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January 10 2019

An Alternative to College Loan Debt Forgiveness

by Arrah Massimini

            It is well-publicized that the cumulative amount of student loan debt in the United States, is in excess of 1 trillion dollars---and growing.  One way of addressing the issue of student loans, which are burdensome to some borrows; proposed by 29 year old congresswoman Alexandria Ocasio-Cortez, and many others of her generation is forgiveness.  The Department of Education (with the taxpayers footing the bill,) should just, like, forget it; and pay for universal student loan forgiveness. 

Now, Ocasio-Cortez notwithstanding, being in favor of universal student loan forgiveness is a bit like being in favor of intergalactic travel.  Even the many left-leaning think tanks and figures, do not support universal student loan forgiveness as affordable or tenable.  Additionally, it’s not necessary.  A majority of borrowers do have realistic options for repayment (without forgiveness.)  And many loan holders are of a higher socioeconomic status than the average American.  Why subsidize graduate and professional degree holders at the expense of Americans who may never have attended any college?

There may be an alternative way of addressing the problem. This week The New York Times, published an article by Andrew Ross Sorkin, discussing income sharing agreements, as an alternative to student loans.  Income sharing agreements forego loans and upfront payment by having students contract to pay a specific percentage of their income to their graduating institution, upon obtaining a job after graduation.  This percentage is typically around 15 percent, for 5-10 years.  Possibly more or less depending on the major and earnings of the graduate.  (Higher paying fields like engineering require a smaller percentage, for a shorter number of years; for lower paying degree fields like the liberal arts; the reverse is true.)

Purdue University, is one of the first institutions to embrace this model, and currently has more than 120 majors represented in “Back a Boiler.”  Of course, not all students are accepted into the Back a Boiler program.  For obvious reasons, in order for the program to succeed; it hinges on identifying the students who are likely to be successful.  Success being defined as sustained paid employment in their degree field.  But putting some onus on individual institutions for educating students for whom their degrees are likely to pay off in a tangible way is smart.  The current model of admitting people into college who may not have the necessary skills to complete marketable degrees, and paying colleges upfront, regardless of student outcomes; may not be entirely replaced soon, but it also isn’t working.

Of course, an even better plan is to come up with ways to lower the unrealistic cost of college. It used to be possible for students to work their way through college. That would be even better than income sharing.

 





Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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