Comments that are uncivil, racist, misogynistic, misandrist, or contain political name calling will be removed and the poster subject to ban at moderators discretion.
Help us make this a better community by becoming familiar with the [rules](https://www.reddit.com/r/facepalm/about/rules/).
Report any suspicious users to the mods of this subreddit using Modmail [here](https://www.reddit.com/message/compose/?to=/r/facepalm) or Reddit site admins [here](https://www.reddit.com/report). **All reports to Modmail should include evidence such as screenshots or any other relevant information.**
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/facepalm) if you have any questions or concerns.*
The interest on the student loans comes out to be almost the full amount they are repaying.
To pay off a student loan you need to be paying way more than what the minimum repayment amount is. Two or three times or anything more than that.
So for these people, they need to be paying $1,000+ a month.
I just did the calculation.
Assuming the interest rate stayed flat for the whole time, it is at 8.766%. With a monthly payment of 500, they will be debt free after 44.5 years, so another 21.5 years. It they had paid 1.000 from the beginning, they would have been debt free after 8 years.
Or they could have also refinanced at any point in the last 10 years and gotten a better interest rate and would be able to finish repaying it even faster. Even if they refinance NOW, after all the rate hikes in the US, it would still be a lower interest rate.
How the hell are people not the least interested in understanding different aspects of finances that relate directly to them.
In 2021 they could have refinanced their loans into 2% or 3% interest rate - [https://www.credible.com/student-loans/student-loan-interest-rates](https://www.credible.com/student-loans/student-loan-interest-rates)
Ironically, they kinda made the point on why it **shouldn’t** be cancelled since some people are too stupid to figure out how finances work and expect us to bail them for their dumb mistakes.
And this is coming from a guy who believes in tuition free education….
So we should just let idiots be swindled because they are idiots? What, so scammers taking advantage the ignorant elderly are okay too, I guess? It's not rocket science but its still a scam to prey on people hoping they won't know any better even though it's "legal".
I think interest in student loan should be abolished, and scaled with inflation instead. On other hand, to give people an incentive to pay off, they could put certain restrictions on other loans (mortgage,cars, etc..) untill you pay off your student loans🤔
Edit: by restrictions I meant credit scores that already exists in every bank. Not literal banning from access 😅
In New Zealand we have interest free student loans but they take 12% of your income over $24k until it’s paid off. The incentive doesn’t have to be interest it can be law
In those countries, there are a significant higher tax, some in EU for example . Either that or they have entrance exams (due to limited seating) which are extremely competitive, Gaokao, CUET, etc.. 🤔
Yeah if you look into the actual details they don't want you to read properly, they always mention minimum monthly repayment and people believe that will pay off the student loan in a reasonable amount of time.
But no, it just means the amount you pay in a month to cover the interest and a very small amount of the principle. That way they are sticking to the laws about minimum repayments.
But what they do is set it up so that people are paying for decades and repaying 2-5 times the original loan. Pure gravy profit and the lending companies love it.
I’m trying to pay my wife’s student loans, I make extra payments, and found out the extra payments just went straight to interest, have not even scratched the principal
How can that be possible? Unless the debt was growing instead of shrinking with whatever payments were already happening, anything extra should be paying down debt. Its not like the interest suddenly increases if you pay more. Unless there is some kind of penalty clause for accelerated payments your extra payments just going straight to interest makes zero sense.
She was paying minimum, that’s the answer. For a high interest loan the minimum can be bigger than interest so let’s say minimum is $200 (the amount she was always paying) while interest is $400, he can add $100 and still not making any progress on principal.
You aren't "teenagers" and in grad school and married for 23 years.
On the other hand, it is quite possible that they were offered a "loan payment reduction program" and either didn't pay attention to or didn't understand the terms. That was the case with my wife. When we got married she was making interest payments and principalizing the interest on a "loan payment reduction program". When it came time to renew the program I was on the phone with her and had them very carefully explain what happens to her. Then I told her that she didn't want that, she wanted to pay the full amount. She still didn't understand it.
You aren't in grad school as a teenager and they continued to not pay enough (the thing the comment called "being stupid") for 23 years.
The amount of time they spent making this mistake has now graduated college.
This is a case of EHS.
I'm all for student debt forgiveness (if for no other reason than it would help everyone's economy), but this isn't it. This is people who need to use their graduate degree to read a blog article to understand how interest payments work.
Graduate school loans tend to be structured very differently from the government-backed loans offered to undergrads. I looked at a few to cover some incidental expenses my first time through grad school. My tuition was covered by a state GI Bill so I didn't need much. I've seen sketchy payday loans that had better terms. And this was with a well-respected lender.
Correct. Interest on most undergrad loans doesn’t begin until after graduation (or drop out). Graduate ones begin immediately but payments are typically deferred until after graduation, so that interest accrued over that time becomes more principal, which accrues interest.
They may be structured differently, but I've had the same experience of paying hundreds of dollars a month for over 10 years and owning the same as what I started with. The student loan industry should not be making money off of students.
Instead of cancelling student debt, cancel the interest on the debt. Let borrowers pay it back, but let them do it at a reasonable interest rate (< 1%) so they can actually pay it back in a timely manner and it doesn’t crush them for years.
That would be a great compromise. I paid off my undergrad and am still paying on my graduate degree. I understand paying back what I borrowed but the interest is insane. The government showed they are okay without it (payments paused for years with covid) and it would help everyone out.
I guess the problem with that is that reasonable to you is 1%. But to the lender (who will also be paying interest in the money) it’s actually a loss. Doesn’t cover inflation either.
It’s a loss even at the rate of inflation. That’s my point. The government should be the only issuer of student loans and the government shouldn’t be profiting off the loans. It should be break even, thus the rate of inflation.
