Student Loan Repayment Schemes

Dr Wolff, In a recent Economic Update you discussed problems in the Student Loan market. You mentioned a scheme to realign student loan repayments so they’re valued against the ability of the borrower to pay (a percentage of eventual income, I believe) rather than the traditional practice of adding accrued interest to the repayment amount every month. You seem to be opposed to the idea behind this scheme, but I don’t quite understand your reasoning in this. In this ‘percentage of income’ approach, capitalist excesses can be minimised if 1) student loan rates are controlled through regulation, and 2) the students have a clear idea of how their repayment burden would affect them in different earnings scenarios. While lenders might seem to be making out like bandits in good economic times, isn’t it true that during tough times, there is an aspect of mercy in this approach by saying that your repayment amount this month is zero since you earned zero this month? Isn’t this ‘forgiveness mechanism’ a concept we need to be grappling with at both the personal and state level in public discourse? Or am I just missing the public discourse where these things are grappled with?

Showing 1 reaction

How would you tag this suggestion?
Please check your e-mail for a link to activate your account.
  • Steve Cooper
    published this page in Ask Prof. Wolff 2017-06-12 04:09:25 -0400