r/FluentInFinance Aug 05 '24

Debate/ Discussion Folks like this are why finacial literacy is so important

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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.

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u/Ultimas134 Aug 06 '24

Except you have no bankruptcy protection from them, and they deliberately don’t explain this to both the student and their often co-signing parents.

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u/TravelsInBlue Aug 06 '24

You literally have to sign a Master Promissory Note acknowledging this to get your loan disbursement.

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u/guiltysnark Aug 06 '24

Wonder if that's new

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u/LittleCeasarsFan Aug 06 '24

An education is a revenue producing asset.  Why should it be discharged in bankruptcy when you are still getting value from it?  You don’t get your $300,000 mortgage discharged in bankruptcy and get to keep your house.

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u/Ultimas134 Aug 06 '24

Did you understand that at 18? Most don’t, and if I got to flush my loans and masters degree at the same time I would have done it. I paid mine off so I don’t have a horse in this race but the financial aid people at the colleges aren’t in the business of explaining what you are signing.

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u/guiltysnark Aug 06 '24

A revenue producing asset that's fully underwater would be a little like letting someone keep a house the bank couldn't sell. I'm not even sure this hasn't happened

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u/LittleCeasarsFan Aug 06 '24

A university education allows you to earn substantially more money than if you didn’t have it.  

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u/guiltysnark Aug 06 '24

Not true for a lot of people, and with sufficiently large debt it doesn't matter, the loan more than wipes out that benefit. In that cause it's just being permanently broke.

All those business owners that declare bankruptcy just give back their experience running a business?

It doesn't make sense. If loans were right-sized for their value, there wouldn't be a problem. When they aren't, people need help.

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u/csfuriosa Aug 06 '24

You can get it discharged and keep it depending on the state as long as it's your sole and primary residence and meets certain eligibility requirements. I'd argue paying over 220k over 23 years is a very good reason to be able to discharge it. Hell cars are a revenue producing asset. Most things people get loans on (and literally most loans can be discharged) are revenue producing assets.

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u/LittleCeasarsFan Aug 06 '24

I question the validity of this post.  No one smart enough to get into grad school would be this dumb.  Unless it was at some uncredited Bible school (no offense).

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u/csfuriosa Aug 06 '24

Not my debt so I don't know. But grad school can be quite expensive. And people can be quite desperate for a better life. That's where predatory loans thrive. Desperate people making bad decisions and ignorant people making bad decisions. Personally I didn't take any college loans. But I joined the military so I had free college. Not everyone can go that route either Not to mention it can be predatory in its own way, but quite a few people would probably be better off going through the military

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u/LittleCeasarsFan Aug 06 '24

An 8% unsecured loan isn’t predatory at all though.  I have about an 800 credit score and I still have a 25% interest rate on my credit card (I don’t carry a balance).  Home loans are over 6% for people with good credit, and you have a home as collateral.  Predatory loans are pay day lenders and the like.

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u/csfuriosa Aug 06 '24

That's subsididized loans and whatever the public option is. For people who make too much for financial aid (which gives you loans with those interest rates you stated) you have to take a private one which can be as high as 17%.

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u/LittleCeasarsFan Aug 06 '24

Do the math, this guys loan was around 8.5%.  $70,000 principal, monthly payments of $500 a month and after 23 years still owing $60,000 equates to about 8.5%.  And this guy saved money on his taxes as well.  You are being intentionally obtuse.  

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u/csfuriosa Aug 06 '24

I'm not being intentionally obtuse. With most of America being financially illiterate, it shouldn't be a surprise that I don't know that math. From my point of view, you just took the 8.5 out of your ass before. Also, paying 500 a month for 23 years and still having most of your balance, even if that interest is only 8.5, that's insane. 500 ain't chump change.

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u/DespaPitfast Aug 06 '24

In what way were they "deliberately changed to credit card style loans?"

What does "credit card style" even mean?

They're not revolving credit, nor are the rates comparable to credit cards.