Loan structuring is something that should be negotiated before taking the loan.
If you’re the lender and you let somebody have your money for a period of time, it’s entirely fair to earn interest and if the borrower agrees to the terms he should be bound by them. You can’t just change the rules in the middle of the game with somebody else’s money.
Federal loans specifically add an extra twist. You’re borrowing against the US economy/treasury. Technically you’re borrowing against your own tax pool, but also everybody else’s.
So I do agree with expanding interest tax write-offs. But if the principle is missed I’m not opposed to aggressive collection.
I should clarify that I meant a structure where payments were applied towards the principal, instead of interest, first. Any interest accrued while paying the principal would still have to be paid to close the loan.
Well exactly to the last part. No bankruptcy is not enough as it still results in “unjust enrichment” of the debt holder. The bank loses while the borrower keeps their degree and benefit thereof. Hence, no discharge through bankruptcy as borrower keeps degree and ability to generate income in let’s say most circumstances.
Regarding structuring, this should be negotiated at the onset of a loan. The context as I read it in the chain was restructuring loans. If a lender agrees, then sure. But if the idea is by legal force, no. You can’t extend somebody else’s money on contractually agreed upon terms and then mid term change the rules of the game and consequently how much you’ll pay them for the service of using their money.
I volunteered tax write-offs for interest, specifically around federal loans. The complicating thing is that non federal entities end up servicing the loans and require compensation but taxing money that came from taxed money seems a little too 1776. It should still be repaid as not everyone will go to college so there isn’t equal representation but it wouldn’t bother me if the interest was wiped in this specific scenario.
Honestly, I much prefer that federal loans and grants are solely based on course of study. Such that fields that are required to meet economic need would receive better terms on loans and incentives via grants. Whereas, the interpretive dance type degrees would not receive any incentives and loan terms would be far worse, with more stringent requirements. We don’t give people with terrible credit scores/history a home, nor should we give loans to folks who pursue degrees that offer no marketable skill.
I’m not a fan of giving the government more control of my life via future involvement in financing decisions.