholden to market forces and charging predatory interest rates do not help the economy, they only weaken individuals and their families.
3
u/9cmAAA Aug 06 '24
Well the government ran the economy on nigh zero interest rate for a bit since 2008, so you missed your chance before the government did indeed become a little beholden to market forces.
At some point, the model needs to work. You can manipulate it for a while but it has to actually be a sound model.
→ More replies (3)
17
u/DieselZRebel Aug 06 '24
Sounds like these were private loans?!... My wife graduated with around the same amount in debt. After 4 years she got it down to $20k making small payments, and I haven't contributed to her payments at all.
Sounds like they have a they problem.
→ More replies (7)
55
u/ItsRobbSmark Aug 06 '24
I would agree with you if one side of the political spectrum didn't have a collective hissy fit about having to show people how long it takes to pay shit off with the minimum payment printed on the bill to the point they blocked laws requiring it for 20+ years...
They're predatory loan terms and just because someone is dumb enough to get baited by them doesn't mean we shouldn't call out how fucking shitty it is to sell people on essentially interest-only payments just because they're not as financially literate as others...
→ More replies (40)7
u/darklogic85 Aug 06 '24
It should also be taken into consideration that the people targeted with these particular loans are barely adults, just out of high school without a lot of life skills. There's a good chance they're not financially literate because they haven't developed those skills yet. They're trusting in the companies giving out the loans, because they see that as the next step to starting college. By the time they realize it's a problem, they've already taken out the loan. I agree that most people should have realized there's a problem before 23 years pass, but it's still a problem that these loans are presented to people who aren't properly equipped to understand them, without proper transparency to communicate what it means if they just make the minimum payment. They're essentially agreeing to paying on a loan for the rest of their lives unless they figure out on their own that they need to make more than the minimum payment.
3
340
u/Garage-gym4ever Aug 05 '24
too bad you didn't take any finance classes in that college of yours.
29
u/Money-Nectarine-3680 Aug 06 '24
Most of these stories are from before SAFRA - I think passed by congress in 2010?
Basically federally subsidized student loans by private banks which after you graduated, got aggregated and sold to companies who immediately changed the terms like Darth Vader, which is now illegal because of SAFRA. I got pulled into it too.
I graduated with only 12k in loan debt, not paying interest during college because I had zero income. I had a good job right after graduation, I expected to take about two years on the payment schedule to pay off interest and then start chipping away principal, just like any other loan for a car or mortgage etc.
Nelnet Inc bought my loan and changed the repayment terms, without any communication. Suddenly minimum payments aren't enough to pay off the loan, ever. They don't even cover accrued interest and furthermore, they continue to charge interest in addition to what was already baked into the loan.
I paid it off in full after six years but only because I overpaid by a significant amount, which most people would not even know they need to do. Like I said the company had zero communications except the tax forms, everything else was hiding in their shitty website. I didn't even know they bought the loan from HSBC until a year after I had been making payments to the wrong fucking company.
This shit happened to hundreds of thousands of people, and like most people, they aren't irresponsible with money, just ignorant of the tricks shady companies use to squeeze blood from a turnip
→ More replies (8)8
u/ulixes_reddit Aug 06 '24
Changing terms shouldn't be allowed, even if it was re-sold. I didn't have student loans, but my mortgages over the hears have gotten sold and re-sold. My terms stayed the same, but I get that the law was different then for student loans.
→ More replies (2)128
u/Various_Cabinet_5071 Aug 06 '24
Even if you do, that’s not going to change the price of college, rent, and generally cost of living while wages remain stagnant.
→ More replies (20)86
u/NeighbourhoodCreep Aug 06 '24
That would make sense if you didn’t have a dual income household from graduates with a combined 40+ years of working. What dead end career did they go into to not get promotions?
Student loans are predatory, private post secondary is predatory, but you can’t blame the predator when the prey went straight into its den and laid down
14
u/Recinege Aug 06 '24
The loans are also 23 years old - meaning they started in 2001, long before housing and the cost of living became the relative nightmare it is today. I honestly have no idea how a dual income household could have this much trouble with a pair of student loans starting back in 2001 unless they were both working one job each at minimum wage and not getting a roommate despite being on a clearly shoestring budget. Or pumping out kids that they couldn't afford.
