Is Income-Based Repayment Obama's Stand-In for a Student Loan Bail Out? And Is it Smart Policy?

By Keith Edmund White

Editor-in Chief

Last week, CUSLI-Nexus Senior Editor Justin McNeil explored the provocative differences between the discharge of student loan debt in Canada and the United States. But is the White House using Income-Based Repayment as a stand in for bailing out those burdened with student loan debt?

Today the New America Foundation releases Safety Net or Windfall?, a report looking at soon-to-be finalized regulatory changes to 2010 legislation that reformed the Income-Based Repayment plan for federal student loans. 

The attention-getting talking point:

But contrary to benefitting [sic] low-income borrowers, the pending changes to IBR will actually provide generous benefits to borrowers with higher federal loan balances – those with graduate or professional degrees. A borrower with an MBA or a law degree can easily have a six-figure loan balance forgiven, even if his income exceeds $100,000 for much of his repayment term. 

And let’s not forget the U.S. fiscal backdrop all U.S. domestic spending (or in this case, forgiveness of federally issued debt) faces: With U.S. law-makers facing a fiscal crisis, any changes to student-loan repayment plans—especially those made in the executive branch via regulation—can’t be considered permanent.

So this brings us back to Justin’s piece:  Should U.S. law-makers, at the very least, revisit the legal rules for students looking to discharge their student debt?

Finally, here's a July 2011 article (updated in Sept. 2012) from The Globe and Mail about Canada's  growing difficulties with student debt.