Four Intriguing Proposals To Fix Student Loans

Career College Central Summary:

  • With student debt growing ever larger, researchers and policy groups think there might be a better way for Americans to pay for college. Here are four proposals to overhaul student loans.
  • Tie payments to income: Over the past several years, the Obama administration has rolled out four programs that allow struggling graduates to repay their loans based on a set percentage of their income. Under all but one of these Income-Based Repayment (IBR) programs, the remaining principal amount owed after 10 or 25 years is forgiven, depending on the plan.
  • Tie loan limits to courses of study: It’s been said that current IBR options focus too much on the "back end" of student debt—helping students after they have taken on heavy debt. Federal policy could instead take into account the likely future income of a student when determining how much he or she can borrow in the first place.
  • Flip the equation around: Several professors at the University of Wisconsin-Madison recently proposed that all federal financial-aid funding should be given directly to colleges, rather than to students, based on the need of their student body. The professors argue this would allow schools to dramatically reduce, if not eliminate, tuition.
  • Beef up Pell Grants: When the Bill & Melinda Gates Foundation asked 15 organizations to "rethink" financial aid, 10 concluded the government should expand the Pell Grants given to needy students. Colleges increasingly use their own money on merit-based scholarships to attract wealthy students rather than those most in need.
  • The current Higher Education Act, which sets out financial aid policy, expires at the end of this year, which means Congress is about to embark on reauthorizing the bill.

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