Saturday, March 20, 2010

Saturday Student Loan News (Updated)

I wanted to share several more articles I came across this morning at Alternet and at Cryn's blog Education Matters.

Education Matters linked to a BBC article that brings up the actual cost for an education in the US these days: $200,000. We've all come across articles and op-eds from people like the U.S. Secretary of the Department of Education who use the $23,000 average student loan statistic, which we all know is baloney. Everyone I know owes more than $30,000 in student loans, even the ones who only went to college and not graduate school.

The second article I came across is by Les Leopold at Alternet called Stop Student Loan Sharking, Make College Free. Thank you! Finally, someone arguing that a college education should be virtually free for anyone who wants it. Leopold make some great arguments for making education free. I just put Les Leopold's book on my must read list. He's one of the few people out there making sense right now.

For a fleeting moment I thought Congress was going to do something really wise: Get out of the student loan-sharking business. Recall that only a few days ago, the House and the Senate were going to fast-track the student loan reform bill by attaching it to the health care package. It was supposed to be a sure thing. What was I smoking?


Our current student loan system could have been invented by Tony Soprano. We taxpayers guarantee the loans and the government does most of the underwriting, rate setting and paperwork. Then private banks step in, impose their extra charges on needy students, and walk off with all the profits. Not only do the feds donate tax dollars to these banks (what else is new?), but the banks bribe college officials to send students their way. Bada Bing!


If the bill passed, eliminating Tony as middleman, the government could have saved from $37 to $87 billion dollars over the next decade for use in supporting more Pell grants for low-income students.


To be sure, Republicans, en masse, are opposed to eliminating the no-account middlemen because that would amount to a socialistic takeover of free-enterprise. But, they also are joined a group of Democrats including Senators Thomas R. Carper of Delaware, Blanche Lincoln of Arkansas, Ben Nelson of Nebraska, Bill Nelson of Florida, Mark Warner of Virginia and Jim Webb of Virginia. The banks in question just happen to be employers in their states and campaign contributors as well. (See New York Times)


Unfortunately we’re having the wrong debate here. The important question isn’t who should be saddling students with enormous debt — the government or private banks. It’s why anyone should be saddling them with enormous debt. As of 2008, 62 percent of all students at public 4-year colleges and universities took out loans. By graduation they owed a median of $17,700. (See CollegeBoard.com).


Allow me to offer this radical concept: They should graduate with no debt. Going to a public college or university ought to be free.


It used to be that way, at least for vets. The Servicemen’s Readjustment Act of 1944 (GI Bill of Rights) sent 7 million Americans to school for free after WWII. In 1988, a Congressional committee determined that for every dollar invested in that program, $6.90 was returned to the US economy. No reason we couldn’t repeat that performance today. Why isn’t universal free higher education on the political agenda? Here are some of the reasons:


1. Students won’t value what they don’t pay for.
Can’t you just see it? We let students in for free and they trash the place. If we’re not careful, we’ll get the ’60s all over again. But of course, this argument doesn’t apply to students from wealthy families who don’t have to pay a dime for college or run up any loans at all. Why the double standard?


More importantly, education is a necessity, not a privilege for the few. Our society always has recognized the need for free public education. As early as the 1600s, the New England colonies provided it. By the 20th century K-12 free public education became the norm. Nobody argued that only those who could pay for it should be allowed to go to high school. Times have changed a bit: Today people need a college degree or advanced vocational training if they’re going to do well in the world.


2. The GIs earned it. Why should everyone get it for free?
The original Servicemen’s Readjustment Act of 1944 was actually opposed by Franklin Roosevelt. Why? Because he believed that everyone in the country had been part of the war effort–factory workers and farm hands were as important as front-line soldiers. So why reward just the vets with a free college education? But Roosevelt soon realized we had to send the 7 million vets to college for free, or else unemployment might soar after demobilization. No one wanted a replay of the Great Depression.


And we don’t want this Great Recession to continue either.. Right now more than 29 million of us are without work or forced into part-time jobs. We need more than 100,000 jobs every month just to keep up with population growth. Free higher education would surely take the pressure off–and it would have that extra bonus of actually educating people and enriching their lives. Unemployed workers of all ages would go back to school if tuition were free.


