During the 1999–2000 academic year, federal Stafford loans had a variable interest rate of 6.32% while in school, and 6.92% during repayment. For the 2000–2001 academic year, these variable rates increased to 7.59% in-school and 8.19% during repayment
A lot of people would need to take additional loans out with Sallie Mae or others and those are typically higher I think my worst was around 10%. Smaller loans and I paid them off as soon as I could, but mismanaging even a little bit I could see this as being true.
Sallie Mae is awful, my now wife recommended i switch to a credit union and that was the first time I saw the loan decrease with 350+ payments at the time. Got it paid off in a few years after that.
Ok, but, aren't you cherrypicking here? What was the rate 23 years ago, during the 2002-2003 school year, which would tie to the post? Per a quick Google search, it appears to have been 3.46%. So, yeah, this post is rage bait.
I also have several loans, all with different rates. My lowest is 4%, which are my most recent ones.
The interest rates are crippling and needs to be addressed.
To put it in perspective, I bought a house in 2020 for $130,000, yet hold only $36,000 in student loans.
If I made a $500 extra payment to each my house and my student loans, I would pay them off at around the same time.
Financially, it makes more sense for me to pay the house off because that's at least an appreciating asset.
But it doesn't matter, because I don't have $500 extra to put on a loan over it's minimums every month, and those student loans will follow me until I die.
No it doesn't.
You target the loan with the highest interest rate. That's generally the winning strategy.
Also houses don't appreciate that much. If you filter out the money tosses into them for upgrades/improvements, they have historically gone up about as much as inflation, maybe a little bit more.
The big benefit of a house is that there's GOOD tax benefits from the mortgage interest rate deduction. Basically a big chunk of your mortgage costs get slashes off your taxes.
Fun fact, if your goal is to have a paid off house as quickly as possible, renting cheaply and investing the extra cash you aren't spending in stocks (this includes the would be down payment) will generally get you a paid off house in 15-20 years (subject to market volatility). The house would only be about half way paid for after 20 years.
A lot of this issue is self-inflicted, along with the government making it too easy to get the loan. Take out hundreds of thousands in loans to get a degree that will never lead to a job that can pay it off.
>Financially, it makes more sense for me to pay the house off because that's at least an appreciating asset.
No… it doesn’t make more sense… it makes less.
First, the appreciating asset thing is a misunderstanding. Money is fungible… it doesn’t care what it is owed on.
E.g. Suppose my home is paid off and I owe $40,000 on a car at 6% interest. In the end, I have two assets (a car and a house) and one liability (a $40,000 loan at 6%). Suppose you have the same car but it is paid off but you owe $40,000 on a similar home at 6% interest. We are in the exact same financial position.
Next, the best financial move is to pay the highest interest first. In the end, you will pay less money.
True, but keep in mind that a lot of the private loans that existed prior to 2008 were explicitly purchased from private companies by the federal government, which then promised loan forgiveness programs. Loan forgiveness that the current administration has been extremely squiffy about honoring, to the point that Trump's first education secretary Betsy DeVos was officially held in contempt of court by a federal judge and fined $100,000 because the Education Department continued to enforce loans, even to the point of wage garnishment and seizure of tax refunds, despite those loans being discharged by court order on the basis of their being fraudulently issued in the first place.
And that was back when the current administration cared what the judiciary had to say.
If they're not federal who exactly are they expecting to cancel it, the bank? Cancelling student loan debt is talking about the federal government erasing federal loans
No it’s not. I know plenty of people. I’ve been paying on mine $300/month for 15 years. I had like $20k. I had. 3% consolidated rate. That compounded interest is brutal
You would’ve paid it off in 15 years. 20k at 3% and paying 300/month. Even if it compounds daily what you wrote isn’t correct. It would still be 6 years.
Correction after researching; graduate loans can go up to 8.94%
My wife’s graduate loans were all in the 7-8% range
Edit: if the average APR of their graduate loans was 8.36% their balance would in fact be $60,000 after 23 years of monthly $500 payments. So it’s possible they’re telling the truth.
The OP's $70k loan at 8% would be 40yrs to pay off @ $500/mo. What kind of person is smart enough to go to grad school but not realize what they are getting into, or at least get a degree in something that allows you to pay more than $500/mo towards your debt.
