Washington Monthly - September/October 2012 - (Page 52)

ansWErinG thE CritiCs oF “Pay as yoU Earn” Plans T ying the repayment of student loans to a borrower’s income is hardly a new idea. Conservative economist Milton Friedman proposed the basic concept in 1955, and so-called income-contingent loans (ICLs), or “pay as you earn,” plans have been championed by many liberals since. This has also given critics plenty of time to come up with well-worn criticisms that are certain to come up again if this proposal gets legs. Here are some of the arguments, followed by our responses: instituting an income-contingent loan system and getting rid of collection agencies would give borrowers a free ride. While such a system would provide much-needed relief to financially distressed borrowers, it would not absolve them of their responsibility to repay their debt. In fact, with the Internal Revenue Service automatically deducting payments from borrowers’ paychecks, it would become substantially more difficult for individuals to skip out on their loans. In other countries that use an ICL system, such as Australia and the United Kingdom, only a small minority of borrowers fail to meet their repayment obligations. since people with very low incomes don’t have to make any payments under this system, won’t it serve as a disincentive for borrowers to work and seek higherpaying jobs? Just as people don’t generally choose a life of poverty to avoid paying taxes, it is highly unlikely that they would do so to escape their student loan debt. There isn’t any evidence from other countries using this system that these concerns are warranted. Also, society has an interest in making it financially easier for people to pursue callings such as primary medicine or public interest law that require advanced education but that pay only modestly or involve highly variable income, such as starting and running a small business. the irs won’t be able to handle the job of collecting on student loans. IRS officials have said in the past that the agency could 52 September/October 2012 handle the job. At a House hearing in 1992 related to legislation that Wisconsin Representative Tom Petri sponsored to create an ICL program, Michael Bigelow, the agency’s then deputy assistant commissioner of returns processing, expressed concerns that the proposal could be practically difficult. Nevertheless, he noted that the agency already collected child support payments and delinquent small business loans successfully, and acknowledged that the IRS would “be able to collect student loan repayments, if that is the will of the Congress and the president.” And that was before all of the technological breakthroughs that have occurred over the past twenty years. With the repayment relief this plan offers, colleges will no longer have any qualms about steering students to take on unmanageable levels of debt. The government already puts limits on the amount of federal loan debt that borrowers can take out. These limits should remain in place under this plan. The potential for abuse could be further addressed by requiring colleges to have some skin in the game. For example, institutions should be put on the hook for a share of the losses that taxpayers sustain when a borrower defaults. Such a change would make schools think twice about overloading their students with excessive debt. such a change would make it easier for unscrupulous for-profit colleges to fleece their students. It’s true that the Department of Education would no longer be able to judge schools by their default rates—since few students would default under such a system. However, with the IRS collecting income data and student debt levels of all borrowers, the government should easily be able to determine which schools are failing to provide gainful employment to their students, and remove them from the program. In addition, policymakers should, as they put ICL in place, redouble their efforts to strengthen the government’s gatekeeping system to prevent unscrupulous schools from getting access to federal student aid in the first place. Further details about how such a system could be implemented in the United States have been put forth in a white paper by Erin Dillon, Affordable at Last: A New Student Loan System (Education Sector, 2011). —Stephen Burd

Washington Monthly - September/October 2012

Table of Contents for the Digital Edition of Washington Monthly - September/October 2012

