- The tax code should stop rewarding schools for being in any activity that's not directly involved in the development and delivery of educational content. I'm talking about sideline businesses -- such as hospitality, entertainment and real estate development -- that are shielded by the schools' tax-exempt statuses. On the other hand, the code should provide incentives for institutions that eliminate costly redundancies through mergers and regionally-inspired operational consolidations.
- The bankruptcy code should no longer punish financially distressed student loan borrowers whose debts are virtually prohibited from being discharged in court, especially when that emboldens private lenders to stonewall those seeking sensible loan restructures or much needed modifications.
- The schools should not only be held accountable for their academic outcomes -- as many politicians and pundits insist -- but they should also be held financially responsible for their failures when public money is involved. I'm talking about chargebacks that are linked to cohort student loan default rates.
- Student loans should be more fairly priced. If the government benefits by borrowing at the lower-cost, shorter-term end of the yield curve to fund its loan programs, so too should consumer-learners. And whatever interest rate add-on is needed to cover administrative and credit costs -- such as for loan servicing, delinquency- and default-management -- should be fully disclosed and rationalized in advance.
- The maximum value of the government's Direct Loan programs should be limited to no more than the annual salary a college graduate can reasonably expect to earn on the other side of his or her diploma. Assigning different caps to specific areas of study can make sense as long as long as the Public Service Loan Forgiveness program remains in place to support those who plan to dedicate their careers for the benefit of others. The duration of these loans should also be extended -- for those who need the added flexibility -- provided all borrowers retain the right to prepay their debts in full or in part at any time without penalty.
Congress Punts 1 Student Loan Problem, Ignores 1 Trillion Others
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