Percentage As You Earn   (%PAYE)

Finance and Finansurance of Human Investments (HI)

The Long & Effective History of 
Percentage As You Earn

In 1959, economist Milton Friedman originated the income-contingent payment system, published in his book, “Capitalism and Freedom.” Former Governor Terry Sanford of North Carolina read the book. Sanford was a Democrat and then President of Duke University, who started using the loan system in March 1970, along with Yale University led by President Kingman Brewster, Jr. 

MIT’s Professor Jerrold Zacharias had proposed individual contracts for tuition-debt for minorities to LBJ in 1964 for an Educational Opportunity Bank. LBJ rejected it because it was not ‘needs’ based even though it offered equal access to college through the free market. 

In 1976, with the agreement of Milton Friedman, a young college econometrics student, Brock d’Avignon, renamed it Percentage As You Earn (%AYE), as both a finance & “finansurance” concept, as he began researching the history of the practice for 375 years and began promoting its modern use. In 1990, Milton Friedman said, “You write the book, Brock!” Both hoped to see %AYE introduced as a far more stabilizing alternative of flexible income payments of tuition-debt than contracts collapsed by defaults on a quarter of installments during every economic downturn. Inflation, redistribution, bailouts, and quantitative easing would all be unnecessary.

In 1979, d’Avignon sent a proposal for what was now known as Percentage As You Earn (%AYE) Medical Finansurance to William E. Simon Sr., former Secretary of the U.S. Treasury, then an actuary for the Booz Allen & Hamilton Management Consulting firm advising 11 medical empires. These actuaries were asked to consider the proposed concept of “finansurance” in a prospectus for a CompreHealth Care Corporation written by d’Avignon addressing all the complexities of the present system of rigid installments, and fee for service, contrasted with percentage-of-income PAYEments.  

Simon’s reaction was, ”This is the best thing I’ve ever heard of since God, Mother, and Apple Pie!”

Brock d’Avignon coined the word as an alternative to the services provided by insurance companies, state clinics, taxes, and politicians whose subsidy system already controls 65% of overpriced medical business yet is still leaving 40-million individuals without the care they need or want while the finance part of finansurance covers pre-existing conditions and unemployment. 

William Simon’s associate actuary, Reynolds followed up, asking how certain tasks and how are people doing them in a medical empire whose revenue would come via PAYE would payroll different numbers of doctors and nurses with a certain number of tasks? 

When a country doctor was asked his price for care, he would say, “I reckon…” The ability of patients to pay was valued according to their income and the doctors. This was not bartering, it was the payment as a percentage-of-income. So the doctor charged a poor farmer two chickens, and a wealthy farmer next door 25 chickens; when each broke their legs while fixing a fence between their properties. The doctor knew from reconnaissance the respective income of each farmer. The other meaning of ‘reckoning’ is calculating. The doctor knows the cost of the hay for his horse, the plaster for the cast, the depreciation for his new-fangled X-Ray machine, and the sale price of a chicken at the county fair. Today, direct deposit accomplishes the same reckoning in a cash economy. 

Similarly, for tuition needs, %AYE was endorsed in 1970 as Tuition Postponement Options (TPO)s by Vernon Jordon, then head of the Urban League, later president of the United Negro College Fund.

The same system used by Duke and Yale Universities for its 1970 classes was carefully monitored by spot-checking IRS 1040s by prior consent. The students paid an accurate percentage of their true incomes, as distinct from what they reported to the government. Yale charged 0.35% of a student’s post-graduate income for 35 years. Duke charged 0.3%, thus, if you borrowed $10,000 you would repay 3% of your income. 

The suspicion that borrowers would cheat and lie about their income was refuted. Ensuring this does not happen, has already been written into the requirements for taking out the loan initially. Transparency and clarity have a dollar value in trust.

Only three individuals of the 2,600 students who had a %AYE TPO loan in the early 1970s even considered defaulting. One art major was offered a 31st-year deferment by the university, choosing to wait for cash money rather than accept stone money from the Island of Yap. Another was a surgeon who was doing well, thinking he was PAYEing too much. He looked at the fixed amortization table and decided to make the flexible but rising PAYEments. One law student, the son of two lawyers, tried to say he did not know what he was signing but also decided to stay with the flexible PAYEments.  

Bill Clinton was the first Yale Law student to pay off his loan, doing so shortly after graduation as a young politician making money. Interestingly, at the 1992 Clinton Economic Summit, two weeks after the election, William H. Donaldson, Chairman of the New York Stock Exchange, volunteered to be the courier for d’Avignon’s free market, CompreHealth Care Corporation Prospectus to offer medical care for all in the free market. 

This equal access to Care for All was presented to Vernon Jordon, now Bill Clinton’s attorney. Bill handed it to Hillary, who he had put in charge of their Health Care Initiative. In January 1993, d’Avignon received a letter from Carol Rasco, from the West Wing of the White House stating Hillary had 396 consultants and did not need another nor his idea. When Hillary presented her plan for the National Socialization of Health Care with posters on easels to Congress, there were 396 boxes. Congress roared with laughter. 

There were moments when Ted Kennedy claimed CAT Scans were too costly and had no place in socialized health care. Doctors objected, saying that having 3D X-Rays would prevent them from making costly mistakes. Competitive %AYE could have covered pre-existing conditions for all Americans, additional kinds of care, including alternatives, prosthetics, and cosmetic surgery, with no government intervention, allowing Americans to benefit from competition in medical care. The cost of competitive medicine would have dropped to 9% instead of today’s subsidized 17% taken from the incomes of all Americans. 

Neither business strategy nor public policy can any longer afford to pick up the pieces of broken dreams and contracts resulting from financial wishful-thinking which ignores the reality of the ups and downs of life.

