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Milton Friedman Did Not Invent Income-Contingent Loans

Published:  August 9, 2012

Conservatives have been gushing praise for Milton Friedman on what would have been his 100th birthday last week. For some liberals, though, Friedman is a more controversial figure, especially in education policy – he proposed what we now know as school vouchers. Yet liberals do thank Milton Friedman for one thing: he proposed the idea of an income-contingent student loan program.

Yes, in case you haven’t heard, many sources cite Milton Friedman as the father of income-contingent loans, including a 2010 Inside Higher Ed op-ed. Income-contingent loans vary by program, but all involve the stipulation that a borrower repay at a rate based on a share of his income, and the newest federal programs involve loan forgiveness after twenty years. For years advocates for income-contingent loans have gleefully stated that Friedman proposed such a structure– a 1988 New York Times article notes that Michael Dukakis’s proposed income-contingent loan program was based on one “first proposed by Milton Friedman, guru to a generation of conservative economists.”

But it turns out that Milton Friedman didn’t advocate for income-contingent loans, nor was it the basis of his idea. In fact, Friedman probably would not like the three income-contingent repayment plans now available in the federal student loan program, nor would he sanction some broader version of those plans which tend to please student advocates and progressive pundits.

To read the full post, visit Ed Money Watch.

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