April 12, 2010

PersonalFinance: Negotiating Student Aid - ABC News

PersonalFinance: Negotiating Student Aid

via PersonalFinance: Negotiating Student Aid - ABC News.

Interesting article for those looking to return to school now or in the future.  Click on link above... my comments are below:

The demand for educational loans is skyrocketing.  But what is this about the government taking on the brunt of the matter (i.e. Stafford loans) and eliminating guaranteed loans from private lenders?  Well, the US government has huge amounts of debt already – so where will this government money come from to help people seeking higher education?  The government will have to borrow it from the private lenders!  So, now the government is borrowing money from private lenders at a negotiated lower interest rate, and loaning this money out to individuals seeking student aid...at a higher interest rate.  The pros/cons of this is that the government could keep interest rates artificially low for educational loans – which initially means low interest rates on student loans.  But in return this could increase the debt owed to private lenders…which means inevitable higher taxes for all down the road.     


 


This is excellent for the private lenders – whose money will be backed by the “full faith and credit of the US government” – because loans from the government are not forgiven.  Which means a student cannot file for bankruptcy and have his student loan debt wiped clean. 


 


Interesting article.


 


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