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Student Loans Can Be Money Traps

There are rumours that most of the student loans are being used as a tool to make money. It is said that the Federal Bank earns few bucks every year by lending money to a few students. A report from David Bergeron from American progress says that according to the accounting rules, the government lends a million dollars to the students and for every dollar lent; it earns a minimum of 16 or 17 cents. However there are many who are against this report. One such man is Wayne Winegarden who is an economist at the Pacific Research institute who has opposed the above statement and says that the Federal Government actually gives out more money to the students as loans than they get back. 

The congressional budget office also has its views in place and has stated that the change in the current student loan program would earn the government about 184 billion dollars and another estimate by the company which was conducted through a different accounting method showed that the government would also lose 95 billion dollars in the process. The risk involved is all that matters according to Bergeron. He uses the official government method to estimate the return on investments. A point from Bergeron also made it clear that there are real costs that are often ignored by us. You can learn more about money loans at http://www.bestratedcashloans.com/ 

Student loans should be priced based on the market interest rate is what Bergeron further added as they involve a higher risk when compared to a treasury note. Apart from this; the economy also makes a difference on the student loan rates says Deborah Lucas, a well known finance professor at the MIT ‘s Sloan school. However no reports are available on how much the interest rate will go up to in the next ten years. Let’s just wait and see how much the government actually makes in the years to come.

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