3. We can’t afford it.
Wrong. What we can’t afford is what we’re doing now: loading up students with debt and slamming the academy’s door in people’s faces. We need as many people as possible to get a college and advanced vocational education. It’s the key to prosperity and a better quality of life. The smarter we are at work, the better the life that we can create for ourselves and our kids. How are people going to tackle global warming, the health care crisis, and all our other challenges without an education?


Also, we need to get a whole lot smarter about economics and governance. Our current economic mess shows just how dumb we are when it comes to protecting people’s livelihoods. Millions lost their jobs because we were too damn stupid to stop Wall Street’s gambling spree. Worse still, most of the economics profression justified it asit was happening. We’ve got to figure out how to keep our free-enterprise economy from turning into a billionaire bailout society, which is where we’re heading. And our political system needs a little work too. For instance, how about educating some people to come in and fix the U.S. Senate, one of the most dysfunctional institutions ever? (While we’re at it, the Texas curriculum board could use a little help too.)


4. There’s really no public support for free higher education.
Are we sure? Few have tried to move the issue on a national level.


But if we asked parents and kids, we’d find out that free higher education is a no-brainer. It would be a good idea even if the federal government had to go deeper into debt to finance it. We’ve pumped more than $8 trillion into Wall Street with our loans, asset guarantees and liquidity programs. God knows how much we squander each year on military boondoggles. Yet, it might cost from $50 billion to $100 billion a year–a relative pittance–to cover all public higher education tuitions. And it would be a huge investment in a brighter future.


But the fact is, we don’t have to run up a tab to get free higher education.


Imagine turning a fee on Wall Street gambling into a “college education for free” card for every American. A small financial transaction tax on bankers’ speculative deals could fund free higher education in perpetuity. To jump start the program, we could put a windfall profits tax on the $150 billion in bonuses Wall Street executives are now collecting, thanks to our bailout. (Or, if we had the nerve, we could place a 10 percent income tax surcharge on those earning more than $3 million a year.)


The GI Bill’s free tuition program was a key factor in building our post-WWII prosperity. If we want our nation to grow smarter and stronger again, we need universal free higher education right now.


Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.


Update: This was my response to Jadz idea about focusing more on vocational training in the comments section:

I agree most with Jadz' opinion. In my perfect world everyone would have equal access to health care and education. I know this will probably never happen, at least in the US, so I think we should at least have a cap on tuition fees and more of a focus on apprenticeships and vocational training like in some European countries.

I think $23k is still too much to attend most colleges outside of the top 50. The same goes with law schools outside of the top 20. The current economic situation is a perfect example of a college and graduate education being worth less than $23k for the thousands of graduates who can't even find a minimum wage internship.

I found the students fees for 2009-10 in the UK on the BBC website:

STUDENT FEES (2009-10)
England: £3,225 pa
N Ireland: £3,225 pa
Scotland: free for Scottish residents, £1,775 to others in UK
Wales: £1,285 for Welsh residents, £3,225 to others in UK
Students from elsewhere in the EU pay the same as those locally
Those from outside the EU pay whatever the university charges

I met an Oxford University graduate who owes less than £10,000. This would be considered virtually free in my opinion to attend one of the best universities in the world. Third tier college and law students in the US often have to pay more than 10 times that amount for a completely worthless degree. Its time to eliminate the student loan sharks and slash professors' six figure salaries. I agree with L4L that instead of paying useless, overpaid ivy league grads who have never practiced law, practicing attorneys should be teaching those classes instead at a third of the cost.


PS - If you're just stopping by to spew Tea Party/Libertarian/ "life isn't fair"/ you're a stupid socialist/Obama is a socialist nonsense, your comment will be deleted so don't bother writing.


Added note. When I say college should be free or low cost to anyone who wants it, let me explain what I mean. And no, I don't think everyone should go to college or has the book smarts or talent to attend Harvard, Yale, Columbia, Stanford, Princeton, Brown, UPenn, Cornell, Dartmouth, Berkeley, Michigan, Virginia, or Julliard:

College shouldn't be the path for everyone. Nor do I think colleges should open its doors to any Jane or Joe who clearly doesn't have the desire or the book smarts to take college seriously.

