| 摘要 | Executive Summary
The federal student loan program is needlessly complex, fails to offer an effective safety net for borrowers in financial difficulty, and distributes the largest benefits to borrowers who need them the least. This paper proposes a plan to simplify the system by providing all eligible students with a single $50,000 line of credit, with repayments structured as an income-share agreement (ISA). Borrowers would remit a small fraction of their earnings to the government on their income taxes, capped at 1.75 times the amount borrowed and for a maximum term of 25 years.
For many undergraduates, the repayment terms would be as good as they are today. Students who borrow against their line of credit for graduate and professional degrees, and undergraduates who go on to earn high incomes, will pay more than under the current program because they would lose access to the current system’s overly generous loan-forgiveness terms. The terms of a federal ISA will be easier for student borrowers to understand. Similarly, income-tax-based repayments will make it easier than today’s cumbersome income-based repayment program for borrowers to have their payments set.
Introduction
The system of federal student lending for higher education in the U.S. is falling short. Students face an unnecessarily complex menu of loan types and repayment options, and the lack of appropriate constraints on borrowing for some groups creates perverse incentives that do not serve borrowers well.
Worse, the safety net designed to support borrowers in financial difficulty, income-based repayment (IBR), has failed to meaningfully reduce the delinquencies and defaults that cost taxpayers $4 billion a year. IBR lets borrowers cap their loan payments at an affordable share of their income, which was supposed to make debts affordable for anyone experiencing a hardship. The current system is also failing taxpayers in another way. Excessive subsidies are delivered through IBR mainly to individuals who need them the least: middle- and upper-income individuals who seek graduate degrees—a group that historically has rarely defaulted on federal student loans. With that in mind, it is little surprise that loans repaid through IBR, which were slated at their inception in 2009 to cost $1 billion annually, are now expected to cost over $14 billion annually.
Even with this huge expenditure, it seems that the safety net is failing precisely those whom it was designed to help. Data on enrollment in IBR suggest that low-income borrowers often do not know that IBR exists. And those who do know often fail to enroll because design flaws have made it unnecessarily challenging to do so.
The current federal lending program, including IBR, is the product of countless incremental changes, enacted through a patchwork of legislative changes and executive actions. This approach to reform has led to a policy regime comprising several loan types and a dozen repayment options that fail to meet the needs of students or taxpayers.
Comprehensive reform is overdue. What’s needed is a new system of federal student lending that is simple for students, provides adequate but not excessive resources for borrowers, and has an effective and efficient safety net to ensure that paying for college does not create a lasting and inescapable financial hardship.
In this paper, I’ll describe how these goals can be achieved by establishing a single $50,000 line of credit, with repayment terms structured as an income-share agreement (ISA), such that students remit a small fraction of their earnings for 25 years in exchange for access to funds that will help them pay for their education.
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