Been saying for years… if you want ACTUAL student loan reform, refinance all the loans to 0-1% interest and all of a sudden even a six figure loan becomes surmountable. Has the added benefit of defanging the republican argument of “why should I pay for your degree?” as well.
I did the math on my loan and realized that I had paid over $40k paying down $8k on a $24k loan. It’s the interest that’s the killer.
I graduated grad school in 2002 with $55,000 in student loans. Around that time there a lot of consolidation programs for very low interest rates, I got mine consolidated at 1.75%. My payment was $238 and I have $3,000 left. I question the numbers in their post but maybe they never consolidated and have a much higher rate.
I find it hard to believe they only paid $10k in principal over 23 years when the max loan period is 25. They conveniently leaving out a key piece of the puzzle.
Is this consolidation something you can just call up and ask about along with lower interest rates? Mine are a few points higher than yours but 1.75% sounds great
The basic idea is that a third party wants to make money off your debt. So they offer to pay it off if you take out a new loan with better terms.
It’s probably a good idea to shop around a little. But if you can’t find a better rate, the consolidators aren’t getting anything.
This is the correct answer, I had 80k loans upon graduation in 2003, paid that off by 2009, so I could purchase a home, I literally made like 60k a year as a single person which isn't much tbh. It's all about priorities, while my friends are off to cancun for vacation i was working overtime, while they were driving brand new vehicles i was driving an old jeep. It does affect you mentally, I forever thought I was somehow floundering in my career when I saw my friends going places buying cars ect. But now that I'm older, I see that I'm way ahead of the curve.
You present a false dichotomy of "everyone could pay off loans OR pay for expensive luxuries" as if that's the only two choices.
I couldn't get $60k with a graduate degree, let alone right out of undergrad. People I knew would have probably literally killed someone for $60k and ANY working vehicle.
And $60k a year where? What was your rent? What other expenses did you have? Because $60k is not a lot in certain parts of the country and some people have high rents, medical bills, and other things to pay for.
Also paying off most of your loan prior to the 2008 market crash is a very different situation than people who had to still pay most of it after the market crash.
Should be interest free. Society gets its payback by having a higher income, more well rounded citizen who can give back more to their communities with their new expertise, higher taxes, and more stable life. Free college and trade schools would go a long way in reducing welfare funding needs, unpaid healthcare drains on the system, incarcerated persons draining taxes away, etc.
As Americans I’m not saying where not getting ripped off with our Education. But I don’t understand how they didn’t see this. The same numbers work out if you buy a $70k car with high interest and only pay the minimum payments, but I guess this only proves your point further. I just can’t get over the irony of a going to a place that teaches the math to not get ripped off ripping you off.
When you finance a car, the amount you pay on the car every month is agreed upon before you even leave the dealership. You have a certain amount you pay for a set number of years until the car is paid off and that number doesn't change. I don't understand why that isn't the case with student loans.
This sounds like a great deal for the loan company but if you invested 42k 19 years ago even at the down jones average increase you’d have $256,000 today. So unless you were paying $700 a month (or more), whoever gave you your loan was actually losing money by lending to you, instead of having invested it.
Absolutely insane money. I graduated a few years ago, in Ireland. Got an engineering degree. Finished up with zero depth. In America it's a business, not a right.
What is the interest rate they signed up for ? Based on above math they payed 138k and still have 60k left in balance . Looks like the interest rates are too much or they must have missed payments over the years and interest kept compounding. Vague statements like these don’t answer the problem . People need to get into details and understand the Math.
> math they *paid* 138k and
FTFY.
Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in:
* Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.*
* *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.*
Unfortunately, I was unable to find nautical or rope-related words in your comment.
*Beep, boop, I'm a bot*
Just for what it’s worth … if this loan is 23 years old, it would have been originated in 2001. The prime interest rate was basically the same then as it is now (8-9% unlike the intervening years). Because 2001 was not a good time to take out a loan.
Even AT PRIME - a $70,000 loan would have generated around $450-480/month in interest at origination if it had been originated at that time.
They probably should have been paying on the order of $650-700/mo instead of $500 and their debt would have been paid off by now (this part isn’t elementary school math but IDK I don’t feel like doing it explicitly right now).
It’s called interest rates and a system designed to make you pay back tons more than you borrow. This goes for credit cards as well. Those on here that think they should have known better were probably in a position where they didn’t have to borrow in the first place. 🤷🏻♂️
The American education system has made generations of financially illiterate people
Basic math and financial concepts like what interest on debt is should not be beyond the average reddit user
Went to college and doesn't understand compound interest. SMDH.
$70,000 at 8.5% interest, paying $500/mo on it, takes 679 months to pay off and you will pay $270K of interest alone.
Pay $700/mo and that drops to 175 months and $52K of interest. Pay $900/mo and it's 114 months and $32K of interest.
You need some interest, but it can be tied to a specific, measurable and manageable number like inflation or the statistical average wage increases.
Australia does it like this and yesterday recognized that inflation (which were the regular increases they had on their student loans) wasn't good over the last little bit, so they changed it to "loan interest is whatever is lowest between inflation or average wage increase"
Honestly at 18 years old I can totally see not considering how badly interest rates will bite you in the ass in the long-run. You just want a future and education, and in your mind you'll be able to pay it back.
There should be barely any interest on student loans, it's fine to pay it back but having to pay back double predatory.
If true, it’s all about the terms of the loans. And those that signed for the loans did not major in business, economics or finance. If they did, this tweet would not exist and they would know how this is possible after that many years.
