fry Posted April 15, 2007 Report Share Posted April 15, 2007 Congress is about to begin hearings (as they always do after the damage is already done) on abuses in the federal student loan programs and much ink is being spilt by the media following the story. While federal student loans don't generally cover flight training the same banks that make federally guaranteed loan also make the "alternative" loans that flight schools love so much (CIT Group owns Student Loan Xpress, Silver State Helicopter's lender of choice). Below is an excerpt from a piece in today's San Diego Union: >>>Lenders face a little more risk with the $17 billion in private “alternative” loans that are not backed by the government, but not much. They can charge interest rates that approach those of credit cards, and federal regulations, strengthened with bankruptcy laws enacted in 2005, make it almost impossible for student loans to be discharged through bankruptcy. If that is not enough help, the Supreme Court ruled in 2005 that lenders have the right to garnish even Social Security income from those who are delinquent on their student loans. Finally, student borrowers are only allowed to consolidate, or refinance, their debt once after graduating. So when a borrower consolidates with a lender, he or she is committed to that lender for the life of the loan. The Stafford and PLUS loans, which fall under the Federal Family Education Loan Program, now have fixed interest rate limits of 6.8 and 8.5 percent respectively. Loans that are not federally backed can have initial rates above 12 percent, depending on a borrower's credit score, Kantrowitz said. The terms of the federally backed loans always start at 10 years, but they can be extended for as long as 30 years if a borrower consolidates his or her loans after graduating. If a student borrows $50,000 for college and makes prompt payments from graduation through the end of the 10-year term, he or she will pay approximately $20,000 in interest and fees. But, consumer advocates say, if the borrower misses payments or allows the loan to go into default, the companies pounce. Late payment penalties that equal 25 percent of the loan's value are common, said Alan Collinge, founder of StudentLoanJustice.org, an advocacy group for borrowers. “Who wouldn't want to be in that business? You can't lose. There is no bankruptcy protection, and you have the borrowers for life,” Collinge said. “It has led to some really abusive situations.” For those of you who like "the math"...the $20k in interest referred to in the piece is on a $50k loan at 6.8% for 10 years. A comparable "alternative" loan (i.e., the kind available for flight training) would have interest (just interest) totaling $71,000. Quote Link to comment Share on other sites More sharing options...
bellpilot Posted April 15, 2007 Report Share Posted April 15, 2007 Thanks Fry, You are always on top of great issues!!! Thanks again on keeping us up-to-date!! Bellpilot Quote Link to comment Share on other sites More sharing options...
zemogman Posted April 15, 2007 Report Share Posted April 15, 2007 Big money is involved...which inclines me to think that this congress that is supposed to be "for the people" may be forced/lobbied in the direction of keeping things exactly the way they are. I'm sure this is contributing to our decline in the world-ranking of educated nations... Our government should keep all educational loans on tight reins. I don't have a problem with capitalism...I love it...However, it's abuse is hurting many. Thanks for bringing the story out... Quote Link to comment Share on other sites More sharing options...
dlo22 Posted April 15, 2007 Report Share Posted April 15, 2007 so are these loans becomming available, or are they being faded out. I kinda got lost withing the post. sure sounds like that would be the best way to go. 71k over ten vs 150 k over 20... Quote Link to comment Share on other sites More sharing options...
Sparker Posted April 15, 2007 Report Share Posted April 15, 2007 Pay cash for everything, saves a lot of math Partly kidding, but almost every loan is a rip off if you really do the math, If you get a 30 year mortgage on a house that would have cost $100,000 you will pay $300,000 by the time you pay it off. Loans suck unless your the one earning the interest. Quote Link to comment Share on other sites More sharing options...
fry Posted April 16, 2007 Author Report Share Posted April 16, 2007 Pay cash for everything, saves a lot of math Partly kidding, but almost every loan is a rip off if you really do the math, If you get a 30 year mortgage on a house that would have cost $100,000 you will pay $300,000 by the time you pay it off. Loans suck unless your the one earning the interest. That would be a mortgage rate of 13.06%...a monthly payment of $1,111. Current rates are about 7%. So you'd rent instead (i.e., "pay cash")? Say your rent is only two-thirds of what a mortgage payment would be...use your number of $1,111. Your rent would about $741 a month. And say your landlord raises your rent 2.5% a year...inflation you know. Over 30 years you will have paid $390,000 in rent. And you still don't own anything. So I guess rents also suck unless you're the one earning the rent, huh? Quote Link to comment Share on other sites More sharing options...
Gerhardt Posted April 16, 2007 Report Share Posted April 16, 2007 all this math is hurting my head. I should stick to simple math, like W&B. Quote Link to comment Share on other sites More sharing options...
fry Posted April 16, 2007 Author Report Share Posted April 16, 2007 all this math is hurting my head. I should stick to simple math, like W&B. Ain't it the truth. Leave all that pesky dollars and sense math that deals with paying for retirement, buying a house, asking for a raise, funding the kids education...the stuff that is uncomfortable to think about...to others. Ya know, like your employer, the IRS, real estate & mortgage brokers and flight school salespeople. Let them do the math for me; they like to do it. Quote Link to comment Share on other sites More sharing options...
Sparker Posted April 16, 2007 Report Share Posted April 16, 2007 (edited) That would be a mortgage rate of 13.06%...a monthly payment of $1,111. Current rates are about 7%. So you'd rent instead (i.e., "pay cash")? Say your rent is only two-thirds of what a mortgage payment would be...use your number of $1,111. Your rent would about $741 a month. And say your landlord raises your rent 2.5% a year...inflation you know. Over 30 years you will have paid $390,000 in rent. And you still don't own anything. So I guess rents also suck unless you're the one earning the rent, huh? I don't think its a horrible idea to rent while saving up for a down payment, and it is STUPID to have a 30 year mortgage, I was giving ballpark numbers. A 15 year mortgage payment is not very much more and it will save a ton of money, but this is supposed to be helicopter forum, there are other forums for talking money, Not every financial plan works for everybody. This is way off topic by now.... I am not going to get a loan for flight school, I am going to get as small of a loan as possible for my house if it means less time slaving away for the bankers to get rich, even if my landlord earns a little extra.... He's a nice guy, anyway My opinion, not trying to start a fight.... Edited April 17, 2007 by Sparker Quote Link to comment Share on other sites More sharing options...
Voluptuary5 Posted April 17, 2007 Report Share Posted April 17, 2007 Ain't it the truth. Leave all that pesky dollars and sense math that deals with paying for retirement, buying a house, asking for a raise, funding the kids education...the stuff that is uncomfortable to think about...to others. Ya know, like your employer, the IRS, real estate & mortgage brokers and flight school salespeople. Let them do the math for me; they like to do it. Touche, Fry! That's pretty funny! -V5 Quote Link to comment Share on other sites More sharing options...
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