Abstract A Fable allows for a short story illustrating a moral or a warning. This story brings the past profiles, current program quirks and future features into view.
A student goes into a bank. He tells the personal loan banker “I want to borrow $7500 each year for the next 4 or 5 years.”
“That’s at least $30,000 over time” the banker says. “Personal loans have a 10% interest factor.”
“For my loan,” says the student, “I need interest rate close to a home mortgage, like 6%. And I don’t want to be charged interest for the first four or five years of the loan”.
The banker asks, “how long is this loan for?”
“20-year payoff after graduation, or shorter ” replies the student.
Banker asks, “Do you have any collateral assets to secure the loan?”
The student says, “No collateral, but a promise to pay it off when I get a job.”
The banker is incredulous, asking “anything else you want to tell about your plans?”
The student says “yes, there is a 10% chance I will totally default in the first year, and a 30% chance I won’t finish my degree. And I will default a few times paying off my loan.”
The banker looks Ready to pass out. But the student is not finished. “In case I have low earnings I want you to adjust the new payment amount to 5% of disposable income.
The banker is unable to speak. Finally, the banker recovers his voice, “what do you mean disposable income?”
“Oh, its simple,” replies the student, “I take my monthly salary and subtract two times the poverty wage or 2,200 a month and pay 5% of what is left.” The student pauses “ and if I qualify and pay for 20 years, I want a loan forgiveness option on the balance”
The banker is close to passing out, but asks “Anything else you want for this loan?”
Student replies, “well I may not be able to get a job that has a first-year salary more than my total student loan”
The banker asks, “But, the university approved your application based on good grades and test scores right?”
Student looks condescending “No, its open admission.”
The banker asks “what will your degree be in?”
“I’ll know more for sure after two years.” The student admits, “I need to find my passion,” and adds “There’s a 50% chance my job won’t be in my major and I may be underemployed.”
“Why did you come to our bank?” The banker is mentally exhausted, looking at the clock and wishing for the first time today someone would call so they can cut the discussion short.
The student replies “I wanted to see who had the best rates for a student loan, and if I go through a bank I might get a new credit card, my current one is full.”
The banker speaks. “So, I can’t waive compounding interest on your thirty thousand dollar loan. The value payoff is $35,000 or more by time you graduate. Which means, even at a 6% rate, you have twenty years of paying at $250 a month. If you only pay 5% of disposable income it means you need to be earning more than 5000 dollars a month to ever pay it off. Where will I get the money to satisfy the remaining balance?”
The student nods, thinks and then says “That’s great, Lets sign!”
Banker says, “I cannot loan you a dime you’ll need to use Federal Student Loans.”
A student goes into a bank. He tells the personal loan banker “I want to borrow $7500 each year for the next 4 or 5 years.”
“That’s at least $30,000 over time” the banker says. “Personal loans have a 10% interest factor.”
“For my loan,” says the student, “I need interest rate close to a home mortgage, like 6%. And I don’t want to be charged interest for the first four or five years of the loan”.
The banker asks, “how long is this loan for?”
“20-year payoff after graduation, or shorter ” replies the student.
Banker asks, “Do you have any collateral assets to secure the loan?”
The student says, “No collateral, but a promise to pay it off when I get a job.”
The banker is incredulous, asking “anything else you want to tell about your plans?”
The student says “yes, there is a 10% chance I will totally default in the first year, and a 30% chance I won’t finish my degree. And I will default a few times paying off my loan.”
The banker looks Ready to pass out. But the student is not finished. “In case I have low earnings I want you to adjust the new payment amount to 5% of disposable income.
The banker is unable to speak. Finally, the banker recovers his voice, “what do you mean disposable income?”
“Oh, its simple,” replies the student, “I take my monthly salary and subtract two times the poverty wage or 2,200 a month and pay 5% of what is left.” The student pauses “ and if I qualify and pay for 20 years, I want a loan forgiveness option on the balance”
The banker is close to passing out, but asks “Anything else you want for this loan?”
Student replies, “well I may not be able to get a job that has a first-year salary more than my total student loan”
The banker asks, “But, the university approved your application based on good grades and test scores right?”
Student looks condescending “No, its open admission.”
The banker asks “what will your degree be in?”
“I’ll know more for sure after two years.” The student admits, “I need to find my passion,” and adds “There’s a 50% chance my job won’t be in my major and I may be underemployed.”
“Why did you come to our bank?” The banker is mentally exhausted, looking at the clock and wishing for the first time today someone would call so they can cut the discussion short.
The student replies “I wanted to see who had the best rates for a student loan, and if I go through a bank I might get a new credit card, my current one is full.”
The banker speaks. “So, I can’t waive compounding interest on your thirty thousand dollar loan. The value payoff is $35,000 or more by time you graduate. Which means, even at a 6% rate, you have twenty years of paying at $250 a month. If you only pay 5% of disposable income it means you need to be earning more than 5000 dollars a month to ever pay it off. Where will I get the money to satisfy the remaining balance?”
The student nods, thinks and then says “That’s great, Lets sign!”
Banker says, “I cannot loan you a dime you’ll need to use Federal Student Loans.”