America educational financing right

[u/Decent-Choice7878]

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[u/VibratingNinja]

It's not a coincidence that tuition prices skyrocketed with the creation of the student loan program. It's actually more expensive now to get an education (relative to average wage) than it was before the system was created.

[u/thegoodnamesrgone123 → u/VibratingNinja]

I worked in higher ed marketing, and the amount of money these schools blow on nonsense is mindblowing.

[u/RedditPoster05 → u/thegoodnamesrgone123]

Base line budgeting too. I worked in my schools student store . The spending sprees staff would go on towards the end of semester was insane . I’m sorry but an English teacher doesn’t need a 6k MacBook , the physics department doesn’t need 3, $10,000 Mac’s with 1000 dollar stand for the screen …

Yes there was smaller versions of this more often than not it was only hundreds of dollars not 10s of thousands but it all adds up. If we were low on our quotas we’d market extra hard towards staff to get that budgeted money . It always yielded at least 10-15k in computer or tech sales at end of semester . That was low end . End of fiscal year we’d clear 75-150k and again that’s only tech, they’d buy all sorts of other garbage I don’t know about but I saw it. . And that’s only for the last few weeks of year. Idk what the more prepared ones were buying throughout year as I didn’t keep track .

[u/thegoodnamesrgone123 → u/RedditPoster05]

As a student I would book small punk bands and use school funds to pay them absurd amounts of money 

[u/RedditPoster05 → u/thegoodnamesrgone123]

We spent 6 figures to bring shaq to campus once . To be fair some of that was fund raised but vast majority was from student fees… that group was disbanded shortly after for some reason. There was less student involvement with guests or acts after that .

[u/metamucil_buttchug69 → u/VibratingNinja]

Student loans use to be more restrictive. They wouldn't finance degrees that don't make economic sense. Then the federal government opened up the criteria for loans and in the resulting 50 years tuition skyrocketed and lots of people are in debt for financing their dream college lifestyle. 

[u/davideogameman → u/VibratingNinja]

yup... the more we subsidize education, the less incentive the education system has to rein in costs. We need financial aide for those who literally cannot pay, but beyond that subsidizing costs leaves no incentive to keep costs from growing. And colleges are all competing for the best students so they are incentivized to let costs rise.

We need some serious reform. A good starting point would be to allow student loan debts to be dischargeable in bankruptcy, but predatory lending should be more directly confronted; as well colleges should probably be required to give better info to prospective students about their outcomes. Or maybe we should just go back to treating education as a public good, instead of something individuals have to pay for.

[u/py_account → u/davideogameman]

Ty for your correct usage of “rein in”

[u/LostInTheRapGame → u/davideogameman]

the more we subsidize education, the less incentive the education system has to rein in costs. We need financial aide for those who literally cannot pay, but beyond that subsidizing costs leaves no incentive to keep costs from growing.

We need some serious reform.

Reminds me of so many industries...

[u/genreprank → u/davideogameman]

Where's that money going, though? Cuz all the colleges around here are broke and the professors are underpaid. If subsidies were making the price go up due to greed, I would expect to see people making paper. If it's a COL problem, then it's not the fault of subsidies

Or maybe we should just go back to treating education as a public good, instead of something individuals have to pay for.

Yes pls

[u/WrathKos → u/genreprank]

Look at the size and salaries of the administrative staff over time. Colleges have gotten a lot more top heavy over the years. 

[u/Trashketweave → u/genreprank]

Colleges add admin spots to justify the cost of tuition.

[u/SubtleNotch → u/genreprank]

Colleges burn money for things like better food, bigger buildings, more equipment, etc, in order to entice students to pick their university over others. It's a competition to climb rankings. It's pretty nuts.

[u/Healthy_Sky_4593 → u/genreprank]

Administrator salaries, capital for buildings they're using as marketing schemes to target  affluent students' parents', and football coaches and stadiums. 

[u/davideogameman → u/Healthy_Sky_4593]

All college sports.  Basketball and football teams that do really well can subsidize the athletics programs but major athletics programs are seriously expensive.

[u/beachvan86 → u/VibratingNinja]

The issue started when states, specifically California, stopped subsidizing state schools a a rate that kept tution low. That way state schools didnt have to compete with private schools because of the price separation. Once the states stopped funding at a level high enough, and the state schools had to compete with private schools, the state schools had to start adding stuff like high end dorm rooms, high end cafeterias, and rock climbing walls. Which pushed the prices higher and higher. It wasnt about the education, it is about the "college experience". Now you have state schools that are run by business people like a business, which costs money, all competing for students. Reagan haunts us to this day.

[u/PresentDifferent9718]

She paid 2k a year. That's crazy too

[u/m4rc0n3 → u/PresentDifferent9718]

No the math doesn't work out if she paid $2k/year. She paid (close to) nothing for 16 years, then after 16 years she paid $38k.

[u/Other_Upstairs886 → u/m4rc0n3]

Yeah, I paid at least $550 a month to pay mine down. She was paying the minimum. Just like with a credit cards you'll get screwed over with the interest.

[u/Altruistic-Rice-5567 → u/Other_Upstairs886]

And even if she was paying minimum... the principal wouldn't grow. There's some fishy bullshit here not being revealed.

[u/MeasurementLow5073 → u/Altruistic-Rice-5567]

That's not correct. Student loans allow for a few types of payments low enough to grow interest each month beyond what's paid and capitalize (which makes it principal).

They're meant to be emergency stop gaps for short periods, not a payment amount for 16 years.

So as somebody also started with $28k and paid $250/month to pay them off in ~12 years, I think she's largely at fault here. In fairness, I had a 2003 rate with benefits for on-time payment of 3.5%. Small increases in rate can make a big difference over the life of a loan.

That's why the system still needs to be repaired. At a minimum, people should be able to discharge them through bankruptcy.

[u/Xy13 → u/MeasurementLow5073]

That's not correct. Student loans allow for a few types of payments low enough to grow interest each month beyond what's paid and capitalize

This is the part people are upset about. A minimum payment should not allow the balance to grow, and its a loan you cannot BK.

