> No offense, but the banks should take on risk if they're charging interest. Right now, they can have their cake and eat it, too, which is stupid - no offense.
i'll skip the faux politeness of "no offense" and just point out that this is foolish.
even if payback is literally guaranteed, interest is still required, because money now is worth more than money later, due to opportunity costs. the US federal government, which everyone considers the pinnacle of credit worthiness, still has to pay interest.
further, just because the debt can't be discharged doesn't mean its paid off in a timely fashion. the interest rate has to be further increased to account for folks who just don't make payments for years at a time.
My argument is not that the banks shouldn't collect interest; my argument is that they should accept risk.
>You'd think a surefire bailout would decrease resistance to debtor relief. But investors want timely payments; they fear federal relief programs might slow cash flow from an otherwise "bulletproof asset class." This creates twisted incentives, especially for SLABS players involved in loan servicing: They often have a stake in borrowers defaulting rather than paying smaller amounts over a longer period of time.
It's perverse policy — bankers are pampered because student debtors are hounded and pounded. To help borrowers, the government should facilitate bankruptcy reform and expand federal relief programs. But we have deeper problems: Lenders, servicers, collectors and investors prosper while students suffer because schools increasingly rely on private tuition rather than public funding.
i'll skip the faux politeness of "no offense" and just point out that this is foolish.
even if payback is literally guaranteed, interest is still required, because money now is worth more than money later, due to opportunity costs. the US federal government, which everyone considers the pinnacle of credit worthiness, still has to pay interest.
further, just because the debt can't be discharged doesn't mean its paid off in a timely fashion. the interest rate has to be further increased to account for folks who just don't make payments for years at a time.