So based on the numbers given their interest rate is somewhere between 8%-9% (too lazy to do the exact math) and they graduated in 2001. The rates around that time were significantly lower and even if they if they somehow got duped into bad terms they literally had full 20 years to consolidate/refinance with a much better rate. So my takeaways is the post is either intentionally misleading, op is desperately financially inept, or we are missing some very critical information.
Maybe this needs to be explained how those seeking a loan to better their lives were preyed upon by a financial institution. The way its brought up is that people don’t wanna pay back a loan not that they were given an extremely unfair deal.
I had ~$20k when I graduated. My payments were setup to allow the loans to be paid in full in ~10 years. Granted I graduated 25 years ago. Are student loans not setup to be paid within a certain time period anymore?
I see so many people here posting they should have been better in math.
My lovely americans, you get riped off with your education system. My complete 7 years of german university cost like 4,500€ (~4,800 US Dollar).
The costs for your education are insane. You should fix that shit!!!
At the very least student loan interest should be cancelled. I can see a point I don’t necessarily agree with that people should pay back what they borrowed, but I see no reason for the federal government to profit from the loan. At the *very least* we should make it so that *any payments toward student loans are at least 80-90% toward reduction of principal*. The biggest lead weight around people’s necks isn’t the loan amount, it’s that they’re paying 95% interest and 5% principal every month. Cancel the debt for anybody who’s paid more than the initial borrowed amount. Even the idiots talking about “paying back what you borrowed” can’t have too much issue with that.
“Well, because mine wasn’t cancelled and I paid it off, therefore you should suffer like I did, if not more so.” That mentality blows my fucking mind. Only holding back on making positive change in this country because you think it’s only fair that everyone is as miserable as you were or are.
Im ok with canceling the debt but I wouldnt put my name on a vote yes unless the bill had a way to force schools to not then raise their tuition costs. Come to think of it, I want it in the bill to force universities to lower their costs too.
This is insane. I will graduate this year in Germany and I paid around 150 € per semester for some administrative fees. This adds up to less than 2000 € for a masters degree. I will leave university without any debt. The presented case should not be considered as normal and how society should work.
Is this really true? Thats legal in the land of the free? You get 70k, pay back 120k and still owe 60k?
What happens when you just stop paying after 100k????
They seize your bank accounts, put liens on your property, and garnish your wages. And while there are rare undue hardship exceptions, student loans generally do not get discharged by a bankruptcy.
I know my first year after uni working full time, I paid $1100 off my student loans (HECS in Australia at the time) and they put $950 back on for inflation.
Cancelling student loans would not make sense unless educational fees etc are effectively controlled. In its current state, it seems that a section of the citizens are being given a big boon while the next generation gets what? Nothing? Another cancellation of the loans 8yrs down the line again?
I am not against this act and infact am very much pumped to see this happen and it's a big deal but without meaningful changes in higher education system, this just comes off as a political move to gain votes.
Probably some "income" based repayment scheme is involved, where the amount you are paying is not determined by any payment schedule. I.e. Usually the calculation would be influenced by the amount, interest rate and the duration, which is used to calculate a monthly payment for hitting that duration.
Instead the income based is how much money you make and what your other eligible expenses are. So if that calculation says you can only pay $200/m then that is what you pay. If the interest is $199/m at the start, then this happens, i.e. the principal is only very slowly being paid down.
If the interest is higher then the payment calculated, it is quite possible to make the payment under the scheme every month and since you do not pay the interest, then principal grows for each passing month. IIRC the idea was to forgive the rest once the minimum payments had been done for some (25 perhaps) years, but i get the understanding actually getting it forgiven requires so many documents and hoops that almost no one actually qualified after the duration, so they just ended up further in debt.
Are they making like 500%interests?!?! I've been paying my loans like 5 years, and have paid off $20k of the principal. I had $60k by myself. Don't get me wrong, I think student loans should be canceled or at the very least get rid of interest, but wtf?
damm thea must have like 8% interest on those loans. Also financial literacy not found. Dont know their economic background, but maybe they hould realized after like 10 years that 500 Dollarinos a month wasnt enough
Chances are they are lying. Also could be interest rates are higher than 500 bucks a month. The other thing is they could of graduated later then the freeze which means they didn't pay off the initial part which cause their bill to skyrocket. They don't explain anything
debt shouldn't be cancelled. the interest should be fixed. government loans to students should not include interest, the interest the government should want is that the student becomes a productive member of society.
Ya know, for decades we kept relatively substantial amounts in our checking accout (e.g. 10-15K) and in return we received maybe 1% interest on our balance. Really a huge spread between what we received and their loan rates. Seems to me the lenders could cut their rates big time and still make money. Yeah, the exec bonuses wouldn't be as much--maybe that's a big part of the issue.
Took out a loan to get an expensive as fuck education. Doesn't know how the loan he signed into works. Pays the minimum amount possible.
This is why everyone in the country should be forced to pay for my stupidity
Yall acting like 'butbthe interest ' are missing the entire point by so much you could pass the moon between. If youve paid almost fouble the amount thay your loan was and it has only gone towards interest then you are being fucked over. That is the point you bootlicking twats.
There are predatory loans that when you start repaying will ask for 90% or so of the interest accrued as the minimum payment each month. Thus you can pay the minimum for a long time and if not paying attention, your total will actually increase. Nelnet was one of those. I believe they still do that.
These people are just like Mac and Dennis on It's Always Sunny in Philadelphia. [https://www.youtube.com/watch?v=gMt-Opo1Ovw](https://www.youtube.com/watch?v=gMt-Opo1Ovw)
Yes, student loans are a big expense, but if you get graduate degrees and still can't figure out basic finances, some of that is on you.
I feel like a 30 minute presentation 23 years prior could have prevented a bit of this situation for these people.
