Fed rate cut, what does it mean?

brymoore

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Huh funny, Wells Fargo must be small potatoes.

Apparently, no one that’s why Americans have 1.5 trillion in student loans debt... hm wait that doesn’t check out.

Also ever heard of a bank garnishing someone’s paycheck or social security because of a auto loan or mortgage... cause yeah that happens all the time on student loans.
Student loans are now done by the federal government. Banks have been out of it for years since approximately 2010.

You must have missed Maxine Waters question to banks asking them how to fix student loans - now a government program.


Student loans have default rates greater than 10%. Think about it. If one in ten loans go bad, you need to raise overall rates because the probability of default is higher.

Garnishing wages doesn’t make any loan good. All your saying is the lender has to pay someone to collect a bad loan

My humble opinion of the situation I get from my personal experience with an economics degree, MBA in Finance, graduate banking degrees and 25 years of senior level commercial lending.
 

wllm1313

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Student loans are now done by the federal government. Banks have been out of it for years since approximately 2010.

Garnishing wages doesn’t make any loan good. All your saying is the lender has to pay someone to collect a bad loan
That’s not accurate, private loans are still very much alive and well.

And I absolutely disagree that the rates need to be that high due to default rates. I work in private equity oil and gas, specifically on corporate deals a 9% rate is unheard of, people were gasping at the 8% buffet was charging OXY in the anadarko deal. I just watched a company “restructure” 800 million in debt and know of another 4-5 billion with of debt that’s going to be shed in the next couple of months from various companies. Point being in the grand scheme of loans, from auto up to corporate finance the rates charged for student loans for how risky they are to the lender are insane, barely better than payday loans. Moral hazard gets bandied around all the time when it comes to you average joe, but we’re perfectly happy to allow all kinds of much much riskier investment and loan behavior.



I’m not sure i would accept any argument that the US wouldn’t be better off with a more educated citizenry and young people that aren’t straddled with debt in excess of home mortgages.

I’m not a Bernie guy and I don’t think forgiving everyone’s loans is viable, but attacking interest rates is certainly a place to start.

No one should be paying 9% period, and yeah I get that corporate debt and student loans are apples to oranges... but at the same time are they really?
 

bobbydean

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I am old and had a 12% mortgage at one time. You do what you need to do, and do not have a mortgage now.

My student loans were much kinder ( I think 4 %). Crowning accomplishment of my life at that time in paying them off!
 

wllm1313

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I am old and had a 12% mortgage at one time. You do what you need to do, and do not have a mortgage now.

My student loans were much kinder ( I think 4 %). Crowning accomplishment of my life at that time in paying them off!
I’m luck and don’t have loans, but it’s been debilitating for a lot of people I know, also college got a lot more expensive than it was for boomers, I think the quoted value is 6-9x.

I’m not going to fault an 18 year old for not having the financial savvy of @brymoore and getting up to their eyeballs in debt at crazy rates just doing what their parents, teachers and society told them to do.
 

brymoore

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I’m luck and don’t have loans, but it’s been debilitating for a lot of people I know, also college got a lot more expensive than it was for boomers, I think the quoted value is 6-9x.

I’m not going to fault an 18 year old for not having the financial savvy of @brymoore and getting up to their eyeballs in debt at crazy rates just doing what their parents, teachers and society told them to do.
I think you’re talking two different topics - loan pricing based on risk and the social benefits of government supported college education.

Student loans based on risk profile are high risk loans whether you agree or not. The market does agree it’s high risk based on rate pricing. The private money you see for student loans are B tier finance companies - sharks looking for a victim. Student loans from colleges are from Sallie Mae. I have a kids in college - I see the student loan paperwork. They’re willing to lend him a third of his annual cost but they’re more than willing to lend me the rest after looking at my taxes due to FAFSA. I’m a good risk. I don’t remember the rates they offered.

If you’re talking about I’m a long circle that student loan rates should be subsidized down by the government, I can string along with that idea somewhat. We subsidize a lot worse things in this country.
 

wllm1313

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I think you’re talking two different topics - loan pricing based on risk and the social benefits of government supported college education.

Student loans based on risk profile are high risk loans whether you agree or not. The market does agree it’s high risk based on rate pricing. The private money you see for student loans are B tier finance companies - sharks looking for a victim. Student loans from colleges are from Sallie Mae. I have a kids in college - I see the student loan paperwork. They’re willing to lend him a third of his annual cost but they’re more than willing to lend me the rest after looking at my taxes due to FAFSA. I’m a good risk. I don’t remember the rates they offered.

If you’re talking about I’m a long circle that student loan rates should be subsidized down by the government, I can string along with that idea somewhat. We subsidize a lot worse things in this country.
I am it’s difficult to fully dig in via this medium... HT isn’t exactly the place to do a white paper on student loan finance. I certainly agree the market treats them as high risk, although I personally don’t see them as such, comparatively.

My wife and I got together my last year in college she did a master plus medical school so I’ve filed out FAFSA every year since 06’. Rates have come down some, the real nuts time was 08-09 the were almost reasonable in 12-13, the last couple years they have jumped up a lot.
 

VikingsGuy

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When people say "the market is due for a correction", this is always true because at some point in the future, whether it is tomorrow or 10 years from now, there will be a modest correction. But to imply that the correction is definately "soon" as it next week, or next month, or within the year is complete and utter nonsense. All you get is occasional confirmation bias when the correction does happen sooner than later, and some dudes come out and say, "Hey, I told you so!"
prescience_2x.png
 

VikingsGuy

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I will take a look at it. She is not as Interested in learning about financial issues as I am. Maybe I can convince her, or it can at least give me a few new ways to explain it.
See if it is "audible" form and listen to it together may be a way if she doesn't have the appetite to read through on own.
 

VikingsGuy

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I am it’s difficult to fully dig in via this medium... HT isn’t exactly the place to do a white paper on student loan finance. I certainly agree the market treats them as high risk, although I personally don’t see them as such, comparatively.
Risk of bankruptcy is very low given difficulty to get discharge, but risk of late payments, government allowed deferments, govt. policy changes around re-financing etc, cost of collections for un-secured debts, all make this financially "riskier" than a traditional home loan - as such rates reflect the lower predictability of payment in this market.
 
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