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by jellicle
4695 days ago
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That's a fine prediction. And yet, student loans were only made so hard to discharge due to changes in the law in 1996 and 2000. And prior to 1996 and 2000, student loans were offered at much less than the exorbitant rates you predict, and lenders made nice fat profits on them even so. And no, there was no significant abuse of the system - after all, there's always a judge involved in bankruptcy proceedings, who has the authority NOT to discharge debts if there's any reasonable prospect of them being paid off. So... your prediction is wrong. |
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There are way too many factors that cannot be ignored, but that you choose to ignore. You need to look at the interest rate environment (which determines the cost of capital), banking regulations (which have changed dramatically in the past several years), the unemployment rate (you might have noticed we're in the slowest "recovery" since the Great Depression) and inflation-adjusted wage growth (hint: there basically is none), amongst other things.
Finally, you fail to note that the federal government was a participant in the student loan market well before 1996, so you cannot look at the history of private student loans without understanding that the government has influenced the market to varying degrees for some time.
If you want to assume that private lenders would rush to provide student loans at low rates at the same pace the federal government has in this economic environment and without the discharge restrictions currently in place, I'd love to introduce you to someone looking to sell you his 100 year J.C. Penney bonds. They yield over 11% and you can buy them at ~70 cents on the dollar - a great deal!