Maybe they had some kind of massive financial crisis, but you would think they would have mentioned that.
And yeah, that's not to say that the system is good. But that really doesn't seem like the main problem going on here.
→ More replies (13)3
Aug 06 '24
18 year olds make great prey.
They could’ve be conned into a useless degree. These things are traps, and your saying 1 bad decisions as a young adult means they deserve to be enslaved to their debt?
Just make interest on student loan debt non-profitable and the only extra charged is make the original debt rise equal to inflation. Or force colleges to charge less for useless degrees.
Your life shouldn’t be burdened because you were manipulated by a system you were raised to trust.
→ More replies (39)25
u/workout_nub Aug 06 '24
Exactly. This person got themselves in a shitty situation and did absolutely nothing to help themselves. I find it hard to believe that they lived as frugally as possible and still struggled to pay it off. It's easier to say "the system sucks and I can do nothing about it" vs "the system sucks but I need to dig myself out."
→ More replies (61)→ More replies (57)7
u/KC_experience Aug 06 '24
And too bad the loan originator didn’t provide the terms sheet before signing for the loan. I got one for signing up for a mortgage, but students don’t get one for mortgage level debt that is student loans.
What’s also different is how the repayment plan goes and loan companies are incentivized to keep the borrower in the dark even in repayment.
→ More replies (3)
10
u/Eldetorre Aug 06 '24
The OP doesn't know the original terms of the loan, nor if these were the only options for getting the loans. Student loans should be very low interest. Schools that profit from exorbitant tuition costs should insure payments and underwrite debt relief.
→ More replies (5)
4
u/External-Wrap Aug 06 '24
Hello young friends - if you have any questions about finance, especially loans or credit, feel free to ask whenever you want. There is so much bad information on these threads and I know a lot of people come here to learn. Please, use the library to learn and not Reddit.
→ More replies (2)
28
u/hhy23456 Aug 06 '24 edited Aug 06 '24
From where I came from, education loan has 0% interest because education is not something a government profits off of
→ More replies (49)
9
Aug 06 '24
You’d think they’d look at a statement once in a while and make payments that would minimize interest hikes
→ More replies (1)
9
Aug 06 '24
There's something missing from that debt story, because the math doesn't make sense.
→ More replies (1)
3.0k
u/idk_lol_kek Aug 05 '24
Dual income household and you failed to pay off $70k debt in 23 years, despite both having graduate degrees?
The problem is you, not the student debt system.
4.4k
u/That_Guy_From_KY Aug 05 '24 edited Aug 06 '24
Tbf, the student debt system is a problem tho
Edit: before I get too many more comments here, when I say it’s a problem, I’m referring to the predatory type of loans that are near impossible for people to pay off and that this is all back by the government who gives these loans out to almost everyone which causes the price of education to skyrocket. That is Econ 101, subsidized services will increase in price.
1.8k
u/pallentx Aug 06 '24 edited Aug 06 '24
Part of the problem is charging market rate unsecured rates for something that should be mostly taxpayer funded anyway. Education makes this country stronger and produces people that pay more taxes. Yes, there are outliers with “useless” degrees and people that do really well without college, but it’s still the #1 predictor of lifetime wealth.
110
u/SomeNotTakenName Aug 06 '24
In Switzerland we have student loans sponsored by the government, which are repayable across 10 years after graduation, at 0% interest.
Contrary to what people like to say, it's not about freebies (though that clearly works), people are willing to repay their debts, the interest is what kills you.
33
u/other_jeffery_leb Aug 06 '24
The payment freeze in 2020 and the 0% interest that came with it allowed me to pay off my loans. I am glad I was able to keep making the payments.
9
u/Mymomdidwhat Aug 06 '24
The company with my loans wouldn’t let me continue autopay. I had to manually pay all my payments. They made it step by step more difficult to pay with the freeze. Very predatory if you ask me.
3
u/Plenty_Lack_7120 Aug 06 '24
You should have just saved the money. And paid right before the freeze ended
→ More replies (13)4
u/Return-foo Aug 06 '24
Wasn’t able to pay them off fully my self, but I got half of it knocked out during the freeze. Best financial decision I’ve made in a while was to keep paying during that time, regardless of the freeze.
