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Transportation Businesses Government The Almighty Buck United States

Let Them Eat Teslas 461

Posted by Soulskill
from the om-nom-nom dept.
theodp writes "If you're a bright kid who wants to prepare for the 21st century workforce (PDF) by studying engineering at Purdue, the government will help your parents pay the $100,000 or so tuition tab with a 7.9% interest loan (plus 4% fees) that's likely to be non-dischargeable in bankruptcy and paid back with after-tax money. If, on the other hand, you want to buy a tricked-out $100,000 Model S, Tesla has teamed up with the government, Wells Fargo, and U.S. Bank on what it calls a 'Revolutionary New Finance Product' that enables those who play the game right to avoid paying sales tax, get the government to pick up the first $15,000 (no down payment needed!), and also receive a 2.95% bankruptcy-dischargeable loan for the balance, the payments for which could be tax-deductible. Yep, 'Revolutionary' may be about right!"
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Let Them Eat Teslas

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  • by trout007 (975317) on Wednesday April 03, 2013 @08:21AM (#43346441)

    They can always repo your car.

    This is why Education should be funded where the risk is borne by the one making the loan. The repayment terms should be based on a percent of the students income for a fixed number of years.

    These guys are trying to do it.

    https://www.upstart.com/ [upstart.com]

    • by SJHillman (1966756) on Wednesday April 03, 2013 @08:26AM (#43346467)

      Very good point...
      With a car loan, the car is collateral. If you default, they can take back the car.
      With a student loan, what are they going to do? Cut out sections of your brain?

      • by Captain Hook (923766) on Wednesday April 03, 2013 @08:33AM (#43346525)
        "This is your brain..." "And this is your brain after defaulting on an education loan..." Cut to shot of egg being smashed under a frying pan.
      • by Custard Horse (1527495) on Wednesday April 03, 2013 @08:34AM (#43346531)
        And who underwrites the losses for students who flunk out, die, refuse to work or only work for minimum wage (they need to be able to retain minimum wage to live), and those who are committed to prison for whatever offence?
        • ...not to mention those that take themselves and their education to another country to earn a living. Would extraordinary rendition be appropriate?
        • by hughbar (579555) on Wednesday April 03, 2013 @08:52AM (#43346645) Homepage
          Yes naughty students for dying just to avoid their financial obligations. Never heard of such outrageous behaviour.
        • by trout007 (975317)

          Think of it like buying stock. You get a cut of the profits. If the company is wiped out you take a loss.

        • by ultranova (717540) on Wednesday April 03, 2013 @09:56AM (#43347227)

          The one making the loan, of course. Moneylending is investting, and investments aren't risk-free.

        • No one underwrites the losses. That's what the interest and fees are for. Or do you think that 4% + 7.9% should be entirely risk free for the lender?

          • by tlhIngan (30335) <slashdot AT worf DOT net> on Wednesday April 03, 2013 @12:03PM (#43348699)

            No one underwrites the losses. That's what the interest and fees are for. Or do you think that 4% + 7.9% should be entirely risk free for the lender?

            Yeah, but college students usually have very little In the way of a credit history, which usually means that the risk is higher so the interest will be way more.

            Part of the interest rate is due to the risk - and students don't have enough of a history to tell you if they're likely to default or not. In fact, the government typically underwrites the loan in order to reduce the interest rate - otherwise a student loan would be fairly high risk.

            Think about it - you're loaning something easily $150K, and they have little to no credit history, and they won't even BEGIN to repay the loan until 4 or 5 years down the road. AND there's no collateral. It's an unsecured loan for a fairly large sum of money for a long period of time with nothing to judge who likely the person you're loaning money to will repay you.

            All for a 4% fee and 7.9% ROI (that often begins accumulating only AFTER the education is over - so it's interest free while enrolled). Most lenders won't touch that with a 10 foot pole.

            Credit cards don't loan out that much money (probably 5% of what a student loan would have) and they still charge high rates of interest.

            Student loans are risky from the investor point of view - there are way better investments one could put that sum of money in and earn similar returns.

