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It's just as crazy in Canada. The fixed interest rate on government backed student loans is prime +5%! That means that during a period of historically low interest rates, students are paying nearly 8% on their loans.

Why not prime? This is non-dischargeable debt, what is the risk to the lender? It's absurd.

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Hmm. You get prime rates on a house -- where the asset's value fully covers the liability -- if you have a decent credit score and a source of income to cover the monthly payments.

Are non-dischargeable debts are just as good as having that asset there, and if not, how much worse are they? What's the additional risk added by having people with nil credit score and little or no sources of income -- more or less than 5%?

If this were really some sort of competitive market we could probably find out empirically by working backwards from extant rates, but apparently it's government-backed, so who knows :P

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