Income-Driven Repayment and the Public Financing of Higher Education

This article provides the first comprehensive analysis in the legal literature of the federal government’s new income-driven student loan repayment programs, known as Income-Based Repayment and Pay As You Earn. In a set of gradual and little-noticed statutory and regulatory moves, the federal government, through these programs, has dramatically reshaped higher education finance in ways that schools, students, and even the government itself are only beginning to understand. Under IBR and PAYE, a student borrower pays no more than 10% of her discretionary income in loan service payments, and after a maximum of 20 years, the remaining debt is forgiven—for any borrower, regardless of degree, career, or debt load. This article argues that such an income-driven system is analogous to the federal government paying the up-front costs of higher education, but raising that money from a 10% “surtax” on the incomes of graduates. This is a huge change from the current mixture of debt-financed tuition, need-based grants, and moderate state subsidies. This framing raises important questions. Is this income-driven repayment structure appropriate? How tax-like and progressive are IBR and PAYE in fact, and can they be made more (or less) so? What are the risks and downsides of such a structure? This article claims that using a tax-like instrument such as income-driven repayment is well suited for higher education, given its economics, financial characteristics, and social benefits. In particular, the key difference between income-driven repayment and up-front need-based grants, such as Pell Grants, is that income-driven repayment makes a judgment of need based on ex post graduate income, rather than ex ante parental income. Based on this analysis, this article concludes with some novel suggestions for reform to PAYE

Over-Stuffing the Envelope: The Problems with Creative Transfer of Development Rights

This note examines how not-for-profit institutions and private developers are engaging in innovative transactions pushing transferable development rights (TDRs) to new extremes. The Board of Estimate has created exceptions to its own zoning laws to benefit not-for-profits, for instance, by allowing transfer of unused development rights to previously impermissible distances. This note explores whether TDR transactions involving not-for-profit organizations have set precedents that will thwart traditional urban planning objectives. The note examines the history of TDRs and recent radical applications involving Grand Central Terminal, South Street Seaport, and Old Slip. The author ultimately balances the creative applications of TDRs with urban planning objectives and proposes a literal interpretation of existing zoning laws to protect zoning objectives

New York City\u27s Pothole Law: In Need of Repair

In 1979, New York City enacted a local law requiring prior written notice of a defect before the city may be found liable for injuries resulting from potholes. But a prior written notice statute interferes with the traditional negligence doctrine of constructive notice. This Note examines traditional common law negligence as it relates to municipal liability. The procedural requirements and legislative history of the Pothole Law are analyzed. In addition, the legal and policy considerations surrounding its enactment are discussed. This Note recommends an alternative solution to the statute which takes into account both the procedural inequities of the law and the city\u27s financial problems. A balance must be struck between the rights of injured parties and the need of the city to have a reasonable opportunity to effect repairs

The Hidden Limits of the Charitable Deduction: An Introduction to Hypersalience

Behavioral economics introduced the concept of salience to law and economics. In the area of tax policy, salience refers to the prominence of taxes in the minds of taxpayers. This article complicates the literature on salience and taxation by introducing the concept of “hypersalience,” which is in many ways the mirror image of hidden taxation. While a revenue-raising tax provision must be hidden for taxpayers to underestimate their tax bill, a revenue-reducing tax provision – such as a deduction, exclusion, or credit – must be more than fully salient for taxpayers to underestimate their tax bill. In other words, the provision itself must be salient, but the limits of that provision must be hidden, or low-salience. This article uses the charitable deduction to illustrate the concept of hypersalience. While the charitable deduction is extremely salient to many taxpayers, not all taxpayers who believe that they will benefit from the deduction are correct. In fact, even though many Americans are aware that donations are tax-deductible, fewer than 50% of taxpayers can take advantage of the charitable deduction. The concept of hypersalience is important for several reasons. First, it highlights the role of non-governmental actors in fostering taxpayer ignorance about the tax system. This article suggests that the hypersalience of the charitable deduction is at least partly due to marketing efforts by private third-party beneficiaries. Second, it complicates economic models, such as those of price elasticity of giving, and suggests that certain tax provisions may be more treasury efficient than previously thought. Third, it may lead to increased consumption of certain goods. This article concludes that, although hypersalience may mean that the government is able to induce greater behavioral distortions without losing revenue, the costs of this phenomenon outweigh its benefits. Because hypersalience is due to taxpayer misunderstanding and the actions of third-party beneficiaries acting in their own interest, this article proposes several possible avenues for curtailing this phenomenon