            If a lender were to "free market" a student loan, 30+% APR would probably be the norm given the risks, putting education in the hands of the rich (who can probably avoid needing a loan).

            And that's why the government underwrites the loan - the lender is only out the interest should the student default - the principle is protected. Otherwise they won't readily put up what a house costs (for the most part) on something so risky - they'd probably make more money buying and selling houses with less risk.

            • Re: (Score:3, Insightful)

              by Anonymous Coward

              You're neglecting to consider what the outcome of this is though. If few people will be given loans for post-secondary education, the cost of that education will come down to the point where students can pay for it with a part-time job, the way it *gasp* USED TO BE.

              Education costs are so high precisely because the government is guaranteeing loans.

      • In many cases, college students, degree or no, would have very little brains they could spare.
      • by rssrss (686344)

        Galley slaves.

    • This is why Education should be funded where the risk is borne by the one making the loan. The repayment terms should be based on a percent of the students income for a fixed number of years.

      This is why Education should be funded by The People. If we took the profit motive out of education we wouldn't have to worry about the "administration" making several times what the instructors do for not even teaching.

      • by Sulphur (1548251)

        This is why Education should be funded where the risk is borne by the one making the loan. The repayment terms should be based on a percent of the students income for a fixed number of years.

        This is why Education should be funded by The People. If we took the profit motive out of education we wouldn't have to worry about the "administration" making several times what the instructors do for not even teaching.

        Or learning.

      • by Stormthirst (66538) on Wednesday April 03, 2013 @08:59AM (#43346717)

        Oooohhh!!! The scary spookiness of Socialism.

        You're right of course.

      • I'm happy to pay taxes to educate children and young adults in basic skills such as writing and mathematics.

        I don't want to send my tax dollars to for profit "colleges" to pay for worthless education and mind-candy degrees.

      • by MightyYar (622222) on Wednesday April 03, 2013 @09:17AM (#43346855)

        This is why Education should be funded by The People.

        I agree... to a point. I think public education should be extended two years such that anyone can get an associates or technical degree for free. That seems to be where the sweet spot is these days in terms of return on investment. A high school diploma is more or less worthless these days. At this point in time, I don't think we should be funding people's advanced degrees.

        • by uncqual (836337) on Wednesday April 03, 2013 @09:58AM (#43347245)

          Unfortunately, in the U.S., I fear this would result in a situation where "everyone gets an associates or technical degree", and these programs would end up getting dumbed down so "everyone gets an associates or technical degree" in the interest of "fairness, diversity, and inclusiveness" - just like our K-12 system has. Then, the two year degree would be worth what a HS degree is now - not much.

          I think the U.S. should be seriously considering something more like the German system. Put students on one of a few tracks early (maybe fifth grade?). One of these would be a strong academic track which is intended to end up with at least solid STEM MSc or a PhD in one of the "softer and in less demand" disciplines (such as Ancient History). At the other end of the spectrum would be trade oriented curriculum with students learning skills necessary for basic life (some accounting, enough math to figure out interest, basic understanding of government, basic writing skills) and skills specific to a group of trades and including apprenticeships in HS.

          If you've ever worked with fifth graders, it's pretty obvious which ones will never be on the academic the track or the one just "below" it. If, in spite of being exposed multiple times to it, they haven't figured out how to compute 6.9 × 0.042 or 42.42 ÷ 0.1, they are extremely unlikely to catch up and even survive Algebra 2 a few years later. However, generally students should be given the benefit of the doubt and put into a higher track if they are "on the bubble" and then be aggressively reevaluated every six months to determine if they should be moved to a less academically demanding track. The requirements and expectations of the tracks should not be adjusted to match the students, the students should be placed in the track that match their motivation, intelligence, and interests.

          • by ebno-10db (1459097) on Wednesday April 03, 2013 @10:51AM (#43347875)

            I think the U.S. should be seriously considering something more like the German system. ... If you've ever worked with fifth graders, it's pretty obvious which ones will never be on the academic the track or the one just "below" it.

