Student debt now stands at $1.3 trillion. More than half of student borrowers are unable to repay their loans according to the original terms. In a well-intended but poorly executed effort to make college broadly accessible, the government has lent freely to students, with little attention to whether they can repay those loans. The result is millions of young people with debt they cannot afford. ...The "well-intended" part is debatable. And when you consider the larger result: millions of young adults who left college dumber than when they started, indoctrinated into left-wing ideology, and financially dependent upon their government creditors, the case could be made that the effort went exactly according to plan.
But casting blame is beside the point right now. At least Bair is suggesting solutions.
Mr. Trump should scrap debt financing of higher education and make the transition to true income share arrangements. Borrowers would fulfill their obligations to taxpayers by paying a fixed percentage of their income over an extended period of years. Think of this change as a shift in the government’s role from creditor to equity investor. When you lend to a business, it is obligated to pay you back with interest, but with a stock investment, your returns derive from the success of the company.
Similarly, with a student loan, there is a fixed obligation to repay the loan amount with interest, but with income share, there is only a contractual obligation for the student to return to taxpayers a certain percentage of his or her future income. Higher earners will pay back more than lower earners (up to a limit), though all will have an affordable payment and all will have protection against life events — a health crisis, caring for an elderly parent — that reduce their income.
Replacing the current, unwieldy programs with a single repayment plan based on income would provide immediate relief for millions of young people while guaranteeing a steady source of revenue to taxpayer coffers, particularly if payments were built into the tax withholding system. It would also provide economic stimulus, as lower payments on student debt would translate into higher consumer spending. ...You can read the rest here.
Bair also has a proposal for college administrators.
An additional measure to ease the student debt load would be tax law changes to require colleges to spend at least 5 percent of their endowments, as is required of other nonprofits. That’s what we do at Washington College. The law should also require that schools use a certain amount of this endowment spending for scholarships. ...A noble effort, but Bair's proposal suffers from the same discredited assumptions that gave us the education bubble in the first place. But since a viable alternative is what separates criticism from heckling, here's my counter-proposal:
- Forgive all $1.3 trillion of outstanding student debt. If multibillion-dollar
insurancecar companies and banks get bailouts, so should students who've effectively been reduced to indentured servitude.
- Shut down the Department of Education.
- No more federal money to colleges and universities
- Close any institutions of higher learning that can't meet their operating costs without federal funds.
These measures may sound harsh, but only if you buy into the same false premise that underlies Bair's plan, viz. that college is for everyone, and everyone can benefit from going to college. The glut of grads who can't read at the high school level, exercise critical thinking skills, or find jobs outside of Starbucks demolishes that canard.