Every Democratic candidate wants to do something about student loans. Brooking’s Adam Looney has a plan. He says it is more practical, more targeted, less expensive than other plans.

  1. Student loans are, when done right, good policy
    1. He says 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 that allow students to complete degrees.
    4. Federal loans are the largest form of aid to graduate students, self-financed like social security.
  2. There are some simple solutions
    1. Don’t make loans we know that borrowers would suffer to repay
    2. Restore loan caps for students and parents
    3. Allow student loans to be discharged in bankruptcy
    4. End parental loans and make up for them for low income students with a combination of loans and grants
  3. Then offer relief to those suffering because of the errors of the past two decades
    1. Make the standard for all, including those not previously eligible, the REPAYE system – 10% of discretionary income over a 20 year period
    2. Forgive the balance
    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. End the program that confiscates defaulted borrowers tax refunds (including, especially, refunds associated with the Earned Income Tax Credit)
    5. Eliminate the income tax applied to discharged debt
  4. There’s more to Looney’s proposal – much of it technical. (By technical, I mean he addresses issues I don’t understand.)
  5. Some Presidential candidate should latch onto the Looney plan.   The candidate probably should name it after himself or herself rather than the author.