            How do you know "which ones will never be on the academic the track"? Did you follow former 5th graders for life?

            While I agree "Ph.D.'s for everyone" is nonsense (other than filling the pockets of the education-industrial complex), the German system is too rigid. Should your performance in the 5th grade determine the path of the rest of your life? I refused to do anything in the 4th through 6th grades (family problems) but wound up getting an MSEE (ok, that's the sort of thing you usually keep in the closet, but I know people who got real degrees too). Similarly, an old friend of mine dropped out of high school and 10 years later went to Harvard Law.

          • by MightyYar (622222)

            Yes, you would have to end social promotion. This seems to be happening now anyway.

            But the high school degree isn't worthless because of social promotion - it's worthless because the whole experience is geared towards the old manufacturing economy of the last century. Even the best students come out with a good mastery of basic concepts, but no training towards any sort of vocation except continuing their education. We have "vocational schools" that do a bit of that, but nothing on the scale of what is need

    • also need to cut fluff and filler from Education.

      The non-dischargeable in bankruptcy leads to lot's of joke majors and lot's of iffy schools that spend more ad's then Education.

      Also more non college options need to be hear as well as more apprenticeship / trades / tech schools that don't take 4+ years of pure class room.

      • It's always funny to hear your illiterate, anti-education rants. Maybe if you had taken some of those "fluff and filler" classes that maybe you could form cogent sentences?

      • by h4rr4r (612664)

        I was with you until the end, I have seen tech school output and it sucks.

        Sure they know a couple software products, but nothing of what is going on under the hood. They can tell you what a subnet mask is but not why or how it works. They think packet captures are black magic and that reboot is the solution to all tech problems. They have no idea at a basic level. I had one recently try to claim his network speeds to a host on the same subnet and the same switch changed when he changed the gateway. He had n

        • by h4rr4r (612664)

          Dammit slashdot let me edit!

            "He had no concept of why that is" should have been "He had no concept of why that is wrong."

    • by h4rr4r (612664) on Wednesday April 03, 2013 @08:47AM (#43346621)

      Great, so I get a loan and don't work or part time for the first X years.

      How about we just admit having an educated society is a good thing and we make a university education free to those who qualify.

    • by xaxa (988988)

      This is why Education should be funded where the risk is borne by the one making the loan. The repayment terms should be based on a percent of the students income for a fixed number of years.

      This is how my British student loan works. The government underwrites the risk, some privatised company manages everything, and I pay off the loan gradually -- minimum 9% of my earnings over £16,000. The interest rate is low (it was very low, but they changed the rules -- I think it's now 1.5%).

      If I were to earn less than £16,000 I wouldn't pay off anything. If I die, or become permanently unable to work, the loan is written off. Everyone is entitled to one loan (I think).

      • by trout007 (975317)

        I should have been more clear. It's not actually a loan but an investment. There is no balance or interest.

        The person looking for the funds pledges a certain percent of their income for 10 years. I think this company does their own predictions and figures out how much money they will get per percent. But an exchange could be established where people bid for that amount.

        Say it's 5% of income for 10 years. It doesn't matter if you are unemployed the whole time or win the Lottery, you owe the 5%.

        • by h4rr4r (612664)

          So indentured servitude is what you really mean.

          How about instead we recognize the benefit to society of having an educated populace and have university education be made available to qualified applicants at a cost low enough that these schemes are not needed?

    • by Sarten-X (1102295) on Wednesday April 03, 2013 @08:58AM (#43346709) Homepage

      Wait, you mean the summary is misleading me? I'm shocked! Shocked, I tell you! Maybe the details of the Tesla deal will bring some truth:

      US Bank and Wells Fargo will provide 10% down financing on approved credit, and the down payment is covered or more than covered by US Federal and state tax credits ranging from $7,500 to $15,000. New Jersey, Washington and DC also have no sales tax for electric vehicles. These advantages are not available when leasing.

