The Education Solution proposes replacing federally guaranteed student debt, as well as Pell grants and tax benefits for higher education expenses with a stipend of up to $10,000 a year that would be available for tuition and fees to any qualified high school graduate attending a qualified school. Rather than being a loan, the stipend would be repayable only as a tax of 2.5% of a former student’s income, plus 1.5% for an additional ten years after repayment. A qualified school could be a 4-year college, a 2-year college or a trade school. $10,000 is sufficient to pay tuition at most in-state 4-year public colleges.
The principles behind the stipend program are:
All federal support for college students should be repayable to the extent that
the student succeeds economically.
An equity partnership between the nation and the former student is fairer to
both sides than a debtor-creditor relationship.
No former student’s life should be adversely affected in any significant way by
the support the nation gave for schooling.
The government should be at least reimbursed, on average, for amounts it
advances to support students’ educations.
The current system offers different types of assistance to students whose families
have different levels of income. But Pell grants do not pay enough even for most 4-year
in-state public colleges; tax benefits do not help lower-income students very much; tax
benefits help high-income students somewhat (but not a great deal); therefore a majority
of students from all income levels except the highest end up also taking subsidized loans.
Those loans have, historically, had high delinquency rates, which have caused high levels
of anxiety as well as ruined credit for a great many Americans who either have tried to
get degrees and failed or have earned degrees but have not succeeded economically. That
is not fair to the students.
It is not fair to the taxpayer that Pell grants and tax benefits are never repaid, no
matter how successful the student becomes economically.
The current system, for these reasons, does not work properly for the taxpayer or
for low-income families or middle-income families. And it provides tax benefits to
wealthy families that they do not need.
The current system also is so complex that college counselors, who should be
spending their time and knowledge helping high school seniors to choose the college that
is best for them, end up spending a great deal of their time keeping up with the
complexities and helping students and parents negotiate the system. The stipend system
would help college counselors to do their jobs more efficiently.