Try Boulder, CO and you’ll quickly find that a shitty studio apartment anywhere close to campus is going to run you $1000/month minimum.
It ain’t the old days anymore my friend.
9 Likes
Well, you would have done better to refinance onto a 15 year fixed, get a considerably lower rate, lower payment, and still pay off at the same time. You might have done even better to get a 7/1 or 10/1 ARM and made extra payments to pay off before the ARM starts floating.
If you lower your interest rate you lower your cost, period. Yes, you can be financially unwise if you take a cash out refinance and then increase your discretionary spending, but if you e.g., refinance to a low rate and can increase your contribution to a 401k or IRA, or even just a rainy day fund by an equivalent amount, you are going to be better off. Alternately, you can just pay your refinanced mortgage off faster than the default. I don’t even think they sell mortgages with a prepayment penalty any more. If you refinance to a lower APR and then pay the same monthly payment you will reduce your time to debt-free.
Of course yes, I understand that some people won’t be able to do this, because they don’t have a good enough financial education, have trouble delaying gratification, or simply are in a rough enough spot financially that they don’t have any good options, but I don’t really think it makes any sense to brag that you didn’t take an opportunity to lower your interest costs.
1 Like
Oh I refinanced, but I didn’t take any principle out, just snagged a much lower interest rate…And sent a little extra in every month until I changed over to a 15 year, so I’m free and clear baby!
1 Like
A serious answer is that I’m not sure any society larger than loose networks of hunter-gatherers has ever tried any form of economics or politics without authoritarian bureaucracies and secret police and stuff. And they arise because in the normal course of doing without such things something legitimately terrible happens that a bureaucracy or police would have stopped.
We’d all stop at exactly the right amount of police and bureaucrats if we could, but (a) people disagree by orders of magnitude where that is, (b) it’s a moving target even from any individual’s perspective, and (c) the external circumstances are constantly changing anyway. There’s no One True Path that’s going to get us all to harmonious civilization on any scale, and at the risk of sounding like a Debbie Downer, there may not even be a particular set of many different, situation-specific approaches that will work either. Humanity is too complex and too many shitty things can happen to us for there to be any guarantees that *-ism or *-ocracy is the optimal path.
7 Likes
Here in New Zealand my bank was required to tell me the total amount of interest that I would be paying across the full term of the loan (30 years). They told me again the other week when I refixed the loan, both on the phone and in a letter they posted out. NZ have toughened up significantly in recent years in terms of the requirements of lenders to specifically state the costs of interest on loans. So there’s really no reason (other than not paying attention or being in denial) for not knowing the full cost when you sign up, at least here.
3 Likes
Bolder IS hella expensive. And IIRC they not only restrict new construction, but limit how tall you can make things.
The obvious answer is to tunnel into the earth for more housing.
Just… you know… don’t dig TOO deep.
2 Likes
Well look on the bright side. You can watch it from your bed at the hospital.
Wait, that didn’t come out right.
1 Like
Ouch! But, yeah.
I think that American universities should be heavily (or even entirely) subsidized by the government, as they are in civilized countries. But you’d have to lack even the most rudimentary understanding of loans and interest to be mystified by the fact that a loan with a balance of $82K would consume thousands a year in interest.
It’s hard to consider somebody like that educated.
1 Like
I know right, and CouchTuner and all the other freebie sites. JEEEEZ WHAT AN IGNORAMUSSSS
Well, OK, but I meant that USSR and PRC and so on are obviously hellish dystopias in ways that aren’t obviously due to economic policies. What I meant to ask is whether communistic ownership of dwellings has been found not tenable in a purely economic context, or if the only context in which it was tested are 20th century authoritarian communist states (which had economic problems, but it’s not at all obvious that their problems were largely economic; I suspect these societies were torn apart as much by the mistrust engendered by everyone having to lie about how much they loved the Party and informing on each other, etc. as by economic problems).
I’m going to follow up on @anon73430903’s response, since it’s extremely specific and limited in scope.
I’m not bragging, simply pointing out that people have different financial situations and that interest rates aren’t everything.
Yes, I could have refi’d to a sub-3% rate or converted to a 7/1 ARM, but I crunched the numbers and factored in other issues (cash-flow, fees, PMI, etc) and came to the conclusion that I’d be better off staying put even with a higher interest rate. I came close to pulling the trigger on a 15 year refi but this was 2009 right after the market crash and the qualification criteria at the time was absurd (800+ FICO for example).
My point though is that chasing the lowest rate is not always the best choice.
“Principal”, not “principle”. Usually, people misspell in the other direction, as in “principle scientist”.
