A student walks into a Bank

A student goes into a bank. He tells the personal loan banker “I want to borrow $7500 each year for the next 4 or 5 years.”

“That’s $30,000” the banker says. “Personal loans have a 10% interest factor.”

“For my loan,” says the student, “and I want interest rate close to the one used for Home mortgages, and I don’t want to be charged interest for the first four or five years of the loan”

The banker asks, “how long is this loan for?”

“20-year payoff after graduation, more or less” replies the student.

Banker asks, “Do you have any collateral assets to secure the loan?”

The student says, “No collateral but a promise to pay it off when I get a job.”

The banker is incredulous, asking “anything else you want with this loan?

The student says “yes, there is a 10% chance I’ll default in the first year, and a 30% chance I won’t finish my degree, and be a slow pay during the loan.”

The banker looks Ready to pass out. But the student is not finished “in case I have low earnings I want you to adjust the payment amount and if I qualify, I want a loan forgiveness option”

The banker is unable to speak. Finally, banker recovers his voice, “anything else?”

Student replies, “well I may not be able to get a job that has a first-year salary more than my total student loan”

The banker asks “what will your degree be?

“I’ll know more for sure after two years.” The student admits and adds “Theres a 50% chance my job won’t be in my major and I may be underemployed.”

Banker says, “I cannot loan you a dime you’ll need to use Federal Student loans.”

We forget to take the historical profile of the loan program into account when we discuss “eliminating student debt.” This story brings the past profiles and program into a current view. The phrasing of the topic leads to discussing amounts and not why after all the financial considerations in the loan as it exists, would we want to forgive the debt and remove the payment from the Government income stream?