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JumpCrisscross 17 hours ago

> student loans are deeply low-risk to the lender

Based on the other comment, they absolutely reflect that.

▲ ceejayoz 17 hours ago | parent [-]

I don't think the other comment is accurate.

edit: Yeah, that other comment is talking about European rates, not American rates.

https://studentaid.gov/understand-aid/types/loans/interest-r...

6.39% to 8.94%, and that's for Federal. Private ones tend to be even higher.

  7/1/21–6/30/22  3.73%
  7/1/20–6/30/21  2.75%
  7/1/19–6/30/20  4.53%
  7/1/18–6/30/19  5.05%
  7/1/17–6/30/18  4.45%
  7/1/16–6/30/17  3.76%

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JumpCrisscross 17 hours ago | parent [-]

Hmm. I wonder why it doesn’t make sense to launch a private lender that offers lower rates.

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ceejayoz 17 hours ago | parent [-]

The Fed rate is too high for the low risk involved.

Private student loans are similarly protected from bankrupcty, and don't have things like income-based repayment; they are, if anything, safer for the lender. https://studentaid.gov/understand-aid/types/loans/federal-vs...

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JumpCrisscross 17 hours ago | parent [-]

Sure. I’m saying why couldn’t you and I start C & J Lenders Inc. and undercut those guys. Say, 5% for a 20-year loan [1].

[1] https://home.treasury.gov/resource-center/data-chart-center/...

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ceejayoz 17 hours ago | parent [-]

Same reason I can't easily start an AT&T/Verizon competitor.

Doesn't mean their pricing is that reasonable, or that funding education should be run this way in the first place. It just means there are big barriers to entry, often established by the existing players to protect their margins. The Fed rate for student loans should be lower.

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JumpCrisscross 16 hours ago | parent [-]

> there are big barriers to entry

What are the barriers? Can I make non-dischargeable student loans at 5%?

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phil21 15 hours ago | parent | next [-]

Finding investors willing to take less than 5% return (after paying for overhead and uncollectable loans being written off due to death/injury/ability to pay/etc) would probably be the primary one. You would likely be offering more or less the same or worse rate as I could get on a 10 or 30 year federal bond with more risk associated with it.

I know I’d be completely uninterested in such an investment pitch. It would work better as a charity ask for me.

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JumpCrisscross 8 hours ago | parent [-]

> Finding investors willing to take less than 5% return

If it’s safe I can leverage it.

> get on a 10 or 30 year federal bond with more risk associated with it

5% is 10 bps over the 20 year. Not a lot. But I picked a round number. Point is why couldn’t it be undercut? If it can’t, easily, it’s correctly priced.

	▲	Jensson an hour ago \| parent [-]
		> If it’s safe I can leverage it. Loans to private persons are very unsafe, for example they can move abroad and just stop paying as the article is talking about. Every person doing that raises interest for everyone else.

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ceejayoz 16 hours ago | parent | prev [-]

> What are the barriers?

Lots of startup capital?

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scarecrowbob 11 hours ago | parent [-]

The inability to issue fiat currency based on a fraction of my actual holdings?

	▲	Jensson an hour ago \| parent [-]
		That is what taking a loan is, you are able to do it, its how you afford your homes etc. The bank is the essential guarantor in that transaction, without the bank the person you buy the home from doesn't trust you enough but the bank has that trust. So essentially governments build trust with banks so those banks can issue fiat currency. Then those banks build trust with people like you so you can use the bank to issue fiat currency. Its the same system, bank pay interest to central bank for doing that and you pay interest to the bank. If you mean why you can't get money from the central bank? Its just that you haven't built trust with them. But you can do so indirectly by taking a loan from your local bank, and that trusted middleman takes a fee for it.