A pretty darn good idea for affordable university tuition

 Posted by on 6 March 2009  Modern Life
Mar 062009
 

Eliot Spitzer — yes, that Eliot Spitzer — now has a rehabilitate-my-reputation gig with online magazine Slate, and he’s using the soapbox to put forth interesting ideas on things like CEO pay and “creative destruction.”

His latest column tackles the thorny question of how much students pay to get their post-secondary education. The answer: a lot. Even in Manitoba, where tuition fees were frozen for almost a decade, it’s hardly affordable to go to school. It’s even worse if you want a master’s or other post-graduate degree.

For years, it was hard to get people to listen to this problem, since so many of the baby boomers attended college when you could pay for the whole year’s worth with a good summer job. They just didn’t grasp how unaffordable it had become.

Now, though, as Gen Xers start to take over society’s discourse, there’s much more awareness of the huge burden that student loans can represent. Spitzer thinks he has a solution:

Instead of paying upfront or taking loans with repayment schedules unrelated to income, students would accept an obligation to pay a fixed percentage of their income for a specified period of time, regardless of the income level achieved. Suppose a university charged $40,000 a year in annual tuition. A standard 20-year loan in the amount of $160,000 (40,000 times four) would produce an immediate postgraduate debt obligation of $1,228.50 per month, or $14,742 per year, not sustainable at a salary of $25,000 or anything close to it. Under a smart loan program, the student could pay about 11 percent of his income, with an initial payback of $243 per month, or $2,916 per year, which is feasible at a job paying $25,000. If, after five years, the student’s salary jumped to $100,000, payments would jump accordingly and move up over time as income increases. After 20 years, assuming ordinary income increase, the loan would be paid off.

Even if your eyes glaze over at the numbers, the idea is simplicity itself: let’s not penalize students with sky-high loan payments as soon as they enter the workforce. Instead, let’s tailor the repayment to the student’s actual income.

Grant Hamilton

  • MPot

    Even $243 per month for a person making $25,000 per year is a hell of a lot. the proposal still, I think, pushes people into majors that provide the false promise of high income (Business, Engineering) while providing very little educational substance.

    Side-note: I’m paying about $655 per month on my student loans and (yay!), nearly all of it goes to interest. Oh sweet government usury! There will never be a day when I am free of student loan payments, as I will never be THAT elderly. :)

    • http://www.absurdintellectual.com/ Grant Hamilton

      The specific numbers are pretty unrealistic in so many ways, to be honest — they’re very American. And really, they’re just illustrative. He suggests an 11% payback rate, but there’s nothing to say that it couldn’t be 5% or 16%, say. Or, it could be on a sliding scale, maybe the percentage you pay back is related to your income. Lower income, lower percentage.

      As well, you could argue that it is society itself which pushes people into majors that provide that “promise” of high income. Student loans make that more pressing, perhaps, but it all comes back to our consumer-driven culture.

      Your side-note depresses me.

  • http://youcannotwin-ston.blogspot.com/ Wynston

    I do think it’s a good idea though it does seem kind of ridiculous to me that someone who borrowed 160,000 would only be paying twice what I pay per month when I borrowed 9,000.

    • http://www.absurdintellectual.com/ Grant Hamilton

      I think, Wynston, that you’ve hit upon a critique of this plan that I hadn’t thought of: it creates incentives for people to overborrow — using student loans to subsidize their gilded university existence and heavy college drinking in pursuit of a “liberal arts” education, all the while, secure in the knowledge that they’ll never have to pay the full price of the piper.

  • Nai

    Okay, I love the idea. However, it may not get rid of people like me who went back to school full time to not have to pay students loans. (Gotta love interest free periods.) Then found a second and possibly third academic love and plan to go to grad school and get a phd. By the time I actually start paying off student loans, I will be close to 40 :D .

    • http://www.absurdintellectual.com/ Grant Hamilton

      See, I dunno … you may not have had to go back to school if the first batch of loan paybacks hadn’t been quite so onerous.

      Then again, I don’t think any system is going to be absolutely 100% perfect for everyone. The trick is balancing the overall social good in education against the individual responsibility that our society wants people to take.

      Another way to sell this might be calling it a future tax. You get free post-secondary education now in return for signing up for an extra income tax in the future.