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But taxpayers are also unable to profit on any future accrued interest for your loan. Also, the people who are getting refinanced aren't typically high risk to

But taxpayers are also unable to profit on any future accrued interest for your loan. Also, the people who are getting refinanced aren't typically high risk to begin with. So the government loses the low-risk interest, creating a riskier pool of investments that yields less interest overall.

lutorm 11y ago
So would you say that someone deciding not to take out a student loan at all also "costs the taxpayers money"?
- dikaiosune 11y ago
  No, but that's not relevant in a discussion of accounting/investment in this case. Here, what's happening is the government gets a commitment from a certain number of people, and well understood actuarial math tells them how many are likely to pay back, how quickly, etc. They then take all that combined with the interest rates and principal amounts, bundle it up into a number, and say "here's the money we will make." That gets used elsewhere in the budget to understand the flow of money, and AFAIK is very widely accepted as a valid accounting practice. (Side note: for an instance of where this went really haywire, look at the 07/08 crash where the math was fudged and we did not understand how much money was coming back from loan investments) The problem is not "oh noes people are paying us back" it's "well crap, the private sector is undercutting our legislatively defined interest rates and we will be vastly under target on these returns." If the government never "had" the money (again, in the accounting sense, loan payments are pretty stable investments normally), then they can't lose it (as in your counter-point). However, if they did "have" the future money (in the accounting sense), and they can no longer expect that to come in, they are in fact losing money (again, on the books). In these cases, there's no actual dollar bills flying out of the window, just some accounting projection spreadsheets somewhere that make people unhappy.
  - lutorm 11y ago
    Well, it seems the actuarial math should include projections for people paying off their loans early just like they include projections for defaults, etc, and if you demand an above-market interest rate, obviously you'll increase the likelihood that people find better deals elsewhere. But what I'm really objecting to is the conclusion that the future loss of interest represents a loss of income, when they now have the principal back and can invest that in the currently best way possible. If what you get from those funds today is significantly worse than the projected income from those loans were, then it seems you are implying that student loans really are meant to shaft the people who take them out.

lutorm 11y ago

So would you say that someone deciding not to take out a student loan at all also "costs the taxpayers money"?

dikaiosune 11y ago
No, but that's not relevant in a discussion of accounting/investment in this case. Here, what's happening is the government gets a commitment from a certain number of people, and well understood actuarial math tells them how many are likely to pay back, how quickly, etc. They then take all that combined with the interest rates and principal amounts, bundle it up into a number, and say "here's the money we will make." That gets used elsewhere in the budget to understand the flow of money, and AFAIK is very widely accepted as a valid accounting practice. (Side note: for an instance of where this went really haywire, look at the 07/08 crash where the math was fudged and we did not understand how much money was coming back from loan investments) The problem is not "oh noes people are paying us back" it's "well crap, the private sector is undercutting our legislatively defined interest rates and we will be vastly under target on these returns." If the government never "had" the money (again, in the accounting sense, loan payments are pretty stable investments normally), then they can't lose it (as in your counter-point). However, if they did "have" the future money (in the accounting sense), and they can no longer expect that to come in, they are in fact losing money (again, on the books). In these cases, there's no actual dollar bills flying out of the window, just some accounting projection spreadsheets somewhere that make people unhappy.
- lutorm 11y ago
  Well, it seems the actuarial math should include projections for people paying off their loans early just like they include projections for defaults, etc, and if you demand an above-market interest rate, obviously you'll increase the likelihood that people find better deals elsewhere. But what I'm really objecting to is the conclusion that the future loss of interest represents a loss of income, when they now have the principal back and can invest that in the currently best way possible. If what you get from those funds today is significantly worse than the projected income from those loans were, then it seems you are implying that student loans really are meant to shaft the people who take them out.