The Yale Tuition Postponement Plan in the mid-seventies

Abstract

The Yale Tuition Postponement Plan (TPO), an income-contingent loan scheme, is discussed and analysed with particular reference to the interest rate crisis and default rates. It is concluded that the high default rate is the most dangerous weakness of contingency loans; nevertheless, the Plan has survived and is still the only scheme of its kind likely to exist in the near future.

How to pay for public education

“…The obligations of those joining were also uncertain and therefore off-putting in a way the obligations to be assumed under my program are not. While the percentage of income due was fixed under the Yale program, the number of years that students would have to pay was not -this depended on how many defaults there were and the corresponding extent of losses the remaining members of the cohort would have to make up (West, 1976). Although 35 years was the outside maximum specified for the number of years of repayment, it eventually became apparent that, in practice, this would turn out to be the minimum too, and Yale had to ultimately cancel the remaining debt of each cohort to avoid forcing non-defaulting poor students to continue paying for the full 35 years, most wealthier students having earlier bought themselves out (The New York Times, 1999).…”