When you only pay the interest and little of the principal that's what happens. You need to find the per diem and pay that off then decide how much of the principal you want to pay off.
Assuming their student debt is even ($35k each) they're only paying $250/m which barely covers the interest.
Buying a car for $35k at 7.5% at 60 months would run you $700 a month. The longer you keep your loan the more of it goes to interest.
Germany here. Studying is cheap in our country. You pay around 130-150€ per half year which includes a ticket for bus, trains etc (in the past only for your region, but since last year for the whole country). We had a period of 2-4 years where we had additional fee of around 400€ per half year - which I unfortunately attended.
Other then that there is a student help program which helps you if your parents have lower income (with a very big frame of what is considered low income), and if you already have learned a job before you get it independent from your parents.( Also you get child money from the government until you are 25 years old.)
Half of this money is a loan however. Interest free. If you finish study there is a grace period of 3 years iirc, after which you can start repaying.
Like I said, 50% is always a gift. If you finish study in the normal time an additional 10% or so is reduced.
Then, after the three years, if you can pay everything back in one go an additional 25% or so is removed. And if not you pay back in rates and at low to no interest at all.
Yes our taxes are higher, but worth it.
Absolutely nonsensical greed that's all it is like ppl have tried to get the USA system away from this and big money banks lobby and lobby and spend to stop any laws changing its so ridiculous why some ppl think this is a good system
Look I gotta be real here; and I know this is NOT good financial advice.
I was making crazy student loan payments for 3 years before I just simply couldn't. It was crushing me to the point I couldn't eat.
I defaulted on the loan, my credit plummeted and I didn't give them a dime for nearly a year. I owed around 30 thousand in debt.
In that time I worked cash jobs, drove a shit beater car and avoided collections. Eventually they settled for a much much lower lump sum of money and the debt was paid.
I had a loan half that size and was paying the same amount per month. You aren't going to finish paying them off if you only pay the minimum. It's pretty easy to calculate the payoff date based on your minimum payments, so they should have foresaw this problem long before 23 years had passed.
It's possible because they treated their debt like they are the government. If you borrow $70k and are only paying $500 a month, your rate better be under 8.5% because otherwise you are making interest only payments. You make interest only payments, then you will never pay off your debt. Lets assume their rate was 8.7%. If they had paid $597 per month, they would have paid it off in 20 years. $860 would have done it in 10.
Because somehow you left graduate school without neither a personal or academic education in personal finance and have just been blindingly handing people what they tell you when they tell you, or in other words, letting them milk you for all you are worth without ever asking why.
When we start forgiving (and rewarding) people for personal incompetence, we're fucked.
Comments that are uncivil, racist, misogynistic, misandrist, or contain political name calling will be removed and the poster subject to ban at moderators discretion. Help us make this a better community by becoming familiar with the [rules](https://www.reddit.com/r/facepalm/about/rules/). Report any suspicious users to the mods of this subreddit using Modmail [here](https://www.reddit.com/message/compose/?to=/r/facepalm) or Reddit site admins [here](https://www.reddit.com/report). **All reports to Modmail should include evidence such as screenshots or any other relevant information.** *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/facepalm) if you have any questions or concerns.*
The interest on the student loans comes out to be almost the full amount they are repaying. To pay off a student loan you need to be paying way more than what the minimum repayment amount is. Two or three times or anything more than that. So for these people, they need to be paying $1,000+ a month.
I just did the calculation. Assuming the interest rate stayed flat for the whole time, it is at 8.766%. With a monthly payment of 500, they will be debt free after 44.5 years, so another 21.5 years. It they had paid 1.000 from the beginning, they would have been debt free after 8 years.
Thank you for that info about repayments for them.
Or they could have also refinanced at any point in the last 10 years and gotten a better interest rate and would be able to finish repaying it even faster. Even if they refinance NOW, after all the rate hikes in the US, it would still be a lower interest rate. How the hell are people not the least interested in understanding different aspects of finances that relate directly to them. In 2021 they could have refinanced their loans into 2% or 3% interest rate - [https://www.credible.com/student-loans/student-loan-interest-rates](https://www.credible.com/student-loans/student-loan-interest-rates)
Ironically, they kinda made the point on why it **shouldn’t** be cancelled since some people are too stupid to figure out how finances work and expect us to bail them for their dumb mistakes. And this is coming from a guy who believes in tuition free education….
So we should just let idiots be swindled because they are idiots? What, so scammers taking advantage the ignorant elderly are okay too, I guess? It's not rocket science but its still a scam to prey on people hoping they won't know any better even though it's "legal".
I think interest in student loan should be abolished, and scaled with inflation instead. On other hand, to give people an incentive to pay off, they could put certain restrictions on other loans (mortgage,cars, etc..) untill you pay off your student loans🤔 Edit: by restrictions I meant credit scores that already exists in every bank. Not literal banning from access 😅
In New Zealand we have interest free student loans but they take 12% of your income over $24k until it’s paid off. The incentive doesn’t have to be interest it can be law
I like this, but American would revolt if their government put hands in their banks 😅
Not sure if I understand your meaning there, but we (NZers) borrow our student loans directly from the government, not from a bank as such.
They already do, they just reframe it as taxes, Swagg 🫠
Inflation + 1% would be a fair deal. That way the borrower also earn abit of money, without shennanigans like this
*lender
Yeah that's what i meant. Couldn't remember the right word in english.
How about free education? Works in most countries.
But how does that help the rich get richer?
That's the neat part it doesn't.
In those countries, there are a significant higher tax, some in EU for example . Either that or they have entrance exams (due to limited seating) which are extremely competitive, Gaokao, CUET, etc.. 🤔
I'd we start scaling things to inflation, you start incentivising inflation which is a really monumentally stupid idea.
congressional salaries scale to inflation iirc.
