You’ll PAYE Even More For College

Note: This post was written by NCPPR’s intern, Scott Alford.

When my father decided to pursue his college degree, mowing lawns and repairing circuit boards gave him more than enough to pay his own way. For a student attending college today, however, that would be a superhuman feat. The price of college has nearly doubled in just the last 15 years. While most American students look to Washington for the answer to affordable college education, few realize that government intervention is the major driver of sky-rocketing college costs. To deal with the student loan crisis, the Obama Administration has proposed extending a program known as Pay As You Earn (PAYE). However, this proposal is simply masking the symptoms of the bad policies Washington has perpetuated in the student loan market.

StudentLoanLoResThe PAYE proposal would work by allowing students to pledge a part of their post-graduation income for a set period of time as payment for their loans, regardless of how much they owe or for how many years they were in school. In other words, after the student makes payments for the fixed period of time, he no longer owes any money even if his student loan debt has not been paid in full.  Sounds great, right?

Not quite. In the first place, students are often unable to make enough money to repay college loans. Government loans have saturated the market with college graduates, many of whom will never find a high-paying job in their field. PAYE does nothing to increase students’ post-college earning potential and thus improve their ability to pay back their loans.

Additionally, it perpetuates the problem of college costs and debt. Like student loan guarantees, PAYE gives colleges and universities increased incentive to increase tuition without any market discipline. Colleges have a greater incentive to charge more since students don’t have to worry about how much they have to pay back since it will be fixed in the future. For millions of students and their families who don’t have access to PAYE, college tuition will continue to straddle them with more debt as college costs keep rising. To top it all off, PAYE is a massive loss for the taxpayers who are often absorbing the poor decisions which the government incentivized.

PAYE is not the solution to make college more affordable or curb the growing student loan debt crisis. Rather, PAYE is fueling the fire of the status quo.



The National Center for Public Policy Research is a communications and research foundation supportive of a strong national defense and dedicated to providing free market solutions to today’s public policy problems. We believe that the principles of a free market, individual liberty and personal responsibility provide the greatest hope for meeting the challenges facing America in the 21st century.