> What's predatory about public loans.

It distorts prices and results in a suboptimal allocation of society’s resources, and results in people complaining about having a “degree” and having to sling coffee cups as their career.

That's not what the word predatory generally means in the context of loans.

The predation is from voters today to taxpayers tomorrow.

Politician A says they want to help students by paying for their education, or at least some of it. This requires cash flow, which results in more taxes, or at the least, entries into the government’s debt figures. Either way it shows up on the balance sheet and can affect tax liabilities today.

Politician B says they want to help students, but they will instead have the government lend money to them, with zero under writing other than the “school” needing to be credentialed by some entity. The cash is spent, but an even bigger asset in the form of the debt is recorded, actually improving the balance sheet. Then you can whittle down whatever taxpayer subsidy is being given to the schools as is, and they can make up for it with tuition increases. Either way, government finances look good, and taxes can even be reduced.

Again "predatory lending" is a standard term, that has a commonly accepted meaning. What you're describing doesn't fit.

Yes, it is not the traditional use of the term. But for me, lending an 18 to 21 year old $200k +/- $50k to get a degree in literature from a non top school would qualify as predatory lending.

The probability of that person digging themself out of that hole and being able to achieve the common expectations of a family, house, vacations, retirement, weekends, etc is pretty low.

You can't get a public loan for $200k. Public loans max out at around $60k. The OP was talking about government backed loans being predatory.

And someone with $60k in public loans most certainly can dig themselves out of that hole, because repayment is capped at 10% of disposable income, and it is cancelled after 20 years.

I was under the impression that private student loans were also guaranteed by the government, but based on my searches trying to source my information, it seems Obama administration changed this since I went to college.

Here's what happened. Federal loans have existed for a long time. The Federal government would guarantee loans made by private organizations. However, these were always "Federal loans", the Federal government controlled the interest rate and the maximum amounts available.

The government under the Obama administration changed things so that "Federal" loans instead of being made by private organizations and backed by the government, were directly distributed from the treasury.

However even before this, there were separate Federal and private loans, and the only way to get to $200k (for undergrad) was to get unsubsidized private loans that weren't backed by the government.

Thanks, I did not know that. What is a subsidized private loan be unsubsidized private loan?

>>What's predatory about public loans.

To some folks, having to pay off their loan, is considered predatory.

The predatory part is the pushing kids who don't understand finances into taking massive loans with high interest rates.

I've passed on a traditional uni for this because I want to avoid debt, and still get "why don't you go to uni?"'d every so often by family and acquaintance's.

And if the argument is "well, if you don't make enough to pay it, just don't!", as GP appears to be, I don't like spending other people's tax dollars dishonestly - especially not on textbook companies [0] and an expanding administrative staff.

[0] Which bribe and cut-throat their way into forcing $100+ payments per student per class per semester. Pirating or buying second hand doesn't even work half the time now - you need the "online access", aka DRM.

>The predatory part is the pushing kids who don't understand finances into taking massive loans with high interest rates.

There's literally lectures and a quiz you have to pass before you can take the loans that explains how repayment and interest rates work.

For public loans the actual amount doesn't really matter because payment is income based. And the cap on lending is around $60k for 4 years, so I'd hardly use the word massive.

>"why don't you go to uni?"'

Of course all this only applies assuming you're American, which I'd guess your not since your friends call it uni.

> There's literally lectures and a quiz you have to pass before you can take the loans that explains how repayment and interest rates work.

Yes, but they are told their whole life "after college, you'll make enough to pay it off easy, no problem!"

> For public loans the actual amount doesn't really matter because payment is income based. And the cap on lending is around $60k for 4 years, so I'd hardly say it's predatory.

60k, with an extremely high interest is most definitely a problem.

> Of course all this only applies assuming your American, which I'd guess your not since your friends call it uni.

Nope, I live in Texas. Anecdotally, my group of friends all flip between "school name"/School/Uni in conversation. In this case, I picked uni because I'm on mobile and typing is hard.

>Yes, but they are told their whole life "after college, you'll make enough to pay it off easy, no problem!"

If anything, the predominant messaging today is the exact opposite of that. It also doesn't matter because public loans qualify for income based repayment, so it doesn't matter. If you end up stuck working at McDonalds for the rest of your life, you'll never pay back a dime.

>60k, with an extremely high interest is most definitely a problem.

Current undergrad rates are fixed at 3.73%.

>Anecdotally, my group of friends all flip between "school name"/School/Uni in conversation.

Interesting, (as an American myself) I've never heard an American use uni outside of conversation with Europeans.

> If anything, the predominant messaging today is the exact opposite of that. It also doesn't matter because public loans qualify for income based repayment, so it doesn't matter. If you end up stuck working at McDonalds for the rest of your life, you'll never pay back a dime.

Unless you do get a job in your field, with enough income that you're supposed to pay it back, but can't. This probably will be less common with the current rates, but as recently as 2012 the interest rates were at 6.8% .

> Current undergrad rates are fixed at 3.73%.

Indeed. I was operating off of the rates from those who took loans in 2012 or before, the current rate is much more reasonable.

> Interesting, (as an American myself) I've never heard an American use uni outside of conversation with Europeans.

I probably picked it up from the internet and spread it to the group, I like saying less syllables :P

>Unless you do get a job in your field, with enough income that you're supposed to pay it back, but can't. This probably will be less common with the current rates, but as recently as 2012 the interest rates were at 6.8% .

There's also the fact that now (even for someone who took out loans before 2012) you'll never pay more than 10% of your disposable income, for more than 20 years. Up to a max of about $500 a month (which is the 20 year payoff rate for a $60k loan at 6.8%).

There are ways you could end up paying more. Say if you spent 10 years unemployed running up interest and suddenly got a job paying $100k, but even then you're talking $700 a month for 10 years before it gets cancelled.

You also get credit for going into public service as well.