Dreaming of a Free Degree

Chance Layton

CounterCurrent: Week of 1/15


I often dream of buying a really nice car (I am, hopefully, joining some majority with this statement). It remains a dream precisely because asking for such a loan would no doubt endanger my banker’s health with the laugh it would elicit. And yet, if I were able to smuggle the loan for my dream car into the Department of Education’s proposed income-driven repayment plans, I might actually stand a chance.

In an article published today at Minding the Campus, Andrew Gillen of the Texas Public Policy Foundation recounts the dreamy ins-and-outs of this new income-driven repayment plan. Previous iterations of the repayment plan allowed students to pay off their loans without defaulting and equalized consumption over time. This means that a zero-dollar income equals a zero-dollar monthly payment and a higher income equals a higher monthly payment, thus ensuring the burden of repayment is more evenly distributed.

These previous iterations have proven beneficial as a policy tool for multiple presidential administrations who wanted to grease the financial wheels of higher education to encourage greater attendance. 

Unfortunately, over the same period the cost of college has begun to burden students and taxpayers alike. With little standing in the way of university bureaucrats multiplying like mechanic charges on a Ferrari, administrative bloat has ballooned at America’s colleges and universities. As we explain in our report Priced Out, this bloat directly increases tuition and, thus, income from Federal student loan and grant programs. 

The Biden administration has no desire to place any responsibility on colleges for increasing tuition. Politically, it can’t keep its hands tied as students take on greater amounts of debt. Thus we get to Biden’s income-driven repayment plan: a lowered cap on the length of repayment from 20 to 10 years and a minimum payment set at 5% of income above 225% of the poverty line.

Gillen notes that this new “plan will result in merely symbolic student loan payments.” Dreamy indeed. More from Gillen:

Nor will the median bachelor’s degree graduate repay any of his loans. Recent bachelor’s degree graduates earn a median of $47,000, and among borrowers, the median amount borrowed was $24,000. The median student would have a monthly payment of $68, and his annual payments ($816) wouldn’t even cover the interest on his loan ($1,200). Thus, the median bachelor’s degree graduate will repay none of what he borrowed and will have about one-third of the interest waived as well.

While this plan is an obvious boon for Americans still paying student loans and those thinking of attending college, it is a drain on the public purse. Worse, it does nothing to encourage the fiscally responsible administration of America’s colleges and universities, and it “breaks borrower discipline.” As Gillen notes, “we are no longer talking about a loan repayment program. Instead, the Biden Administration has converted student loans into a delayed grant program.”


CounterCurrent is the National Association of Scholars’ weekly newsletter, written by Communications Director Chance Layton. To subscribe, update your email preferences here.

Image: Unsplash, Public Domain

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