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Comment by happyopossum | Hacker News Reader

  - zero interest
  -  {snip} you end up having to pay 150% of the principal loan (assuming you have a high enough paying job for long enough within those 5 years)

Those two things don't line up, and repeating the 'zero interest' line in an edit doesn't change that. If your repayment is 150%, you've paid interest.

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It doesn't really behave like interest though: the amount paid doesn't depend on compounding or your repayment schedule.

That it doesn't compound doesn't mean it's not interest.

That just means it's not compound interest.

It’s a fee, not interest. Interest is charged over time (either compounded or uncompounded, either way you pay more interest if you take longer to pay off the loan). Here they’re charging a onetime 50% fee.

I think the point here is that "zero interest" isn't particularly compelling when the cost of credit is being driven up (to exorbitant levels) by another mechanism. An equivalent loan with a 5-year term would have an interest rate of almost 18% and in this case you don't have the option to save money through early repayment.

Debit is not just big digit, it is an ever deepening well. There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase.

A loan with a very reasonable 5% overall interest if paid on time can have unbounded interest if paid late enough.

The student dept crisis is dominated by the latter kind of situations.

(still yes, it is zero compound interest + 50% fixed interest)

> There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase.

The problem is a lack of financial literacy education on one side and a lack of career options for decent-paying jobs on the other side - a lot of office jobs these days require college degrees, and not everyone can work in the trades or join the military.

Personally, I believe that all of this is actually designed the way it is to make money for the banks handing out student loans.

To be pendatic, the fee is just interest that is compounded exactly once.

Instantaneously on contract creation and irrespective of loan term / repayment / etc.

It's such a non-standard contract that the terms loan and interest are kinda fuzzy

> That just means it's not compound interest.

that's not true. simple interest is calculated on the remaining principal, thus it does continue to accrue with time (which this "zero interest 50%" does not)

compound interest means interest calculated on the remaining principal and on accrued interest.

https://www.investopedia.com/ask/answers/042315/what-differe...

Important distinction to make, most people just think "more money means interest" but the mechanics of the two financial instruments differ and this is the entire selling point for these ISAs, and the reason why one may be a good / bad idea in a situation.

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