Monday, June 29, 2009

The Federal Government Acts Yet Again to Destroy the Labor Market

If you do not believe me, then I suppose you believe the New York Times. [update: NYT moved the story to here, apparently to correct a minor error]

Take a single person who earns $50,000 per year. Each 1000 dollars she adds (subtracts) from her income adds (subtracts) from her monthly student loan repayment by $89. Moreover, if her income goes above $60,000 (below $40,000), the 8.9% cap becomes a 10.9% (2.8%) cap.

This is a further erosion of work incentives, and will take yet another bite out of national employment.

Some of this just affects the maturity dates of the loans, but loan maturity dates are also capped. I'll report back with a marginal tax rate calculation, but the basic analysis here is as with my analysis of home mortgage forgiveness (see here, here, here, here, here, here, here, and here).

This terrible program starts July 1, 2009

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