Re:Why Does College Cost So Much?
by brudgers on Saturday February 19, 2011 @02:22PM
(#2239669)
>"For the lenders, higher tuition means more loans returning 5% or more for which the government assumes all the risk."
5% is a typical origination fee for an educational loan. The lender takes it off the top. Interest on educational loans - since loans to parents and relatives are a big part of the business - can run quite high for non-government backed loans (9%-11% was not uncommon for loans written in the 1990's).
Focusing on traditional educational loans (Stafford, Plus, etc) misses the other big form of educational borrowing - credit cards. Perhaps this has declined with the recent downturn, but from the late 1980's credit card companies increasing targeted students, and it was not uncommon for people to graduate with $3000-$12,000 in credit card debt in addition to student loans. [and it has also become a more difficult debt to discharge through bankruptcy]
5% is a typical origination fee for an educational loan. The lender takes it off the top. Interest on educational loans - since loans to parents and relatives are a big part of the business - can run quite high for non-government backed loans (9%-11% was not uncommon for loans written in the 1990's).
Focusing on traditional educational loans (Stafford, Plus, etc) misses the other big form of educational borrowing - credit cards. Perhaps this has declined with the recent downturn, but from the late 1980's credit card companies increasing targeted students, and it was not uncommon for people to graduate with $3000-$12,000 in credit card debt in addition to student loans. [and it has also become a more difficult debt to discharge through bankruptcy]