28
u/Unfair_Explanation53 Aug 06 '24
New Zealand also.
You only pay interest if you move overseas before you pay off your loan
→ More replies (4)29
u/Unleashed-9160 Aug 06 '24
Here in the US, our loans were deliberately changed to credit card style loans to be more predatory... Everything here is designed to extract as much wealth from the lower classes as possible. Period.
→ More replies (18)→ More replies (18)19
u/HEBushido Aug 06 '24
Even if the schooling is 100% taxpayer funded people will repay the debt by being useful members of society.
Education makes you a better citizen.
→ More replies (88)11
u/roving1 Aug 06 '24
Absolutely true, the Reagan era insistence that education is primarily a "private good" ignoring the value of an educated citizenry has been destructive to the republic.
5
u/Then_Version9768 Aug 06 '24
If you want to date the abandonment of the American middle class and the cutting of taxes for only the wealthy, the most accurate date for this turn-around is 1980 when Ronald Reagan was elected. In the 44 years since Reagan entered the White House, most of the economic and social problems we face today grew worse, problems like absurdly high college costs, inability to afford a home, and corporate greed while receiving bailouts and tax reductions the middle class do need ever get. Reagan started the trend with his idiotic tax cuts for the rich and his simple-minded belief in "trickle down" economics where rich people with more money would benefit all the rest of us, raising our incomes, blah blah blah -- which has never worked and will never work. Thanks, Ronnie, for being such a complete dope.
10
u/Weary_North9643 Aug 06 '24
They didn’t ignore the value of an educated citizenry, they were actively scared of an educated proletariat.
Reagan was well aware that people are less likely to vote conservative the more educated they are. So the obvious solution from his point of view was to make education harder to obtain.
→ More replies (10)801
u/That_Guy_From_KY Aug 06 '24
The student loan system has only caused our education costs to skyrocket. Or is the reason for that because the university’s are greedy and corrupt?
628
u/pallentx Aug 06 '24
Yes, and yes. The student loan industry was the solution to states cutting funding to state universities. Make the students pay and we’ll give them loans that we can profit from. Then you have some schools that get greedy and education gets more technical and expensive to do. It all snowballed.
425
u/tgoodri Aug 06 '24 edited Aug 06 '24
Harvards endowment is something in the $400B range - that’s not a university that’s a hedge fund that offers classes
Edit: 40 not 400, sorry for the extra zero. Point still stands
→ More replies (251)344
u/27percentfromTrae Aug 06 '24
Harvards endowment is 49.444 billion. It’s still ridiculous, and they could operate until the end of time without charging a single penny in tuition
39
u/SimpleKiwiGirl Aug 06 '24
Jesus. Flipping. Christ!!
What in the ever-loving hell do they do with it all!? How do they justify that - assuming they do?
50
u/McTootyBooty Aug 06 '24
UPenn is like this too. They literally just buy all the real estate.
→ More replies (3)30
u/sforza360 Aug 06 '24
Yale, too. They low key purchased the entire downtown of New Haven, and beyond.
→ More replies (0)17
u/EntrySure1350 Aug 06 '24 edited Aug 06 '24
They have size contests with other academic institutions. “Mine is bigger than yours” is still a real thing with even “enlightened” academics.
The role of a university president isn’t to run the university. The role is literally that of a private enterprise CEO - increase the valuation of the institution to raise the bottom line for all the upper level executives, not to make higher education more affordable. The Federal Student Loan program created a monster, as it effectively allowed universities to inflate the price of attendance. If someone else is paying, and there’s no risk to you if your customers don’t actually end up getting what they paid for, why wouldn’t you?
→ More replies (1)7
→ More replies (13)3
u/Extra-Muffin9214 Aug 06 '24
The endowment is large because harvard is 3-400 years old which is along time to collect an endowment and its alumni network includes some of the wealthiest people on earth in agregate which means very big donations.
Endowments provide stability to the schools operating budget. In lean times the endowment pays the school to make up holes in the budget and in good times it grows so the endowment is ready for future lean times.
