Tuesday, December 29, 2015

You Should be Able to Refinance Your Student Loan Debt




It took me a while to figure this out, so bear with me. Megan McArdle tries to pooh-pooh a very good question asked by Bernie Sanders:

The day after Christmas, Bernie Sanders asked a question on Twitter: “You have families out there paying 6, 8, 10 percent on student debt but you can refinance your homes at 3 percent. What sense is that?”


Finance types may snicker. But I’ve seen this question asked fairly often, and it seems worth answering, respectfully, for people whose expertise and interest lie outside the realm of economics.


The short answer is: “Loans are not priced in real life the way they are in Sunday School stories.” In a Sunday School story, the cheapest loans would go to the nicest people with the noblest use for the money: single mothers who need money to buy their kids a Christmas present, say.

That’s splendid for the recipient. But what about the lender? Let’s say you had $150 that you really needed to have at the end of the month, say to pay your rent. Would you want to lend it to the single mother whose income is stretched so tight that she needs to borrow money for Christmas presents, or would you want to lend it to some heartless leech of a securities litigator with an 800 credit rating who happens to have left his wallet at home? C’mon. You know the answer; you just don’t want to say it. If you really need the money -- if you cannot afford to turn your loan into a gift -- then you lend it to the better credit risk with the higher income, not the person who may find themselves too short to pay you when the loan comes due.


In aggregate, most of the money in your savings account is loaned out using this cold calculus, and unless you could afford to have that contents of that account suddenly vanish, you want it to be. That’s why poor people, on top of all the other unfairness heaped upon them, pay higher interest rates. And that is why secured loans, like mortgages, get lower interest rates than unsecured loans, like credit card balances and student loans.


Student loans are two-for-one in terms of risk: They are frequently made to people with no income, no credit history, and somewhat imperfect prospects; and they carry no guarantee of payment other than the borrower’s signature. If someone fails to pay their auto loan, you can take their car away. This ensures repayment in two ways: first, you can auction the car and recover some of the money that you lent out; and second, people need their car, and will scrimp on other things in order to keep it from losing it. The immediate personal costs of failing to pay your student loans, on the other hand, are pretty minimal, and people are going to take that into account when they decide whether to pay you or the auto finance company. That’s why the government has to guarantee these loans; the low-fixed-rate, take-any-course-of-study-you-want-at-any-accredited-institution, interest-deferred-in-school is probably not a financial product that would exist in the wild.


Secured loans have thus always carried lower interest rates than unsecured loans, and will do so until the heat death of the universe renders moot such questions.

And so on, and so forth. McArdle tries to demonstrate competence and knowledge here, but let's go back to the question that kicked off this discussion:

Bernie Sanders asked a question on Twitter: “You have families out there paying 6, 8, 10 percent on student debt but you can refinance your homes at 3 percent. What sense is that?”


Let's ignore McArdle and really answer the question. Let's say a family, who refinances their home, takes a look at their student debt and makes an honest effort to refinance that debt. They can't! And that's why the question needs to be answered from the viewpoint of a family with student loan debt as opposed to a recently graduated student with student loan debt.





McArdle is basically right about why a student who just gets out of college is charged a higher interest rate--they're a riskier proposition. But the family, with their home as an asset, is a much lower risk. Why wouldn't you allow them to use their home as collateral so that they could refinance their existing student loan debt?





That's the part that makes no sense. You have two people who are married and, if they're at a point where they own a home and refinance it, let's say they're also ten years into the thirty year process of paying back their student loans. They've been making ten years of payments on that debt at 7 or 8 percent while their home is financed at 3 percent. You could say that the only reason why they own their own home is because of the degrees they earned. 





As a condition of refinancing their student loan debt, you could minimize the risk and reduce the interest rate on their student loan debt by using the equity in their home as collateral. You're telling me that someone who has paid off a third of their mortgage is the same risk as a kid just out of college? Hell, no. They're a damned good risk and they deserve an interest rate cut. That would mean huge savings for the family and bring them greater financial stability in the long run, making it more likely that not only would they pay back their mortgage but that they would pay back their student loan debt.





And wouldn't that help bring down interest rates? Or am I being an idiot on purpose?





These are the kinds of scenarios that Sanders is really pushing--common sense changes to how we do things so that Americans can get out from under crushing levels of debt. And no one currently self-identifying as a Republican would even dream of such a thing--it runs against the economic self-interest of their primary voters as well as their donors.

Tell the Libtards that Obama Still Sucks




Jobs? What jobs?

Look, here's how the modern American economy works. If a Republican is in office, the deficit doesn't matter.

If a Democrat is in office, the deficit is the ONLY thing that matters.

Here's proof, via Paul Krugman, that Obama has been a far better president than we're being told.