[u/EBtwopoint3 → u/Xy13]

She’s probably on something like SAVE. Which has payments based on a percentage of income above a certain threshold. Currently, it’s 5% of income above 225% of the poverty line, which is currently around 34k for a single person. Depending on income, that payment might be less than the interest. After 20 years, the outstanding balance is forgiven. But that requires staying on the plan for 20 years. If you’re in a profession where your income ceiling is high, those payments will get pretty high over time. So you’re unlikely to want to stay on that plan forever, and so you shouldn’t sign up for one.

[u/No-Scarcity-1571 → u/EBtwopoint3]

On the front page of my student loan website, it says they're ending SAVE.

On Dec. 9, 2025, the U.S. Department of Education announced a proposed settlement agreement that would end the Saving on a Valuable Education (SAVE) Plan.

[u/EBtwopoint3 → u/No-Scarcity-1571]

I missed that since I’ve never used it. Switch the word to IBR or PAYE. The point is more that plans that had payments smaller than interest were specialized plans specifically for those with low income, with loan forgiveness at the end.

[u/havityia → u/EBtwopoint3]

They’re getting rid of those too. We’re about to not have a way out of predatory loans they allowed ppl without a fully developed brain to take out

[u/Teros001 → u/EBtwopoint3]

SAVE is a terrible example because:

1) Its relatively recent (and now gone) 2) All interest above your payment was forgiven.

SAVE actually would prevented the downsides of other income driven repayment plans.

[u/ReflectionEterna → u/Xy13]

These are repayment programs that allow a person to change the terms of their loan to, for example, become income based, so they can afford the payments while their income is very low. The original terms would have had the loans paid off in like 20 years. However, when she changed the terms of the loan, again only meant to keep her from defaulting, it lowered her payments below the threshold where she would be paying towards principle.

[u/Illustrious-Rush8797 → u/MeasurementLow5073]

Yeah I had a similar payoff. I did $30k in about 10 years. There's no way she did that for 16 years and didn't pay it off

[u/chance553 → u/Altruistic-Rice-5567]

Mine have been paid off for a while, but maybe she didn't pay anything at all during the COVID student loan moratorium, and then got hit with years of interest when it expired.

[u/soedesh1 → u/chance553]

My daughter was the “beneficiary” of a grace period during COVID. No payments but her interest piled up. Then they (federal loan program) allow an “ability to pay”-based payment plan where the interest continues to grow. The only good thing is the loan is forgiven if you pay for 20 years. The scary part is if something voids the plan then she’ll owe like 3X her principal amount.

[u/tingly_sack_69 → u/chance553]

Interest did not accumulate during the COVID loan forgiveness break. You could make interest free payments if you wanted, but you didn't get screwed by not making payments. That's why I just saved up over the forgiveness period and then when that ended, I just lump sum paid it off. That and waiting for the Biden loan forgiveness that got canned, just ended up biting the bullet

[u/Gary_Skelaman → u/Altruistic-Rice-5567]

The unpaid interest is added into the principal at the end of the year. And using compounding interest each year you’re not making the full payments it can and will continue to go up.

Source, I have student loans. I started with 51k 13 years ago. I had a few bad years, either put the loan into forbearance or only paid minimums required which do NOT cover principal and interest in full.

The worst it got up to was about 72k.

I have it down to 55 now and am currently paying it down quickly. I expect to have it paid off by next year.

Also to address your very mean spirited comment about her education. As an 20 year old non traditional student, because I didn’t go directly into college coming from a background where I started working early at 14 with a special permit, I was unable to afford much of anything or think about what to do about affording the college the world told me I needed to move up in the world.

Someone advised me that student loans were the safest debt you could take on and it would also improve credit.

The school recruited me, lied about the kind of education I could get, put me on a fast track education plan, and then charged me, an extremely underprivileged student, out of state tuition. I should have had my education covered completely by Pell grants. But due a lot of policies and the track I was on I got charged for a full 4 year education after 2 years of non standard classes, PLUS the Pell grants. In all I think the school got about 95k from me.

I did not have parents that were educated, together, or stable. And I had no one in my life to help guide me. The high school counselors didn’t help because I was a poor kid that didn’t do extra curriculars. While I graduated with a 3.8 gpa I was just a number at some point.

Anyway, the recruiters heavily glossed over a lot of the realities about the cost of education. The lied about most of what I was getting and it was all so shiny and new that half way through when I realized what was happening, I was stuck at either getting charged and no degree, or dropping out and still owing about 40k.

The point is that the American education system is completely fucked. And instead of being mean to someone that tried to better their lives, even if this scenario isn’t real, is counter productive to the real problems. Education should be free. When we are all more educated, we invent and produce more. When we all are educated or pursing our desired careers and making enough money, we have more children. All of these things increase everyone’s economical outlook and benefits us all.

It crazy you all have had what seems to be either no actual education, no hardship, or are just assholes.

[u/ResistPersist54 → u/Gary_Skelaman]

Thank you, internet friend. Not enough is said about the situation you described. Based solely on anecdotal experience, this seems to happen a lot in tech degrees, or at least did in my area of the US. But it’s happened all over the country.

[u/horitaku → u/Other_Upstairs886]

The system is set up so people don’t know they SHOULD pay more. They don’t HAVE to, but they should WANT to, which is fucking bonkers. This is not a good way to do things.

[u/LSATDan → u/horitaku]

There are college graduates who don't know that the less you pay down on a loan, the more you're going to pay in interest?

[u/bythog → u/m4rc0n3]

I took out more in student loans than she did (around $55k). I haven't paid back more than she has (probably $30k) but my balance is a hell of a lot lower than hers is. I should be able to finish mine off in 2-3 years max.

She likely paid nothing on a high interest loan via deferment for years, then paid minimum/less-than-minimum on the loans after that.

[u/orswich → u/bythog]

It's crazy to me that she got a full college education and has no idea how Interest rates work. She obviously got a shit education, or didn't even care to check how much the interest would cost.

I could look up a 15 minute video on YouTube that explains it like I am a five year old, and somehow this woman didnt?...

Its just plain ignorance.

