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The Big Profits Behind Student Loan Interest Rates

The Big Profits Behind Student Loan Interest RatesThe Big Profits Behind Student Loan Interest Rates (via Credit.com)

If insanity is defined as repeatedly doing the same thing and expecting a different result, the student loan interest rate throwdown that’s about to be reprised in Washington, D.C., warrants an intervention. You may recall that at this time in 2012, Congress was in a lather over the subsidized student…

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  • bweb

    i believe you give the wrong impression of the “real” profit made on loans. There are several factors need to consider when to determine the “real” profit, the costs is just 75bps, have to consider inflation and the costs of us not paying down higher interest debt.

    Also need to consider default rates, which can be difficult, as there is so large population that is in deferment or forbearance which are not included in delinquent rates.

    The Feds did lower commission rates paid to their collection agencies for 2013, they were way to high the prior couple of years. Collection agencies are rewarded for the percent of balance (instead of percent of payments), if they set student up 11payments in 12months. This is a win for the student as well, as they get their prior late fee’s/interest waived. The program still needs to improved, to bring incentives in line with industry standards. Collection agencies working for the Feds should also not be rewarded and encouraged to subcontract collection work.

    Long term solutions need to focus tying loans limits to area of study, this help insure loans are repaid. Like what is currently happening in the AUTO industry with longer term loans becoming the norm, student loan repayment plans should be given the option to extend plans longer like the author mentioned.

    As a society we do not give student loans to make money of the interest, the goal is the investment in our people with increase the overall wealth and wellbeing of nation, and thus the investment with pay for self. That being said, we have to understand, student loans are not for everyone

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