Installment payments, demanding long-term commitments to set amounts, began with the 1845 business model of Issac Singer. These were used to lower the cost-impact to sell sewing machines in “twelve easy short-term monthly payments. ”These were small payments for a short period of time, not for big-ticket items requiring multi-year and decades-long installment contracts, as if nothing bad could happen to a payer during the contract. This kind of assumed stability is heartlessly and logically flawed, witness the last century of financial ups and downs and bail-outs of brittle financial instruments in America. There is a better alternative. 

Think about going to a bank fortune teller with a crystal ball forecasting you will easily be able to pay $2367.32 on the 18th of January 2024. There is no way to know that. It's irrational. However, you can say with certainty of an uncertain amount, you will pay 27% of your income towards your mortgage. That's rational and doable come rain, shine or tsunami.
A lender and borrower get used to the fact that each month's amount is different. Lenders can profit in the good times from being patient during your bad times. You qualified for your house at 27% of income, but under installment averaging, lenders only get paid average in the good times; yet still have headaches of skip-tracing and repossessing. In contrast, %AYE ends all that administrative loss with a continuum-of-contact through boom & bust, trickle & gush. 
There are plenty of precedents in American History and Law for income-contingent PAYEment systems.

In 1989, Jack Kemp used d’Avignon’s PAYE alternative to sell all federally-owned housing to the residents with erratic low-incomes. None of these PAYE mortgages were foreclosed. Ever. Residents paid 7% of their income for seven years for a small apartment. For a used house, 17% of their income for 15 years was charged. Kemp had unwanted housing demolished.

For a brief, shining moment in America, everyone had the option to a roof over their heads, a goal for many Americans, including Jack Kemp.

As CEO of Habitat for Humanity Kemp used d’Avignon’s research to raise 596 million dollars for his “More than Houses” Campaign for fixer-uppers and opened 100 Habitat Offices world-wide. Yet today a growing number of Americans are homeless for the holidays. How would Jack Kemp view this failure of America to care for those in need?  

We think we know. Jack Kemp founded Empower America, a civil rights and free-market advocacy group that merged to become Freedom Works just before he died.  
Before his death from cancer, Jack Kemp said, “Keep up the good work, Brock.” Kemp held a vision for America he did not get to bring to fruition but it is a vision needed more now than ever.  

Americans need to invest using the tools which decentralize our world, bringing people and communities together. Such tools focus on people with a view of allowing them to answer the inner need in each of us to realize our human potentials. Investments can bring many kinds of returns in addition to the obvious monetary return. And, for many of us, the most important returns are not only monetary.  

Jack understood the need for Human Investments and how Percentage As You Earn could make the vision a reality.  
Today, it is in our power to provide homes for all using durable, completely sustainable, 3D Printable Geopolymer materials. Homelessness is a problem we can solve with free-market tools, without government. Percentage As You Earn financing is a tool that frees people to build new lives, find prosperity, and discover their own potential. By so doing they also honor the legacy of Jack Kemp.

The less obvious, but surmountable problem, is the programming for electronically making the payments. Institutions are habitually reluctant to change their internally adopted protocols, but in this instance, the resulting stability for all parties, based on the considered judgments of so many respected experts, will dissolve the reluctant to adopt %AYE, hopefully before disaster strikes. 

China has now slipped to number two foreign holders of Federal Debt, unloading dollars, down to $1.12-trillion. Japan is at $1.13-trillion while the US Federal Reserve holds $2.5-trillion. Unfunded liabilities, like the Social Security "Trust" Fund, are $160-trillion worth of IOUs after it was stolen by Congress each year since 1936, not to mention U. S. Annual operational debt of $19-trillion. Failed installment derivatives held by the federal government amount to $592-trillion dollars (see

Fiscal disaster for individuals and nations is on the horizon with the May 2, 2016 announcement of the gold and uranium 70% backed Asian Infrastructure Investment Bank (AIIB), supported by 23 of 64 0f our former allies competing with the 1.5-cent-backed Federal Reserve Note, hanging in thin air. The world has tired of Congress redistributing the world’s former reserve currency into the coffers of bankers.  

Here are some forecasts: Within five years, %AYE will become the conventional form of finance & finansurance, while the current system of charging by brittle unpayable installments will be used to punish only the most dishonest people. Instead of expensive warehousing of non-violent criminals, even outvict" criminals working like the rest of us, will be judged and watchdogged to PAYE some percentage-of-income to their victims, instead of a fixed amount fine that only causes more crime.
Constancy amid change of better charging paradigm now. 
The federal government owns 92% of mortgages, 95% of tuition debt, 65% of medicine, and 40% of vehicle credit. This should never have happened. income works. Change amid constancy of income is fiction. It doesn't work. The last time the cracked crystal ball fell off the rickety amortization table, it broke in 2008; there is no more thin-air money to sell to foreigners. They are unloading dollars. America needs a

We reckon you know the answer to this longest installment con in history: Individual contracts paid by percentages of income. 


Daniel Brake d'Avignon Dissertation 
                        Part One - Making the Uncommon Man
            Part Two - Historical Probes 1 - 6

     Case Studies  - Duke and Yale 

                                                                   University of Pennsylvania

                                                Harvard and Radcliffe

State Legislatures

Federal Government

More to Find Out About Percentage As You Earn

Finansurance = Financing, and Insurance

Continuum of Contact 

Explaining Percentage As You Earn

Redemptioners - Redeemed their Debts, building better lives

Privateers - proved the efficacy of  Letters of Marque and Reprisal

Rendezvous - The Mountain Men Blazed the Way