Economics 101

[_subgenius]

KG,
Bernie fails under 2 possible reasoning:

1.should interest rates for secured debts differ from the rates for unsecured debts?

2. If one rate is set by market forces and the other by legislation, then why convey them under a false comparison? Why bring up apples and ask why they don't taste like oranges?

Otherwise thank you for confirming the OP assertion of "nope".

[_Doctor Steuss]

Heh. Maybe Bernie has an innovative plan to repossess people's education if they default on their loans.

*knock on door*

"We're here for your diploma. We'll also need to edit your résumé while we're here."



ETA:
I'm kind of liking this idea. Maybe I could score a foreclosed diploma on the cheap... or at least rent one for a while.

[_ajax18]

The government has been profiting off of student loans at the tune of roughly $40 billion annually. So why not lower rates?

Because your damn welfare programs are expensive and the government needs the revenue.

[_Kevin Graham]

KG,
Bernie fails under 2 possible reasoning:

1.should interest rates for secured debts differ from the rates for unsecured debts?

2. If one rate is set by market forces and the other by legislation, then why convey them under a false comparison? Why bring up apples and ask why they don't taste like oranges?

Otherwise thank you for confirming the OP assertion of "nope".

Again, rates for student loans are not determined by the market, they are determined by the government which makes your entire premise about "Economics 101" faulty. Their purpose is not to make a profit for the government, but rather to provide affordable loans to those seeking to continue their education. Since the early 90's Congress has been tinkering with legislation that would affect the rates. Not once did "economic" advantages for the government decide the rates.

This isn't an issue of understanding economic principles so much as it is a difference of political ideology. Sanders is more likely saying that it makes no sense, in the sense of fairness, that the government take our tax dollars to loan back to us at such high rates. As time passes, it is becoming more of a cost than a benefit to try to finish school. More and more students are finding it to be counter productive because by the time they're finished, they're up to their eyeballs in debt. This is why sixty percent of them regret doing it in the first place.

I've read some of the stories and they're truly heartbreaking. The older generation like me can't really relate to any of this because when we were in school tuition was significantly lower making federal loans more manageable. It really sucks for these kids, they're made to suffer due to no fault of their own.

[_Kevin Graham]

The government has been profiting off of student loans at the tune of roughly $40 billion annually. So why not lower rates?

Because your damn welfare programs are expensive and the government needs the revenue.

Do you have any idea whatsoever what this country would be like if we had it your way and did away with all welfare services? Are you truly so naïve as to believe the millions in need would suddenly become model citizens after pulling themselves from their bootstraps?

Your shaming of those in need is typical Republican rhetoric.

[_Gunnar]

This is what bothers me about this issue:

1. Why are college education tuition rates so obscenely high compared to what they used to be, therefore necessitating going into such deep debt to finance them in the first place? If I am not mistaken, tuition rates have increased much faster than general inflation rates. What is the cause or rationale for that?

2. It is often claimed that the money the government invests in education is one of the few things (if not the only thing) government spends money on that consistently returns much more in revenue (at least over the long run) than the money invested, due to the higher productivity, income potential and technological and scientific advancement enabled by a highly educated and skilled populace. If this is true, it would seem foolish for the government to not fund, or help fund higher education. The eventual return on that investment in the form of more tax revenue due to the resulting higher standards of living and income levels would exceed the initial investment, even without the repayment of student loans taken out at high interest rates to pay for it.

[_subgenius]

Again, rates for student loans are not determined by the market, they are determined by the government which makes your entire premise about "Economics 101" faulty. Their purpose is not to make a profit for the government, but rather to provide affordable loans to those seeking to continue their education. Since the early 90's Congress has been tinkering with legislation that would affect the rates. Not once did "economic" advantages for the government decide the rates.

Read my post, I'm not saying student loan rates are set by market..ergo...Bernie fails on claiming Apples should taste like oranges.
Either way you have not provided a direct, or coherent, response to the 2 reasons/questions from the post you quoted.

This isn't an issue of understanding economic principles so much as it is a difference of political ideology. Sanders is more likely saying that it makes no sense, in the sense of fairness, that the government take our tax dollars to loan back to us at such high rates. As time passes, it is becoming more of a cost than a benefit to try to finish school. More and more students are finding it to be counter productive because by the time they're finished, they're up to their eyeballs in debt. This is why sixty percent of them regret doing it in the first place.