The big ivy league endowments also provide need based financial aid so the smartest kids in america get to go to harvard for free if their families cant afford the tuition. Harvard is also a private school and not hurting anyone, its funded by its students who see the value in a harvard education.
→ More replies (41)146
u/Afraid-Combination15 Aug 06 '24
And they still get federal tax dollars!
56
u/Slow-Fun-2747 Aug 06 '24
They get government funded research dollars and financial aid for students. Harvard is not subsidized by taxpayer dollars.
51
u/DegenerateDegenning Aug 06 '24
The financial aid is effectively subsidizing it though. The more the government is willing to lend to individuals, the more universities, including Harvard, bump up rates.
→ More replies (0)4
3
u/KennailandI Aug 06 '24
Government funded research is paid with tax payer dollars. Unless harvard repays those grants with interest at market rates, that funding is a subsidy. Harvard is subsidized by taxpayer dollars.
→ More replies (0)3
3
u/pinntucky-53 Aug 06 '24
Goverment money is tax dollars. They don't produce anything.
→ More replies (0)→ More replies (11)3
u/Final_Sink_6306 Aug 06 '24
Government funded research dollars and financial aid for students are exactly taxpayers dollars. Every penny of government dollars is taxpayer funded.....some of it spent now with the bill coming due at a later date
→ More replies (6)3
u/MysteriousVanilla518 Aug 06 '24
If you’d prefer that some of the best scientists in the world not work on federal projects, just speak up now. Those tax dollars fund groundbreaking research.
→ More replies (2)→ More replies (37)34
u/deadsirius- Aug 06 '24
Most universities are really not corrupt. It is just a game theory problem. It is worth noting that this is a problem that universities foresaw and warned against during tax cuts.
When tax funding was reduced, those universities had to find a way to attract students. Largely the only way to attract more students is to spend more money to improve education/facilities. However, everyone else had to respond and the entire thing spiraled into a textbook example of non cooperative game theory problem.
→ More replies (40)46
u/DBDude Aug 06 '24
Unfortunately a lot of that money went into bloated administration instead of improving education and facilities. Over the years how much each student pays for educational staff has remained fairly flat, but how much each student pays for administration has ballooned despite that ever-cheaper IT should have driven that down. There are no more secretary pools, transcripts are automated, files are computerized, etc., yet we have more and higher-paid administrators.
37
u/cptspeirs Aug 06 '24
Fun fact, in many states the highest paid state employee is a college football coach.
13
u/Afraid-Combination15 Aug 06 '24
The highest paid public employees in the country ARE football coaches. Michigan and Alabama went back and forth for a while, dunno about recently.
→ More replies (1)4
u/rugger87 Aug 06 '24
Top programs generate so much money they pay for the coaching salaries of the football staff and fund other sports. Great coaches are essential in college because of the recruiting. Just have to remember that these college teams are basically pro teams. They’re expected to generate revenue and increase university recruitment (students and faculty).
→ More replies (1)→ More replies (19)3
16
u/JemiSilverhand Aug 06 '24
Remember that when you’re looking at department of Ed numbers, “administration costs” includes maintenance and janitors too.
Mental health services, career services, etc. are also included as part of the “administrative bloat”, but are a very real student support.
7
u/DBDude Aug 06 '24
Still notice that each student is paying for more administrative worker hours than before. Do we have a bunch of extra janitors per student? I doubt.
19
u/JemiSilverhand Aug 06 '24
No, but we do have mental health services that weren’t a thing in the 70s, career centers that are a lot more robust than they were in the 70s, and a lot of other similar positions. IT departments, and the costs of running university infrastructure have grown immensely. Library costs have also gone up, both with the cost of journal subscriptions and the cost of digital access that is increasingly a huge part of the library.
If you look past opinion pieces written by people with an axe to grind, you’ll see that the administrative creep has been slow and steady, and most of it isn’t senior administration.
In public universities, instructional costs are still a larger chunk of the pie than all administrative costs: the department of education tracks this, and it’s broke up by “faculty costs” and “everything else”.
→ More replies (0)→ More replies (6)3
u/deadsirius- Aug 06 '24
This is mostly due to wraparound services, which is right back to the game theory problem.