Rich kids will always have the advantage of going to college whether they want to or not, usually on their parents' dime, and a lot of them will use the opportunity as a four year frat party. Those aren't the people I'm concerned with or this article addresses. Poor kids who don't take school seriously will either not go to college or end up in community college anyway and those are the people who will benefit the most from apprenticeships and trade schools after high school. It's the poor and middle class kids who have the potential and smarts to work in academia or become doctors, teachers, lawyers, writers, and scientists who are getting the shaft.

Our tax dollars will be better spent on work training and education programs than paying for prisons and wars. And that is exactly where a lot of these kids wind up when they don't have access to education and vocational training. Billions of our tax dollars are wasted on the most idiotic programs, yet people scream socialism when some of us actually want to put that money to good use back in our communities to help people stay healthy, safe, and happy.

I've always advocated closing down most of the law schools outside of the T20 because I understand how the proliferation of crappy, low ranked schools devalues the worth of a degree. The same goes for colleges. With fewer schools, colleges and graduate schools will become more competitive and people who don't make the cut can get a low cost education at community college or vocational school part time and work in an apprenticeship to pay off the tuition easily. Those who go to college should have the privilege of attending for free or at a low capped rate depending on financial need and merit-based scholarships both from the government and the university.

We really wouldn't have these problems if our government gave us BACK our tax dollars (rather than to Goldman Sachs) to use for education, vocational, job creation, and community health programs. I see it less as socialism and more as getting back what we pay for to invest in our communities.

18 comments:

  1. I agree with this almost 100%, with the caveat that universal free higher ed must be coupled with a serious upgrade in vocational education. A free liberal arts education, which although valuable in many intangible ways pretty much qualifies a student to DO nothing, probably just ends up delaying the huge unemployment-of-the-young problem by another 4 years. Providing the option for a rigorous vocational education (I am thinking like the French system, where somebody going into culinary arts, for example, is apprenticed for several years and really knows what they are doing when they get out) -- together, perhaps, with a gigantic change in attitude toward the trades, would do a lot to provide the younger generation with a REAL start in life, which in a rich country like ours really should be a birthright. I would much rather see my kids become happy and successful carpenters than angst-ridden underemployed philosophy majors!

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  2. Good post Hardknocks. Blatant blogwhoring here, but I take a look at the role of Sallie and the student loan scam in the U.S. in the context of the recent OECD report on social mobility. You might find it interesting.

    http://angryfutureexpat.wordpress.com/2010/03/20/a-picture-of-the-present-sallie-mae-a-boot-stomping-on-a-human-face-forever/

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  3. The article you quote is mostly empty nonsense, especially point number 3. Anyone who says something like, "Let's educate people on how to fix our broken U.S. Senate" is not a serious person. We know what is wrong with the Senate and with the economy, but just saying "fix it" does not deal with the enormously complex issues at hand.

    I hate Sallie Mae as much as the next person, but this article is a load of shit, the person who wrote it is a dummy, and free college for everyone is not the answer to our problems.

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  4. Maybe we should just copy China's educational system. Only the very top move on.

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  5. I don't think even Tony Soprano could have come up with something this sleazy. I always said that Las Vegas was better off when the mob was running it. At least Bugsy Siegel didn't give out sub-prime mortgages or build tacky replicas of the Eifel Tower and the Statue of Liberty to attract tourists. I think it is the same people who bankrupted Vegas (e.g Steve Wynn) that are responsible for these unsavory lending practices.

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  6. While 200k is excessive, I don't think the pricetag for college should be zero either. There should be a happy medium. And by that, I don't mean 100k. 23 sounds reasonable.

    A college education has provided you a service. You should pay some nominal amount for that. And don't tell me you pay by getting a job in the future and paying income taxes. I mean, we all know there are electricians and such that make just as much as lawyers do. So they pay the same amount in income tax. Yet they didn't cost anything from the government in the way of the govt paying for their schooling. Where is the fairness to the blue collar workers who aren't costing the govt higher education expenses?