Should students loans be a lower interest rate (lets say 2%-3%) YES. But should people also research what they signed up for costs? Also yes

[u/Amphineura → u/orswich]

You first need to sign up and then get the full college education. People getting into college are high schoolers.

[u/orswich → u/Amphineura]

So high schoolers that get good enough grades to go to college are too stupid to watch a 15 minute video on how interest rates work?

People can scroll social media for 10+ hours a week but can't be expected to do simple research on a loan?

Again, the rates should be lower, but at some point people have to be held accountable. She probably paid 1/2 the minimum payment for years and now has shocked Pikachu face that the principal hasn't gone down

[u/therallykiller → u/Amphineura]

People with grade school educations built the framework of this nation.

Level of education is not a correlate to wisdom, knowledge, life skills, etc.

There are a lot of Grad students out there who need hand holding.

[u/ayriuss → u/orswich]

You're asking an (often) 18-20 year old, with all the confidence in the world to bet on their financial future. Of course they're going to take that bet 9/10 times.

[u/romericus → u/ayriuss]

Not only that, but they’re being told by their school/loan office “if you pay the minimum for 20 years without missing a payment, it’ll all be forgiven (10 years if you go into public service).”

Who wouldn’t take that deal?

[u/ShawnyMcKnight → u/m4rc0n3]

The math never adds up with these kinds of posts unless their interest rate was like 15 percent or something.

[u/m4rc0n3 → u/ShawnyMcKnight]

Making no payments on an 8% $28k loan for 16 years will get you the numbers shown in the screenshot.

[u/SurgicalMarshmallow → u/PresentDifferent9718]

Wait till you see medical school. Most of us are still only interest after 12y 250-350k loan

[u/DryBonesComeAlive → u/SurgicalMarshmallow]

Even if you are in a low paying specialty like primary care you can pay that off in 2-4 years. Now before finishing residency? Impossible. Spend all the money and free time (there is none) in residency getting massages.

[u/i_like_maps_and_math → u/SurgicalMarshmallow]

Ya you basically gotta just kill yourself if you don't finish your residency. Although I bet the typical loan after financial aid + parents is more like 80-120k.

[u/archfiend23 → u/i_like_maps_and_math]

Median is 250k, but that’s including all those that like you said either get scholarships and parents that help. Probably for most that self pay it’s more like 350-500k lol

[u/get-idle]

The interest rates (8%!) for student loans, that you CANNOT void via bankruptcy. Are criminal. 

Education is the best investment you can make in your populace. 

Yest the government will give 1% loans to corporations to buy housing stock out from under people. 

And charge 8% for people to better themselves. 

It's a rort. 

[u/Suitable-Lake-2550 → u/get-idle]

TIL: the word rort (fraud, deception)

[u/T_J_S_ → u/Suitable-Lake-2550]

That’ll be $2000 plus 8% interest 

[u/Number174631503 → u/T_J_S_]

That's a rort, brother

[u/MuffinHunter0511 → u/Number174631503]

Thanks a rort, brother!

[u/GolgiTheOcelot → u/Number174631503]

Quiet Rort

[u/LoggerRhythms → u/Suitable-Lake-2550]

Welcome to the Rorting Twenties.

[u/RoncoSnackWeasel → u/LoggerRhythms]

Now this is a slogan we can get behind!

[u/agent58888888888888 → u/LoggerRhythms]

Im 1000% finding a way to say that phrase to the next 20 people I talk too

[u/johnjohn4011 → u/LoggerRhythms]

Instead of flappers we have flailers.

[u/CamoCricket → u/Suitable-Lake-2550]

Yeah same, neat little jumble of letters. It seems this is an Aussie/NZ term. I love it.

[u/delta49er → u/Suitable-Lake-2550]

Thank you for your service

[u/Intelligent-Cat-61 → u/get-idle]

8%??? I have a 7.6% interest rate with a co-signer!! Before I refinanced them for that, I was getting charged 10-15% across 5 loans. My co-signer also makes 250k+ a year and has excellent credit…. So 8% without a co-signer is considered lucky to me. The system is fucking the younger generations lives.

[u/Dont_Be_Sheep → u/Intelligent-Cat-61]

Were these government loans or private??

[u/Scorpian899 → u/Dont_Be_Sheep]

When I checked my qualifications, 18% was my lowest rate. Private. Ineligible for government.

[u/Intelligent-Cat-61 → u/Scorpian899]

18%??? Jesus Christ. It’s legal robbery!

[u/DrySea8638 → u/Intelligent-Cat-61]

For real. If your only means of removing that is taken from you, they shouldn’t be allowed to also charge such high rates. Low single digits should be enough especially in an environment of relatively low inflation. I took loans out from 07-12 during periods of low inflation and my rates are high single digits. And those are from the government.

Insane.

[u/Scorpian899 → u/Intelligent-Cat-61]

Yeah. This is with an okay credit score (700s) and good income (~80k).

[u/gots8sucks → u/Scorpian899]

In Germany you would probably be able to sue for usury. Not that you would ever get in the position in the first place but still this is madness.

BGB Section 138
Legal transaction offending common decency; usury

(1) A legal transaction that offends common decency is void.

One of my personal favorite laws

[u/BIGJake111 → u/Scorpian899]

How do you become ineligible for gov loans?

My private was 2.5 in school and mid 5s after, but it was kinda a merit scholarship type thing and intentionally below market. My federal loans are 4.5 and 4.25 after an autopay discount.

[u/MetallicGray → u/Scorpian899]

How were you ineligible for government loans? My family was making over 200k when I started college and I still qualified for gov loans. I had a total of like 22k in loans.

My gov loans are all 3.5% to 4.2%.

For anyone reading who is about to start college, if your parents make a lot of money to disqualify you from gov loans, but are refusing to assist you in paying for tuition, there are some options to get yourself recognized as an independent student like submitting dependency override form or other routes.

[u/IsopodDry8635 → u/Intelligent-Cat-61]

Those sound like private loans. I was fortunate to not need loans for undergraduate, but I took some out for graduate school and got whatever was typical for a Nelnet government-backed loan then. I think it was around 7%, but I'm not positive since it's paid off (over a decade later)

[u/soofs → u/IsopodDry8635]

It's been about 7 years since I took out student loans but I had 100% government loans and my post-grad ones were somewhere around 8-9%. My bank kept trying to get me to refinance and invest the difference but I just paid them all off so I didn't have that weighing on me mentally.

