Chatterbox thinks it’s unseemly for rich Yale graduates to go bellyaching to the Wall Street Journal about having to pay off their student loans. The thrust of a page-one story in today’s Journal is that Yale screwed up back in the 1970s when it instituted a program called the Tuition Postponement Option, which invited Yale students to take out big, long-term loans to pay for their pricey Ivy League education. To repay the loans, the students were required, in effect, to tithe a percentage of their income to Yale; once the debt of an entire “cohort” (i.e., class) was repaid, the tithing would stop. The idea, as William M. Bulkeley’s Journal piece points out, was “to help needy students afford an Ivy League education in a way that wouldn’t discourage them from pursuing worthy low-paying careers.” The Journal headline terms this a ” ‘Noble Experiment’ Gone Awry.” (The program was devised by the Nobel Prize-winning economist James Tobin.)
But the only significant way the program seems really to have gone awry is in misjudging the gratitude of those who would benefit from it. Twenty to 30 years on, the richer ones are bitching about how much they’ve had to pay. “[E]asily the worst financial decision I ever made,” gripes David Bettis, a physician in Boise. “It’s like getting a case of herpes,” says Kerry Fowler, a research chemist in Bothell, Washington. “It won’t kill you, but it doesn’t make you feel good about the person who gave it to you.” An e-mail support group for self-made Yalie plutocrats who now regret opting into the repayment scheme was started by Juan Leon, “who now sells Gulfstream jets in Latin America.”
Chatterbox will admit that one reason he really likes the Yale program is that it redistributes income from rich Yalies who maximize the profit potential from receiving their prestigious diplomas to (relatively) poor Yalies, many of whom, one presumes, are using their fancy educations to give something back to society. (Of course, some of them are probably just bums.) But there are also non-pinko–indeed, conservative–reasons to admire the Yale program. (Milton Friedman was once, and may still be, an advocate of something like it.) To the degree Yale graduates are subsidizing each other, they are not being subsidized by the general public through low-interest student loans. Though the Journal piece doesn’t say so, what killed the Yale program in 1979 was the availability of subsidized student loans to pretty much anyone who wanted one at a time when interest rates were sky-high. (In general, banks hate the Yale plan and its progeny; when the Clinton administration instituted a much milder version of it for the college student loan program, the banks lobbied successfully to water it down to virtual meaninglessness. Some of this story is related in Steven Waldman’s book The Bill.) Chatterbox also likes how the program serves as a reality check on the market value of a Yale education. If it’s all it’s cracked up to be, the tuition program should pay for itself (in the aggregate, per cohort) fairly quickly.
That hasn’t happened–according to the Journal, none of the cohorts, going back to the class of 1971, has yet paid off its debt–but the reason is that Yale hasn’t been aggressive enough in going after deadbeats. Yale’s failing, then, isn’t that it’s too confiscatory of its alumni’s riches; it’s that it isn’t confiscatory enough. All the other “problems” cited in the piece–a turbocharged 1990s economy boosting the tithed payments higher than expected, spouses having to assume Yale grads’ financial debt, the burden of having to submit income tax returns to Yale–simply show the program working as it ought to.
–Timothy Noah