      So buyers don't "get the government to pick up the first $15,000 (no down payment needed!)", but rather they get a government credit that may cover the 10% down payment, assuming their purchase qualifies for the various government programs. There's no further details on what exactly the tax credits are, but my suspicion is that they're generic credits for buying an electric car or other blessed "green" technology, and probably cover 7.5% to 15% of the item's value..

      After 36 months, you have the right, but not the obligation to sell your Model S to Tesla for the same residual value percentage as the iconic Mercedes S Class, one of the finest premium sedans in the world, made by Daimler (also a Tesla partner and investor).

      Not only is Tesla guaranteeing that resale value, but Tesla CEO Elon Musk is personally standing behind that guarantee to give customers absolute peace of mind about the value of the asset they are purchasing.

      And here's the part that's being touted as "revolutionary". The company founder is apparently personally guaranteeing the car's resale value. That's it. We're back to the idealized old days where company owners stood by their products and actually put money behind having satisfied customers. Not really "revolutionary" in my book, but I don't write headlines.

      As is usual for Slashdot these days, the summary is sensationalist bullshit and most of the comments are knee-jerk anti-government reactions.

    • I've been pushing for this for years. I haven't seen upstart.com, so thanks. I will take a look at this. To me it's simple: the lender takes a very small percentage from your salary at the lower payscales and then the percentage increases somewhat as your pay rises until you've paid off the loan + agreed upon interest.
      • by h4rr4r (612664)

        That is how it works right now.

        You don't have to pay back much if you do not make much money. They can only take a max of some percentage, but then the loan takes forever to pay off and interest of course does its dirty work and makes you even more in debt.

    • by Meeni (1815694)

      And we could call this taxes, and make education free for all who merits.

  • So what? (Score:5, Funny)

    by bistromath007 (1253428) on Wednesday April 03, 2013 @08:21AM (#43346445)
    I don't really have a problem with this. Everyone knows that a car, even considering that they quickly depreciate, is much more valuable to the average person than most college degrees.

    I defy you to prove me wrong. :|
    • by hackula (2596247)
      You have to be kidding me. The data shows quite the opposite:

      "Average annual earnings of individuals with a bachelor's degree are more than 75 percent higher than the earnings of high school graduates. These additional earnings sum to more than $1 million over a lifetime."

      http://www.aei.org/article/education/higher-education/how-much-is-that-bachelors-degree-really-worth/ [aei.org]

      • Depends which car we're talking about, there are plenty in the 7-digit range. Although yes that is more than a Tesla, however I think that this may be another instance of the mean vs. median problem with a few hyper-rich people skewing the average upwards.

  • Lease Tesla (Score:5, Funny)

    by 0100010001010011 (652467) on Wednesday April 03, 2013 @08:22AM (#43346447)

    Sell Tesla.

    Use funds for college.

  • 1. Buy a tesla
    2. Sell the tesla for 90% of its market value
    3. ???
    4. Profit from a government-financed education at 2.95% (minus 10k or so "lost in transaction")

    • by DigitalReverend (901909) on Wednesday April 03, 2013 @08:45AM (#43346601)

      Apparently you have never financed a vehicle. The bank holds the actual title, you only get a certificate of registration. You cannot sell the car without the title, and the bank will not release it without the loan being paid off.
      So if you tried to sell the car, the bank would take the money and you'd end up with nothing.

    • by MightyYar (622222)

      Problem: loan will come due on sale, and the lender won't give you the title until it is satisfied.

  • Not really the same (Score:4, Informative)

    by mschiller (764721) on Wednesday April 03, 2013 @08:27AM (#43346483)

    While it would be easy to say Government just prefers the sheeple broke and stupid... These really aren't the same. Cars can be repo'ed.. Your education can't be repo'ed.. Further from a Govt perspective the return in tax income from your education is risky.. You might never finish school. Might end up working in India and not paying taxes.. You might never repay those loans if given the choice because you won't lose anything.. The car might seem like a loss, but you will definitely pay taxes on stuff for the car like tires, registration and property taxes etc the employees who built the car will pay income tax etc. Plus there is the political side of green jobs.....