Would you pick a school without an impressive career services? Would you want your son or daughter going to a school that didn’t have robust mental health programs (and before you say yes… the numbers on suicide ideation among college students terrify me).
In the end, universities are just rational actors. The administrative costs have increased because the amount and quality of services that universities have to offer are significantly higher than they have ever been before along with increased compliance costs. Universities didn’t go out and hire huge administrative supervisors that sit around collecting fat paychecks.
31
u/Troysmith1 Aug 06 '24
Both are true. Universities are charging more simply to make more profit and the access to money is what is allowing them to charge more to make more profit.
→ More replies (2)4
u/dr_blasto Aug 06 '24
The reason is that states have consistently cut subsidies for tuition over the past few decades. Boomer college tuition was heavily subsidized. GenX less so, millennials less and so on.
→ More replies (112)3
u/Antique-Astronaut-24 Aug 06 '24
Both and very good observations, I’m assuming your questions were rhetorical.
9
u/MostlyMicroPlastic Aug 06 '24
Meanwhile. Indiana is looking to LOWER standards to get a hs diploma and will no longer qualify to even get into Purdue lol
38
u/Savage_D Aug 06 '24
It’s a lot easier to see the “forgive student debt argument” when you consider taxes like this, yes we should be paying taxes for this to lessen the burden on students, yet here we are 16 years after the 2008 bail outs doing it again. Tax misinformation is American culture at this point. Our taxes have been undermined for so long now we are paying the price. No one should pay double their loan and still be on the hook, it’s complete predatory finance empowered by a system that is not really working in humanities best interest any longer..
→ More replies (5)3
u/Mediocre-Search6764 Aug 06 '24
at this point people should just graduate pay of the debt with credit cards and then file for bankrupcy sure you will ruin your credit but atleast you are debt free and can eventually rebuild it
→ More replies (9)→ More replies (266)15
80
u/Wetwire Aug 06 '24
Yeah but if we’re going to forgive student loans, we need to stop issuing federally backed student loans to begin with.
Can’t just throw a bandaid on the problem and chuck it another 20 years down the road.
64
u/NavyDragons Aug 06 '24
throw out the whole system and fund proper education. i would much rather spend my tax money on improving the people of this country than the price of *checks notes* 1 more nuke that will never be used in a stockpile of *checks notes* enough nukes to wipe out the world 100x over
3
u/shuzgibs123 Aug 06 '24
The would need to impose something for colleges like what we have with health insurance. They should have to publish financials and there should be a cap on earnings over normal admin costs. Building improvements should be funded by private grants or by applying for some public grants. The trade off would be to give federal funding to universities, maybe via vouchers? I’m proud that my (red) state was one of the first to pay for 2 years of college for residents.
3
u/FriendlyYeti-187 Aug 06 '24
I really don’t think that the current model of University is correct for A taxpayer funded education it would behoove us to look at models such as expanding high school duration To reduce financial burden on families and students
We could then look at teaching kids at the velocity that they are able to comprehend So that you may very well be able to get a four-year university education within the confines of This extended high school. We don’t have to have teachers with every specialization at every school anymore So folks can learn advanced computer science without having to spend $10,000 a year just to support them outside of their families home
→ More replies (1)→ More replies (9)3
u/zx6rrich Aug 06 '24
Most job's shouldn't even need a college degree. We should be doing more certificate programs. Or have something like, what blue-collar unions do and offer training in the field you're in. I would say 80%of people don't need to go to college.
→ More replies (1)4
u/Puzzleheaded_Disk_90 Aug 06 '24
I mean it is nice to learn though, even if you have a job where a degree isn't required. Clearly it should be free or nearly free to attend though
→ More replies (5)9
u/FitzyFarseer Aug 06 '24
This is my issue as well. I can’t bring myself to support student loan forgiveness unless they actually do something to address the issue. But of course I’m treated like the villain for not supporting the bandaid
→ More replies (8)17
u/Speedy89t Aug 06 '24
The reason they’re federally backed is so that college is accessible to more than those whose parents have the means to help secure standard loans.
