5 ms·

> adverse selection problems I gotta admit feeling some schadenfreude that people trying to revive indentured servitude end up being out-grifted by their own c

by ridaj 5y ago

> adverse selection problems I gotta admit feeling some schadenfreude that people trying to revive indentured servitude end up being out-grifted by their own customers

TulliusCicero 5y ago
Modest income sharing as an alternative to loans isn’t any more “indentured servitude” than taxes are.
- dragonwriter 5y ago
  ISA’s weren’t modest; they were heavier share than income-based student loan options.
  - s1artibartfast 5y ago
    But they are also free of runaway interest and lifelong debt. Payments are higher if you succeeded, but the downside risk is lower. This is the fundamental tradeoff.
    - dragonwriter 5y ago
      > But they are also free of runaway interest and lifelong debt Federal student loans with an income based based repayment plan are free of both those things (fixed maximum repayment period and fixed interest rates at origination.)
      - s1artibartfast 5y ago
        Federal loans have maximum repayment periods of 10-30 years, but that does not mean the loan is forgiven at the end of this period. If you fail to make regular and complete payments, the loan can persist for the entirety of your life. By runaway interest, I mean compounding debt, not change of interest rate. If payment on a federal loan is low or non-existent, the debt will increase exponentially over time. Take for example a student who takes ~50K in debt, but fails to graduate or secure income to pay the annual interest. With a federal loan, payments may be deferred or reduced, but the debt will continue to increase with time. If not payed off, this will last for the student's life. With some ISAs, there may be no payments required, and the entirety of the debt disappears after X years.
        dragonwriter 5y ago
        > Federal loans have maximum repayment periods of 10-30 years, but that does not mean the loan is forgiven at the end of this period. Yes, for income-driven plans that are paid as required, it does. > If you fail to make regular and complete payments, the loan can persist for the entirety of your life. If you don't pay an ISA as required it becomes an unpaid debt with all the normal features of unpaid debt, it doesn't just vanish if you fail to pay. So “federal loans don't disappear if you don't pay them”, while true, isn't really a difference.
        s1artibartfast 5y ago
        >Yes, for income-driven plans that are paid as required, it does. Thank you for sharing this, I was not aware and found supporting information here: https://studentaid.gov/manage-loans/repayment/plans/income-driven https://studentaid.gov/manage-loans/repayment/plans/income-d... >If you don't pay an ISA as required it becomes an unpaid debt with all the normal features of unpaid debt, it doesn't just vanish if you fail to pay. Correct, ISAs don't vanish if you meet the criteria for payment, but choose not to. This is only comparable to a federal loan, and one with an income-driven plan. This says nothing about ISAs verses other federal loans, and ISAs versus other private loans.
gwright 5y ago
If someone takes out a loan, goes to school, and then has to pay off the loan is that also "indentured servitude" in your mind? It just seems like two different ways to finance a purchase (training) that has a future value. The ISA's that I'm familiar with don't bind the person to a particular employer, have minimum salaries that are required before the payment is taken out of paychecks, etc. It seems very different than "indentured servitude" and much closer to a loan.
- klabb3 5y ago
  Agreed, at least if comparing to American student loans, which certainly come with the same philosophical/ethical "servitude issues". ISAs seem to align incentives between lender and loan taker better than traditional loans, (although as pointed out not perfectly). More income = more money for both. Most people who are getting training/education likely aims to maximize their income in a 1-2 year time frame. Now, which one is actually the best deal varies from case to case. If you pay more dollars on average in total with an ISA, that'd be expected but hardly the fault of the ISA issuer. That's just an unfortunate side effect of debt and risk calculations that are true across the board.

by ridaj 5y ago

> adverse selection problems I gotta admit feeling some schadenfreude that people trying to revive indentured servitude end up being out-grifted by their own customers

TulliusCicero 5y ago

Modest income sharing as an alternative to loans isn’t any more “indentured servitude” than taxes are.

dragonwriter 5y ago
ISA’s weren’t modest; they were heavier share than income-based student loan options.
- s1artibartfast 5y ago
  But they are also free of runaway interest and lifelong debt. Payments are higher if you succeeded, but the downside risk is lower. This is the fundamental tradeoff.
  - dragonwriter 5y ago
    > But they are also free of runaway interest and lifelong debt Federal student loans with an income based based repayment plan are free of both those things (fixed maximum repayment period and fixed interest rates at origination.)
    - s1artibartfast 5y ago
      Federal loans have maximum repayment periods of 10-30 years, but that does not mean the loan is forgiven at the end of this period. If you fail to make regular and complete payments, the loan can persist for the entirety of your life. By runaway interest, I mean compounding debt, not change of interest rate. If payment on a federal loan is low or non-existent, the debt will increase exponentially over time. Take for example a student who takes ~50K in debt, but fails to graduate or secure income to pay the annual interest. With a federal loan, payments may be deferred or reduced, but the debt will continue to increase with time. If not payed off, this will last for the student's life. With some ISAs, there may be no payments required, and the entirety of the debt disappears after X years.
      - dragonwriter 5y ago
        > Federal loans have maximum repayment periods of 10-30 years, but that does not mean the loan is forgiven at the end of this period. Yes, for income-driven plans that are paid as required, it does. > If you fail to make regular and complete payments, the loan can persist for the entirety of your life. If you don't pay an ISA as required it becomes an unpaid debt with all the normal features of unpaid debt, it doesn't just vanish if you fail to pay. So “federal loans don't disappear if you don't pay them”, while true, isn't really a difference.
        s1artibartfast 5y ago
        >Yes, for income-driven plans that are paid as required, it does. Thank you for sharing this, I was not aware and found supporting information here: https://studentaid.gov/manage-loans/repayment/plans/income-driven https://studentaid.gov/manage-loans/repayment/plans/income-d... >If you don't pay an ISA as required it becomes an unpaid debt with all the normal features of unpaid debt, it doesn't just vanish if you fail to pay. Correct, ISAs don't vanish if you meet the criteria for payment, but choose not to. This is only comparable to a federal loan, and one with an income-driven plan. This says nothing about ISAs verses other federal loans, and ISAs versus other private loans.

gwright 5y ago

If someone takes out a loan, goes to school, and then has to pay off the loan is that also "indentured servitude" in your mind? It just seems like two different ways to finance a purchase (training) that has a future value. The ISA's that I'm familiar with don't bind the person to a particular employer, have minimum salaries that are required before the payment is taken out of paychecks, etc. It seems very different than "indentured servitude" and much closer to a loan.

klabb3 5y ago
Agreed, at least if comparing to American student loans, which certainly come with the same philosophical/ethical "servitude issues". ISAs seem to align incentives between lender and loan taker better than traditional loans, (although as pointed out not perfectly). More income = more money for both. Most people who are getting training/education likely aims to maximize their income in a 1-2 year time frame. Now, which one is actually the best deal varies from case to case. If you pay more dollars on average in total with an ISA, that'd be expected but hardly the fault of the ISA issuer. That's just an unfortunate side effect of debt and risk calculations that are true across the board.