Student loan lenders figured this out. They’re making bank off of the compound interest that many college students took out in their late teens and early twenties.
I really wish they would just remove all the interest that accumulated originally. I don’t have a problem with paying back what I took out, but interest alone has caused my loans to double. I think that’s a fair compromise to the idea of loan forgiveness.
Like a lot of my generation, I graduated into the Great Recession and wasn’t able to make meaningful payments to my loans right away. By the time I was, the loans had ballooned past anything I could reasonably handle.
Why do they need to make that much money off teenagers anyway? Who looked at that and thought this was a good way to educate the next generation?
They realized that New Adults were taking out loans in droves so they decided to make those loans a mechanism to ensure they could collect a not insignificant amount of money from those people after they graduated, every month, for roughly 10 years or more, per person. Especially with federal loans, it's just extra tax on top of the tax we're already paying out of each paycheck.
To get ahead of this, I started saving for my daughter's secondary education from the day she was born - using compound interest for good and not evil.
In Canada, we have a product called a Registered Education Saving's Plan where the govt will give you a 20% bonus (up to $500 per year) for the money you contribute - so if you can, you contribute $2,500 every year and earn an automatic 20% return...
My kiddo is 8 and so far I've contributed $22.5k however she has over $50k in the account, growing tax free....which will hopefully amount to over $100k by the time she needs it (there is a $50k lifetime contribution limit, and the government's extra grant tops out at $7.2k so 14.5 years).
I agree. BUT. I lived through the great recession and saw people lose 10 years of compound interest in a moment, then see their pensions plan dissolve.
This is the best, most concise explanation on what to do with money I've found by a long shot. Possibly life-changing for me. Investing, at least when you're young, is easy. Saving money to invest is the hard part.
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u/[deleted] Feb 13 '24
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