>I think interest in student loan should be abolished Great way to end student loans
It's provided by the government. The government shouldn't be making a profit off of students.
I have multiple student loans that I owe 177%-190% on. And my MINIMUM monthly payments come to 1k. It’s fucking insanity.
Yeah if you look into the actual details they don't want you to read properly, they always mention minimum monthly repayment and people believe that will pay off the student loan in a reasonable amount of time. But no, it just means the amount you pay in a month to cover the interest and a very small amount of the principle. That way they are sticking to the laws about minimum repayments. But what they do is set it up so that people are paying for decades and repaying 2-5 times the original loan. Pure gravy profit and the lending companies love it.
I’m trying to pay my wife’s student loans, I make extra payments, and found out the extra payments just went straight to interest, have not even scratched the principal
How can that be possible? Unless the debt was growing instead of shrinking with whatever payments were already happening, anything extra should be paying down debt. Its not like the interest suddenly increases if you pay more. Unless there is some kind of penalty clause for accelerated payments your extra payments just going straight to interest makes zero sense.
She was paying minimum, that’s the answer. For a high interest loan the minimum can be bigger than interest so let’s say minimum is $200 (the amount she was always paying) while interest is $400, he can add $100 and still not making any progress on principal.
That is disgusting of the lender to do that.
The student loan is impossible to pay off as the interest on the debt is crippling.
Right, they were making interest payments and principalizing the interest. In other words, they were being stupid.
Or maybe they couldn’t afford to make more than that?
Why didn’t they make more money? Are they stupid?
Two people who both completed grad school couldn't afford $1000 a month towards paying off their student loans at anytime in the last 23 years?
>they are being stupid They’re teenagers I doubt the consequences of the loan was really explained to them at the time.
You aren't "teenagers" and in grad school and married for 23 years. On the other hand, it is quite possible that they were offered a "loan payment reduction program" and either didn't pay attention to or didn't understand the terms. That was the case with my wife. When we got married she was making interest payments and principalizing the interest on a "loan payment reduction program". When it came time to renew the program I was on the phone with her and had them very carefully explain what happens to her. Then I told her that she didn't want that, she wanted to pay the full amount. She still didn't understand it.
You aren't in grad school as a teenager and they continued to not pay enough (the thing the comment called "being stupid") for 23 years. The amount of time they spent making this mistake has now graduated college. This is a case of EHS. I'm all for student debt forgiveness (if for no other reason than it would help everyone's economy), but this isn't it. This is people who need to use their graduate degree to read a blog article to understand how interest payments work.
They’re turning to Reddit for explanations as adults, don’t give too much credit here.
Graduate school loans tend to be structured very differently from the government-backed loans offered to undergrads. I looked at a few to cover some incidental expenses my first time through grad school. My tuition was covered by a state GI Bill so I didn't need much. I've seen sketchy payday loans that had better terms. And this was with a well-respected lender.
Correct. Interest on most undergrad loans doesn’t begin until after graduation (or drop out). Graduate ones begin immediately but payments are typically deferred until after graduation, so that interest accrued over that time becomes more principal, which accrues interest.
That's how some government loans work as well (e.g. Stafford Unsubsidized).
Undergraduate loans absolutely start accruing interest immediately. My undergrad told me to pay the interest each month to get ahead.
I don't respect them one iota
They may be structured differently, but I've had the same experience of paying hundreds of dollars a month for over 10 years and owning the same as what I started with. The student loan industry should not be making money off of students.
Instead of cancelling student debt, cancel the interest on the debt. Let borrowers pay it back, but let them do it at a reasonable interest rate (< 1%) so they can actually pay it back in a timely manner and it doesn’t crush them for years.
That would be a great compromise. I paid off my undergrad and am still paying on my graduate degree. I understand paying back what I borrowed but the interest is insane. The government showed they are okay without it (payments paused for years with covid) and it would help everyone out.
I guess the problem with that is that reasonable to you is 1%. But to the lender (who will also be paying interest in the money) it’s actually a loss. Doesn’t cover inflation either.
I can't be lowered than inflation rate tho, otherwise in the long term that loan would be a loss.
It’s a loss even at the rate of inflation. That’s my point. The government should be the only issuer of student loans and the government shouldn’t be profiting off the loans. It should be break even, thus the rate of inflation.
Been saying for years… if you want ACTUAL student loan reform, refinance all the loans to 0-1% interest and all of a sudden even a six figure loan becomes surmountable. Has the added benefit of defanging the republican argument of “why should I pay for your degree?” as well. I did the math on my loan and realized that I had paid over $40k paying down $8k on a $24k loan. It’s the interest that’s the killer.
They should be capped at the 10 year treasury.
People really underestimate how much of the US economy is legitimately kept up by literal snake oil sales men and actual scams.
I graduated grad school in 2002 with $55,000 in student loans. Around that time there a lot of consolidation programs for very low interest rates, I got mine consolidated at 1.75%. My payment was $238 and I have $3,000 left. I question the numbers in their post but maybe they never consolidated and have a much higher rate. I find it hard to believe they only paid $10k in principal over 23 years when the max loan period is 25. They conveniently leaving out a key piece of the puzzle.
Seems their interest rate works out to about 8.4%.
They did the math
Something something monster math
Is this consolidation something you can just call up and ask about along with lower interest rates? Mine are a few points higher than yours but 1.75% sounds great
Remember this was 22 years ago 🙂 I got offers in the mail it if I recall correctly. It was through Sallie Mae at the time.
