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I'm not sure how I feel about this one there is a proposal to have student loan payments taken out of a person's paycheck like taxes.
If it were pre-tax dollars, then I may be willing to sign up.
@Anonymous wrote:If it were pre-tax dollars, then I may be willing to sign up.
I might go in this case, but I highly doubt anything like this would be part of it. Most people can't even take advantage of taking the interest off the top because of all the stipulations. I seriously doubt they would consider allowing you to take principal and interest off the top
@Anonymous wrote:
"Most people can't even take advantage of taking the interest off the top because of all the stipulations. I seriously doubt they would consider allowing you to take principal and interest off the top"
What do you mean the interest off the top?
I think what they're saying is that currently interest is tax-deductible provided you make under a certain income threshold. But if payments were taken out of a paycheck pre-tax, then both interest and principle would essentially be tax-deductible.
With income phase-outs for deductibility, implementing such a scheme would be a payroll nightmare...
However, I've read recently that payments via payroll deduction is how the UK student loan repayment system works, and payments are capped at 9% of income, and loans are cancelled after 30 years or the borrower dies or becomes disabled. Needless the say, this sort of system isn't unprecedented.
https://thecollegeinvestor.com/13871/student-loans-different-uk-vs-us/
Automatic repayment plans that are based on income hits everyone the same realistically, though maybe there should be some floor for uncollectable much like the IRS has for tax liens.
Also suggesting there are going to be errors in the system is frankly a red herring: we've done automatic payment for more than a decade in other systems, and even on this forum we've had basically zero complaints on it.
It's seriously a solved problem, and as such isn't worth even worrying about... if it did occur there's plenty of legal redress.
That all said I think student loan handling needs some re-work to other's points I'm just not sure if we're capping payment and duration that there shouldn't be some tradeoff.
On the flipside there will probably be some abuses either way, vis a vis I might as well take student loans when I get to undergrad if interest rates stay any sort of similar, and then since I will be making very little chasing a doctorate for 5-7 years and capped at 10% of my income, well there will be others doing the same.