Hypothetically, let’s say there is a person named “Fred”. Fred has managed to rack up an absurd amount of student loan debt. Maybe he made a bad decision, or maybe he took a calculated risk that did not pay off. (perhaps he enrolled in a top 14 law school and got thrown out due to malfeasance on the part of the school administration. He obviously can’t get justice against a law school in court)
Fred will never make enough money to pay off the debt, and 15% of his income (on income based repayment) is an absurd amount of money compared to his total income. (since that money is charged from before tax income)
Fred would have to pay 8640/year towards his student loans. What would stop “Fred” from signing up for 6 hours of online courses each term, indefinitely? Perhaps he could be studying robotics or advanced algorithms or management skills or some skill actually useful for his job.
Upon retiring, he could finally start paying his loans back…using IBR against his very low retirement income (social security + withdraws from his 401k I guess).
Or, maybe he could just take his money and leave the country. Not sure if the US DOE really can dun someone’s investment income earned off of overseas accounts not in their jurisdiction, from someone not filing U.S. tax returns.