Forgive the Interest

The most painful stories in the student loan pantheon involve borrowers who have actually tried to pay their debts, but wind up owing more than they actually borrowed. If they only make minimum payments, or miss some payments due to financial hardship, the interest charges will eat them alive.

The person who “borrowed $40,000, made $20,000 of payments, and now owes $60,000” is all too common.

Albert Einstein once described compound interest as the “eighth wonder of the world,” saying, “he who understands it, earns it; he who doesn’t, pays for it.”

The obvious solution is to forgive all accrued interest and all future interest. The person above would owe $20,000, not $60,000.

This can only work for federal loans, since private lenders cannot forgive interest – but that is about 90% of loans outstanding.

We must establish a bedrock principle that governments should not be charging interest to its own citizens. The following article gets us started in that kind of thinking………

https://uproxx.com/life/student-loans-0-interest/

The excellent Marshall Steinbaum notes that such forgiveness amounts to far less in net dollar costs to the government as the recent tax giveaways to the rich, although with a very different beneficiary population.