    The way I see it, there are two possible outcomes from making college free:

    1. Too many people go to college. I mean, even more of a surplus than right now. That probably wouldn't happen without an ensuing taxpayer revolution of some sort. Of course parents and kids think college should be free. But what about non-parents and non-kids? They already are mad for paying property taxes which funnel into the schools for grades K-12. You're going to tack on college to that? And arguably costs that return zero on investment for all the surplus college grads. I can't see that happening.

    2. Too few people get to go to college. The govt doesn't have limitless funds, they can only give "free" college to a select group. One of the commenters suggested that only "smart" people get to go to college. For one thing, people will complain that testing is skewed in favor of wealthier kids. Even absent that complaint, there are many late bloomers who didn't do so hot in high school and then picked up their game later on in life. You would decree that such people have missed the boat. Too bad, so sad. Better luck next life.

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  7. I agree most with Jadz' opinion. In my perfect world everyone would have equal access to health care and education. I know this will probably never happen, at least in the US, so I think we should at least have a cap on tuition fees and more of a focus on apprenticeships and vocational training like in some European countries.

    I think $23k is still too much to attend most colleges outside of the top 50. The same goes with law schools outside of the top 20. The current economic situation is a perfect example of a college and graduate education being worth less than $23k for the thousands of graduates who can't even find a minimum wage internship.

    I found the students fees for 2009-10 in the UK on the BBC website:

    STUDENT FEES (2009-10)
    England: £3,225 pa
    N Ireland: £3,225 pa
    Scotland: free for Scottish residents, £1,775 to others in UK
    Wales: £1,285 for Welsh residents, £3,225 to others in UK
    Students from elsewhere in the EU pay the same as those locally
    Those from outside the EU pay whatever the university charges

    I met an Oxford University graduate who owes less than £10,000. This would be considered virtually free in my opinion to attend one of the best universities in the world. Third tier college and law students in the US often have to pay more than 10 times that amount for a completely worthless degree. Its time to eliminate the student loan sharks and slash professors' six figure salaries. I agree with L4L that instead of paying useless, overpaid ivy league grads who have never practiced law, practicing attorneys should be teaching those classes instead at a third of the cost.

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  8. It's funny how there are so many people saying the government can't afford this stuff, when the government wastes trillions of dollars on random junk all the time.

    Not that any of this matters though, a free education doesn't change the root of the problem: there aren't enough jobs to go around. If you prohibit outsourcing that'd do a lot more than just making education free. It's not like anybody learns any practical skills in academia anyway. We were better off with the old apprenticeship model.

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  9. This comment has been removed by a blog administrator.

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  10. If you don't like the articles or comments on this blog then piss off and start a Tea Party blog. I welcome opposing views but if you're going to spew your ignorance and attack me or the other commenters here then your comments will be removed.

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  11. "If you don't like the articles or comments on this blog then piss off and start a Tea Party blog."

    A "Tea Party blog"? What exactly do you mean by that? Without seeing the offending comment, I can only guess.

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  12. Good post, and I agree in part, HK. The fact of the matter is that higher ed is WAY too expensive. I mention this in my most recent post. And thank you for calling out the DOE Secretary's BS.

    However, the article states that "education is a necessity. Not a privilege for the few." I do have an issue with that statement.

    Some education is a necessity. However, higher-ed is not a necessity by any stretch. The propaganda from the Education Industry and the government tell us that we will make $_____ more with a college degree. So, more higher ed = more income for all, and higher ed is necessary for that higher income, correct? That is BS for two reasons.

    1. While on average, people with degrees make more than those without, such a statistic does not account for the fact that the people with the degrees may have had the same income advantage even without the degree. College doesn't create talent or a hard-working individual. Those traits are present and evident regardless of college. And honestly, what percentage of what you learned in college is actually used in the real world? Be honest!

