Reactions about loan guarantees were more mixed

Reactions about loan guarantees were more mixed

Some participants with experience with higher education saw great potential for this type of guarantee to benefit the lives of students more generally. Some participants in Groups 2 and 3 thought that the guaranteed income in the Adrian College example (of $37,000 or more) was unreasonably low, though not all participants who expressed this opinion were uninterested in the program.

As with the job guarantees, some participants in every group viewed a loan repayment guarantee based on postgraduation income as a way of easing fears about continuing their education

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We described ISAs to all participants as programs in which students start making monthly payments after graduation that are set as a fixed percentage of their income, rather than a flat amount based on the total they borrowed. Their payment amount will fluctuate with their income, and they will continue to make payments that way for a predetermined number of years.

We also told students in Group 1 that because the amount they pay is a percentage of their income, students who find high-paying jobs will end up paying back more than students who have lower-paying jobs. Participants in Groups 2 and 3 instead received a concrete example of such a guarantee from Purdue University, in which students meeting certain criteria could get $10,000 to help pay tuition. In exchange, students would agree to pay back 3.38% of their salary for 100 months. Graduates of that program typically earn around $47,000, which means they’d start with making monthly payments of about $132. Of course, borrowers who earned more would have to pay more. And borrowers who earned less would pay back less. The monthly payments would be $197 per month if they were making $70,000 per year, and just $70 if they were making only $25,000 per year.

After this introduction, we gauged the participants’ interest in this kind of guarantee. Participants with any level of posthigh school education were asked if they would have been encouraged to enroll in an institution different from the one(s) they had attended if that institution had offered such a guarantee. Read more