To start with, it seems to go against the very foundation of why and who should provide prison services, but more important to many people is the practicality of this proposal. What are the effects of making prisoners 'pay back' society? Well for one, how do we deal with people who never get out of prison? How will they ever repay society? Do we look to their families to deal with the 'loan'? No. That seems to be inappropriate; making more suffer for a single person's actions. We seem to be forced to forgive the loan which would make the prison company lose money. Something tells me they won't be accept that. I'm betting that they would raise interest or food/health rates to make up the difference. Does that really seem appropriate?
How do we honestly expect anyone in prison to be able to pay back this 'loan'? Most prisoners are from low income backgrounds and once they get out, it is extremely difficult for them to find work. When work is found, it's usually low paying or minimum wage, which would hardly allow for decent living conditions. The United States' current minimum wage isn't a livable one, and to then expect an individual on minimum wage to be paying off a loan for time in prison seems to defeat the entire purpose of the penal system. For many, the added financial burden of a loan may in fact be a driving factor that lands them back in prison again. There is this fear that people go to jail on purpose to avoid having to pay for things in the 'real world' so how would adding another cost help that?
In light of that, would this policy be a 'deterrent' as some would claim? Knowing you'll still have to 'pay' for your food and wellbeing? I'd doubt it. Besides the fact that many studies have already shown that increases in severity of punishment don't act as deterrents, I would think that knowing you won't have to pay until you get out (and since getting out will probably only mean you'll end up going back), that it might even have the opposite effect.
Finally, how is this loan system going to handle those who have been wrongfully imprisoned? It would seem obvious that they are entitled to some kind of compensation but do we just give them all the money that would have been owed? Do we just relieve them of the debt? Who is liable to give this compensation to such people? Is it the prison or the government? The waters are so muddled that its impossible to tell how such situations would be handled. Particularly in private prisons that aren't looking for justice but merely a profit.