i just tried to consolidate loans and the best rate i could find is libor + 5.8% that is a f*n racket if there ever was one you can't escape student loans in bankruptcy you can use at least 8*1 leverage as a bank no borrow risk because it is linked to libor i mean that is making 40%+ per year are there companies that i can buy stock in to take advantage of this racket, i'm wondering if there are any newer smaller companies that have started up to take advantage of this that don't have any older bad stuff on the books.
Yes, you are a dumb_mother indeed. "you can use at least 8*1 leverage as a bank". No you can't. Not for student loans, which are risky; The securitization pipeline is down so they can't shift the risk off the books. "no borrow risk because it is linked to libor" - no. LIBOR based means there's no interest risk. But there's default risk. "i mean that is making 40%+ per year" Where the fuck are you getting this with L+580? Or do you x8? That only works in your mind, not on a bank balance sheet. So, the only place to get your imaginary returns is in your imagination.
how are student loans so risky- you can't escape them in bankruptcy- makes me think there is low risk there why do you say no 8:1 leverage for banks, is there a different capital ratio i'm not aware of for student loans? because the capital requirement right now is less than 12.5% for banks i get 40+% by doing the math of lend out 8$ for every 1$ you have all towards student loans at a rate of libor + 5.8% (which is lowest i could consolidate for when i asked last week) 8*5.8% = 46.4% not even including the libor ie. you have 1250$ lend out 10000$ in student loans at 5.8% + libor after 1 year you have: 1250$ + 580$ - 8750$*libor + 10000*libor = 1830$ + 1250*libor
What do you expect to get paid in when the borrower has nothing? You think a judgment will accomplish anything in that case?
"how are student loans so risky- you can't escape them in bankruptcy- makes me think there is low risk there" - because you can simply not pay them. So you can't pay - the bank can't take your house or collateral or even garnish wage below basic. So you may die with the debt, the bank won't get their money back. Hence - default risk. The inability to discharge the debt doesn't mean the bank will get its money. The last time I checked, there's no debtor's prison in the US. Student loans require 100% risk capital. It's certainly not subject to leverage. The old way of doing it is through securitization. That's not really happening these days. So, your lack of basic financial education is the problem here, not some institutional conspiracy.
i guess if they need 100% risk capital that could be tough, but if it is like any other bank loan and they can "create" 8$ to loan out for every 1$ in deposits- and lend them out for student loans this racket stands-- just make it a special rate you offer to people with real majors- and don't lend money to liberal arts / drama / music and you shouldn't have any trouble with getting paid back. ++ engineering
Which part of 100% capital reserve do you not understand? They can't any balance sheet leverage at all - period. It used to be done via securitization, but that's no happening as easily these days. Second - risk based student loan pricing? great idea - except there are laws against doing that. So again, you lose. Your original arguments have been blown to shits and now you are grasping for air.