First, the program deceptively leads students to believe they will advance and save money by taking out big loans for four years instead of skipping college altogether or taking steps to graduate debt-free—like working part-time and maintaining academic scholarships with good grades. The average student will only save between $4 and $8 a month on this program. Upon graduation, they could end up with unmarketable skills, a poor education and a 10 percent excise tax on their income for 20 years. Awesome.
Second, Pay As You Earn encourages college graduates to pursue jobs they don’t want. Students will accept lower-paying jobs in public service simply because they can get their student debt written off in 10 years—not because their skills or interests fit public service.
Third, this program discourages natural entrepreneurship. Inc. Magazine reports: ‘As part of the “We Can’t Wait” initiative, the White House also announced an unusual partnership with Gen Y Capital Partners.’ Basically, once students qualify for Pay As You Earn, Gen Y will help them with up to three years of their student loan payments and potentially help them find free room and board for up to two years on a participating college campus. Gen Y’s founder, Scott Gerber, defended the partnership in The Huffington Post as necessary during “a time when our nation is in desperate need of economic stimulants…”
Huh? Natural entrepreneurs do not need free housing from a college that will over-structure their life or possibly try to take credit for their ideas.
Realistically, I see this partnership encouraging young people to set their sights low and develop stupid companies with meager growth prospects in order to get their student loans forgiven. A calculator on the U.S. Small Business Administration’s website reveals that if a young entrepreneur reports an income under $20,000 a year, their monthly student loan payment would be $0.
The President should be encouraging entrepreneurial youths to ditch college and pursue a private Peter Thiel-style fellowship rather than pushing them to spend four years of their life accruing needless information and burdensome debt. Extreme innovators like Steve Jobs, Taylor Swift, Rush Limbaugh, Michael Dell, Bill Gates, and Ralph Lauren helped themselves and society by “selfishly” skipping overpriced, cookie-cutter experiences like college.
Pay As You Earn lets colleges get off the hook for rising costs and failing educational programs and hangs young people out to dry. I think students and their parents deserve more than the President’s middle finger in exchange for their votes in 2012.