Washington Monthly - September/October 2012
Contents
Editor’s Note: Where Credit Is Due
Letters
Tilting at Windmills
Do Presidential Debates Really Matter?
The Clintonites’ Beef With Obama
Party Animals
Introduction: A Different Kind of College Ranking
America’s Best-Bang-for-the-Buck Colleges
The Siege of Academe
Getting Rid of the College Loan Repo Man
Got Student Debt?
Answering the Critics of “Pay As You Earn” Plans
National University Rankings
Liberal Arts College Rankings
Top 100 Master’s Universities
Top 100 Baccalaureate Colleges
A Note on Methodology: 4-Year Colleges and Universities
Why Aren’t Conservatives Funny?
First-Rate Temperaments
A Malevolent Forrest Gump
Broken in Hoboken
Identity Politics Revisited
Washington Monthly - September/October 2012 - Washington Monthly - September/October 2012
Washington Monthly - September/October 2012 - Cover2
Washington Monthly - September/October 2012 - 1
Washington Monthly - September/October 2012 - 2
Washington Monthly - September/October 2012 - 3
Washington Monthly - September/October 2012 - 4
Washington Monthly - September/October 2012 - 5
Washington Monthly - September/October 2012 - 6
Washington Monthly - September/October 2012 - Contents
Washington Monthly - September/October 2012 - 8
Washington Monthly - September/October 2012 - 9
Washington Monthly - September/October 2012 - Editor’s Note: Where Credit Is Due
Washington Monthly - September/October 2012 - 11
Washington Monthly - September/October 2012 - Letters
Washington Monthly - September/October 2012 - 13
Washington Monthly - September/October 2012 - Tilting at Windmills
Washington Monthly - September/October 2012 - 15
Washington Monthly - September/October 2012 - 16
Washington Monthly - September/October 2012 - 17
Washington Monthly - September/October 2012 - 18
Washington Monthly - September/October 2012 - Do Presidential Debates Really Matter?
Washington Monthly - September/October 2012 - 20
Washington Monthly - September/October 2012 - 21
Washington Monthly - September/October 2012 - The Clintonites’ Beef With Obama
Washington Monthly - September/October 2012 - 23
Washington Monthly - September/October 2012 - Party Animals
Washington Monthly - September/October 2012 - 25
Washington Monthly - September/October 2012 - 26
Washington Monthly - September/October 2012 - Introduction: A Different Kind of College Ranking
Washington Monthly - September/October 2012 - 28
Washington Monthly - September/October 2012 - 29
Washington Monthly - September/October 2012 - 30
Washington Monthly - September/October 2012 - America’s Best-Bang-for-the-Buck Colleges
Washington Monthly - September/October 2012 - 32
Washington Monthly - September/October 2012 - 33
Washington Monthly - September/October 2012 - 34
Washington Monthly - September/October 2012 - The Siege of Academe
Washington Monthly - September/October 2012 - 36
Washington Monthly - September/October 2012 - 37
Washington Monthly - September/October 2012 - 38
Washington Monthly - September/October 2012 - 39
Washington Monthly - September/October 2012 - 40
Washington Monthly - September/October 2012 - 41
Washington Monthly - September/October 2012 - 42
Washington Monthly - September/October 2012 - 43
Washington Monthly - September/October 2012 - 44
Washington Monthly - September/October 2012 - Getting Rid of the College Loan Repo Man
Washington Monthly - September/October 2012 - 46
Washington Monthly - September/October 2012 - 47
Washington Monthly - September/October 2012 - 48
Washington Monthly - September/October 2012 - Got Student Debt?
Washington Monthly - September/October 2012 - 50
Washington Monthly - September/October 2012 - 51
Washington Monthly - September/October 2012 - Answering the Critics of “Pay As You Earn” Plans
Washington Monthly - September/October 2012 - 53
Washington Monthly - September/October 2012 - National University Rankings
Washington Monthly - September/October 2012 - 55
Washington Monthly - September/October 2012 - 56
Washington Monthly - September/October 2012 - 57
Washington Monthly - September/October 2012 - 58
Washington Monthly - September/October 2012 - 59
Washington Monthly - September/October 2012 - 60
Washington Monthly - September/October 2012 - 61
Washington Monthly - September/October 2012 - 62
Washington Monthly - September/October 2012 - 63
Washington Monthly - September/October 2012 - 64
Washington Monthly - September/October 2012 - 65
Washington Monthly - September/October 2012 - 66
Washington Monthly - September/October 2012 - 67
Washington Monthly - September/October 2012 - Liberal Arts College Rankings
Washington Monthly - September/October 2012 - 69
Washington Monthly - September/October 2012 - 70
Washington Monthly - September/October 2012 - 71
Washington Monthly - September/October 2012 - 72
Washington Monthly - September/October 2012 - 73
Washington Monthly - September/October 2012 - 74
Washington Monthly - September/October 2012 - 75
Washington Monthly - September/October 2012 - 76
Washington Monthly - September/October 2012 - 77
Washington Monthly - September/October 2012 - 78
Washington Monthly - September/October 2012 - 79
Washington Monthly - September/October 2012 - Top 100 Master’s Universities
Washington Monthly - September/October 2012 - 81
Washington Monthly - September/October 2012 - 82
Washington Monthly - September/October 2012 - 83
Washington Monthly - September/October 2012 - Top 100 Baccalaureate Colleges
Washington Monthly - September/October 2012 - 85
Washington Monthly - September/October 2012 - 86
Washington Monthly - September/October 2012 - 87
Washington Monthly - September/October 2012 - A Note on Methodology: 4-Year Colleges and Universities
Washington Monthly - September/October 2012 - 89
Washington Monthly - September/October 2012 - Why Aren’t Conservatives Funny?
Washington Monthly - September/October 2012 - 91
Washington Monthly - September/October 2012 - 92
Washington Monthly - September/October 2012 - First-Rate Temperaments
Washington Monthly - September/October 2012 - 94
Washington Monthly - September/October 2012 - 95
Washington Monthly - September/October 2012 - A Malevolent Forrest Gump
Washington Monthly - September/October 2012 - 97
Washington Monthly - September/October 2012 - 98
Washington Monthly - September/October 2012 - Broken in Hoboken
Washington Monthly - September/October 2012 - 100
Washington Monthly - September/October 2012 - Identity Politics Revisited
Washington Monthly - September/October 2012 - 102
Washington Monthly - September/October 2012 - 103
Washington Monthly - September/October 2012 - 104
Washington Monthly - September/October 2012 - Cover3
Washington Monthly - September/October 2012 - Cover4
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