Question
Assume you have been tasked with choosing which student loan forgiveness program, if any. If you choose not to implement a student loan forgiveness plan,
Assume you have been tasked with choosing which student loan forgiveness program, if any. If you choose not to implement a student loan forgiveness plan, please explain economically, why you chose this option. Here are the 3 loan forgiveness option choices:
1. Income driven repayment (IDR) plan 1. Borrowers begin paying once their income exceeds $40,000 per year. After 20 years, any remaining loan balances are forgiven.
2. Income driven repayment (IDR) plan 2. Borrowers begin paying once their income exceeds $80,000 per year. After 20 years, any remaining loan balances are forgiven.
3. Payments are not income driven. All borrowers may receive forgiveness up to $50,000 per borrower. Payments are paid over 20 year payback period.
Borrowers make loan payments equal to 10 to 15% of their income each year.
For example, a borrower with $40,000 of income would pay 10% of her income ($4,000 per year or $333 per month) in loan payments. A borrower with $80,000 of income would pay 15%, or $1,000 per month in loan payments. or 300% of the poverty line, $80,000 in 2020.
Explain, using economic terms (for example, efficient, marginal benefit, marginal cost) describe a solution to this dilemma, what the cost to society, that is, the government, of engaging in a student loan forgiveness program .
Explain why no option considered in this program makes college more affordable. Is it possible this program could increase the cost of higher education? Why or why not?
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