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I am close to people who have experiences similar to your (as recently as 2018). It's true that they are making it work, but it'll be another ten years before t

I am close to people who have experiences similar to your (as recently as 2018). It's true that they are making it work, but it'll be another ten years before their debt is paid off. Furthermore, they all graduated on time, they are all in well-paid engineering disciplines, and they are all relatively free of other situations that cause large financial burden (heath crises, disasters, family drug issues, etc). For any of them, I'm not sure it'd be going smoothy if any of things had gone differently. Put another way: when everything goes right, you can just barely pay for private college yourself. As soon as anything goes awry, all bets are off.

pohuing 3y ago
You could means test repayment. That's how it's done here in Germany, only once I earn a good deal I'll have to pay back a small percentage each month. If I never get a steady income I just won't have to repay it if I understand it correctly.
- dragonwriter 3y ago
  We already means-test repayment in the US, we just make the means-testing opt-in, and have loan servicers who have a financial incentive to steer people who would benefit away from the means-tested option.
  - semiquaver 3y ago
    Honest question: in what way are student loan servicers in the US financially incentivized to steer borrowers away from income based repayment plans? I think that the opposite is true. Servicers are paid a flat fee per outstanding loan, without regard to balance or monthly payment, _as long as payments are current_. Delinquent accounts are worth less. Being put on an IBR reduces your monthly payment, making it more likely it can remain in the state that is most profitable for the servicer. https://thecollegeinvestor.com/36556/how-much-do-federal-student-loan-servicers-make https://thecollegeinvestor.com/36556/how-much-do-federal-stu... From that perspective, the servicer is strongly incentivized to use IBR plans for accounts at risk, with no downside to them for erring on the side of lower payments. Furthermore, income based repayment plans aren’t a forgiveness of debt or reduction in interest rate. They simply reduce the monthly payment by extending the term as needed. In practice this can mean adding decades to the term, sometimes creating a situation where the principal grows every month. The longer the extension, the more fees paid to the servicer, since they make a flat monthly fee per loan. Again, one would think that the servicers would have every incentive to promote such a system.

pohuing 3y ago

You could means test repayment. That's how it's done here in Germany, only once I earn a good deal I'll have to pay back a small percentage each month. If I never get a steady income I just won't have to repay it if I understand it correctly.

dragonwriter 3y ago
We already means-test repayment in the US, we just make the means-testing opt-in, and have loan servicers who have a financial incentive to steer people who would benefit away from the means-tested option.
- semiquaver 3y ago
  Honest question: in what way are student loan servicers in the US financially incentivized to steer borrowers away from income based repayment plans? I think that the opposite is true. Servicers are paid a flat fee per outstanding loan, without regard to balance or monthly payment, _as long as payments are current_. Delinquent accounts are worth less. Being put on an IBR reduces your monthly payment, making it more likely it can remain in the state that is most profitable for the servicer. https://thecollegeinvestor.com/36556/how-much-do-federal-student-loan-servicers-make https://thecollegeinvestor.com/36556/how-much-do-federal-stu... From that perspective, the servicer is strongly incentivized to use IBR plans for accounts at risk, with no downside to them for erring on the side of lower payments. Furthermore, income based repayment plans aren’t a forgiveness of debt or reduction in interest rate. They simply reduce the monthly payment by extending the term as needed. In practice this can mean adding decades to the term, sometimes creating a situation where the principal grows every month. The longer the extension, the more fees paid to the servicer, since they make a flat monthly fee per loan. Again, one would think that the servicers would have every incentive to promote such a system.