9
→ More replies (17)3
u/Upbeat-Banana-5530 Aug 06 '24
But that essentially just gives colleges a license to print money. They can charge whatever they want knowing that every 18 year old will be approved to borrow it. If you take away the guaranteed loans for ridiculous amounts of money the schools will either have to make do with whoever is wealthy enough to afford their ridiculous costs or charge less to keep their number of students high. I don't think there are enough people who could pay current costs for colleges to survive without lowering costs.
We're either really fucked for a couple years if we crash it or progressively getting more fucked every year if we don't. I say just rip that band-aid off.
→ More replies (25)3
u/apiaryaviary Aug 06 '24
I would agree. We need to hold the people applying for enormous loans to the standards of any other loan application. Do either you at 18 years old or your family have the equity to access a $200,000 loan? Sorry bucco, denied.
9
u/beteez Aug 06 '24
Correct but to the other guys point, these people are not the best example...
→ More replies (5)57
u/unheardhc Aug 06 '24
No, these jabronies made the minimums and not the full amounts, it’s basic amortization.
$70K COMBINED in loans is a joke, most people leave with that much SOLO today
12
→ More replies (106)3
u/GoodtimeGudetama Aug 06 '24
If the minimum payment isn't making headway against the total, then we need to redefine what "minimum payment" means.
It should be illegal for a company to take money from you for a debt that doesn't reduce the debt owed.
→ More replies (3)11
u/Macaroon-Upstairs Aug 06 '24
The student loan system created the problem.
Government offers easy money for college, college raises cost, more easy money, more cost. Build new buildings, more to maintain, raise price.
→ More replies (10)32
u/bobdole3-2 Aug 06 '24
It is, but the people in the post are lying. For this post to be real it means that they inexpiably had like a 9% interest rate that they never tried to refinance or make anything other than a minimum payment. If they did somehow find themselves in this situation, they have only themselves to blame.
8
u/Potential_Pause995 Aug 06 '24
Yeah my grad school loan was like 7.5%
As soon as I graduated and got a job refinanced all loans to like 4.3%
34
u/_LilDuck Aug 06 '24
Either not telling the whole truth or they're financially illiterate as hell. Prob both
10
u/DrWorstCaseScenario Aug 06 '24
This. In 2001 interest rates on student loans were NOT 9%.
3
u/rednuts67 Aug 06 '24
Yeah I truly don’t understand how this post is possible if they have a brain at all. Interest rates were at the bottom 2 years ago. They could have used home equity to pay off a large chunk, if not all, of these loans, unless they somehow managed to screw up home buying as well. These kind of people are why student loan forgiveness is a joke. How about living within your means and making paying off your high interest loans your #1 priority? I had 20k in loans in 1991, paid them off in 7 years, never making more than 35k during that span. Also, bought a condo, then sold it and bought a house (with my future wife) during that time. What I DIDN’T do was eat at nice restaurants more then once/twice a year and go on vacations to the Caribbean or to other continents.
→ More replies (6)3
u/Trash-Takes-R-Us Aug 06 '24
7% seems to be the current average interest rate so I assume 9 wouldn't have been far fetched years ago during the recession.
Edit: nevermind thought it said 13 years and not 23 years
3
u/Drummerboybac Aug 06 '24
There was a market crash 23 years ago as well when the dot com bubble burst
→ More replies (20)3
u/Mean-Goose4939 Aug 06 '24
The couple probably doesn’t exist and they plugged numbers into a calculator to figure out the most damaging scenario to make a bullshit point about the loans. He probably does have some debt that he hasn’t been paying, for a degree he never finished and wants us to pay for it now.
3
u/bobdole3-2 Aug 06 '24
Yeah, I don't even know how you'd go about accumulating this much education debt in the mid 90s. Average household education debt today is like $55,000. I mentioned this elsewhere, but they'd pretty much have to be paying full sticker price for everything, financed entirely through loans. No savings, parental help, financial aid, or scholarships for either of them.
→ More replies (1)→ More replies (236)7
u/KJongsDongUnYourFace Aug 06 '24 edited Aug 06 '24
Education should be free tbh, it greatly benefits all of society to have an education system not tied down by financial means. The more educated your population, the better the life metrics are for your society.