I'd be curious as to the lifestyle choices made by 'socialiststeve'.
There are a LOT of stupid grad programs out there. And they don’t have funding for exactly that reason, and that’s why people wind up with that much debt from grad school. I paid absolutely nothing for grad school, and received a stipend that was good enough to keep my bills paid provided I lived within my means.
Even worse, it's presumably for TWO people. TWO people who presumably chose the worst-paying careers possible, since they were on an income-based plan the entire 23 years and barely made a dent to the principle.
In addition to the lifestyle choices, I'd want to see what they majored in and what career they decided to go into.
Education costs in US is ridiculous, but you can't have someone borrow 270K in total loans to end up a social worker (an actual person I've met) and say that they had absolutely no fault in any of it.
Student loans back then were often 7-9%. They start accruing when they’re distributed but you don’t repay until 6 months after graduation putting you a couple years behind.
I had a variable APR at between 11-14 before I refinanced. And the loans compounded after I graduated. I'm in a VERY similar boat as the OP bot. Before I refinanced I had paid $1000 a month and owed more than my original loan for over a decade.
Yeah my wife’s situation isn’t too far off from this, either. She borrowed $60k, deferred multiple times when she was first out of school, and then made payments pretty steady for the last 15 years or so.
Last I checked, she was paying $800 a month and owed around $70k.
Yeah, definitely not the smartest move. Though, back then, the support reps were pretty aggressive about pushing deferment and we were completely broke. So it is what it is.
But, yeah, had she not deferred, I imagine her repayment plan would look quite a bit different now.
My student loan back then was 2.5% and i got a half percent knocked of for auto pay. I paid mine off in 10 years. This is either a fake story or these people are terrible with their money.
Cool story. Mine was 8.75%, which was the legal limit authorized by Congress, and they've been hanging round forever. And no, they weren't private loans. Mine came 100% directly from Uncle Sam. No, I can't re-finance them. I do get .25% off for autopay, so that makes it 8.5%. Either way, I ain't ever paying them back. I'll die with these loans.
Yes you can refinance. There is nothing the government can do to stop you. As long as you can get a bank to make you put a new loan at a lower rate then you can use that to pay off the government loans. Depending on your credit they may not give you a better rate but you can always refinance any loan.
Government loans are forgiven after 20 years of income based repayment. So you won't die with them. Assuming you are on the income based repayment plan. Biden also gave people an opportunity to switch to that plan and have their past payments count towards it but probably they are not doing that anymore.
If you do PSLF (public service loan forgiveness) you can get them forgiven in 10 years on income based repayment
I'm not from the USA, but I heard you can decide to basically pay off only or almost only the interest rate to make the monthly payments smaller. In that case you won't be able to pay it back anytime soon. If they didn't expect that to happen, then the money spent on their college was not much worth anyway.
Student loans are designed to be flexible, have a lot of deferment options, and so on, because careers after graduation aren't uniform, and some people need to make lower payments because they have lower income. A lot of people just assume that the debt is like a mortgage, and it will be paid off after some amount of time, because they weren't really paying attention to the payments or the terms. Other people paid the minimums because they hoped there would be student debt cancellation. For most people, they should have just continued living like a 20 year old, and committed the savings from their new, higher paying job into paying down the principle on their student loans. But most Americans live paycheck to paycheck, and have lifestyle creep eating up that additional income.
It's been a couple years since I checked the data, but the average student graduates with about $30k in debt, and earns about $1,600,000 more in a lifetime than someone who only graduated from High School, which is about $35k a year in extra income on average. So, even if you have a rough couple of years where you're underemployed or on deferments, it should be relatively easy for most students to pay back their debt, they just spend their money on other stuff, like a nicer house or car.
Or they just can't find good work. The assumption is you get a degree and go into debt for the better paying jobs, but a lot of jobs have been shrinking roles and pay for those roles, people are not getting promoted and are staying in "entry-level" positions that are usually filled by recent graduates, entire sectors are being evaporated practically overnight (be it because of ai, market trends, or what have you), and an ever growing list of other things.
