• Student Loan Relief, No. Education Costs Reform, Yes, Please.

    January 8, 2022 // 9 Comments »


    Joe “Vote Panderer” Biden dropped a little Christmas present in the punchbowl late December. He extended the “pause” on student loan payments until May 1. Biden remains under pressure to cancel the debt. The debt has been a Democratic White Whale forever, and what happens next in May will not be the last of this, especially heading into the midterms later this year.

    Despite Democrats’ acid-soaked dreams, student loan forgiveness will accomplish little. But major changes in how education is paid for, and what it costs, can lift America into the 21st century if only we had the guts to do it.

    Start with trying to figure out the benefits of student loan forgiveness/debt relief in the Joe Biden and Democratic vision. You come up with a) it’s free money for the recipients and b) it may be worth more votes for Democrats in the younger demographics than it causes them to lose in the older ones (polls show the divide near dead-even, with 46 percent supporting free money.) That’s kind of it. It’s just a pay off for votes.

    Tag along arguments are dismissible, stuff like the comparatively small amounts of money on a per-person basis involved with loan forgiveness will help balance economic and/or racial inequality, or that people will spend the money set aside for loans on flat screens and game credits to boast the economy more than spending the money on tuition, and this will all somehow end “privilege.” The Trump administration already deferred student-loan payments because of Covid so canceling payments outright would not lead to much more of a short-term boost in consumer spending (and help drive inflation as well.) And unless forgiveness also includes tax reform, most of the “forgiven” money will suddenly be taxable as income. Forgiveness won’t help America be smarter and more 21st century because the people with the debt already have their degrees.

    About here in most articles about student debt things get emotional. So meet Maria, a bright 22-year-old who always dreamt of giving back to her community via a degree in BIPOC Gender Studies. But upon graduation she discovered she owed a gazillion dollars in student loans plus whatever “interest” was, and that Craigslist had no jobs listed for her major! Her job at Target only pays enough to cover her Spotify bill. She says she is a victim of an unfair system.

    You’d think that was fiction, yet The Atlantic goes as far as calling student loan debt “immoral,” because in the writer’s words it is “a high debt burden proportional to my income. The burden is so heavy that it has delayed major milestones. My partner and I are soon-to-be newlyweds in our 30s with stable, full-time jobs… Thanks largely to our student-loan debt, we don’t know how we’ll be able to afford kids.” She also has to rent. OMG.

    And politically, debt relief may hurt as much as it sort of helps. Many voters would be very uncomfortable with the idea of saying to people who paid their debt off through sacrifice and hard work, ha ha, joke’s on you suckers, if you’d only waited another year it would have been free. Why is college debt more special than debt for medical care, a car you need to have a job, etc. What about people who joined the military for the college money (75 percent of those who enlisted said they did so.) Thanks for your service sucker, and hey sorry about the arm, you could have stayed home and smoked herb and got the same financial deal.

    Despite the horror stories about 22-year old kids with six-figure debt, only six percent of student borrowers owe more than $100,000. This small percentage of super-borrowers accounts for about one third of all student loan debt. The government limits federal borrowing by undergrads to $31,000 (for dependent students) and $57,500 (for those no longer dependent on their parents.) Those who owe more than that almost always have borrowed for the discretionary decision to go to graduate school. About 30 percent of undergraduates finish school with no debt, 25 percentage with less than $20,000.

    Student loan debt isn’t even the critical part of our economic problems. Some 71 percent of the $14 trillion in ballooning consumer debt is mortgages or home equity loans. Student loan debt is 11 percent, with car loans at nine percent.  Formal income-based repayment plans have existed for some time now for student loans with no equivalent for other debt. Nobody seems concerned about mortgage debt relief, not in 2008 when Obama and Biden bailed out Wall Street over Main Street and not in 2021 when Biden is back, and that’s after the American mortgage crisis almost took down the entire global economy.

    Student debt is relatively small on a per person basis, and a fraction of overall debt. This is much more of a political pandering for votes issue than an economic one. But AOC wants you want to do something. So time to reform education costs.

    Unlike nearly every other developed country, which offer free or low cost higher education (Germany, Sweden and others are completely free; Korea’s flagship Seoul National University runs about $12,000 a year, around the same as Oxford), in America you need money to go to college. Harvard charges $63,000 a year, a quarter of a million dollars for a degree. Even a state school will charge $22,000 a year. There are only a handful of paths to higher education in America: parents; be poor and smart to qualify for financial aid (there is no financial aid crisis current university endowments can’t lick,) the military, or take on debt.

    No matter which path you take, the problem is the price of education. Like many of the old, crumbling things in America built a long time ago in an industrial nation which no longer exists outside of the Springsteen songbook, our paying for education needs a serious fix. Forgiving debt is a Band Aid on a throbbing wet tumor. The next crop of freshman will just start accumulating new debt in the fall. After we forgive all that and do nothing to change how much colleges charge, we’ll just have to do it all again in a few years.

    The cost of college increased by more than 25 percent in the last 10 years. In Louisiana tuition doubled since 2008. In Alabama and Arizona, tuition at public colleges and universities is up more than 60 percent. The price continues to rise eight times faster than wages. For example, in 1978 when I attended Ohio State, tuition was $1056 a year. Minimum wage was $2.65, so working year-long only about eight hours a week one could pay tuition. In 2021 tuition is $10,744 and the minimum wage $8.80. It takes about 23 hours a week, a more than half-time job, to pay, though most businesses cap part-time workers at less than 20 hours to avoid triggering Obamacare payments. It is no surprise 40 percent of kids don’t graduate within six years, a vicious cycle of more years, more costs.

