dummble said:

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I was thinking really hard about this this morning and annoyed that we worked hard and lived a very frugal life to pay off my wifes loans as fast as we could.

But if I take a step back and pretend that we are in an economical crisis, which we may be in 3 months. And look at this as a direct stimulus that targets young college educated middle class people. This may be a pretty good bang for the buck. This would free up $400 to $1200 a month for frivolous spending and increasing lifestyle. Home purchases, automobile purchases, general spending. Not sure what the savings percentage of 22 to 35yo's.

Anyways, I am not a smart person and I really hate the idea, but I was trying to be positive about it.

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Deputy Travis Junior said:

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The dictionary definition of usury is charging the borrower an unethically high amount rate, so let's break down student loans:
-Student loans can't be discharged in bankruptcy and, if I'm not mistaken, are guaranteed by the government, meaning they're essentially riskless.
-The rate on a ten year treasury (a nice comp) is something like 0.8%.

I'd say ~8-9x the going rate of another risk free asset is usury.

Compounding the immorality, teenagers and the adults making the loan process information differently:

https://www.stanfordchildrens.org/en/topic/default?id=understanding-the-teen-brain-1-3051
" The rational part of a teen's brain isn't fully developed and won't be until age 25 or so.

In fact, recent research has found that adult and teen brains work differently. Adults think with the prefrontal cortex, the brain's rational part. This is the part of the brain that responds to situations with good judgment and an awareness of long-term consequences. Teens process information with the amygdala. This is the emotional part."


So put another way, teens are particularly vulnerable to the "if you don't go to college you're a failure" criticisms and more easily swept up in the "you're gonna go get a 6 figure job!" fairy tale, making them more likely to make a dumb, emotional decision. Meanwhile, the adults are more coldly aware of the consequences of the actions they're enabling

Finally I'd note that student loans are probably the only money lending where the lender doesn't really negotiate with the borrower if circumstances change. That is, miss a few mortgage payments and your bank will call up with offers to restructure or whatever. So there's nothing unique or unfair about changing student loan terms to help the borrower pay it off and help the lender recover as much of the principal as possible.

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Deputy Travis Junior said:

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It's not legal usury because the government writes the laws, but i do think it's unethical because the rates are much higher than those of investments of similar risk. That is, legal, but sleazy.

So look, I think you will agree with the following:
1) American society places enormous pressure on kids to attend college, and they often wrap it in an emotional "follow your dreams" message. This is really hard to resist at 18-22.

2) Any credit model worth anything would reject a ton of these loan apps with prejudice. That is, the student loans program is knowingly giving out bazillions of dollars that they strongly suspect that the borrowers will not be able to pay off. However, rather than share in the predictable consequences, the lenders got the government to exempt them from the downside via federal guarantees and lol@your bankruptcy provisions. No other money lending works like this. Normally, if you're a money lender and you give a stupid loan, you lose money right alongside the borrower.

3) tuition has skyrocketed due to profligate spending by greedy academics who are taking advantage of infinite demand (see #1 for the reason for this infinite demand).

I get that a lot of these kids made really stupid, emotional decisions, but I think items 2-3 show that they are not the only ones deserving of blame, so it isn't fair or just to place 100% of the consequences on some of these hopelessly underwater people. I think reducing interest rates, capping total interest, and making payments tax exempt is a nice way to hold both the borrowers and the lenders responsible, and honestly it's a far better deal than the lenders would get in any other industry.

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