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> incentive to repay promptly, borrow less

In an environment where inflation is running well over 5% and 1 Year Treasuries are yielding 4%, there is no [economic] incentive to pay off a loan at a 1.5% interest rate. You would literally be better off to buy 1 Year Treasuries than pay off that loan (and consequently, to borrow as much as you could).

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That’s not how loans work, if it was credit card debt yeah you could pay a minimum forever, but education loans have terms attached with fixed payments.

Yet people have loans outstanding 20, 30, or more years after taking them out, so obviously there's some amount of flexibility in the system. In any event, on its face, this system would not encourage prompt repayment but rather the opposite: the slowest possible repayment.

I think we should be careful not to discount the idea where the 1.5% likely was actually a stand in for a variable to be discovered/optimized

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