Under… [an income-contigent program]proposal, loans would be offered at a single interest rate for all borrowers; payments would be automatically withheld from the borrowers’ paychecks by their employers and would be managed by the IRS, just as income taxes are collected. As in the president’s proposal, 10% of a borrower’s earnings would go toward their student loans. The more they earn, the faster they would repay their debt. Such a system would not only help graduates manage their student loans, it would save the government money because it would drastically reduce delinquencies and be far easier and less expensive to administer….
income-contingent loans would be universal and automatic. Everyone who took out a student loan would be put into the program and, because their loans would be tied to their Social Security numbers, the repayments would come out of their paychecks, just as their income, Social Security and Medicaid taxes are withheld.
Australia and Britain have had great success with their income-contingent loan programs. In Britain, more than 98% of loans are repaid.
That might take care of the federally insured loans but most students also have private loans from banks, credit unions or other organizations.
It also makes suckers of the kids who worked hard, or went into the military, and then went to community college for two years, and then to a cheap state college. Their frugality and sacrifice would bail out rich kids who spent 60 thousand a year having fun and eventually earning (or not earning) a more prestigious degree.
Another bail out for the wealthy who sent their kids to private schools.
Why not introduce the ability to elect to pay a graduate tax in perpetuity (i.e. beyond simple repayment of the loan and accrued interest).
Because it’s a choice, it leaves people free to seek financing through the private sector and provides the latter with an incentive to be competitive. Because it’s income-related, it will not penalize those who enter professions that serve the community but are not well-remunerated.
As one who has been blessed beyond deserving in terms of family support for my academic training and has subsequently discovered that all the good scholarship in the world is no guarantee of secure employment, I feel for those preparing to enter university.
It would make more sense to simply have a series of National examinations in a “core curriculum”. Those who pass Calculus, Chemistry, Spanish 301, Brit lit etc. etc. automatically qualify as having earned a “college degree”.
Then folks could sit down, study the material, (or hire an out of work pHD to tutor him and 5 others) and take the examination.
The current debt based system is just a way to funnel student tuition dollars into banks and colleges.
There is NO reason why half the jobs that now require a college degree need one.
A close look needs to taken at why education costs so much today.
Just where is the money going that these students borrow and then are obligated to repay?
Are there excessive costs or inefficiencies existing within the educational institutions that that are being placed on the shoulders of the students?
For example, text books that are slightly modified and then republished in order to generate income for the persons who write them and the publishers?
[i]A close look needs to taken at why education costs so much today[/i]
Increasing demand chasing static supply. Analagous to Government distortion of the healthcare industry. When the Govt makes an item seem to be “free” demand goes way up. When nothing is done to stimulate the supply side, prices rise to match the increased demand to the static supply.
The solution is to get the Federal Government out of the healthcare and the education industries so that true demand will be chasing supply and supply will have to expand in order to keep prices at a level to match the paying ability of the demand.
[i] most students also have private loans from banks, credit unions or other organizations [/i]
As of July 1, 2010 all Stafford loans are “Direct Loans” through the Dept of Ed. I’m not sure what the overall percentage is now but this certainly tips it in the Fed direction.