A huge issue that has been prevalent since the beginning of time is student loans. A majority of people who attended college have an enormous amount of debt due to their student loans. In a new study by a doctoral student in economics at Princeton, Daniel Herbst, Herbst discovered that the person who answers the phone at the loan company can determine the loan the person receives. It was determined that those enrolled in the income-based program, led to them obtaining a mortgage which would increase their chance of becoming a homeowner, while others received worse plans and were at higher risk for bad credit, reducing their ability to obtain a job or house. This reminds me of the film we watched in class, "Your Life, Your Money," where the college student Amanda McCormick ended up with $30,000 of debt. Her solution was to organize her payments based on needs versus wants. However, how could we have prevented Amanda from even acquiring this debt in the first place?
Two solutions have been proposed: Making the loan process easier to navigate and automatically placing people in an income-based program if they fall behind with their payments. Or, using the ideas of England and Australia and using a system of payroll withholding where one's loan payments would automatically change based on one's earnings. Which solution do you think would be the best to preventing bias in the loan company's, ensuring equality of student loans and decreasing their debt?
https://www.nytimes.com/2018/04/06/business/how-to-clean-up-the-student-loan-mess.html
2 comments:
I think that the best way to decrease and ensure the equality of student loans is to follow England and Australia's system of payroll withholding. Although it may prevent people from prioritizing things like food and rent over paying off their loans, that's only if one's income is high enough. If one's income is low enough, their payments are cut to zero automatically. Moreover, I think if everyone pays their loans with the same system, there won't be a bias in loan company's where some people receive better plans than others. This system of payroll withholding already works for social security, medicare, etc. so adding one more deduction doesn't seem like it would hurt.
I agree with Christina that the best way to make the student loan payback process as painless as it can be is go off their payroll. As newly graduates, jobs are likely to be constantly changing, and with that, their incomes. Having a flat rate in which the graduates have to pay back the loans makes it a nightmare for those who start little. This may lead to some graduates slacking off completely and not earning any money so they do not have to pay any loans back, so I believe there should at least be a minimum amount flat rate they have to pay back as an incentive.
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