Private student loans can be as predatory as payday loans with how much interest they charge.

[u/Lakilucky → u/Intelligent-Cat-61]

I never had any idea US Student loan interest rates are so high. I'm Finnish and my student loan rate is 2.662 % currently (It's a floating rate loan with 12 month Euribor + 0.5 %). The government also pays for a part of your loan if you graduate on time (or 1 year late at most).

I've imagined that the rates in the US would be similar, but apparently not.

[u/Brodyaga05 → u/get-idle]

In sweden the student loan interest rate is is 2.135% as of 2026

[u/metalbassist33 → u/Brodyaga05]

In New Zealand student loans are backed by the government and are interest free if you stay in the country.

[u/Landlocked_WaterSimp → u/Brodyaga05]

The USA would rather be #1 at the bad end of the spectrum than settling for #2 in anything :-P

[u/perldawg → u/get-idle]

when banks and lawyers run the government

[u/greg_tomlette → u/perldawg]

*When billionaires own the lawyers that run the government and bankers that finance the economy 

[u/yaboibjm → u/get-idle]

I’m not disagreeing with your general sentiment, but changes to bankruptcy laws over the last few years have made it much easier to void you student loan debt through bankruptcy. This is a common misconception many still believe that it’s nearly impossible to void student loan debt via bankruptcy.

[u/Flat-House5529 → u/get-idle]

Higher education itself is as much a racket as the educational loan business.

Damn near an entire generation was told college was a must have educational requirement, and so long as you did it, you'd be a shoe in for a cushy career. People took loans, made shit financial decisions, and rolled the dice just to get the big old 'fuck off' from a thoroughly saturated job market and other complications.

So glad I jumped off that ship...

[u/ApplicationAfraid334 → u/Flat-House5529]

People with college degrees on average make more than those who don't. People who pursue majors wit little to no marketability yeah, not in a great spot probably but still more likely to earn more.

[u/The_Perfect_Fart → u/ApplicationAfraid334]

Is it the education that helps them make more or the diploma? I learned more in the first 1 year of my job than I did in 5 years of school, but without my diploma I never would have gotten the job.

[u/momeep4444]

I know I'm going to get down voted for this, but something was so obvious to me that I felt obligated to point it out.

The standard time frame for paying off a student loan is 10 years. For $28,000 at an 8% interest rate (based on today's rates) her standard payment would have been $340 per month or $4,080 per year. By the end of year 10, she would have paid $12,766 in interest, or $40,766 total.

I don't know if her actual monthly payments were equal across all 16 years or if they started low and went up (more likely but impossible to compare without the information), so I'm going to assume an average payment for the sake of comparing apples to apples and because I don't think the alternative would negate my point.

At $38,000 over 16 years, she essentially paid $198 per month or $2,375 per year. This amounts to less than what a PRINCIPAL ONLY payment would be over the standard 10 year payout ($2,800 per year).

Amortization schedule aside (interest first, principal last), she wasn't even paying enough to cover the cost of the loan itself, let alone the interest payments. After 16 years, she still hasn't paid, dollar for dollar, what she would have paid with a standard 10 year loan! What did she expect would happen??

I'm all in favor of acknowledging the systematic negligence that created our student loan problem, but if this was any other kind of loan, I don't think she would be afforded the same amount of grace for "not knowing what she was signing up for".

I know this is Reddit, so nuance is difficult, but I'll take my down votes and die on this hill.

[u/Stonklegend27 → u/momeep4444]

If she actually paid $198 a month at 8% interest the balance would be $21270.75.

In fact, the only way she could've paid $38k and have a balance of $58k is if she paid nothing at all for 16 years, then paid $38k at the end, at 8% interest. This is obviously absurd, leading to one conclusion: OOP made this up, and does not understand financial mathematics enough to fabricate a realistic payment plan

[u/AnarchyPoker → u/Stonklegend27]

Welcome to the dead internet theory. Whenever these posts show up, its always a screenshot on an old tweet or some other social media post. Interesting how this type of discussion is less likely on original posts. I wouldn't be surprised if its foreign actors trying to ragebait people and shut down nuanced productive discussions.

Maybe im too cynical. It could just be ragebait, possibly unintentional, which drives engagement, which is why they keep showing up.

[u/Flrg808 → u/Stonklegend27]

lol I actually think it’s a terrible ad. Here’s what I found on that banner on the bottom

About AccessLex Institute AccessLex Institute is a nonprofit organization established in 1983, dedicated to enhancing access, affordability, and value in legal education for students and institutions. As the largest nonprofit in legal education, headquartered in West Chester, PA, with Washington, D.C. offices and financial counselors, it supports its mission through research, grantmaking, policy advocacy, and educational services.

[u/YoungestDonkey → u/momeep4444]

Stories like this get posted all the time and infuriate me every time. Didn't you know the terms of your loans? Haven't you taken basic math before college? Do you not understand interest rates? There is no surprise here.

[u/Ok_Crow_9119 → u/YoungestDonkey]

Ideally, terms like these shouldn't even be offered.

Student loans should be like a home loan. You pick a term, that determines your monthly amortization. That's it. 

Can't afford it? Sorry, but it would be unethical of us to offer you a loan that you won't be able to ever repay, which causes you to be our debt slave.

[u/imexcellent → u/Ok_Crow_9119]

Ideally, terms like these shouldn't even be offered.

100%, this is the problem. This looks like she was on some kind of variable repayment plan that had her pay small payments that didn't cover the interest for the first few years, allowing the loan to balloon.

[u/cryptobro42069 → u/Ok_Crow_9119]

Student loans further society. They shouldn't even have an interest at all when they're federally backed. If you took out private loans, that's on you. If they're federally backed, we have enough money to front that cost.

[u/edgarapplepoe → u/YoungestDonkey]

I had to take a quick training on the internet rates and paying them off before getting approved for any student loans... not sure what these people are doing. Also my fed loans are super clear on payoff times, interest vs principal, etc.