I’m not going to bash this guy. As someone who has significantly more student loan debt than anyone I know (2 graduate degrees, all borrowed, all unsubsidized), and both borrowed and worked my way through undergrad (and scholarships), and has always chosen the in-state school option (cheaper, closer, etc.), I’ve heard it all and, honestly, if one comes from a lower middle class or poor background and wants to go to college or pursue higher ed these days, you’re going to incur outrageous debt. There just aren’t the need-based grants that there used to be, the loans are not subsidized anymore for graduate studies, and need-based scholarships have given way to private vanity scholarships and grants that emphasize niche areas of study for specific people.
I’m surprised at the Boing Boing readers & commentors who, on many occasions, lament the increased cost of living compared to the minimum wage but don’t seem to connect that disparity with the decreased ability to pursue undergraduate and graduate degrees and some kind of social and economic advancement.
As someone who comes from lower middle class, entered the work force in the middle of the recession and the housing bubble (Yay! 2001!), I’ve always been too poor to afford anything but had too much income to qualify for any assistance that would actually give me any stability. So, I’ve borrowed. And I will keep borrowing, and working, and studying. Because it’s that or fall so far that I don’t think I could ever get up again.
15 Likes
“Principal”, not “principle”.
1 Like
True. The hospital has free cable.
1 Like
It’s true that most people who refinance do so into a new 30 year loan with exactly the consequence you describe, because they’re focused entirely on the monthly payment and not the total cost over time. But there’s no requirement that you take a 30 year loan when refinancing.
If, for example, you take a $100k 30yr loan, then after 15 years you’ll have paid down about $30k in principal. You could refinance into a new 70k 15yr loan and be in exactly the same place except for the effect of rate changes (and the transaction costs of the refi). Swapping a 5.8% rate for a 3% rate (not unlikely for a 15 year fixed rate home loan right now) on that 70k balance would lower your payments by $100/mo on a $100k loan. So depending on what the transactions costs are, it might be worth it.
With only five years left on your mortgage, it probably isn’t worth doing anything. But it can’t hurt to call a few banks and find out if they maybe have a 5 year refinancing option available. If you could lower your rate to 2%, you would save about $50/month for every $100k in proceeds you took 25 years ago. So if you live somewhere that refinancing transaction costs aren’t prohibitive, it could in theory be worth it.
4 Likes
Reading through this thread, there are a number of people I’d like to borrow money from in what they would consider a loan. Which, apparently, means “interest never compounds.”
I’m in a stable, two-income household with a great credit rating and no debt besides my mortgage. In fact, I’d be willing to put 100% of the loan amount as cash into escrow–no risk to the lender!–if only I could get these terms. And I’ll take an exorbitant rate–10%, far more than I’d pay a bank and only slightly less than what I’d pay a credit card company. As I now understand it, a “loan” would look like this.
- You loan me $10,000 at 10% APR with a minimum annual payment of $1,000.
- I pay you $1,000 per year for ten years, thus paying down the principal to zero.
- Meanwhile, interest has accumulated: $1,000 in year 1, $900 in year 2, and so forth down to $100 in year 10, for a total of $5,500. It goes in the separate “interest” column and does not compound. (That’s the crucial part! Without that, you’re no better than these dastardly student loan people!)
- I pay you back that $5,500 at $1,000/yr over 5.5 years.
- We both shake hands and agree that this was always a 10% APR loan, and not a 2.9% APR loan, even though that’s what the bank would have called it. [($10,000 * 1.029^15.5) ≈ 15,500.]
Let’s make some money! Serious inquiries only, please. 
2 Likes
When the difference between his behavior and the behavior of a similar student 30 years before is that the earlier student quite likely paid off their tuition while still in school or soon after graduating because the tuition was significantly lower and wages were higher when inflation is considered, it doesn’t make students in present times takers. The ones pushing unsubsidized loans, high tuition costs, and high interest rates on lobbied-for undischargeable loans are the ones taking.
You say HBO, but there are many people paying off student loans who are putting off marriage and having kids, which cost significantly more than an HBO subscription. Grow a heart.
14 Likes
Or you could just be a bank that’s too big to fail…
2 Likes
almost everyone I know who has loans, and went through college in the 80s/90s got fairer loans, lower rates, and much cheaper. most of the undergrads I know NOW are having to piece together loans from a variety of sources, and work full time usually. So, not only has tuition gone up, so has cost of living, meaning you need more $$ out of the gate to make it without a full time job. And those who do have a full time job, take longer, because they have a full time job. Unless you’re on a full ride and work study (which, you can imagine, has strong competition) or your parents were able to save for you, you’re kind of screwed. And now, if you want something outside of service, you really need a college degree.
It’s a number of factors that have driven costs up. It’s not just life choices.
17 Likes