It's hard to argue with the proof at hand, but that's all they have--an argument. The fact that it doesn't hold water is a feature, not a bug.

Monday, December 28, 2015

Microagressions Suck





Just by writing this, Emily Shire committed a microagression!

Before 2015, playing beer pong and pulling all-nighters were the activities most associated with the college experience. That all changed this year.


From large public universities in America’s heartland, like the University of Missouri, to small private colleges along the coasts, like Claremont McKenna College in California, student outrage spread like mono at a frat party.


A new lexicon to cover hot-button campus issues—“microaggressions,” “safe spaces,” “yes means yes”—entered the mainstream as college protests earned increasing national interest, far beyond the academic bubble.


Student outrage doesn't bother me and it shouldn't bother you, either. Let them get spun up about these things--it's not like there aren't people being shot and it's not like women just stopped being raped. Let them have their moment within the safe environment of college to learn how the world really works, and, oh by the way, let them change society for the better by redefining what we can and cannot talk about. Deriding someone's opposition to racism or gender inequality means you're getting a taste of what's around the corner. Eventually, we'll all stop offending one another, even if it means giving up a banh mi sandwich, whatever the hell that is.

Friday, December 25, 2015

So Much For That Scandal




How much do you want to bet that there will be a "scandalous" revelation about the Clinton Foundation in the weeks ahead?

One of the nation's largest charity watchdog groups has removed the Bill, Hillary & Chelsea Clinton Foundation from its watch list that is supposed to alert donors to potential issues of interest when they are making philanthropic decisions.


The foundation was placed on the watch list in April after a slew of news stories about foreign governments and donors giving to the foundation who were also lobbying the Obama administration while Hillary Clinton was secretary of state.


The Clinton Foundation responded to the label with a lengthy memo in May.
"There has been no indication, accusation or evidence in any of these stories of any wrongdoing," the memo read. "Our supporters donate to the Clinton Foundation because they want to see lives improved; they want better opportunity across the globe; and they want to see communities, businesses and governments working together to address problems that, when working together, we have the solutions and resources to fix."


The way it works is, someone makes a barely-sourced accusation against the Clintons, and, under the Clinton Rules, every minor malfeasance that emerges in the fevered imagination of someone who won't put their name on anything becomes a huge scandal that normally wouldn't affect a Republican with similar issues. Everything is blown sky-high and out of proportion so that, eventually, we get to read about the vindication the Clintons when the information is dumped on a major holiday or on a late Friday afternoon.

Friday, December 18, 2015

Your Kids Belong in the Car, Not on the Roof




This is a story about parents who have lost control of their common sense:

LEAGUE CITY, TX (KTRK) -- One League City neighborhood attracts people from all over with its homes decorated for the holidays.


But Tuesday night, as Jeremy Barron was headed home, he saw something he had never seen before.


"As I passed by them I saw the kids sitting on the roof and it just blew my mind,"said Barron.


Barron says he saw as many as three children riding on top of a minivan as it cruised through the neighborhood. He couldn't tell if they were restrained in any way. There were two adults inside. Barron has no idea who they are.

Now, this was Texas, not Florida. Based on my super scientific application of incompetent Photoshop, there was an older kid holding on to a smaller kid. They may have been tied to the luggage rack.





Bad parenting. Bad, bad, bad. And worse Photoshopping, too. Well, at least I don't use Photoshop on the kids.

Thursday, December 10, 2015

Cheap Oil




A barrel of oil goes for about $39 right now:

Oil fell below $37 a barrel on Thursday, after new data showed OPEC is still pumping like there is no tomorrow.


The mighty oil cartel produced 31.7 million barrels a day in November, its latest monthly report shows. That is the highest output in over three years and 1.7 million barrels a day over its former production ceiling.

Oil hasn't been this cheap in a long time. About a year and a half ago, it was $108 a barrel.

The implications of this probably aren't well understood. There are a number of countries--Iran, Venezuela, Mexico, Nigeria, and Saudi Arabia that face unique circumstances at home. They have restive, unhappy populations that are trying to live in struggling economies. The governments of those nations (only Mexico is a non-OPEC state) are forced to chase revenue and produce oil in abundance, working against their common interests in the name of maintaining a revenue stream that is drying up.

If those countries come apart at the seams because of cheap oil, we'll have interruptions in supply and the possible intervention on the US military as a result. Sure, I like paying less than $2 for a gallon of gas, and I laugh about it all the time because what else could be more hilarious, but there are some really difficult choices here. Do we continue to live like this and hope the oil producing states can remain stable or do we welcome a modest price hike? It would seem to me that someone has to figure out how to cut production, bring the price up, and do this quietly.