Imagine that you never spend the $10k disbursed by the loan. Then for every dollar of principal that you repay via payroll deduction, you transfer a dollar from the original loan amount into the bank account where your paychecks are deposited.

How would that above scenario look different from one where you could instead make loan repayments from the original principal rather than payroll deduction? It wouldn't. Your bank account would have the same ending balance, and you'd see the same amount of taxes being withheld (and ultimately taxed) from each paycheck.

How can you be double-taxed if the money used to repay the principal is never once taxed until you withdraw it in retirement?