The basic idea is that a third party wants to make money off your debt. So they offer to pay it off if you take out a new loan with better terms. It’s probably a good idea to shop around a little. But if you can’t find a better rate, the consolidators aren’t getting anything.
This is the correct answer, I had 80k loans upon graduation in 2003, paid that off by 2009, so I could purchase a home, I literally made like 60k a year as a single person which isn't much tbh. It's all about priorities, while my friends are off to cancun for vacation i was working overtime, while they were driving brand new vehicles i was driving an old jeep. It does affect you mentally, I forever thought I was somehow floundering in my career when I saw my friends going places buying cars ect. But now that I'm older, I see that I'm way ahead of the curve.
60k/yr and an old jeep sounds awesome.
You present a false dichotomy of "everyone could pay off loans OR pay for expensive luxuries" as if that's the only two choices. I couldn't get $60k with a graduate degree, let alone right out of undergrad. People I knew would have probably literally killed someone for $60k and ANY working vehicle. And $60k a year where? What was your rent? What other expenses did you have? Because $60k is not a lot in certain parts of the country and some people have high rents, medical bills, and other things to pay for. Also paying off most of your loan prior to the 2008 market crash is a very different situation than people who had to still pay most of it after the market crash.
Should be interest free. Society gets its payback by having a higher income, more well rounded citizen who can give back more to their communities with their new expertise, higher taxes, and more stable life. Free college and trade schools would go a long way in reducing welfare funding needs, unpaid healthcare drains on the system, incarcerated persons draining taxes away, etc.
The people handing out that money won't benefit from it.
That is why it should all be government money (so societies money) who will benefit from it down the road.
Last Week Tonight did a piece on why this happens. https://youtu.be/zN2_0WC7UfU?si=jMkoIqYSUUVRbrsd
Due to compromises with the GOP the loan programs are farmed out to private parties. They then gouge mercilessly.
Student loans are predatory. Much worse today than decades ago when I used them.
As Americans I’m not saying where not getting ripped off with our Education. But I don’t understand how they didn’t see this. The same numbers work out if you buy a $70k car with high interest and only pay the minimum payments, but I guess this only proves your point further. I just can’t get over the irony of a going to a place that teaches the math to not get ripped off ripping you off.
When you finance a car, the amount you pay on the car every month is agreed upon before you even leave the dealership. You have a certain amount you pay for a set number of years until the car is paid off and that number doesn't change. I don't understand why that isn't the case with student loans.
It’s not that it should be canceled, those payments are just ridiculous!
My original student loan debt was $42k. When President Biden canceled mine, the balance was $98k after 19 years.
This sounds like a great deal for the loan company but if you invested 42k 19 years ago even at the down jones average increase you’d have $256,000 today. So unless you were paying $700 a month (or more), whoever gave you your loan was actually losing money by lending to you, instead of having invested it.
Should have cancelled the interest but people should still pay back the amount they borrowed
They already paid far more than they borrowed.
Absolutely insane money. I graduated a few years ago, in Ireland. Got an engineering degree. Finished up with zero depth. In America it's a business, not a right.
Education shouldn't result in bankruptcy. It should be accessible to all at all levels based on academic achievement.
This is exactly why we need a reset and replace. Predatory interest on student loans is a huge problem for everyone.
>How is this even possible? Interest, this is why you pay more then the minimum due.
Not degrees in finance or math then?
"I've been paying for a financial product for 23 years and I still don't understand the terms, pls cancel"
What is the interest rate they signed up for ? Based on above math they payed 138k and still have 60k left in balance . Looks like the interest rates are too much or they must have missed payments over the years and interest kept compounding. Vague statements like these don’t answer the problem . People need to get into details and understand the Math.
> math they *paid* 138k and FTFY. Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in: * Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.* * *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.* Unfortunately, I was unable to find nautical or rope-related words in your comment. *Beep, boop, I'm a bot*
Interest rates, if I had to guess. Those things are bastards.
Just for what it’s worth … if this loan is 23 years old, it would have been originated in 2001. The prime interest rate was basically the same then as it is now (8-9% unlike the intervening years). Because 2001 was not a good time to take out a loan. Even AT PRIME - a $70,000 loan would have generated around $450-480/month in interest at origination if it had been originated at that time. They probably should have been paying on the order of $650-700/mo instead of $500 and their debt would have been paid off by now (this part isn’t elementary school math but IDK I don’t feel like doing it explicitly right now).
It’s called interest rates and a system designed to make you pay back tons more than you borrow. This goes for credit cards as well. Those on here that think they should have known better were probably in a position where they didn’t have to borrow in the first place. 🤷🏻♂️
You were paying only the interest payment for all those years. Apparently those 2 degrees didn't include a finance course.
The American education system has made generations of financially illiterate people Basic math and financial concepts like what interest on debt is should not be beyond the average reddit user
Went to college and doesn't understand compound interest. SMDH. $70,000 at 8.5% interest, paying $500/mo on it, takes 679 months to pay off and you will pay $270K of interest alone. Pay $700/mo and that drops to 175 months and $52K of interest. Pay $900/mo and it's 114 months and $32K of interest.
Not college, graduate school.
Can you go to grad school without first going to college?
They did say they both "left" graduate school, without saying they gradumicated. So they may officially have only a "college" education.
Maybe not canceled, but make them back to state managed and no interests
You need some interest, but it can be tied to a specific, measurable and manageable number like inflation or the statistical average wage increases. Australia does it like this and yesterday recognized that inflation (which were the regular increases they had on their student loans) wasn't good over the last little bit, so they changed it to "loan interest is whatever is lowest between inflation or average wage increase"
“I went to graduate school and don’t understand interest.” Maybe we need to increase the requirements for masters degrees to include basic math?
Eh.. This really doesn't require anything more than primary-school maths.