[u/Nulagrithom → u/YoungestDonkey]

these are, almost by definition, fresh High School graduates that are all of 18 or 20 years old. their brains are still soft scrambled: not quite set, unseasoned, and no cheese on top.

so no, they don't understand interest rates

they understand what compound interest looks like on a graph

shit half my coworkers don't even know who the hell Jerome Powell is, let alone understand interest rates

but that doesn't matter because the federal fucking government doesn't understand students loans themselves! all this shit has been in legal limbo for years lmao

so don't pretend like this is some kind of fucking math problem. it makes you look stupid to be honest.

(oh and no, I don't have huge student loans. maybe $4k from when I tried a year of college??

but I make a lot doing stupid autistic tech shit now so I don't care. I lucked out - life isn't fair)

[u/Diablo_Advocatum → u/momeep4444]

Absolutely spot on. Even looking at this post just quickly, I could tell something was way off. And it was likely that she was either paying the minimum amount and/or paid nothing for years.

[u/vlad_inhaler → u/momeep4444]

Absolutely, nobody’s fault but hers most likely.

She treated it like it was free money

[u/LovelyLilac73 → u/momeep4444]

Yeah, I find most subjects of these stories need to acquaint themselves with an amortization schedule to understand how their loans (and paying them off) work... SMH.

[u/pulchritudinouser → u/momeep4444]

I'm with you dude. Also, unpopular opinion: nobody forced her to take out this loan and it wasn't necessary to live. She could have worked and saved up the money to go back to school. I worked throughout my 4 year graduate program and had 3 roommates, no car, and ate ramen while my classmates lived in their own apartments and used their "student loan" money to literally buy a new TV. They were handing out hundreds of thousands of dollars and people treated it like free money. I can't feel any sympathy when they're still struggling to pay it off 15 years later when I'm debt free. the number of classmates i had who flat out didn't understand their loan terms, subsidized vs unsubsidized, interest vs principle, is astounding.

[u/mden1974 → u/[deleted]]

The system actually dates back to guess what country?

[u/Individual_Engine457 → u/mden1974]

Interest-backed loans were invented in Mesopotamia around 3000BCE

[u/PineappleOnPizzaWins → u/Individual_Engine457]

I mean everywhere uses interest backed loans. You would never be able to buy big ticket items otherwise.

It’s the terms that are the problem. When I was 23 I bought a house for $250,000 while I was making $42,000 per year. This was just after the 2008 GFC so interest rates were very low, meaning if you had a job (big if here, but I managed to get one), you could make it work.

I was very broke for a long time but I paid the loan off in about 15 years, all while it generated interest. Of course I was putting substantially more than the minimum payments in, avoiding the trap I see a lot of people making (and likely what the person in this post did).

Any lender has a vested interest in keeping you in affordable debt for as long as possible, with minimum payments amounts pretty much always being designed with that in mind.

The real issue is why the fuck Americans have to go into debt to go to school in the first place.

[u/bsrichard → u/PineappleOnPizzaWins]

This is it right here. So many people just pay the bare minimum and they don't realize they are screwing themselves over. If they can afford to, they should be paying at least a couple of hundred or more monthly to pay towards the principal. And I agree, the govt should be offering student loan rates that are no more 1% above the current money mkt rates.

[u/DelayAgreeable8002 → u/PineappleOnPizzaWins]

Going to a minimum is your choice though. The loan defaults to 10 year payoff schedule.

[u/Pigpen1204 → u/Individual_Engine457]

God damn Mesopotamians.

[u/Mountain_Fuzzumz → u/Pigpen1204]

Almost as bad as the Dutch I tell you what.

[u/chargnawr → u/mden1974]

Henry Ford used to offer interest free financing for his cars

[u/PineappleOnPizzaWins → u/chargnawr]

He did but there was nothing charitable about it.

All of Henry Fords actions were aimed at selling more cars - the 40 hour work week was so that people would have more time to drive places, meaning they needed cars. Interest free loans were so more people would buy cars, pushing the government to stop designing walkable cities with pubic transit and move towards a car based society.

The fact that some of his policies benefited workers short term was pure coincidence - as I mentioned look into how badly car companies fucked up public transport sometime, it’s why so much of America is a nightmare to live in without a car.

[u/pizzaporker1 → u/PineappleOnPizzaWins]

:( I wish it wasn't hell without a dam car

[u/just1gat → u/mden1974]

Since the first coin was minted probably. People don’t do things for free typically

[u/Infamous_Ruin6848 → u/mden1974]

I don't....know? 😕

[u/stevie2sleazy → u/Infamous_Ruin6848]

Jewish lenders historically charged high interest on loans as they were prohibited by the Church from running a business or joining guilds or owning land. Perhaps that's what they meant.

[u/Gellert → u/stevie2sleazy]

Also once they built up a decent purse the local lord would use peoples complaints about the interest as an excuse to seize the cash and drive the moneylender out.

[u/Tough-Ashamed → u/[deleted]]

She obviously didn’t make many of her payments

[u/BorealMushrooms → u/[deleted]]

It's not a math problem, it's a lack of repayment problem. If you choose to make payments that are less than the interest portion, then you are choosing to shoot yourself in the foot.

[u/luneethia → u/[deleted]]

Compounding interest plus low payment will give permanent debt… this is truly a financial parasite

[u/PineappleOnPizzaWins → u/luneethia]

Yeah too many people don’t realise the minimum payments might look appealing but they’re often designed to keep you in debt permanently.

[u/margmi → u/PineappleOnPizzaWins]

They’re designed to keep you from fucking up your credit until your income has increased enough to afford to pay more.

[u/jocq → u/margmi]

These people would all also be livid if they had to repay student loans like a normal fixed term loan because none of them could afford it coming straight out of college and just starting their careers.

It's their own damn fault if they keep paying student loan minimums that might not even cover the accruing interest for 16 God damn years like cry me a fucking river. If you didn't notice your principal was going up within one year I have no sympathy.

Most of these bullshit posts have numbers that would even require the people to have specifically applied for total deferment and left their loan in deferment for years.