  • Not exactly (Score:4, Insightful)

    by Adifex (2856821) on Wednesday April 03, 2013 @08:27AM (#43346485)
    Nissan took 1.4 billion from the feds for the Leaf and produced laughable results. Tesla took a third of that and produces the Motor Trend car of the year, and is set to pay off the loan early. I don't blame the DOE for wanting to help them out some more. Note: from a student with a non-dischargeable 7.9% loan.
    • Re:Not exactly (Score:4, Insightful)

      by SJHillman (1966756) on Wednesday April 03, 2013 @08:31AM (#43346511)

      As a former student with a non-dischargeable 6.8% loan (due to finally be paid off in two weeks, yay), I agree. Sure, the Tesla might be aimed at Rich Guys right now, but that's the way most new technology goes - especially in cars. How many standard features in this year's Focus or Camry used to be exclusive to high-end cars a few decades ago or less? Quite a few. If you get Rich Guys to make it profitable in the beginning, those technological advancements will become affordable and even standard within most of our lifetimes.

  • Tesla Loan is BS (Score:2, Interesting)

    by Anonymous Coward

    Man geeks are drinking the Tesla Kool-Aid.

    The Tesla program costs about $1,100/mo even for their cheapest model and the $15,000 only applies for people in West Virginia.

    The $500/mo pricing they keep quoting is a huge fabrication based on "total cost of ownership". Even with their calculator, and assuming the lowest model, you would need to drive that sucker to it's max range 5 days a week every week for three years to actually make the ownership cost $600/mo less than a gas car.

  • A larger fraction of the US population has college degrees than in most other industrialized nations. Encouraging more people to get college degrees will not raise the standard of living or incomes, it will simply mean that we end up with more waiters and cab drivers with college degrees. Subsidizing more college degrees with public funding or loans will mean that tuition rates will keep rising and more and more jobs will require college degrees even though they don't need it.

    As for electric vehicles and su

  • Just take the loan, buy the car, sell it for cash and pay your tuition fees. Easy-peasy :)
  • from King of the Hill: "That guy's done more in a quarter mile than I've done in my entire life."
  • by T.E.D. (34228) on Wednesday April 03, 2013 @09:31AM (#43346981)

    They still aren't really comperable. Even with this sweeheart loan deal, you are going to be out 85 grand in an "investment" that will depreciate down to nearly $0 in 10-15 years. In the mean time you get transportation that you could have had with a couple of $5-10K used cars. That's a whole lot of money down the toilet.

    For the student loan, you get an education, which cannot be taken from you by a bankrupcy court either, and is a ticket to the upper 60% of the job market, culminating in 1.6 to 3 times the expected lifetime earnings [publicradio.org] (depending on how much education you get).

    If you have to pick only one, take the student loan.

  • by frinkster (149158) on Wednesday April 03, 2013 @10:03AM (#43347277)

    I am biased as I already have a Purdue degree, earned 12 years ago. It was far cheaper back then - tuition and fees were less than $7500 per year. Add in the cost of housing and food and I was all in for around $50000. My first job after college paid more than that per year.

    Now, 12 years later, I have three quarters of a million dollars in the bank and a six-figure job. I can write a check for a Tesla sedan without flinching. And as the years pass, I will continue to increase my financial standing.

    On the other hand, if I were to buy a Tesla sedan and use it for 12 years I would have an obsolete car with a severely diminished battery. Now, don't think that I dislike Tesla. I have high hopes for them. I made a lot of money buying long-term call options several years ago - in fact it was when the Model S was announced and everyone thought they would be out of business in a year. I put my own money on the line, in the face of overwhelming negative opinion.

    I think that electric cars will prove to have far lower operating costs than IC cars - and the benefit gets larger the longer you own and the more miles you drive. But let's be perfectly honest. A degree helps you make money. A car costs you money.

  • by johnlcallaway (165670) on Wednesday April 03, 2013 @10:32AM (#43347581)
    ... even more stupid people going to college to get degrees in things they have no talent for. I see them all the time, developers with 'degrees' who can only code if you put a spec in front of them, they are incapable of creative thought and have no real-world experience to pull from.

