"Pay-As-You-Earn" Student Loan Program: Are You Ready for the Future?

Walter Steele

What’s becoming more and more clear is that the price of a college education is showing no signs of decreasing. Students are finding themselves in untenable tension between needing a degree for a well-paying career, but then finding that they need that well-paying career solely to pay for the education they needed in the first place.

Students shouldn’t be going to college to get a job to pay for going to college.

Which is why this U.S. Department of Education news piece is so interesting: What if students were allowed to pay as they earn?

For one thing, this program could actually be a benefit to those of us who collect on student loan debt. This becomes, in a sense, a default aversion strategy that would prevent students who later on may have the ability to repay from sliding into delinquency and default.

Those accounts in delinquency and default are significantly more challenging — if not impossible — to collect that late in the game. Not to mention the expense.

Of course, it might also increase the volume of loan debt that is ultimately forgiven. Anyone care to hazard the effect this could have on our industry?