Monkeys on this site have discussed the problem of student loans and those "student loan horror stories" quite often. To all of us here that plan to take out student loans in the future: there is some good news. Many private lenders are dropping those infamous variable-rate loans and introducing fixed loans.
The largest student lender, SLM (SLM), known as Sallie Mae, introduced fixed-rate loans earlier this month. On May 21, Discover Student Loans (DFS), the third-largest education lender, started a fixed-rate loan program as well. Wells Fargo (WFC), the second-biggest lender, had launched fixed-rate loans last summer. For families with good credit, the private loans could be as low as 5.75 percent—a full point lower than the 6.8 percent for unsubsidized federal loans.
This will not solve the problems that currently exist, but how will this affect students in the near future?
While the new loans can't compare with the government-run Stafford loans, surely it is good news that newer, better options are being offered for students who need private loans to cover some educational costs. In addition the newly formed Consumer Financial Protection Bureau is seeking to educate students about which loans are best for them here: http://www.consumerfinance.gov/students/knowbeforeyouowe/ Unfortunately not everyone has good financial sense like most monkeys on WSO.
In looking over that page they get a C for effort or at least trying to put something out there to educate kids about the loans. The problem is it fails any mention of addressing the root cause of the issue which is that kids pick irrelevant majors and take on way too much debt for a given income in the future. Its pretty obvious that a random literature degree with a high debt load is a terrible idea. This thing should have debt load at the end and then look at the median salary ranges for that profession in this market. That would be eye opening for a lot of students IMO.
It is blatantly irresponsible to be lending large amounts of money to kids who have no idea of what they want to do in the future or without any concept of what it will take to pay it back. I think kids have a realistic understanding of the costs but an unrealistic understanding of how their major will affect their ability to pay it off in the future. Sure, there are some like on here who know exactly what they want to do or what career they are looking for from the start. I know I sure as hell didn't when I got to college.
Competition is always a good thing. What I worry about is that some banks will get in the college loan game thinking that the government will bail them out if their investments go south, just like they did with the mortgage bubble.
Well if I can't consolidate my private loans with these new rates then I could give two shits. Hopefully easier consolidation will be an option for outstanding loans.
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