The average monthly car payment was $568 for a new vehicle and $397 for used vehicles in the U.S. during the second quarter of 2020, according to Experian data. The average lease payment was $467 a month in the same period.
The average student loan borrower pays $393 per month, according to the Federal Reserve.
Yes, these are averages, some pay less, some pay more and just as with a new car, recent college graduates pay more.
With both buying a car and attending college individuals have many choices. They can buy the most popular vehicle, a pickup truck, for more money than necessary for transportation or they can buy a vehicle just for that purpose.
They can select their college, their courses, their major and how long it takes to graduate and what job to take after graduating … all of which affect their expense and ability to repay their debt.
In theory at least a college education is an investment, a long term investment.
A vehicle is a bad investment especially when that vehicle is more for pleasure, luxury and show.
From 2006 through 2021, average federal student loan interest rates were:
- 4.66% for undergraduates
- 6.22% for graduate students
- 7.27% for parents and graduate students taking out PLUS loans
- Source: https://www.credible.com/blog/refinance-student-loans/what-are-average-student-loan-interest-rates/https://www.credible.com/blog/refinance-student-loans/what-are-average-student-loan-interest-rates/
These rates are lower than a car loan even for those with excellent credit.
So, what’s the answer? It may not be unreasonable to set interest rates on student loans at no higher than that paid to the Social Security Trust. The numeric average of the 12 monthly interest rates for 2019 was 2.219 percent. The annual effective interest rate (the average rate of return on all investments over a one-year period) for the OASI and DI Trust Funds, combined, was 2.812 percent in 2019.
IMO there is no justification for blanket forgiveness of all or part of student loan debt.