Yeah no. The interchange fee is 1.5%-2.65%, most of it is paid to the issuing bank, the network only takes ~0.05%-0.13% [1, 2]. So let’s just say the bank collects 1.4% of every transaction.
Let’s say the bank fronts the money on average for 35 days (15 days to average the billing cycle, plus 25 days grace period, but let’s assume on average people pay their bill a little closer to the due date). Under these assumptions the issuing bank generates about 14.6% APR (1.4%*365/35) on the money they let you borrow.
According to this, AmEx collects more in interchange fees than they do in interest. So no, those who pay interest do not subsidize those who do not.
I did the same into FFELP as well. At the time I thought UHEAA was a govt. agency but they seem to treat FFELP as private loans. I hope Biden’s DOE will treat FFELP loans differently. If not Is there a way to convert/ move to Direct loans (wasn’t an option in 2005)
You could have and still can reconsolidate into a loan that qualifies for the forgiveness programs, but none of the payments that you made while it was a FFELP loan count towards forgiveness, so you would be starting the clock over from scratch. So essentially, you are like me and SOL. I’ll bet you the remainder of your loan balance that the DOE does not change anything to make your loan and payments eligible. Don’t bother hoping for that. It’s a waste.
I would agree with your bet under Trump/Devos but this time seems different
I’m “writing off” the past payments since I haven’t been in IBR or PSLF (I did do a few years of public service but not many. Bummed out since I didn’t know one had to be in a specific IBR program for the 20 yr payments forgiveness.
I didn’t reconsolidate /refi to Direct b/c I didn’t want to lose the 2.75% rate, but now the $10K Biden proposal is making me look. Q is the FFELP qualify or just the DOE Direct.
I’m guessing that you’re making an argument that almost anyone could pursue college if they had the right help, support etc and that almost all people are capable of doing it if given the right chance and circumstances, etc? I mean is that your argument that people couldtheoretically almost all handle collge? If so I don’t disagree with that sentiment generally. But I’m sure the people who literally can’t handle college is substantially higher than ‘null set’. I mean the technically intellectually disabled of the population are a good 2-3% alone which is not a ‘null set’.
But …We’re talking about the reality. Reality is everyone goes to college and yet people drop out in droves.
2/3 of people don’t graduate college in 4 years. 40% can’t get trough in 6 years
THats pretty clear lots of people can’t handle it one way or another. Maybe most of them have the inate ‘ability’ but they don’t apparently have the educational prerequisite, work ethic,
Then of the people who do graduate we’ve got 6% of them getting a BA in psychology adding to the millions of those degrees the nation doesn’t really need.
If you can barely get through high school then you should not go to college (on our dime). Maybe it wasn’t their fault they sucked at school but still.
If you don’t know what you wanna be when you grow up and major in stupid stuff then you should not go to college (on our dime)
I’m not opposed to people enriching themselves and being well rounded, etc. We’ve got libraries for that.
FYI, I’m also not opposed to the idea of student loan forgiveness.
Some of the highest achievers from my high school went to top tier universities undeclared, because they didn’t know what they wanted to be. And while high achievers can usually get scholarships (i.e., not on our dime), I would argue that their potential for success is high enough to warrant at least some public investment, because it’ll have a high ROI.
Honestly it seems most 18 year olds don’t have a good grasp of what they wanna be when they grow up. I’m almost 50 and I don’t know what I wanna be when I grow up
I do think we have far too many people getting psychology, communications and English degrees though. These are all valuable things in their ways but we serve noody well by having 10x as many degrees in the fields as needed.
Much of discourse here is whether we should forgive or not. Just a matter of time It WILL happen now ( whether by Biden fiat or by Congress depending on GA) My question is how to best position my loans like I did to UHEAA in 2005 (Thx FWF)
Welcome to pendulum politics, denying 95% of forgiveness under DeVos etc
Q is “broadly cancel up to $50,000 in Federal student loan debt.”= FFEL or just Direct Loans
It is true that DeVos was in office while the forgiveness was denied, buth her hands were tied. The rules were literally set out by law in 2007. It took 10 years for anyone to be eligible, so the denials fell on her desk, but there was nothing she could do. It was the the Dept of Ed under the presidents before Trump that didn’t do a good job getting people into the loan payment programs that would eventually lead to forgiveness. I would bet none of those Administratios’ Department of Education sent a single letter to a single public service employer telling them to let their employees know they need to be paying on Direct loans in order to qualify for forgiveness.
Not sure if that’s entirely true. I listened to a story on NPR that described people who did qualify under all the rules but were denied due to ignorance and incompetence at DoE or loan servicers, who not only mistakenly denied the forgiveness, but wouldn’t follow up or correct their own mistakes, IIRC. That story was the reason DeVos was forced to testify before Congress on the subject and promised to do better.
I agree with most of your comments, but my point is we’ll probably overcorrect now with mass forgiveness. I’m hoping they’ll include FFEL as their federal loans but I’m debating whether I should move over to Direct just to have a safe harbor.
And again if it makes the moral hazard people feel better, I’ve paid over 55K in interest so far and still owe over 90K in loans over 15 years
I am not remotely surprised by this as I have been predicting it.
I have been telling people for years to not pay off their student loans because the Federal Government is going to wipe them out. I got into arguments with people and downvoted into oblivion. I even told people that they would end up feeling like suckers if they paid off their loans.
The reality is this is a great way for politicians to buy votes and appear compassionate. It will make the moral hazard worse and provide schools with no incentive to control costs.
I’ve been predicting that too, but over 15 years I’ve paid 55k for that bet. At this rate I will pay enough in interest to match the principal while waiting for the bet to pay off.
For all the moral hazard police not paying mortgages was a bigger issue since it affected all our house values (mine, in particular, being in PHX) . I do agree that It would be better to control tuition/fees like it was for the boomers, not subsidize future loans that’re inflationary
Second kid going to college next year and current one still in college. So I’d like to get in on this deal before I pay more from the kids 529 Plans. Even if I have enough to fund their college studies fully without loans as it is, why not partake in free money if our government is freely handing out yet again more money it doesn’t have.
Hopefully they figure it before I have to make more payments next summer. I wouldn’t mind saving $30k combined for my kids’ college degrees.
I agree… Biden’s main idea is to give out “free this & free that” to gain popularity. You should get in on the deal also.
I remember well when our 2 sons were in college at the same time. We scrimped & saved those double payments & managed to get by. Would have been sweet for Uncle Sam to come along & pay those bills.
So now, I suppose the rest of us “hard working” folks will get another tax increase. Gotta pay up
To tell the truth, I don’t want the borders opened up. Free welfare, Free Medicare for illegals!