I'm not say plenty of people aren't just wasting money on concert tickets or new phones, but I am saying that those excuses are far less universal than people seem to think. I work in the service industry and have known so many people still serving because they can't find anything decent, and just having a degree doesn't really mean anything anymore. My uncle got a great job with NS doing programming and his degree is just in accounting. He has never gone back to school nor worked as an actual accountant at any point in his life. He got into programming when nobody had a programming degree, and most people just didn't have degrees at all. Now, most people have degrees and that same entry level job requires more certifications than even existed 15 years ago.
And I'm usually the guy complaining about "the lucky ones" who went to college. Getting a job that makes close to $50k without one feels herculean, and now, I'm seeing more and more peers with degrees in the same desperate boat I'm in. I have a friend who lost her job over a year ago. She went from a $65k salary to $16/hr split between a PT teaching (arts) and uber deliveries. She's getting by but barely and she's been looking for a new job since the day she lost her last one. Shit, I've been trying to find a PT gig for about as long and the options are scarce for even that. I don't even really know where to look for jobs at this point, indeed and the like are mostly fake sales jobs or lying about selling at&t inside Costcos (I've done mobile sales, the golden days have been gone for a at least a decade). I guess linkedin is better for corporate but it looks more like social media than an actual job board to me.
Absolutely true, student loans are flexible. For everyone who says student loans are predatory they should really check out the terms of a payday loan and find out what happens if they are short a single month, how many fees and penalties there are.
They probably also got something that you don’t really need to pay top dollar for, like a liberal arts degree. Not saying people should get those but there’s a reason there so many communications majors out there.
These people made poor financial choices and want to act like the world owes them something. If you both have college degrees and can only afford $500 payments for TWENTY THREE YEARS, ypu got a worthless degree and didn't make enough money to justify your loans. That's on ypu.
They likely had a loan with a higher percentage rate due to the student loan being a private loan or they consolidated after a few years which could of drove the rate into the 8-9% range which would match their numbers almost perfectly.
Making a payment may cover the interest and a little to the principal.
Capitalized Interest;
If you owe $10,000 in student loans and have accrued $500 in unpaid interest, the interest capitalizes. Your new principal balance becomes $10,500. Going forward, you are charged interest on the $10,500.
Edit: Federal and Private interest rates are massively different. Like, Private interest can be 25% (pure greed).
You can’t refinance federal student loans and keep them federal because the federal government doesn’t refinance loans. You have to convert them to private, which then completely removes ALL forgiveness protections.
Assuming they went to undergrad and grad right after, and graduated in 2003, the rates for their loans would be
Dude I work in finance and I have people working with me who think whatever tax bracket you are in is what you pay on all income. I’ve had people say they didn’t want a promotion cause they will be on a higher tax bracket and lose money. I made a spreadsheet to show them how taxes work.
It’s true if they have a lot of benefits that are income-tested, then it can be a disadvantage. But that is because of the stupid design of those programs: instead of ramps, it’s all or nothing.
I worked with a guy like that. Didn't want to get paid for overtime because he would make less overall due to taxes. At the time we had the option to take it as paid leave.
This is what happens when stuff like this expected to be learn on your own. They dont teach this stuff in schools, even though it's something literally everyone needs in life because they profit off of people's lack of knowledge.
I’d like to think I’m financially competent and yet, only in the last few years did I realize the concept “hey since it’s very highly doubtful government relief is coming, maybe I should pay more per month than the actual payment is, since the company just wants me to keep paying the minimum forever”.
Now I see the light at the end of the tunnel and have actually paid off a few of my loans and see the principal on the others moving downwards more.
Okay. Y'all are suffering from intense recency bias. Nobody was thinking the government was going to wipe out student debt 20 years ago. People only really started talking about that like five years ago.
You can't claim to be financially competent and think the government is going to manage money correctly lmao. Sounds like you've come to realize that so you're above average.
Good for you! I think the whole "maybe they'll be forgiven someday" question is a cruel ploy and is keeping people from taking better control of their finances.
And this is why AI usage is growing so incredibly fast.
Most people are dumb as bricks, maybe they excel in one or two things but otherwise they struggle, even in difficult careers like medicine and engineering you have people who lack common sense elsewhere.
AI let's a simpleton ask anything and usually get a half decent answer; not an experts answer but better than most people's knowledge.
