A non-academic article about the current practices applied to determine student loan interest rates and why they are wrong – by Alberto Furger
In this article, I explain why the READ model is not based on interest rates and credit scores. At the core, I describe why the commonly applied concept of interest rate is irrelevant to determine the real economic risk of capital for young borrowers.
To do so, I challenge two big financial ideas; first the currently prevalent theory of money creation and second the concept of credit scores. I argue that both are not ‘good’ indicators to determine the price of a student loan.
For the benefit of all readers, I attempt to build up my argumentation step by step.