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You answered your own question. > Why is this a problem? >So yeah the government is losing all these future interest payments
by kansface 11y ago
You answered your own question.
> Why is this a problem?
>So yeah the government is losing all these future interest payments
- iamjdg 11y agoi guess I need to clarify a question first: when the private company refinances the loan, do they pay the government the current principle?
- kansface 11y agoYes - otherwise, they would have to pay interest on the loan while refinancing to a lower rate (they'd lose money).
- iamjdg 11y agoIf the answer to the question is yes, then is the net present value of the remaining interest payments greater than the present value of the loan payout they just received? It is, but not by a huge amount. If I was the government is be happy to get all this cash from loans paid off early and I would use it to make more money (loan it out again to something more lucrative, mitigate the risks of likely to default student loans).