They probably did but didn't actually learn anything. I had 2 finance classes in Highschool and only once I became and adult did I realize how much I screwed myself by not retaining anything from them
I know so many people who claim to never have had a finance class, when in reality they cared so little they don't even remember taking the class. I know they did because they were in my graduating class or within a few years of me at the same school.
High schools should prob have finance classes, sure; but the people I see complaining the most about “why didn’t they teach me about this stuff?!” didn’t pay attention to ANYTHING in high school and barely graduated. Had they taken extensive financial classes, they wouldn’t have retained much if anything.
You learned about compounding interest in algebra 1 or algebra 2 that would have been 7th or 8th grade probably. By the end of highschool people should have learned enough to teach themselves subjects. If people walk around life complaining they weren't hand fed information in highschool, they are never gonna amount to much regardless of how many classes they take.
Ummmm I had zero finance classes in high school… you got a leg up on me bud. I’m living life one Pokémon pack at a time. Gotta hit that big investment card to add to my portfolio (binder)
I can chime in on this! I’ve tried doing this. They simply don’t allow you to make payments to the principal. I called directly and everything and they flat out told me that’s not allowed. The work around is to make your monthly payment, then immediately after it hits, make another payment which would then hit the principal. Unfortunately, that’s an added fee a lot of people can’t afford.
I’m not calling you a liar, but loans with terms that prohibit early payment of the principal of not the norm. On top of that, most loans also have a portion of the structured payment apply to principal so even if you’re just paying the minimum, the principal will go down. I have no idea what kind of terms you got stuck with, and the only thing that makes sense if you got some sort of sub sub sub prime loan that was signed in a back alley with a loan shark.
That's not what they mean. If you want to pay down the principal, you have to pay at least enough to cover the interest, and then some. The "workaround" is to increase your monthly payment so you're not just covering the interest.
The vast majority of loans work the way you're describing. For student loans, the lender will often not capitalize the interest. This actually works in your favor. But in exchange, you must pay down the interest before the principal-- Otherwise, the interest itself is basically a 0% loan.
I'm not sure they even do that. You get a lot of theory, but actual practice is very messy. I'll take someone with 2 years of direct experience over the one with an MBA in almost every circumstance.
Most people in my experience arent great at being able to handle broad theory. They do better when the outcome is a or b. Not .15% a, 40% b, 45% other with shifting variables.
The years of experience makes you better at understanding the behavior of those variables. Which is far more valuable than knowing the general form of the equation
After getting an engineering degree, I took some MBA classes. We spent a whole chapter on COGS = Beginning Inventory + Purchases - Ending Inventory
Which honestly would have been a single word problem in most other disciplines.
Chapter two was entirely about something like Ending Inventory = Beginning Inventory + Purchases - COGS
In most disciplines, one equation like that would be part of one chapter and you'd be expected just understand all the algebraic variations of each. But MBAs devote two entire chapters to something that would be part of a chapter in any science engineering class.
Also, there are classes like "Statistics for Business Majors" and "Computer Science for Business Majors". But I've never seen "Business for Statisticians," or "Business for Computer Scientists".
I graduated 40 years ago, got student loans for the last few semesters, and got them paid off. But back then it was POSSIBLE to pay them off. Now, they're designed to be an albatross around your neck forever.
Don’t go to grad school unless someone else is paying for it. Get your money asap and get out of the debt pits the systems want to put you in. You need a modicum of freedom and capital to make level-headed decisions that are in your own interest.
This is solid advice and is likelly becoming more mainstream as the student loan crisis has developed. Its too bad an entire generation got nothing more than "go to college or you're a failure" and adjustable rate student loans as the cherry on top.
Both. The problem with the latter is 99.99% of mods between all subreddits don't get paid, and do it either out of passion or for ego tripping.
That being said, I reported about 40-50 bot accounts a few months ago and reddit gave me a strike for "abusing the report system". They honestly don't care about improving the platform as long as people are buying awards and theyre selling ad space.
To be fair, the minimum payment SHOULD be able to get you a paid debt in the original term length agreement. Paying more should be “if you’re able” not “you must”.
This. Most people who get a loan for a car or house are mostly thinking in terms of the minimum and only put in more when they feel like they can and it doesn't inconvenience them.
Obviously not a direct financial education class but learning about compounding numbers in math.