    I went for a job interview last week, and the hiring VP said their biggest problem is finding developers who know how to program instead of just knowing how to code. Programmers who actually understand things like operations and systems. Programmers who are capable of seeing the big picture and coding at the systems level instead of at the method level.

    These days that type of programmer is hard to find, because the days of becoming a computer programmer by starting as an operator or trainee are over. No one will hire anyone without a degree now. And no developer with a degree is willing to start as an operator, they all want $100k/year to pay off their debts. And of course, no one will hire a programmer with a degree as an operator because they are overqualified.

    Yet some of the brightest programmers I know don't have degrees. They started at the bottom and worked up. They attended classes here and there, either at school or online, to learn what they needed to learn. They bought books and learned new tech.

    But back when I started, companies were willing to hire someone simply because they were smart, creative, and had a great curiosity about how things work. People with good work ethics that worked smarter, not necessarily harder, than their peers.

    And we do none of it now because we have been lied to that programming requires a degree. Bullshit. Programming is one of the easiest things in the world to do. I've seen 10 year old kids write code without ever having been to a class. Simply because their brain works a certain way. I've seen programmers learn new styles of programming over a weekend simply be reading a book. Their biggest stumbling block wasn't not going to college, they understood how to do things. But they didn't know the fancy words for everything. They just programmed and got the job done without worrying about technical mumbo-jumbo that really doesn't mean jack squat. Like how 'initialization' was change to 'instantiation'.

    If all we want is code monkeys who need a complete spec before writing anything, go ahead. Keep sending them to school. Continue to let the government subsidize people who really have no business writing code because their brain just doesn't have the spatial aptitude that is required for programming. Because they thought it was just a great way to make a buck. Continuing only hiring people based on a piece of paper that only says they know how to pass tests.

    Now .. I'm not saying that some truly great people have not come out of college and done great things. I know some people far smarter than me that have degrees and will always make more than me. And no matter how much college I had, I would never have been them. They had the talent already.

    It wasn't college that made them successful, it was themselves. College was just a tool they chose to use because it served a purpose. They already had the ability, college was a different way of getting the information.

    Starting at the bottom is not a bad way to learn. Sure, it sucks at first. But in 3 or 4 years, you get 3 or 4 years of experience and little or no college debt. Many companies will help with tuition. Granted, it cuts out a lot of companies that will only hire if you have a degree. And it can take a lot of time to find someplace that will do it. But someone that has been writing code at home or part-time for friends and family, and knows how to write a resume, should be able to find something if they truly have talent and interview well. If you don't interview well .. go to college.

    But really, do you want to work for a company that is so procedure oriented that they won't look beyond the resume to what a pe
    • by PPH (736903)

      Like how 'initialization' was change to 'instantiation'.

      Oh, but there is a difference. Any CS graduate would be happy to explain it to you. And in the hour or so that this takes, you and I could get a couple of hundred lines of code written.

  • I doubt these facts (Score:3, Interesting)

    by TomGreenhaw (929233) on Wednesday April 03, 2013 @10:43AM (#43347763)
    I just bought a Tesla. I paid sales tax (a lot). I got a 1.9% loan from BofA that wasn't subsidized by anybody. My accountant would laugh if I suggested that this would be deductible. The federal grant is $7500, there may be a little more from Illinois. From what I understand, what is "revolutionary" is Tesla and Elon Musk personally guaranteeing the resale value of the Tesla as part of their new financing plan. The taxpayer isn't on the hook for that - Elon Musk is. Frankly, if I wasn't planning on keeping the car for 8 years with it's "everything but tires" warranty option, I'd jump on this new deal if I could. As for the subsidy, I suppose that's a matter of opinion. Any reasonable person has to agree that we cannot burn gasoline in our cars forever. But there is a chicken and egg problem. A completely free market will likely fail to protect the environment for our children. Alternative fuel cars are prohibitively expensive and always will be without the economy of scale. The government's role is to to serve the long term public good and the tax break's intent is to resolve the chicken/egg problem.

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