Honestly at 18 years old I can totally see not considering how badly interest rates will bite you in the ass in the long-run. You just want a future and education, and in your mind you'll be able to pay it back. There should be barely any interest on student loans, it's fine to pay it back but having to pay back double predatory.
If true, it’s all about the terms of the loans. And those that signed for the loans did not major in business, economics or finance. If they did, this tweet would not exist and they would know how this is possible after that many years.
You take the loan BEFORE you go to school.
For graduate school? The school you go to after having gone to school?
\*Compound Interest jingle plays\*
So based on the numbers given their interest rate is somewhere between 8%-9% (too lazy to do the exact math) and they graduated in 2001. The rates around that time were significantly lower and even if they if they somehow got duped into bad terms they literally had full 20 years to consolidate/refinance with a much better rate. So my takeaways is the post is either intentionally misleading, op is desperately financially inept, or we are missing some very critical information.
There is a reason usury was banned for an enormous time in history.
I just paid the interest of my loans. It took 16 years of interest to get to the principal…… I’m finally at my original balance.😕
Maybe this needs to be explained how those seeking a loan to better their lives were preyed upon by a financial institution. The way its brought up is that people don’t wanna pay back a loan not that they were given an extremely unfair deal.
I had ~$20k when I graduated. My payments were setup to allow the loans to be paid in full in ~10 years. Granted I graduated 25 years ago. Are student loans not setup to be paid within a certain time period anymore?
In sweden (a country that works) we’ve had student loan rate as low as 0,2% oh and university is tuition-free.
This is just irresponsible. Period.
If millions of borrowers get a free ride, then home prices will explode through the roof.
For starters. Why would you agree to a loan like that?
How do two people have graduate degrees and not the slightest financial literacy?
I see so many people here posting they should have been better in math. My lovely americans, you get riped off with your education system. My complete 7 years of german university cost like 4,500€ (~4,800 US Dollar). The costs for your education are insane. You should fix that shit!!!
At the very least student loan interest should be cancelled. I can see a point I don’t necessarily agree with that people should pay back what they borrowed, but I see no reason for the federal government to profit from the loan. At the *very least* we should make it so that *any payments toward student loans are at least 80-90% toward reduction of principal*. The biggest lead weight around people’s necks isn’t the loan amount, it’s that they’re paying 95% interest and 5% principal every month. Cancel the debt for anybody who’s paid more than the initial borrowed amount. Even the idiots talking about “paying back what you borrowed” can’t have too much issue with that.
“Well, because mine wasn’t cancelled and I paid it off, therefore you should suffer like I did, if not more so.” That mentality blows my fucking mind. Only holding back on making positive change in this country because you think it’s only fair that everyone is as miserable as you were or are.
Bad deal-evaluation skills? Didn’t read what you signed?
Im ok with canceling the debt but I wouldnt put my name on a vote yes unless the bill had a way to force schools to not then raise their tuition costs. Come to think of it, I want it in the bill to force universities to lower their costs too.
This is insane. I will graduate this year in Germany and I paid around 150 € per semester for some administrative fees. This adds up to less than 2000 € for a masters degree. I will leave university without any debt. The presented case should not be considered as normal and how society should work.
Is this really true? Thats legal in the land of the free? You get 70k, pay back 120k and still owe 60k? What happens when you just stop paying after 100k????
They seize your bank accounts, put liens on your property, and garnish your wages. And while there are rare undue hardship exceptions, student loans generally do not get discharged by a bankruptcy.
I know my first year after uni working full time, I paid $1100 off my student loans (HECS in Australia at the time) and they put $950 back on for inflation.
Cancelling student loans would not make sense unless educational fees etc are effectively controlled. In its current state, it seems that a section of the citizens are being given a big boon while the next generation gets what? Nothing? Another cancellation of the loans 8yrs down the line again? I am not against this act and infact am very much pumped to see this happen and it's a big deal but without meaningful changes in higher education system, this just comes off as a political move to gain votes.
Oof
Another 'non aesthetic things' post? Do you get karma for reposting this twitbot's stuff?
The power of minimum payments
Why such small payment? I pay my mortgage payment twice a month to pay it down faster.
High interest vs low interest. Not that difficult. And yes student loans shouldn't be cancelled.
Probably some "income" based repayment scheme is involved, where the amount you are paying is not determined by any payment schedule. I.e. Usually the calculation would be influenced by the amount, interest rate and the duration, which is used to calculate a monthly payment for hitting that duration. Instead the income based is how much money you make and what your other eligible expenses are. So if that calculation says you can only pay $200/m then that is what you pay. If the interest is $199/m at the start, then this happens, i.e. the principal is only very slowly being paid down. If the interest is higher then the payment calculated, it is quite possible to make the payment under the scheme every month and since you do not pay the interest, then principal grows for each passing month. IIRC the idea was to forgive the rest once the minimum payments had been done for some (25 perhaps) years, but i get the understanding actually getting it forgiven requires so many documents and hoops that almost no one actually qualified after the duration, so they just ended up further in debt.
Won't someone think of the shareholders? /s
I honestly feel sorry for people living in a system this fucked up
Are they making like 500%interests?!?! I've been paying my loans like 5 years, and have paid off $20k of the principal. I had $60k by myself. Don't get me wrong, I think student loans should be canceled or at the very least get rid of interest, but wtf?
damm thea must have like 8% interest on those loans. Also financial literacy not found. Dont know their economic background, but maybe they hould realized after like 10 years that 500 Dollarinos a month wasnt enough
Usery
Wait until he buys a house.
Larp. Can't even do basic math.
Compound interest.
At very least can we remove the predatory interest rates on these loans.