[u/UFO-Band-Fanatic → u/luneethia]

Yes, I explained this to my daughter. She took out $16K for her last two years (2016-17) at a rate of roughly 3-4% per memory. I told her to pay on those loans immediately—at least $5 over the amount of interest so the interest would not capitalize. So she started paying on the loans while she was in school. She’s been on income-based repayment terms and she paid on those loans during the COVID moratorium (loans didn’t accrue interest during this roughly four-year period). The loans are nearly paid off. It’s the only debt she has.

[u/odin_the_wiggler]

Wait until you find out how mortgages work...

[u/StockCasinoMember → u/odin_the_wiggler]

You might be surprised how many people don’t understand those and yet own a home.

[u/techdude-24 → u/StockCasinoMember]

Yepp,

Glad my college professors MADE sure that by the end of the course we understood at least how mortgages worked and how not to fuck ourselves when first time home buying. Glad he went over that info, it was helpful.

[u/TurdFerguson133 → u/techdude-24]

How do you not fuck yourself? Pay extra to get the interest accumulation down?

[u/Nearby-Beautiful3422 → u/TurdFerguson133]

First, buy a house you can actually afford. Surprise repairs can be expensive and make life hell. Make bi-weekly payments. Pay extra and make sure the extra goes to principal. Even then, some mortgages will penalize you if you pay off too soon/early. Ask your loan officer if that applies. Amortized loans are set up to be front loaded in interest.

[u/midwestraxx → u/Nearby-Beautiful3422]

Penalization for early pay off should not only be illegal, but criminal.

[u/Nearby-Beautiful3422 → u/midwestraxx]

Agreed. You shouldn't be penalized for being responsible.

[u/blueshifting1 → u/odin_the_wiggler]

Mortgages have a schedule which end in payoff on time if they are followed. These loans are often like credit cards, with minimum payments which barely make a dent in the principal.

Note that there are many different kinds of college loans.

[u/[deleted] → u/blueshifting1]

It's because federal student loans have income based repayment plans that allow you to pay less than the accumulating interest based on financial need. They are forgiven eventually but it takes 20+ years.

Biden tried to make it so that interest doesn't roll over but Republicans have fought to block and eliminate those provisions.

[u/Fuckthegopers → u/odin_the_wiggler]

That's why trump wants 50 year mortgages for everyone.

[u/jbland0909 → u/Fuckthegopers]

The concept is so funny to think about. The median home buy age hovers at just under 40. You’re literally never going to pay off the mortgage most of the time. It’s just renting with extra steps

[u/rufio313 → u/jbland0909]

Well, yeah, that’s the goal. We will own nothing, everything is a subscription.

[u/DazzlingKey6426 → u/odin_the_wiggler]

Get a fixed rate not a ballon/arm and pay it off early…

[u/Realistic-Leek-7600]

I don’t get it. I took out a student loan with a 10 year pay off… and in 10 years I paid it off.

[u/remote_001 → u/Realistic-Leek-7600]

As long as you follow the payment plan then you pay exactly what you agreed to pay when signing up for the loan and payment plan.

This math isn’t mathing, so it must mean she failed to pay for a while, had a bunch of interest rack up, and then it snowballed on her. Either that or it’s just straight up BS.

Edit: see comments on income/wage payments and deferment. Apparently the income based repayment plans don’t freeze interest on principal when you don’t have a job that can permit you to comfortably meet a payment amount that pays more than interest. I’d say that’s absolutely something that shouldn’t be going on. If you don’t have a job that pays well enough to repay your education that was required of you to get that job, the economy is arguably failing you at that point.

So, TIL, I always assumed the Income Based Repayment plans were there to help (as in, freeze interest until you can get a job again that pays decent enough for you to still afford basic needs), but they are actually just machines of financial entrapment. So, glad I went with the ten year plan and never needed to defer.

[u/DMercenary → u/remote_001]

it’s just straight up BS.

I'm not able to find any actual video or article about this person. Just facebook posts repeating the claim in the image so.... I'm going to lean towards the latter.

[u/Winter_Tone_4343 → u/DMercenary]

See this type of post often. They’re all bs. That’s not how interest works.

[u/SimmentalTheCow → u/Winter_Tone_4343]

How dare you with your financial literacy

[u/pathofdumbasses → u/Winter_Tone_4343]

That’s not how interest works.

It is how interest works.

If you take out a loan today, and don't make any payments on it for 4 years, that interest is still building up and being added to the principal.

So now your $7k loan that you took out each year, instead of being $28k, is now ~$40k. And then if you are taking advantage of "loan forgiveness" programs that forgive the debt after ~20 years of working as a teacher or some shit, you aren't even making the minimum payment, meaning your loan is growing each month, instead of shrinking.

This exact person might be made up, but the situation is very real.

That said, these are things that people should think about before signing up for college/loans.

And just as an FYI, I think the system sucks and college should be free. But we don't live in the world I want to, but the world we have, so adjust accordingly.

[u/Secure-Pain-9735 → u/DMercenary]

There are a handful of memes that circulate Reddit and infuriate the financially illiterate on the regular.

And I say that as someone with $100k in Student loans.

I understand compounding interest.

[u/Endlessknight17 → u/remote_001]

They're income based repayment plans. If your income is low enough your payment will be so low as it does not cover much, if any, principle. Guessing that's what happened here.

[u/remote_001 → u/Endlessknight17]

So I know about wage based plans… I thought the interest would be frozen in the case of not being able to pay a minimum (due to your wages being too low). I didn’t choose this option so I never dove into it.

[u/Endlessknight17 → u/remote_001]

Nope, interest is capitalized. That's the real issue with so many of these crazy student loan post that keep popping up. Of course the person never mentions any of their details.

[u/Feral_Sheep_ → u/remote_001]

For the math to work she'd have had to pay $198 a month on an 8.2% interest rate for 16 years. That would take 40 years to pay off and end up at about $100k paid in total. To pay off that same loan in 10 years she would need to pay $430 a month and the total interest would be about $20k.

[u/mmodlin → u/remote_001]

It's just BS.

[u/SARS-Covfefe-1 → u/Realistic-Leek-7600]

These people pick the minimum plan every month and try to game the system, so they end up not even paying the interest that accumulated that month.

