Yesterday I put together a spreadsheet and looked at two different approaches to income-based repayment — a current federal program (Pay-as-You-Earn) and Oregon’s proposed Pay it Forward. It did not end well for Pay-it-Forward, although I’m still waiting for someone more familiar with modeling these policies to pick up the torch and check/fix my models.

Now that I have the spreadsheet coded, it’s easy to look at the effect of assumptions. Yesterday we saw what a huge difference getting to degree in five years makes compared to degree in four, and how that change in assumptions generally makes Pay it Forward one of the more expensive options. Today I want to show the effect of dependents. Here is a person who earns an average of $30,000 for the rest of their life. (Again, you want more complex scenarios, then read the original article and download the spreadsheet.)

You’ll notice $30,000 a year is the break-even point for single people with no children. Below this Pay-as-You-Earn, with its progressive structure, handily outperforms Pay it Forward. Above $30k/yr, Pay it Forward starts to provide a low lifetime cost to the loan.

But that’s for single people with no children. Add a child into the equation, and the story changes pretty dramatically:

Because Pay-as-You-Earn is tied to discretionary income, and discretionary income is impacted by children, Pay-as-You Earn ends up a better deal here for single parents (I’m not modelling married parents because it’s a hassle to code the spreadsheet).

How much does it impact it? So much that Pay-it-Forward becomes three times as expensive as Pay-as-You-Earn. Three times.

So what ends up being the pivot point for the single parent? At what level of income does Pay it Forward become a better deal than Pay-as-You-Earn? It’s actually $47k/yr.

This means that people making a lifetime average of $47k/yr or less are better off going with the federal program if they are single parents. Interestingly, this is also the break-even point with lifetime cost of a standard loan (although again, the high payments on a 10 year plan are an issue here).

Again, I want to stress this is a rough pass at these figures. Tweet these around if you must, but the point here is not to “win” the argument, but to convince people to start doing the math.