Mentioned in the previous article was a method of loan payments in the form of a percentage of income being taken out of your paycheck to slowly pay your loan back. There is more to it than just being able to pay the loan back however. So let's begin.
Concept: Basically each paycheck, money is deducted from your paycheck to pay your student loan back. Simple right. Basically it acts the same way as traditional income tax would if it were to be deducted or automatic payments from your checking account. But here is where it gets "interesting". If you don't have a job then you don't have to pay. So if you’re unemployed, you will not have any money deducted to pay. So literally the paying back of your loans is put on hold until you find a new job. It’s actually a nice idea.
Variations: Similar concepts to this idea have been proposed. One option was to have the need to pay back the loan expire after a certain period of time. So say after 20 years if you paid a certain percentage back, the rest of your debt will be forgiven. I did not like this idea as people who were successful would pay off most or all of their loans before the cut off while others got off from their obligations. Also, those who wished to escape the rest of their debt may work at menial jobs for a short period of time until they reach the cut off so they would not have to pay back the rest of their loan. I find it dishonorable to do such a thing as to not pay what you owe (let alone the part about it being unfair to those who become successful).
Other variations mostly dictate varying levels of income being deducted; with the highest number I've seen being 30 percent. Also, some continue to charge interest even if you are not working. However, I mostly see the ones that charge interest combined with the cut off clause.
Troubles: The main purpose for giving a loan is one: to help those afford something they cannot at the current moment and two: to make a profit while incentives a return on investment. So it is unclear how a bank or even a government will break even on their loans to students. I know many (including myself) are fine with helping those who cannot afford to go to college to actually be able to go. But, college prices are beyond the pale as you and I well know. Something has got to give. I can see this method being applied with a form of the "Sharia Compliant Loans" where the traditional interest is added up front so as to make a profit and the person knows how much they must pay back. In short they have a goal. If this variation becomes successful, then I can possibly see it being applied to other forms of loans as well, such as loans on your home or other lines of credit. However, that assumes this method, where loans are paid back only when you are working, catch on in combination with the variation of the sharia compliant loan.
Conclusion: It is, overall a good idea. I like that you are only asked to pay a percentage of your salary if and when you are working exclusively. I also like my idea of combining my variation of a sharia compliant loan (interest tacked on upfront) with this concept so as to make paying all forms of loans more affordable and lessen the chance of a repo man knocking on your door to reposes your home if you miss too many payments. So I am willing to give it a shot, if the loan is done in such a way that makes it affordable and that the individual pays all of that money back.
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