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[quote=Anonymous]Here's another solution I had proposed in a thread about this years ago:

Allow recent graduates a five-year interest free period. You have to make the payments, but it's interest free for the first five years. Then, a moderate interest rate (with zero interest, the government loses money because of inflation).

Here's my rationale:

Income-based repayment plans are a trap, because when you are in your entry-level, lower-earning years, your income-based payments barely cover the interest. Once you break into your higher-earning years, you are so far in the hole that it feels insurmountable, and you get six-figure earners who still can't afford a house or anything resembling a normal lifestyle, or they just never actually pay down the balance and the interest keeps rising and rising.

You do have to have some skin in the game in that you choose your major and career path wisely so that you ultimately set yourself up and earn enough to pay back your loans and live a decent life. But - and I don't care what your major is - often times the first five years after graduation are tough. Ask the graduating Class of 2009!

Let people take some time to find some footing into their careers and pay a fixed percentage and chip away at the balance, not have it grow out of control. If you "make it" soon enough after graduation, good for you, you can pay a bit more to decrease the burden later, or you can squirrel away some savings. Once those five years pass, you should be expected to have your feet on the ground and get past the entry level grunt stage and start paying in higher amounts. 
I would even suggest that this policy come with abolishing the income-driven plan altogether after those five years.

So, in short, everyone gets 15 years to pay back their loans in full. Five years interest-free. Ten years to pay the remaining balance on a standard plan, let's say at 5% interest. Nobody pays a higher total amount than they started with. Nobody makes a payment only to see the balance increase rather than decrease. [/quote]

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