Income-based Taxpayer Ripoff

Great stuff on Forbes.com today by the Center for College Affordability and Productivity’s Daniel Bennett. Bennett examines the income-based student-loan repayment provisions attached to the health-care reconciliation law, and itemizes how much of their monthly repayment bill borrowers in most federal loan programs will be able to skip out on, leaving taxpayers holding the bag.

Check out Bennett’s entire, handy chart in the article to see the savings for numerous levels of debt and income, and I’ll just highlight the savings for borrowers with $25,000 in debt – slightly more than the average for those graduates who have any debt.

Basically, any single person at that debt level making below a little more than $60,000 a year would see savings under IBR. A federal loan of $25,000, with a 6.8 percent interest rate, would normally carry a monthly repayment of $383. But a person earning $60,000 a year would only pay $365 under IBR, a $19 monthly savings. And, of course, the IBR savings to the borrower – and loss to the taxpayer – gets bigger as income goes down.

Oh, and that’s really only half the story: While anyone with a federal loan (excluding PLUS loans) is now eligible for IBR, if you go into saintly non-profit work – including assuming the incredible hardships of working for the government – your remaining loan balance will be forgiven after only ten years of on-time payments, versus twenty for any devil who dares produce things for which people voluntarily pay!