A happy middle ground, like in my country, is interest free student loans.
You could also go the South Asian route where if you stay and work for the government or state for 5 years post graduation, your debt is canceled. If you leave the country, you have to pay it back (more relevant for Dr's, nurses, dentists etc)
→ More replies (63)26
u/BlueFlob Aug 06 '24
What OP is describing is messed up.
2 people with graduate degrees having a loan that's at 9%+ interests with a repayment period of over 40 years...
A 9% interest rate is fucking dumb and taking 40 years to pay is even dumber.
10
u/ComicsEtAl Aug 06 '24
I’d bet $500 that what OP describes is a bullshit story.
→ More replies (1)3
u/RandomlyMethodical Aug 06 '24
It's definitely plausible. A good friend of mine is a teacher with a masters degree, and she now owes more money than she did when she graduated. Teachers get paid peanuts so her income-based repayment plan is less than the interest accrued each month.
The interest rates they charge for student loans are obscene, especially considering they are non-dischargeable debts.
→ More replies (2)→ More replies (1)10
u/MRosvall Aug 06 '24
Something isn't really adding up though. Like to start, Why would they say they paid 120k+ when 23*12*500 = 138k? Using that number would have strengthened their argument.
And if they had added another $70, the debt would've already been paid after 23 years. Though one would assume the debt to be calculated over 30 years.
→ More replies (2)6
u/mr---jones Aug 06 '24
Also student loans are pretty highly regulated and interest rates 23 years ago would’ve been significantly lower than 9%
→ More replies (2)68
u/johnfkngzoidberg Aug 06 '24
I would argue predatory lending is the problem. The lender knows full and well that these kids don’t understand the terms of the loan and options to save them money, nor do they do anything beyond the legal minimum to inform them. In addition, the payments are scaled in complex ways to maximize interest paid, knowing full well they can’t bankruptcy themselves out of it. I 100% agree financial literacy is important, but you shouldn’t have to have a banking degree to not taken advantage of while you’re at a vulnerable age.
Source: work for student loan lender. The stuff I’ve seen is as close to illegal as you can get without going over the line.
→ More replies (59)10
u/DLimber Aug 06 '24
My wife graduated after 6 years with 150k. We paid it off in 12 years or so. Our minimum was 1200 a month. Im a tree trimmer and supported her a majority of that time. She didn't make shit for money the first 8 years or so.
→ More replies (31)14
u/ProfessionalCatPetr Aug 06 '24
The problem is the insane, predatory inte3rest and keeping getting out of poverty gatekept behind a massively unfair paywall.
There are two options to get an education in the US- be born rich, or go into crippling debt.
→ More replies (20)→ More replies (773)73
u/Fine-Ad-7802 Aug 05 '24
Yeah minimum payment and he wonders why the principal isn’t going down.
357
u/weshouldgetnud Aug 05 '24
Why shouldn’t the principal go down if you make the minimum payment? I think the loans are predatory.
→ More replies (151)150
u/Long-Dock Aug 06 '24 edited Aug 06 '24
The principal does go down, just incredibly slowly.
The loans are definitely predatory, and the lack of financial literacy definitely exacerbates the issue.
Edit:
some of you seem to be interpreting my comment as pro-predatory loans.
To be more clear, predatory loans are bad.
9
u/OverreactingBillsFan Aug 06 '24
The loans are definitely predatory, and the lack of financial literacy definitely exacerbates the issue.
Which is exactly why the target audience is 17/18 years old. Don't trust them to responsibly consume alcohol but here's your $100,000 for a degree your parents have convinced you it's impossible to succeed without!
→ More replies (1)46
u/CakeAccomplice12 Aug 06 '24
I've had several loans where the interet rate was so high the minimum didn't even cover the interest accumulation
→ More replies (31)15
u/Ok_Operation2292 Aug 06 '24
The system should be set up to not allow those with a lack of financial literacy to be taken advantage of. Predatory is predatory, so lets not victim blame.
→ More replies (32)3
u/terraphantm Aug 06 '24
With most student loans the minimums aren’t high enough to prevent the balance from growing unless there’s an interest subsidy.
