You cant buy a house but here, drown in loans

[Lord Jade Cross]

I used to think that student loans were smaller and used in case you needed quick cash at the moment. However looking at the price of "education" you can very realistically buy a house for the amount of money some of these accumated loans reach on just accumulation without mentioning the % of interest that gets added up later. So if an 18y/o is legally "capable" (and I use that in quotation marks because I think we arent teacheing/being taught how to properly handle money) of taking out loan after loan for a (useless) degree, why is a mortage any different? 

 

I guess you can argue the credit score thing but thats an iffy system at best and it doesnt really take into account so many other variables that can happen and which can alter a persons ability to pay off the mortage. It just works to look good on paper 

[JimmyJazz]

We did have a global recession caused both by irresponsible bankers and mortgage defaulters. There is an inherent danger in having a mortgage you cannot afford to pay and that is why it is harder now to secure one. I’m probably going to put down a 33% deposit when I purchase and will likely have to, otherwise they will reject my application on the basis I cannot reasonably make the monthly repayments.

 

Additionally, the government doesn’t own your house, they do own your education in the UK. Student loan debts are written off by the taxpayer. Nobody pays them back anyway… I graduated seven years ago and still don’t earn enough to repay mine.
 

Thirdly, housing is a market. Try buying a car on finance and see what happens when you miss a payment. Private business is totally different gravy to publicly funded education.

[Lysandre, the Star-Crossed]

A mortgage or other loan for physical property holds a different level and type of risk. A mortgage lender loses, at most, a fraction of the value of the purchase. At best they can gain back far more than they paid for it. Conversely an education loan doesn't come with intrinsic collateral, because you can't repossess knowledge. The lender for such a loan is ultimately at the mercy of the debtor's ability to repay or having valuable assets to seize, which may never be the case. As such I'd say it makes far less sense to give education loans than mortgages.

[Lord Jade Cross]

1 hour ago, JimmyJazz said:

We did have a global recession caused both by irresponsible bankers and mortgage defaulters. There is an inherent danger in having a mortgage you cannot afford to pay and that is why it is harder now to secure one. I’m probably going to put down a 33% deposit when I purchase and will likely have to, otherwise they will reject my application on the basis I cannot reasonably make the monthly repayments.

 

Additionally, the government doesn’t own your house, they do own your education in the UK. Student loan debts are written off by the taxpayer. Nobody pays them back anyway… I graduated seven years ago and still don’t earn enough to repay mine.
 

Thirdly, housing is a market. Try buying a car on finance and see what happens when you miss a payment. Private business is totally different gravy to publicly funded education.

Im guessing its diffferent in the UK but the goverment can take your house away, even if you pay it off, though its not a practiced done too regularly

 

Also, student loans now have debt collectors assigned and legal consequences for non comoliance. I know because mine was bought twice, by private banks (without any consent to boot) in the time span it took me to pay it off

[JimmyJazz]

18 hours ago, Lysandre, the Star-Crossed said:

A mortgage or other loan for physical property holds a different level and type of risk. A mortgage lender loses, at most, a fraction of the value of the purchase. At best they can gain back far more than they paid for it. Conversely an education loan doesn't come with intrinsic collateral, because you can't repossess knowledge. The lender for such a loan is ultimately at the mercy of the debtor's ability to repay or having valuable assets to seize, which may never be the case. As such I'd say it makes far less sense to give education loans than mortgages.

The problem isn't mortgage lenders losing out, it's more where mortgage lenders get their funds from and what happens when they cannot pay their creditors. We all suffered during the Great Recession whether you owned property or not. We don't all suffer because people don't pay their student loans, we actually benefit from graduates paying tax on high paying jobs they attain because of the qualifications they were given a loan to achieve.

[Olallieberry]

On 12/21/2022 at 2:59 AM, JimmyJazz said:

you can't repossess knowledge. The lender for such a loan is ultimately at the mercy of the debtor's ability to repay or having valuable assets to seize, which may never be the case. As such I'd say it makes far less sense to give education loans than mortgages.

It makes fine sense (for the lender) if they're priced accordingly.

 

(USA specific:)

Some student loan interest rates are subsidized. That's partly a market manipulation and partly a matter of public policy, and it's not what we're talking about here. The guarantors of those loans are different from "normal" lenders in various ways, and they're protected against massive levels of default in ways which normal lenders aren't. Granted, these protections are draconian to the borrower in that these loans are insulated from bankruptcy proceedings.

 

So, for free-market student loans, the interest rate reflects the risk. Mortgages and other loans which are secured with any sort of collateral have lower interest rates than unsecured loans.

 

Loans are not very different from insurance policies. The people selling them know the risks and do business profitably anyway.

 

Now, regarding the borrower - how much sense that makes is a separate issue.

[Alaska Native Manitou]

I once handled personnel records for a hospital.  The nurses made a lot more than most people do, & the doctors a hell of a lot more.  Yet most of them were having their wages garnished, paying off student loans for years.