“CNN.com Recently Published/Updated – Student cashes in savings after private loan falls through”
My first thought when I saw that headline was, “Huh? Paying cash for school is now headline news? I guess people really DO assume that you can’t go to school without loans anymore.” So of course I clicked through. Turns out it was an article about how a company had suspended its student loan program.
But there was a part of the article that I just didn’t get:
“Eric Hahn thought his financial situation was set after he was approved for a private student loan with an 8 percent interest rate to supplement his federal education loans.
Just a few weeks later, Hahn, 21, was forced to cash in his savings and investments so he could make his rent and tuition after finding out that the lender, MyRichUncle.com, had suspended its private student loan program.
Eventually, the country’s leading student loan provider, Sallie Mae, approved him for a private loan at 12 percent.”
So wait. He had the money available in savings and investments to pay for school and rent in full, so he cashed it out. But then — big relief! — he was able to borrow at 12% instead? Maybe I’m missing something, but is anyone making 8% to 12% on their investments right now? (If you are, please tell me where.) It doesn’t say that he raided a retirement account; it just says “savings and investments”. Why on earth would you want to go and borrow money at high rates when you have the cash to pay for school?
I guess I just don’t get it.