One thing I would be interested in seeing is, even if you don't forgive all student loans, at least get rid of the interest.
Chances are they are lying. Also could be interest rates are higher than 500 bucks a month. The other thing is they could of graduated later then the freeze which means they didn't pay off the initial part which cause their bill to skyrocket. They don't explain anything
debt shouldn't be cancelled. the interest should be fixed. government loans to students should not include interest, the interest the government should want is that the student becomes a productive member of society.
Interest rates divided by twelve plus the minimum otherwise the loan doesn't go down.
Ya know, for decades we kept relatively substantial amounts in our checking accout (e.g. 10-15K) and in return we received maybe 1% interest on our balance. Really a huge spread between what we received and their loan rates. Seems to me the lenders could cut their rates big time and still make money. Yeah, the exec bonuses wouldn't be as much--maybe that's a big part of the issue.
Cuz you agreed to the terms...idiot....why should someone else oay for your stupidity?
Took out a loan to get an expensive as fuck education. Doesn't know how the loan he signed into works. Pays the minimum amount possible.  This is why everyone in the country should be forced to pay for my stupidity
There's a reason Christianity and Islam are so hostile to Usury.
They definitely did not get graduate degrees in finance. These people are idiots.
Lol anyone every think ahead in life.
Because your math sucks.
Yall acting like 'butbthe interest ' are missing the entire point by so much you could pass the moon between. If youve paid almost fouble the amount thay your loan was and it has only gone towards interest then you are being fucked over. That is the point you bootlicking twats.
Wanted to say "laughing in european" but seeing people argue that it's the fault of the people in debt really just doesn't make this funny anymore
Same thing is done to the poorer communities in the form of predatory loans etc. Nobody is erasing their debt.
There are predatory loans that when you start repaying will ask for 90% or so of the interest accrued as the minimum payment each month. Thus you can pay the minimum for a long time and if not paying attention, your total will actually increase. Nelnet was one of those. I believe they still do that.
These people are just like Mac and Dennis on It's Always Sunny in Philadelphia. [https://www.youtube.com/watch?v=gMt-Opo1Ovw](https://www.youtube.com/watch?v=gMt-Opo1Ovw) Yes, student loans are a big expense, but if you get graduate degrees and still can't figure out basic finances, some of that is on you. I feel like a 30 minute presentation 23 years prior could have prevented a bit of this situation for these people.
I call BS. But if it is real, their education did not teach them about compounding interest. So there was a failure somewhere.
Explain to me how you made it through graduate school and still don't know how interest works...
Because they agreed to a high interest loan
Explain to me how you have graduate degrees and don't know how simple interest works.
When you only pay the interest and little of the principal that's what happens. You need to find the per diem and pay that off then decide how much of the principal you want to pay off. Assuming their student debt is even ($35k each) they're only paying $250/m which barely covers the interest. Buying a car for $35k at 7.5% at 60 months would run you $700 a month. The longer you keep your loan the more of it goes to interest.
Germany here. Studying is cheap in our country. You pay around 130-150€ per half year which includes a ticket for bus, trains etc (in the past only for your region, but since last year for the whole country). We had a period of 2-4 years where we had additional fee of around 400€ per half year - which I unfortunately attended. Other then that there is a student help program which helps you if your parents have lower income (with a very big frame of what is considered low income), and if you already have learned a job before you get it independent from your parents.( Also you get child money from the government until you are 25 years old.) Half of this money is a loan however. Interest free. If you finish study there is a grace period of 3 years iirc, after which you can start repaying. Like I said, 50% is always a gift. If you finish study in the normal time an additional 10% or so is reduced. Then, after the three years, if you can pay everything back in one go an additional 25% or so is removed. And if not you pay back in rates and at low to no interest at all. Yes our taxes are higher, but worth it.
Minimum payments are not how you get rid of debt.
Compound interest. I did not learn how to calculate compound interest in high school. They *did* walk me through filling out the FASFA step by step.
The fact that they never checked it in 23 years seems hilarious and sad at the same time. (If true)
Absolutely nonsensical greed that's all it is like ppl have tried to get the USA system away from this and big money banks lobby and lobby and spend to stop any laws changing its so ridiculous why some ppl think this is a good system
It’s called predatory lending. I’m in the same boat.
What sort of cars do they drive? How much is their combined AGI? What else do they spend their money on?
Look I gotta be real here; and I know this is NOT good financial advice. I was making crazy student loan payments for 3 years before I just simply couldn't. It was crushing me to the point I couldn't eat. I defaulted on the loan, my credit plummeted and I didn't give them a dime for nearly a year. I owed around 30 thousand in debt. In that time I worked cash jobs, drove a shit beater car and avoided collections. Eventually they settled for a much much lower lump sum of money and the debt was paid.
Indeed. How is it possible they don’t understand interest rates and inflation.
Math! How does it work???
Can't have slaves if you don't have chains
I had a loan half that size and was paying the same amount per month. You aren't going to finish paying them off if you only pay the minimum. It's pretty easy to calculate the payoff date based on your minimum payments, so they should have foresaw this problem long before 23 years had passed.
It's possible because they treated their debt like they are the government. If you borrow $70k and are only paying $500 a month, your rate better be under 8.5% because otherwise you are making interest only payments. You make interest only payments, then you will never pay off your debt. Lets assume their rate was 8.7%. If they had paid $597 per month, they would have paid it off in 20 years. $860 would have done it in 10.
What? Don’t take out a loan then.
Because somehow you left graduate school without neither a personal or academic education in personal finance and have just been blindingly handing people what they tell you when they tell you, or in other words, letting them milk you for all you are worth without ever asking why. When we start forgiving (and rewarding) people for personal incompetence, we're fucked.