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[quote=Anonymous]I think a good solution is to go easier on borrowers who are earlier on in their careers and then get tougher on borrowers five years in. Here's what I mean:

When you take out the loan, you have to pay it back, and in a reasonable period of time with reasonable interest. The problem with income-driven-repayments is that the interest accrues so much on the minimum payment that you NEVER pay it back, even when you start making six figures.

The solution would be to have an interest grace period for five years and automatic income driven repayment, just for those five years. This way, when graduates are early in their careers in entry-level jobs, they can faithfully make payments without the interest blowing the balance way out of reach.

After five years, you are automatically transferred to a standard, 10-year-plan with a fixed interest rate at something reasonable, like 2-3%. Certainly not over 5%. This way, the entire balance is paid off in 15 years total. I think this is fair and balanced.

Let's say you take out a loan for $100K to get an advanced degree. You are optimistic about your career prospects, but it's a long road ahead of you. You might graduate during a recession, or your dream job might take a few years of clawing up. Your entry level salary is around $70K and you have to be a grunt for a few years. So you scrimp and save while paying a manageable percentage of your income towards your student loan, and see a little bit of a dent made in the balance, instead of the balance going up because of interest.

Five years later, you establish yourself in your career and you are making $120K. You can now make full payments and pay off the loan in full, because you have $85K left to pay. It hasn't ballooned to $150K over the five years of making minimum payments as an underpaid grunt.

This is fair. This is reasonable. This is responsible. [/quote]

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