And even if someone learned this later in their life or not at all, common sense tells you that if you're paying money and the total owed isn't really going down, then you probably should figure out why...
These are the same kids in HS sitting there saying "Why do I even have to learn this Im never going to use it anyway....." Than im guessing they went off and got arts and got a degree in art or history.Not there theres anything wrong with that
Because China and Russia run extensive state-sponsored bot-nets prompted to make the US look bad by upvoting and reposting this sort of fake rage bait.
Yeah but it doesn’t work. I would not feel bad for these people. It’s not the systems fault if you are that ignorant you don’t know how simple loans work.
This is a fabricated BS post. Interest rates 23 years ago were very low. At 7% interest, 23 years with a $500 payment would leave a balance under $7,500. With refinancing, it could have been paid of years ago. And in 23 years, no increase in their $500 payment? With these fabricated facts, this guy doesn't understand basic math and finance
In your case you absolutely should demand a refund because you’ve learned nothing in your years at college if you think minimum payments is how you pay off your loans
I agree that student debt is getting out of control, but if these people are telling the truth, they're complete morons lmao. Sounds like they should have refinanced ages ago.
I think this is the point many are missing here. Sure it's probably a shitty predatory loan to begin with, but after 23 years, you'd think they'd refinance into a better loan with more favorable terms.
Explain to me why it should. Nothing here is an argument supporting so doing.
FURTHER... you said "again". So you've heard the arguments. And failed to address them. You should ask your school for a refund because you clearly weren't educated, but that's a different thing.
The funny Thing is they think they are intelligent enough to study, jet they are unable to read and understand the Terms of their loans. Whoever pays Student debts with that conditions and interest, derserves to pay them until Infinity.
Take out a 60k loan with lower interest and pay it off immediately. The fact that you got a higher education and then proceeded to do something stupid for 23 years is not the loans's fault.
You didn’t have a problem taking the money. I had $25k in loans and worked full time during college. Paid it all off in three years after starting out with a $44k annual salary. You can pay more than what you did on your loans. The reason they shouldn’t be canceled is because while people like me were focused on paying them off you were spending money elsewhere….
What I don't get about the cancel debt argument is that it doesn't actually fix the root of the problem. The kids going in next year will just get in debt all the same and if anything it will cause colleges to be more expensive and loans to be more predatory as the govt showed they will just come along and bail everyone out
You got a loan for a degree that didn't provide a job to pay for the loan, then only made minimum payments to cover interest and not remove principal. Sounds like a you problem buddy
Well get a 23 year mortgage then compare how much your loan was vs the total payment made at the end of the loan, and you will see this is actually how loans work.
If you buy a house and pay the minimum you still pay it off in 30 years. That's sort of the expectation. Same with a car payment. You set buy a car and the rate is dependent on the term of payments, the expectation is once again the minimum payment.
You should be asking yourself why the minimum for student loans is somehow still leading to them only paying off 1/7th the principle after two decades. Not chastising them for paying their obligation.
70K back then is about 120k in today's money. Its amazing how people go all the way through grad school and can't figure out the way to Google a simple loan calculator and figure out their repayment rates, etc. You know you can do that before you take on a loan, right?
Imagine having this much education without using a calculator to realize you will need to pay more than $500 a month to pay off something with this high of a balance w/ interest
Like yea...it's a racket, but isn't the idea that you get this much education to make more money and also shouldn't you be smart enough if you can do that to also figure out you're gonna need to pony the fuck up to get rid of the debt?
I was 18 years old when I made the decision not to pursue college immediately as I would have needed to take out student loans and my mother was willing to sign for them but I had a basic understanding of the concept of debt and interest and said no fucking way, unless I'm 100% sure of what I want to do and what the time table and outcome is going to be, not gonna do it
So many mother fuckers just went for the "experience" and to front, well guess what? I still went to your fucking parties , no student ID required at the door of any house I showed up to, didn't need to rack up all that debt while not knowing wtf I wanted to do with my life yet.
I am not going to cry for most of you, most of you are just stupid, regardless of education level, and the stupid get FARMED, and if it isn't this racket it's another, like high interest mortgages, revolving car loans every 3~ years, overpriced vacations, yall fucking dumb and I don't give a fuck about the stupid.
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