[downrightmike]

Student loans currently carry no risk. They can't be discharged. Interest is the payment to the lender to accept risk. There is no risk in the current state of student loans. Therefore they should never-ever charge interest.

Also schools need to be reigned in, if GA et al can pay each student athlete $40,000 a month, they MUST be held accountable for burdening the students and the state with unscrupulous debt.

[chasd00]

> Student loans currently carry no risk. They can't be discharged. Interest is the payment to the lender to accept risk.

you make a good point, if there's no risk there should be no interest. Or at worst, the interest rate should track COLA adjustments to social security. Some basic adjustment relative to inflation so the lender gets back what they lent out.

Now that schools can pay their athletes I hope the rest of the student body take notice and start asking questions about school funds allocation. It should make it plain as day to the average student that their school has plenty of cash and choses to force them into debt.

[gruez]

>you make a good point, if there's no risk there should be no interest.

Even loans to the US government pays interest. If you meant "no premium beyond the risk-free rate", why would anyone want to lend to students, when they have to deal with the hassle of dealing with lenders and the political risk of it getting discharged, when they can just led to the federal government instead?

[downrightmike]

College grads also pay on average 10x the taxes above a HS grad, so there is a huge disconnect on the repayment the lenders get. Once you pay the SL amount in taxes, you should be done.

[zeroonetwothree]

Around 6% of student loans are defaulted on. Some of those end up never being repaid while others are delayed substantially.

Also interest is payment for the combination of losing use of money + risk + inflation.

[Ekaros]

They should charge rate. But rate should be similar to say interbank rate. Maybe plus something like 0.5%. This is how standard loaning often operates. You have risk free lending so you get loan from somewhere else and then take some margin.

[fwip]

One downside is that money lent for a student loan cannot otherwise be invested. If paid back later with no interest, the money will likely have lost value to inflation in the meantime.

I think I agree with your broader point - just quibbling, here.

[trothamel]

Interest also compensates for the other things that money could be doing. If I didn't loan it to you (or a student), then I would be doing something else with the money, even if just buying a government bond.

[thatcat]

I'm not sure that is accurate. You need a borrower to do that. If there were other low risk borrowers they would also lend them money, it's not a zero sum game. I'm no banker, but pretty sure the bank doesn't lend itself fractionally reserved loans and buy t-bonds.

[downrightmike]

College grads also pay on average 10x the taxes above a HS grad, so there is a huge disconnect on the repayment the lenders get. Once you pay the SL amount in taxes, you should be done.