One of the things about student aid that makes it such great fun as a policy area is that it’s as much about framing as it is about actual policy. For instance, which of the following two policies would you like to have?
a) A policy where students are asked to bear a huge amount of debt – over $100,000 in some cases for an undergraduate degree – over 25 years, and where three-quarters of students will never repay their loans in full; or:
b) A policy where graduates are asked to pay a 9% surtax for 25 years, up to a maximum of about $100,000, but much less (possibly even $0) if their earnings are low.
If you’re a regular reader of the Guardian, you’ll probably recognize the first policy as being the one implemented by the Cameron government in 2012, to cover fees in English universities. That’s the one the progressive types are always pointing at and shouting: “Look! Students are being horribly indebted AND the government is losing lots of money through the program! Quelle fiasco!”
But here’s the thing: that second program is also the English loan scheme. As I’ve explained before, for the three-quarters or so of graduates not expected to pay off their loans in full, the scheme is simply a graduate tax. It’s not explained that way, but that’s what it is. It’s a packaging issue.
There’s something similar going on in student aid policy in the United States; namely, the interest in something called “Income Share Agreements”. It’s been kicking around for awhile (the American Enterprise Institute wrote about it a year ago), but is getting more of a hearing these days because Florida Senator, and potential Presidential candidate, Marco Rubio is now backing it. It’s basically a Human Capital Contract – someone gives you money today, and you agree to give them a set portion of your income for a set number of years.
If that sounds like a Graduate Tax, that’s because it’s exactly how a graduate tax works – the difference in this case simply being that you’re not giving that money to government, but rather to an individual who has chosen to “invest” in you. The beneficiary is different, but the flow of funds is precisely the same. But that difference is enough to get the idea some love from a Tea Party favourite.
And that is to say nothing of our experience in Canada where the CFS, which absolutely hates income-contingent loans, and has done so for years, applauded the introduction of the Repayment Assistance Program (RAP) – which basically makes the Canada Student Loans Program fully income-contingent – because the government simply chose not to call the program “income contingent”.
This all goes to show: in student aid, few people actually look at substance. The real debate is about the packaging.