Wellness Working

I guess I better keep making wishes, because some of them may actually come true.

In my last entry I made a wish that "college costs would stabilize". Well perhaps someone heard my wish because this week Princeton University announced that they would not increase tuition and fees for next year. Although Princeton is not your typical institution, and ranks in the top five of the largest endowments among colleges, I'll call it a start! Princeton has always been a leader in making innovative financial aid policies. They were the first to eliminate loans from low income students' financial aid packages. Princeton was the first school to announce free access to the institution for low and moderate income students. And rapidly, the other big guys followed suite: Harvard, then Yale and other wealthy institutions. Granted, Williams College attempted to set this trend about seven years ago when they froze their tuition increases but they were largely overlooked. Maybe Princeton has some clout. Let's wait and see and perhaps our wishes will come true.

Here's another wish: "I wish we could improve the student loan repayment process." With average student loan debt approaching $20,000 for an undergraduate education, we can no longer expect student loans to be repaid under regulations created in the 1960's. Granted, we have added some additional options for repayment, but all we have done is extend the repayment period. Other countries have very innovative approaches and we could adapt some of them. Here is what I would like to see. Student loans repaid as a percentage of the students income, and the payment deducted from their payroll, just like taxes and social security. We can debate the amount, but let's start with 8%, the generally accepted debt burden for student loans. Self-employed individuals would make payments through the estimated tax payment system. After 25 years (or maybe 30.... you tell me) if the student has never achieved a high enough income to repay the loan, then it is forgiven.

There are a lot of advantages to a system like this. First, it would encourage students to enter some low paying public service jobs for a period after graduation. Second, think of the money which would be saved by not having to bill students, do delinquency calls on late payments, and collecting defaults. There may be some arguments that this would encourage unemployment, and that the resulting accrued interest would be very high. But rather than argue the problems, let's find solutions. One other part of my plan would be to offer tax credits to companies that assist in loan repayment as a benefit to their employees. The company helps pay the loan, and gets an off-setting tax credit. For profit and not for profit organizations benefit from the increased level of education that their employees have paid for and bring to them, so there is some rationale that they should share some of the burden of repayment.

What do you think?

Best, Duane

Posted by Duane Quinn on January 29, 2007 at 11:38 AM EST

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