The Biden administration is again pushing for free student loan money. This time, they are trying to make it income dependent. Keep in mind that SCOTUS has ruled that the President doesn’t have the power to forgive student loans, so he is trying to dictate payment terms.
Biden’s new Saving on a Valuable Education (SAVE) plan is setting repayment plans based on a debtholder’s income and family size. Under the income-driven repayment plan, many debtholders would pay $0 per month. Single wage earners would not pay any money until they make $40k or more a year, while a family of three would not repay any money unless they make $60k or more per year.
I have a better idea. We need to stop overeducating people for jobs that don’t require it. If a student:
- attends college using a student loan and fails to earn at least a 2 year degree within 4 years, they are not eligible for ANY public assistance, no refundable tax credits (including EIC), no further student loans, and all of their lottery winnings and tax refunds are forfeited to the loan servicer until their loan is repaid.
- earns a 2 year degree and makes less than an amount equal to $35k a year or twice the annual cost of attending that college (whichever is more), the college must refund all tuition paid, directly to the loan servicer.
- earns a 4 year degree and makes less than $40k a year or three times the annual cost of attending that college (whichever is more), the college has to refund all tuition paid- directly back to the loan servicer.
- 4 year degree and makes less than $50k a year or four times the annual cost of attending that college (whichever is more), the college has to refund half of all tuition paid.
Any tuition not refunded by the college must be repaid by the graduate, and the payment will be equal to 10% of their pretax salary until the loan plus interest is repaid.
My plan will have multiple effects- it will end useless degrees, will keep tuition under control, and will make colleges more selective in who gets admitted to college, unless they make arrangements to pay with funds other than student loans.