Every Democratic candidate wants to do something about student loans. Brooking’s Adam Looney has a plan. He says it is practical, targeted, and relatively inexpensive. His view:

  1. Student loans, when done right, are good policy
    1. Most borrowers use loans responsibly. Only 2% have borrowed more than $50,000.
    2. Few default from loans for traditional four year colleges.
    3. For two year community colleges with very low tuition, the loans are for living expenses. They allow students to complete degrees.
    4. Federal loans are the largest form of aid to graduate students. They are self-financing like social security.
  2. Some simple solutions from Looney
    1. Don’t make loans lenders know would make borrowers suffer to repay
    2. Restore loan caps for students and parents
    3. Allow student loans to be discharged in bankruptcy
    4. End parental loans. Replace them for low income students with a combination of loans and grants
  3. Offer relief to those suffering because of the errors of the past two decades
    1. Make the REPAYE system standard for all, including those not previously eligible. The REPAYE system limits loan repayments to no more than10% of discretionary income over a 20 year period.
    2. Forgive the balance remaining after 20 years.
    3. Provide IRS information to the Department of Education for implementation OR allow for loan repayment through the withholding system used for payroll and income taxes
    4. Stop confiscating defaulted borrowers’ tax refunds (especially refunds associated with the Earned Income Tax Credit)
    5. Stop applying discharged debt as income for the income tax
  4. There’s more to Looney’s proposal – much of it technical. (By technical, I mean I don’t understand it.)
  5. Some Presidential candidate should latch onto the Looney plan, change its name, and go for it.