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this post was submitted on 23 May 2024
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I don't relish coming to Brandon's defense but this doesn't matter as much as it might seem. Everyone taking these loans (except parents taking out for their kids, maybe?) will be eligible for the SAVE plan where any interest remaining after making your monthly payment will be wiped out. It doesn't matter if it's at 6.5% or 100%, your debt will not grow because of interest.
Of course it matters in that it can extend the amount of payments you have to make to pay off your loans (like if only $37 is going towards principal instead of $40) but for most cases where the principal is large enough for the interest to be particularly impactful, you'll be shooting for the blanket forgiveness after 20 years of payments rather than paying it off regularly.
But under the terms of the save plan, it looks like it only covers the remaining of interest if the payment isn't enough. So wouldn't that make the principle unchanging if the payment wasn't enough to cover interest at all? Just paying the "interest" every month.
Correct, which steers you toward the 20 year forgiveness path through minimum payments (or as little as 10 years depending on how much you borrowed). If so little of your payment was going to the principal that a 1% rate hike means it's all going to interest, the forgiveness path was probably the best choice for you to begin with.
Such a roundabout way to "forgive".
no arguments here
I would like to advance the position that they will do several rug pulls between now and 2044.
That is, of course, assuming the SAVE plan isn't tossed right out the window whenever the next administration gets elected in and decides that forgiving loans that have been paid in earnest for twenty years by people who will never be able to fully pay them off is Stalinism 2: Electric Boogaloo.
You just described a modern, financialized rendition of indentured servitude