    That rise in costs was hand-in-hand with 41 states spending less per public university student. Higher education funding cuts on the state level are responsible for 79 percent of tuition increases. State funding cuts are driven by decreasing tax revenues, political decisions to spend money elsewhere, and increases in the number of students going to college as a higher education moves from a prized possession to a near-necessity in the job market.

    Any one-timey debt relief will change nothing in the underlying factors driving students into debt. Something has to change the calculus among the minimum wage, tuition costs, and declining state funding.

    One solution would be to tie Federal funding to a state’s willingness to lower public tuition to match a reasonable work expectation from a full-time student. So tuition would go up or down based on what someone could earn at minimum wage with say 15 hours of after school work a week. It would be possible once again to work your way through school.

    There’s also another way, sadly far beyond the intellectual reach of a once-great nation like the United States. Security is defined by much more than a large military. The United States, still struggling to transition from a soot and steel industrial base to something that can compete in the 21st century, can only do so through education. More smart people is an investment in one of the most critical forms of infrastructure out there – brains.

    A single F-35 fighter plane costs $178 million. Dropping just one plane from inventory generates 3,358 years of college money at today’s average costs. We could pass on buying a handful of the planes and still defend ourselves well. Give the money saved to states directly for education. Or use the money to create some type of civilian service alongside the military; there’s got to be something that needs doing enough that the government will pay for college other than humping a ruck across the next Afghanistan.

    For a nation that can clearly afford to pay for a broader base of accessible higher education if it wants to, it seems very wrong to simply leave the nation’s future to a Darwinian system of financial survival overlaid with a Dickensian debt plan. But new priorities and serious reforms, not free money, are the solution.

     

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    Copyright © 2020. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.

    Posted in Biden, Economy

    Does Free College Threaten Our All-Volunteer Military?

    September 27, 2016 // 46 Comments »

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    Does free college threaten our all-volunteer military? That is what writer Benjamin Luxenberg, on military blog War on the Rocks says. But the real question goes deeper than Luxenberg’s practical query, striking deep into who we are as a nation.

    Unlike nearly every other developed country, which offer free or low cost higher education (Korea’s flagship Seoul National University runs about $12,000 a year, around the same as Oxford), in America you need money to go to college. You need the bucks for tuition and books, and for most students, you need the bucks to not work full-time for a couple of years. Typical of America’s top end schools, Harvard charges $63,000 for tuition, room, board and fees. That’s more than a quarter of a million dollars for a degree. Even a state school wants $40,000 a year.

    Right now there are only a handful of paths to higher education in America: have well-to-do parents; be low-income and smart to qualify for financial aid, take on crippling debt, or…

    Or join the military.

    The Post-9/11 GI Bill provides up to $20,000 per year for tuition, along with an adjustable living stipend. In Cambridge, Massachusetts, where Harvard is located, that stipend is $2,800 per month. There is also a books and supplies stipend. Universities participating in the Yellow Ribbon Program make additional funds available without affecting the GI Bill entitlement. Some 75 percent of those who enlisted said they did so to obtain educational benefits.

    And in that vein, Luxenberg raises the question of whether the free (Bernie Sanders) or lower cost (Hillary Clinton) college education is a threat to America’s all-volunteer military. If so many people join up to get that college money, if college was free or cheaper, would they still enlist?

    It is a practical question worth asking, but raises more serious issues in its trail. If people are enlisting in significant part because college tuition is not affordable, does that imply tuition costs need to stay high to help keep the ranks filled? That an unequal college costs playing field helps sustain our national defense?

    Of course motivation to join the service is often multi-dimensional. But let’s look a little deeper, and ask what does it say about our nation when we guarantee affordable higher education to only a slim segment of our population. About seven percent of all living Americans were in the military at some point. Less than 0.5 percent of the American population currently serves. Why do we leave the other 99.95 percent to whatever they can or can’t scrape together on their own?

    The issue of money always comes up, and was used by Hillary Clinton to knock down some of Bernie Sanders’ education proposals. Donald Trump may bring up the same question in the upcoming debates about Clinton’s more modest proposals.

    Money matters, but what the country can get for its money is also important. Let’s round off the military higher education benefit, tuition and living stipend, to $53,000 a year. An F-35 fighter plane costs $178 million.

    Dropping just one plane from inventory generates enough money for 3,358 years of college money. We could even probably survive as a nation if we didn’t buy four or five of the planes. A lot of people who now find college out of reach could go to school, even more if we reduced the stipend to where the difference could realistically be made up with 20 hours of minimum wage work a week.

    The final question many people will be asking at this point is one of entitlement. What did those civilians do that makes it so the United States should give them college money?

    Leaving aside the good idea of expanding “service” to include critical non-military possibilities, the answer is nothing. Nothing, but maybe it is more important than that.

    Security is defined by much more than a standing military (and that does not even touch the question of how say an eight year occupation of Iraq made America more secure.) The United States, still struggling to transition from a soot and steel industrial base that collapsed in the 1970s to something that can compete in the 21st century, can only do so through education. More smart people equals more people who can take on the smarter jobs that drive prosperity. It is an investment in one of the most critical forms of infrastructure out there.

    No one suggests veterans should have their benefits reduced. But for a nation that can clearly afford to pay for a broader base of accessible higher education, it seems very wrong to simply leave that process — or the nation’s future — to a Darwinian system of financial survival of the richest.




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    Copyright © 2020. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.

    Posted in Biden, Economy