A Better Way To Repay?

Andrew Sullivan —  Aug 30 2012 @ 9:13am

Stephen Burd wants a new student loan system:

We could follow the lead of countries like Australia, New Zealand, and the United Kingdom and create a single student loan repayment system that is entirely based on a borrower’s future income. Under such a program, employees with federal student loans would see a portion of their income withheld by their employers and used to pay down their debt, much as they see payroll taxes withheld today. 

Self-employed borrowers would use a simple schedule on their federal income tax forms that would tell them how much they owed on their federal student loans. When a borrower’s adjustable gross income went up or down, so would their monthly payments, with the only enforcement mechanism needed being the Internal Revenue Service. Defaults would be virtually eliminated, along with the need for the government to spend tax dollars on collection agencies. Borrowers with high incomes would simply pay off the loans more quickly than those with low incomes. (For answers to questions critics of ICL raise, see "Answering the Critics of ‘Pay as You Earn’ Plans")