Sunday, December 6, 2015

It Makes Sense to Lower Mortgage and Student Loan Interest Rates

Mortgage rates slipped to 3.93% while graduate student loan debt is at a whopping 6.84%. Housing and education are long term investments and should naturally have lower term rates. Despite this, student loan interest is prohibitively high and at a $1.3 trillion price tag that is holding the economy back. Encouraging the population to own their own homes and go to school needs more than wishful thinking.

Current college students, and those in high school now, are not big fans of buying houses or taking lots of student debt. They are staying with their parents longer and looking for certificates so they don't have to pay the big price tags. There is a reason why MOOCs and alternative education became popular.

I don't think anyone can blame them. If I could go back and do it all over I might stay with my parents longer, work, and pay as much of my education via cash online. I can go as long and as far as I want as long as I pay cash for it. I would do my best to live simply and take little debt.

Yet that wasn't the conventional wisdom at the time. We pushed people to take larger student loans and encouraged people to buy bigger houses they didn't need. This led to a housing crash that put the country into an economic spiral and sweltered a current student loan crisis that continues to drag the economy. 

Despite these unfortunate mishaps we still have an obligation to invest in our nation's future. Home ownership, particularly the process of refurbishing existing homes versus expanding to new homes, has significant benefits for the nation. Likewise, encouraging people to get a meaningful yet cost efficient education has its advantages for long-term national competitiveness. 

Our past mistakes should not be put unfairly on the current generation that must now limit their opportunities. High student loan interest is unfair and limits their capacity to go to school.  It is also limiting the growth of the nation through locking up large payments at high interest rates that could be used for other things. Because these high interest rates are protected by the government students have little recourse. 

Keeping student loan rates low, but ensuring the education has advantages for the economy, can help keep the younger generations in school---hopefully, relevant school. Keeping mortgage rates low, especially for urban development, encouragess the new generation repopulate and improve the value of cities. It is hoped the next generation has market relevant skills and contribute to national improvement in a beneficial way....they just may need a little support. 

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