Bernie Sanders Poses Bad Lending Question

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Two loans: one with collateral, the other without any. All else being the same, which one do you think would have the higher interest rate?

Given his tweet, Socialist (Democrat) candidate Bernie Sanders might not understand the question.

The twitterverse was quick to pounce on him for it:

To be fair, student loans might be unsecured debt but they can’t be discharged in bankruptcy. There’s also ways for debt collectors to garnish a paycheck to pay them back. That’s entirely dependent on the borrower generating income though and likely means a substantially longer repayment period. In a famous op-ed by Lee Siegel in the NY Times titled, Why I Defaulted on My Student Loans however, it is apparently possible to just avoid the debt altogether (and apparently feel okay about it).

With stories like that it’s easy to understand why a loan secured by a home would cost less than a loan secured by someone’s willingness and ability to pay. And in the case of Bernie Sanders, a candidate who believes college should be free for everyone, it’s tough to say if his question was really just rhetoric meant to stir up his base or a serious one in which he really doesn’t understand how the underwriting of loans work.

Either way, many people are worried:

Last modified: December 27, 2015
Sean Murray



Category: Loans, Politics

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