Allow me to digress from baking here while I try to work out this idea I came up with at school today. I'm sure someone else with much more influence than I have has had it too, but as grad students with a gazillion dollars in student loans (no, I'm not going to do the math, I don't want to know the real number) clearly we're looking for a way to not be in debt for the rest of our lives. Especially thanks to AIG and predatory lenders destroying the economy.
In class we were talking about social security and Medicare and 401Ks so this was a kind of related topic: Why can't we repay student loans with tax-free dollars? Example, like your flexible spending accounts, a chunk of money comes monthly from your paycheck and goes to health expenses. So in this proposal, the money you would be putting in the bank then sending back to whoever is managing your loan would go straight from your paycheck to the loan people, without setting foot in your bank account (or passing go or collecting $200 dollars). And you wouldn't pay taxes on the money that you're paying interest on.
Pros:
You don't have to pay taxes on that part of your wages.
Less defaulting on loans - if you're employed you automatically are paying for your loans.
Employers may find it attractive to include loan repayment as a benefit (which may decrease your salary).
Incentivizes college attendance. (A little bit.)
Cons:
How exactly would this be managed? Does the govt need to set up one loan/repayment place so that employers aren't tasked with managing all of that hassle? (Or would this create new jobs!)
Thoughts? It seemed like a good idea to us in the lounge - those of us who actively need to plan how to get out of this kind of debt-up-to-our-eyeballs.
Side note: did you watch Mama's Boys? It would have been the worst reality dating show I'd ever seen until that jerk on The Bachelor dumped his fiance on live TV. Anyway, there was this one very fake girl who had $130k of debt - and not the student loan kind. More like the fake tits and over spending credit card kind. Dealbreaker!
But maybe some serious and super-smart economist or Congressional historian can explain to me why this isn't working? (Dear Steven Levitt, if you were to post on my blog I would have a nerdgasm.)
Note, somewhere in this post I used have in 3 different tenses. In a row. And I think the sentence made sense.