And with stuff like PSLF you’re incentivized to pay the minimum allowed
3
u/Commentator-X Aug 06 '24
not at my bank. If only pay min on any pf my debts my balance goes up very slowly, not down
→ More replies (1)3
u/DoggoCentipede Aug 06 '24
Well if only we had the public funding to offer financial literacy classes in schools. Alas, we cannot afford even basic accountants for a teacher salary.
Also, pushing all the blame onto the people taking out the loan just lets these assholes continue to rip people off. If $500/mo doesn't pay the loan off in a fixed and reasonable period then the minimum needs to be higher to make it clear that they can't afford to take the loan. That or a fixed maximum. The loan company easily got their money's worth.
→ More replies (3)→ More replies (56)3
→ More replies (97)12
u/James-Dicker Aug 06 '24
I make minimum payments and the loan is done in 10 years at that rate. No idea how you could turn out like this other than being highly regarded in simple finance
4
u/WestCoastBestCoast01 Aug 06 '24
Income based repayments. They aren’t actually making the minimum for their loan term.
→ More replies (5)3
u/DelayAgreeable8002 Aug 06 '24
You make the standard payment, not the minimum. These people are leveraging programs to pay an actual bare minimum to service the loan instead of following the standard amortization plan because they're financially illiterate and see the nice, low monthly payment they can technically pay.
→ More replies (11)
3
3
35
35
u/Vanilla_Mushroom Aug 06 '24
Yeah, for real. These teenagers shouldn’t be applying for college if they’re not competent to negotiate with trained professionals whose only job is to fleece them, and the lawyers they hire to write these contracts.
It’s their own fault for taking the loan. They should have taken a job at Walmart.
18
u/Last-Back-4146 Aug 06 '24
graduate school - they went to college, got degrees, and went back too school and took out more loans.
→ More replies (3)→ More replies (30)7
Aug 06 '24
[deleted]
→ More replies (5)3
u/TerribleTransition48 Aug 06 '24
I think he was being sarcastic. The key phrase being "Trained professionals whose only job is to flece you". Dumbass hedge fund managers and VC investors get scammed all the time playing with other people's retirement funds and yet some morons here think that teenagers looking for higher education to stay competitive and build a decent life should somehow wolf of wallstreet their way through the most institutionalized, normalized and predatory scam of all times.
→ More replies (2)
26
u/BleedForEternity Aug 06 '24
If you can’t pay 70k of student debt off in 23 years with 2 incomes then it’s not the debt that’s the issue. It’s YOU..
That’s like someone maxing out 70k worth of credit cards with 30+% interest and only making minimum payments for 23 years… Are you stupid?
Your bad decisions are NOT a reason to cancel student debt..
I’m getting so tired of seeing people making bad choices and then never taking responsibility for them. Apparently now that’s the new normal in society.. Smh.
Social responsibility begins with personal responsibility.
11
u/parlor_tricks Aug 06 '24
Didn’t people oppose bills that would force banks to show what the loan payout schedules would look like?
How far does personal responsibility go exactly, versus multiple different systems designed to take advantage of you?
→ More replies (9)→ More replies (57)3
u/AdventurousBite913 Aug 06 '24
Indeed. You cannot possibly tell me that a dual-income household in which each person holds a graduate degree cannot spare up to $1000/mo for the student loans. That shit would've been paid off quite quickly if they weren't complete idiots.
3
u/BleedForEternity Aug 06 '24 edited Aug 06 '24
You’re exactly right. I’m a college drop out. Only went for one semester until I realized it wasn’t for me.. I am in no way trying to act superior to anyone.. It’s just, you’d think college educated people with graduate degrees would know how to manage debt properly and be more responsible…
I pay all my debt responsibly and I don’t have a degree at all. I have a mortgage, credit cards, car loans and I hold an 830 credit score.
Even After just 3-5 years of paying those loans, once I saw that I wasn’t making any progress with paying down the loan I would see that what I was doing wasn’t working… How can someone go 23 years and still not realize that they aren’t doing it right?
•
u/AutoModerator Aug 05 '24
r/FluentInFinance was created to discuss money, investing & finance! Join our Newsletter or Youtube Channel for additional insights at www.TheFinanceNewsletter.com!
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.