Here Nerdy, they even have a video with pictures for the UCLA grads of the world:
https://www.investopedia.com/terms/p/presentvalue.asp
What is ‘Present Value - PV’
Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return.
No reason to bring the Lord into your puerile spat. I bet Jesus is rolling in his grave right now.
bs is very dumb :). i think he thinks he graduated from stanford or harvard.
Yes, but does net worth include home equity?
lololol
50 pages later…
Listen, I think I get the confusion here Nerdy.
Sallie Mae is not a government agency, it is a publicly traded corporation and the debt could be held by any investor, including Navient. Ergo, the US Government will be on the hook to pay the future balance. You’re assuming the government wrote a check for the education and is now just going to write off that check, that’s not how student loans work. Hence the taxpayer outflow will cover the outstanding balance ($1M today, $2M in 20 years) and that has not happened yet. Capisce?
Glad to have educated you. Holy smokes.
I’m not familiar with the forgiveness program or whatever, but aren’t student loans one of the very few debts that are passed down to your kids when you die? So, if the parents were in a car wreck or whatever, and my facts are straight (which I really don’t know that they are), they’d wreck their kids’ financial future. That doesn’t sound like being responsible parents.
Depends on state, type of student loan (private, agency) and details. None pass on to your kids. Some pass on to your spouse, but it often depends on whether they cosigned or if you were married when incurred. Some private loans have death discharge, if not, they can be taken against your estate (and in this way impact your kids, although not beyond impacting the value of your estate). Most agency loans are not dischargeable through bankruptcy.
Also consider that he will owe income tax on the loan forgiveness amount of $2 million+. So, he will effectively still have to pay about $700k in principal*. This is stated in the article.
To reiterate, WSJ calculates that his total financial burden is equivalent to borrowing $600k at about a 4% interest rate. This interest rate is below market levels, so he is still being subsidized by taxpayers.
Of course, the fact that he owed $600k itself is a huge burden, despite the relatively low 4% effective rate. The entity that benefited was USC, who got paid a heavily subsidized fee up front. If Meru defaults, the taxpayers don’t get paid and USC escapes unharmed.
*I don’t see how he will be able to pay $700k at this rate. So, he will most likely need to take up more loans, and become further in debt later in life.
Yep you got it. The only outflow is on 2012 for 600k. Everything else is an inflow in forms of tax and minimum payments. Even if he defaults on the entire thing it only means there is less inflows in future.
The only outflow from the lender was in 2012. The lender is not the USG, the USG if it forgives the loan will now pay the full $2M balance in 20 years to pay off the debt holder.
I declare victory over Nerdy and #21 ranked UCLA.
Lol where are you getting this information that the loans aren’t given out by us government. USg owns like 1 trillion in student loans, it’s half their assets. Silly!
how many colleges are there in the world again bs?
where is fact check at!!!
Sigh. Those are not held by the federal government (taxpayer), despite what you read on advisor perspectives. Those are held through the federal reserve bank (which is independent) and are structured products bought through open markets as part of QE. In other words, they paid market value for them and store them at market value and funded them with issued dollar liabilities. But the US government can not go into the central bank and just cancel an asset. The student loan forgiveness programs still have to take taxpayer money and go buy that loan whether it be from the Fed or an investor like a mutual fund or Navient. Again, you simply don’t understand how student loans work. Sallie mae is a corporation and issues government guaranteed debt, however the government does not actually issue student loans. What DID they teach you, this is mind numbing stupidity.
https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/17frusg/02142018_FR(Final).pdf
ctrl f student loan.
you are an idiot 
Right, but everything I said above is true, as is my point. The treasury is rolling up the federal reserve exposure.
What? With 10y-30y Treasury yields around 3%, the government is charging a spread of about 1% for this uncollateralized loan to some random individual. As the President would say, this is the worst deal ever. What kind of finance skills are you teaching poor latina girls?
Lol well technically education increase income and productivity so I think the government stands to make money on this since it is invested on the youth.
The most likely alternative expense is Medicare and social security, these are people who are sickly and old with a majority prolly not yielding a positive npv at their current state. This is like an even worse deal.
The government should invest in education, and the government of any country does do this. However, I don’t think people need to spend $600k to learn dentistry, on top of undergraduate education. These loans are paying to make USC and other schools look like 5-star hotels.
The same way government subsidized lending encouraged taxable home ownership and ultimately helped support the government balance sheet? (Hint: bailout)
In both cases you’re ignoring the fact that subsidization just artificially balloons prices and the only real winners are the sellers (home owners / universities). What you need to be looking at are the marginal increases demand, the marginal increases in income, the marginal increases in taxes (which are all relatively small, people for the most part would be attending school anyway in the cases where it is economical). What you’re really doing is supporting the uneconomical cases. Beyond that, the other part you’re missing is that a credit loss quickly wipes out small gains. Doubly true when 11% of student loans are delinquent and the interest rates are subsidized.
This model works in Germany and the UK, but in those instances, the beneficiary (school) is owned by the federal government, which caps cost appreciation. Those schools are also extremely selective so the uneconomical cases are eliminated from premier schools before the government stakes its money on the outcome.