Yes, bring up economics but claim is not about economics. Your position here is that interest rates should be set arbitrarily by some yet to be stated value system. ..some self serving sense of fair because you don't like the agreement you signed.
Increasing tuition costs and lack of jobs (jobs that the self entitled expect) is not the argument bernie was making and you can't make it either.

I've read some of the stories and they're truly heartbreaking. The older generation like me can't really relate to any of this because when we were in school tuition was significantly lower making federal loans more manageable. It really sucks for these kids, they're made to suffer due to no fault of their own.

It was their fault when they signed the promissory note. Living and spending beyond your means is a symptom of liberal thinking and the indoctrination is complete when you whine and expect others to bail you out for decisions you made.

Perhaps if waiting in line for the next iPhone paid $15/hour.

[_subgenius]

This is what bothers me about this issue:

1. Why are college education tuition rates so obscenely high compared to what they used to be, therefore necessitating going into such deep debt to finance them in the first place? If I am not mistaken, tuition rates have increased much faster than general inflation rates. What is the cause or rationale for that?

2. It is often claimed that the money the government invests in education is one of the few things (if not the only thing) government spends money on that consistently returns much more in revenue (at least over the long run) than the money invested, due to the higher productivity, income potential and technological and scientific advancement enabled by a highly educated and skilled populace. If this is true, it would seem foolish for the government to not fund, or help fund higher education. The eventual return on that investment in the form of more tax revenue due to the resulting higher standards of living and income levels would exceed the initial investment, even without the repayment of student loans taken out at high interest rates to pay for it.

Your post makes valid points and asks the right questions
But
It does not address the bad economics being perpetuated by Bernie

[_EAllusion]

I think there is some confusion here.

First, Bernie's comment seems to be a reference to private student loans. The rates he cites is what the rates you currently can get on the open market for a student loan, whereas federal loans are currently cheaper. Federally subsidized loans are sensitive to market forces too, but that's not what he's talking about. Bernie seems to think those rates as they compare with mortage re-fi rates highlight their inherent unfairness. He rhetorically asks where's the sense in that. But the "sense" seems obvious in that mortgage rates are set by market conditions for secured debt. The conditions are determined by the cost of money (which in turn is heavily influenced by the Fed), expected return on investment, and the expected rate of default and cost of it should it happen. Interest rates aren't determined by how noble we think what you are attempting to purchase with the loan is.

Simply comparing default rates between mortgages and student loans doesn't make sense because if you default on your mortgage, you have a valuable assets that the lender can use to cover its losses. One of the main drivers of the mortgage rate is trying to figure out how cheaply a customer can be lent money while still getting enough return on investment to cover expenses and underwrite the risk of default.

Basically, Sanders invited an apples to oranges comparison to make a point about fairness that doesn't function as a successful analogy. Even Kevin isn't really explaining how the analogy works so much as arguing that cheap student loans provided by the government is a good thing. For all we know, the tweet is really from one of his campaign staffers who had a moment of incoherence while attempting to drum up support from his free college education for all platform.

[Guest]

KG,
Bernie fails under 2 possible reasoning:

1.should interest rates for secured debts differ from the rates for unsecured debts?

2. If one rate is set by market forces and the other by legislation, then why convey them under a false comparison? Why bring up apples and ask why they don't taste like oranges?

Otherwise thank you for confirming the OP assertion of "nope".

Again, rates for student loans are not determined by the market, they are determined by the government which makes your entire premise about "Economics 101" faulty. Their purpose is not to make a profit for the government, but rather to provide affordable loans to those seeking to continue their education. Since the early 90's Congress has been tinkering with legislation that would affect the rates. Not once did "economic" advantages for the government decide the rates.

This isn't an issue of understanding economic principles so much as it is a difference of political ideology. Sanders is more likely saying that it makes no sense, in the sense of fairness, that the government take our tax dollars to loan back to us at such high rates. As time passes, it is becoming more of a cost than a benefit to try to finish school. More and more students are finding it to be counter productive because by the time they're finished, they're up to their eyeballs in debt. This is why sixty percent of them regret doing it in the first place.

I've read some of the stories and they're truly heartbreaking. The older generation like me can't really relate to any of this because when we were in school tuition was significantly lower making federal loans more manageable. It really sucks for these kids, they're made to suffer due to no fault of their own.

Yes, it is heartbreaking and seems, in many ways, so senseless. It is as if some of these government sponsored loan programs and laws regulating them are set up, not for the benefit of the students, but for the benefit of highly predatory loan companies and financial institutions.