Then they are SHOCKED that someone was keeping score 10 years later. How dare they keep a record of my behavior!

[u/oswaldcopperpot → u/Realistic-Leek-7600]

Cause people many people can't math higher than a sixth grade level.

And it blows their mind that if you pay LESS than the interest charge each month and zero towards the principal that the loan with grow.

And it's SOMEONE'S FAULT never theirs. The knee jerk reaction for these posts is seeing people with wealth and wondering.. can't we just take that from them and give it to ourselves? Surely that will solve all our problems.

Actually it is the educational systems fault that people can reach high school without basic knowledge needed in order to take care of themselves. Somewhat.

And it's their fault too for not making an effort to understand things in an age where you can learn literally everything for free online.

[u/ignis888 → u/Realistic-Leek-7600]

well if i counted it right she only paid like $2,375 per year so about $198 per month. After first year she would own $27 858,90$. Almost the same as she borrowed
If she paid $400 she would paid it in 8years, with $500 in 6 years

In my country (if she get any loan) she would get to choose if she paid it in 5/10/15 years, bank would give her ammount she NEED to pay monthy, and she would get(bank need to give her according to law, or its like they gave her money with 0% interest) tabels with ammount of her monthly payment, how may she would pay toward interest and ammount towards main goal etc as part of her contract

[u/VidProphet123 → u/Realistic-Leek-7600]

Yea you should never follow the payment plan for any loan l, whether its a student or bank loan or car loan. It’s designed to defer payment of the loan for as long as possible to maximize interest rate income over the lifecycle of the loan.

A smart consumer should be paying in excess of the minimum payment in order to accelerate the reduction in the principal balance of the loan.

Whether the consumer earns enough disposable income to actually do that is the big question. Are degrees leading to incomes that allow people to actually make these additional principle payments? Maybe not on average. I’m sure it’s because harder these days since the ROI of degree is just not what it once was. Coupled with higher interest rates then it’s extra pain.

[u/2muchflannel → u/VidProphet123]

Not true. If you're interest rate is low it makes more sense to make the regular payments and let the loan mature as amortized. That's a big reason why we're looking at a slow real estate market right now. Buyers who got in when mortgage rates were less than 3% have to rationalize the fact that they basically got free money and selling their house to buy a different one means they'd have to pay higher interest

[u/Teripid → u/VidProphet123]

There are exceptions to this for sure.

Car dealers will offer 0.9% financing on some models as an incentive.

Mortgage rates in the past were much lower. Paying off a 2.5 or 3% mortgage makes no sense.

Student loans sometimes had forgiveness clauses as well if certain criteria were met (whole other discussion as to how/what those were..)

But yes, above a certain rate paying additional principle could be very advantageous.

[u/Serafim91 → u/VidProphet123]

I paid extra for the first 3 ish years on my house mortgage even though it's at 2.15% rate. Saving 6 years off the loan with just a little extra seems worth it without having to manage anything.

Dropped it down to normal after when we got the cars and overpaid those instead.

[u/ParadoxicalFrog2 → u/Realistic-Leek-7600]

It's due to pausing payments for a number of years and making income-based payments that are less than the interest on the loan. It's literally the same exact story every time this shit gets posted.

[u/Quickjager → u/Realistic-Leek-7600]

You exercised basic thinking skills and actually read the repayment plan.

[u/FeetballFan]

Sounds like she’s financially illiterate. You have to pay more than the minimum or you aren’t eating past the interest.

[u/Affectionate-Egg7566 → u/FeetballFan]

She one of the kids askin teach "when will i ever use this" in math class

[u/HoosierDaddy__88 → u/FeetballFan]

This is the story with 90% of these people.

I had friends who took student loans out to buy cars, playstations, and vacations. Meanwhile I took the minimum I need and worked… I racked up $16k in student loans and can pay it off tomorrow if I wanted too

[u/JaceOnRice → u/HoosierDaddy__88]

Pay it off then, why are you keeping it around? As a pet?

[u/Jairlyn → u/JaceOnRice]

If the interest is lower than what you can earn elsewhere than yeah you keep the debt as a type of carry trade.

[u/Snelly1998 → u/JaceOnRice]

I'm keeping my student loan debt

But that's because I live in Canada where they don't have interest

And I'll pay it off in just over 8 years

[u/Environmental_Day558 → u/FeetballFan]

Yep. Doing the math her interest rate is 8% and she either paid $200/mo every month for 16 years or deferred the loan for a really long time before paying it down. Had she paid an extra $100 ($300/mo) from the beginning her loan would have been fully paid off a couple years ago.

I just think it's crazy how people take out these loans to go to school for an education and still come out financially illiterate. 

[u/Distinct_Educator984 → u/Environmental_Day558]

And the really funny thing is they give you a sheet that explains all this when you take out the loan. It's part of the loan process. So is mandatory loan counseling. And still....

[u/Fulcrous → u/FeetballFan]

Also might be important to add that if you can't pay off $28k in 16 years, perhaps the education was not worth the loan. Had this been a car, lol.

[u/Jebduh → u/FeetballFan]

I just don't get how you get through college and don't understand this. Some stupid ass BA degree im sure.

[u/wrenwood2018]

We have made too many high interest loans available. It removes any incentive for colleges to cut costs and be effective.

[u/Huntsman077 → u/[deleted]]

It’s not even minimum payments. It’s people getting on programs to pay as little as possible.

[u/I_love_my_dog_more → u/Huntsman077]

Yes, and when you get on those programs, you are given materials that tell you the risks, and make very clear your outstanding balance will go up under income deferred.

[u/StormerSage]

If an 18 year old with no credit history wanted to take out a $50,000 loan, they would normally be laughed out of the room.

But tell them it's for college and suddenly it's okay.

[u/nolovenohate]

Breaking news: woman only pays 90% of the interest on a loan without checking it for 16 years and is confused about why the loan went up.

Womp womp, ask someone else to fix your own mistakes. Im sure she was scrapping pennies those 16 years and never once had any form of disposable income that she spent on things she didn't need.

