By Jonathan Leirer
As a low-income student, I have first hand knowledge of the student loan system in America. After four years of working my way through college, I will leave not only with duel degrees in mathematics and economics but also with roughly $15,000 in student loans. While I am grateful for all the gift aid I have received through grants and scholarships and acknowledge the fact that not everyone receives such generous awards, I will still carry a significant burden of debt. This, coupled with graduate school and the possibility of an even greater debt burden, has provoked, as a result of my own self-interest, a poignant curiosity about possible improvements, revisions and alternatives to our current student loan system; therefore, when the opportunity to examine Arthur Beroz’s “Grantloan” program presented itself, I leapt at the opportunity.
The Grantloan program is really fairly simple. Throughout their college career, students apply for “grantloans” when needed. Then, upon graduating or otherwise exiting college and meeting one of four criteria, the “absolute liability” of the student would be calculated, taking into account the “full and absolute cost of the grantloan” over its lifetime. This is a fixed amount that would be paid off based on a month repayment schedule. These monthly repayment amounts are determined by taking many factors into account, including income and family responsibilities, i.e. spouse, children, etc. The percent of income required for repayment is progressive, thereby alleviating part of the repayment burden for those with low-incomes. Monthly repayment will continue until the “absolute liability” is paid off, until some maximum timeframe has been reached. For a more detailed breakdown and analysis of the Grantloan program, point your browser to www.arthurberoz.com.
I believe that a movement to the Grantloan system would be a laudatory endeavor. Granted there would be transitional problems and possible unforeseen consequences. However, as a whole I believe the Grantloan system to be preferable to our current loan system. If nothing else it would be preferred for its simplicity. As noted in past blogs, the current loan system is overly complicated and marred by redundancy. According to the recent report from The Secretary of Education's Commission on the Future of Higher Education, “at least 20 separate federal programs providing direct financial aid or tax benefits to individuals pursuing postsecondary education.” Not all of these are loan programs, but many of them are. This patchwork system of financial aid is unnecessarily complex, a problem which could be alleviated with the Grantloan program.
Furthermore, I believe that the Grantloan system would provide a greater incentive, or perhaps lessen the disincentive, for students to enter into programs whose careers have relatively diminished earnings potential. To cite one particular career infamously believed to have low earning potential, we can look at school teachers. While I personally cannot vouch for its legitimacy, it is often suggested that there is a great shortage of either school teachers or of quality school teachers. Yes, a large part of the problem stems from the system of rewards and compensations currently governing teacher salaries, but another part of the problem is the prohibitively burdensome student loan debt many potential teachers acquire while pursuing their education degree. This debt, coupled with low salaries, can make studying to become a teacher more of a sacrifice then an investment. Granted, the Grantloan system is not a panacea, but it would nevertheless help alleviate some of the current deficiencies in the market for school teachers.
This argument is analogous for many other careers as well, many of which can be viewed as beneficial to society; such as the aforementioned school teachers, philosophers, painters or other artists, social workers, etc. These professions do not carry with them enticing monetary compensations, yet many would agree that society as a whole benefits from them. Additionally, as a student with a somewhat romanticized few of the world, I would have liked to have the ability to choose my career based more on my personal interest and less on its earnings potential. Even from an economic stand point, it can be suggested that certain low salaried, “noble” professions might actually have large positive externalities. Therefore, it may be in our own self interest to subsidize the education of these professionals.
With the availability of “grantloans,” I believe we would also see a great increase in low income students obtaining college degrees. While we cannot do much to alleviate the implicit costs of college for low income students, who may find income today to be a much more pressing issue then expected income tomorrow, the Grantloans program will help decrease some of the explicit costs of college. By offering a payment plan that is manageable on almost any income, college becomes a more realistic goal for those economically disadvantaged.
The biggest drawback with the Grantloan plan is that it doesn’t go far enough in helping low income individuals. Gift aid is an important part of maintaining an equality of educational opportunity. However, the Grantloan system takes great measures to ensure that not only the richest of the rich and the poorest of the poor have an opportunity to afford college, but that everyone in between does as well, thereby extending the equality of educational opportunity to every income bracket. I see great value in that. For some, equality of opportunity may not be an important virtue, but I cannot see how anyone, especially anyone who applauds the merits of capitalism, could suggest that rewarding someone based on the achievements of their ancestors is preferable to rewarding someone based on their own achievements. To me, it would be the optimal strategy for a society as a whole to give each individual the opportunity to develop their maximum potential and pursue their comparative advantages, rather than reward the progeny of those successful in the past.
All in all, I would support the Grantloan system for its potential success in advancing, at least in higher education, the opportunities afforded to an individual, regardless of their prior economics situation.