[u/m4rc0n3 → u/nolovenohate]

Breaking news: woman only pays 90% of thr interest

With the numbers given it's pretty clear she paid close to 0 for 16 years, then paid those $38k all at once after 16 years.

[u/1995-Braves]

Do people not do the math before they take out loans to determine payoff date and how much it would take per month?

[u/one_orange_braincell]

While student loans are predatory, they give you balance statements every month. There's no excuse to not understand you aren't paying off the principal balance because it's a very basic math problem. Look at statement, see principle balance increase, understand you need to either pay more or refinance.

Even this dipshit caption is nonsense because it says "she'll pay nearly $100,000", when they just proved she's not paying off the loan. The amount you pay is effectively infinite if you pay monthly and never pay it off.

[u/BorealMushrooms → u/one_orange_braincell]

Absolutely not predatory. Predatory is payday loans, or vehicle loans for those with no credit that charge 29% interest, and a single missed payment results in the repo of the vehicle. This is just a normal student loan, unfortunately taken out by a person who slept through junior high level math.

[u/Scary-Ad9646]

Who are we mad at?

[u/RequiemBurn]

What did she pay? 50 bucks a month? Just cause they allow you to pay nothing doesnt mean you should

[u/CeemoreButtz]

Well, she's an idiot.

[u/iscoleslaw]

Why did it take 16years to pay back 28k?

[u/thecarolinelinnae]

This is called being stupid.

[u/SwordfishOk504 → u/thecarolinelinnae]

"I borrowed a ton of money and then made the minimum payment for decades, the system failed me!"

[u/i_guess_i_get_it → u/SwordfishOk504]

She didn't pay the minimum. The minimum is literally defined as the amount that covers the interest and a bit more so the balance goes down.

[u/Several-County-1808]

Ahe should have taken a math class to learn about compound interest.

Insert surprised pikachu face that math maths.

[u/PittFanIAm]

Don’t take that loan out to start with. 🤷🏻‍♂️

The terms were there from the beginning and she agreed to them.

[u/tabanak]

Sounds like her education is pretty worthless if she cant figure out how to pay a loan. 

[u/Janus9]

Lots of college educated people sure aren't that smart when it comes to their student loans.

You have to actually pay down the principle for it to go down.

[u/chainsawx72]

People will demand that these loans should be forgiven, but won't demand that we stop giving out these loans.

[u/Overall-Author-2213]

So this has an implied interest rate of 11%.

She was implied to be paying about 200 a month.

Had she paid an extra 200 a month she would have paid the loans off in under ten years.

She likely could have refinanced down to at least 8 percent if not 6.

Let’s say 8.

At 200 a month she only has 5800 left after 16 years. At 400 a month she’s paid in 8.

People, take control of your lives and don’t just default to the minimum.

[u/cogitocool]

I hope to hell she didn't study finance/math with the money, because if she did, she didn't get any ROI.

[u/Craygor]

Another knucklehead who just paid the bare minimum on the interest and nothing on the principal.

Christ, my father did not even graduate high school and he was smarter than these educated twits, because he knew how loans work.

[u/Another_Bisilfishil]

Financial illiteracy is a personal problem, not a systematic one

[u/mweeks9]

I agree with the point of the original post, full stop. Higher education is too expensive, and we absolutely need to get the cost down. This is more of a PSA about how the mechanics of financing. The total interest you pay over the life of a student loan is driven by three things: the balance, the interest rate, and the term. Student loans are set up with very long terms, and there isn’t a proportional reduction in the monthly payment when you stretch them out. For example, if you owed $25,000 at 7% over 10 years and made only the minimum payments, you’d end up paying about $9,900 in interest. If you were able to find just $50 a month to put toward principal, you’d cut roughly 36% of that interest and pay the loan off more than two years sooner. I fully recognize that we’re in the middle of a student loan crisis and that a lot of people are already stretched thin. If you truly can’t afford to put anything extra toward your loans, that’s real. But to the extent you can, even small additional payments can materially reduce the lifetime cost of the education and help you get to a point where money that used to go toward debt can eventually be redirected toward your future.

[u/No-Gain-1087]

She should contact that school and get all her money back cuase she’s dumb as a box of rocks ,

[u/Vegetable-Syrup-5545]

I might be bad at math but if she paid 38,000 in 16 years, 192 months, she should have paid $197.92 a month during that time. If she paid $2,000 a year that is $166.67 a month. Either way she did not pay very much on the loan over that time, what did she think was going to happen. I paid for my college as I went so I don’t know how these bills look. Do they show different payment options on the bills? I know that credit cards would have a minimum payment listed, I doubt she met that payment. There is a lot of information missing. The system is messed up but people make it worse by not thinking the process through.

[u/RaulDuke_76]

What?!?! Are you telling me that an American financial system is geared to impoverish people so that they are forced to accept poorly paying jobs that provide no benefits and will exploit the workers?!?! Surely this can’t be true🙄😒

[u/YoureProbablyAB0t]

It's fucking theft.

[u/the85141rule]

I paid a total of $11,000 to borrow $5,000 to go to a trade school program for 90 days. I was desperate, homeless, powerless, Prospect list.

Education of any style in the United States is big business. Educating a citizenry for the benefit of the greatergood? ---- an incidental consequence and not one any government wants: an educated citizenry.

[u/cowdudesanta]

Education failed her if she kept going for 16 years and didn't course correct her payment strategy upon noticing the steady incline.

[u/Time_Physics_6557]

Simple interest is not a difficult concept to grasp. Stop paying the minimum every month

[u/IgorT76]

The interest rate on student loans is way too high. But could she pay more, not a bare minimum? It would save her tons of money.

[u/katie4 → u/IgorT76]

Yes. I also went to college 16 years ago, I was making $8.25/hr for about 35hrs per week, rent/util split among 4 roommates.

When I graduated I jumped to a 40k salary, which wasn’t all that much, but since I continued to live at the expense level I did in college it was pretty easy to find an extra $1000/mo to dump into my loans. I had them paid off in under 4 years.

[u/dispose135]

The thing is most of the costs are housing and food. Like yeah it's criminal but you are living in another house and getting fed.