    2. When more people have a degree due to "free" education, it won't mean an increase in everyone's income. It will, however, mean that the degree itself will be worth much less. Over the years a higher percentage of Americans have been earning degrees or at least taken classes in college. Real wages in the US have been stagnant and/or shrinking.

    The expansion of student loan funding and the rise of the Education Industrial Complex has turned college into the new high school. There are too many students getting college degrees. A BA, AB or BS is just expected these days. It is not that hard to earn, and thanks to student loans, people don't realize the real costs until later. So millions go to school, when many either don't belong and/or would be better off not wasting their time and future earnings learning things that will be of no use to them in the future. This extra demand has pushed up costs and led us to the disaster that we have today.

    I know quite a few people myself who didn't buy into the idea that higher ed is the only way. They worked, have no education debt and are in better financial shape than others who are still paying for their $100k 4-year frat party.

    So, in closing, I think that the costs can be brought down. Higher ed used to be much more affordable, as my recent post points out. Get rid of the federal student loans to cut out the artificial, excess demand.

    And for those who truly want to put forth the effort to save and pay for school, the degrees will be worth much more than they are now and they will feel as if they were ripped off.

    I would go on about the parallels between this and the housing market, but I've already gone on for too long. Thanks for allowing me to post, HK.

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  13. I'm the hole $100,000 thanks to law school and I am darned bitter about it. However, I don't think college should be for free. People should pay their own way, either themselves or by taking out student loans like I, unfortunately, chose to do.

    What the government should be doing is working to make sure there are going to be jobs for all the people coming out of college, law school, tech schools, etc. The lack of good jobs is the problem, not the cost of education or the number of crappy law schools or the student loan system.

    If the tea party folks want to complain, they should complain about all this darned outsourcing and the way the Religious Right keeps us from making scientific advancements. Other countries are bypassing us on stem cell research - something that could have been ours.

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  14. P.S. I also forgot to mention green jobs. Other countries are proactively doing something about climate change, which will create future jobs, yet we still have those who insist it's not happening. If we don't start getting our $hit together soon, this country really will be doomed.

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  15. Due to how the job market has evolved, I think free college is a no-brainer. Several decades ago, one could earn a decent and honest living with a high school diploma - that was the prerequisite for a "good" job. And, of course, it was free. Now that a college degree is what's needed for a "good" job, why should that not also be free?

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  16. Economics is about trade offs. After the trade offs have been identified we use our values to help us decide what choice we want to make. But inevitably there is always a trade in economics. If you want A you have to forgo having B or at least part of B. This is a truth as true as the maxim "power corrupts." The gov't should use the tax system to incentivize working class families to save for college. If you have a two earner household where the wife earns $15/hr and the husband earns $7.25/hr they will have a family pre-tax income of roughly $46,280. If they save $3,000 a year for 18 years then they will have $54,000 to send JR to college. That combined with a more robust federal and state grant system for state universities should make college an economic reality for JR. The gov't should use the tax system to let the family make a contribution to a "state college savings plan." They can deduct the amount from their net income thus lower their tax burden. Also when the money is used at a state institution make it exempt from being taxed, because it is going to the state anyways. Yes I know $3,000 a year is nothing to sneeze at for a family making 46,280 a year. It's a little over 6% of their yearly income. That will mean they have to give something else up they would have otherwise had. This doesn't solve the problem that many working class families do not value education enough to save $3,000 a year and give something else they value up in the process. The tax free saving scheme is an effort to help with that. What the U.S. system of gov't is set up to do well is incentivize. I understand this tax scheme does not solve the problem of college for those that come from the under-class. But I think this idea is a realistic policy decision that would be a step in the right direction.

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  17. Its swings and roundabouts - yes it costs less to qualify as a lawyer in the UK but the salaries are are lot less too. The job market is still dire for lawyers over here in the UK.

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  18. I hate to be contrarian (OK, I don't), but isn't free undergrad pretty much already the case? My state (Tennessee) is a long, long way from a socialist paradise, but any kid with a C average gets a full public undergrad tuition (must maintain a reasonable GPA) through the lottery money. As I understand it, at least most of the surrounding states do the same.

    The loan costs come from either 1) lifestyle- you've still got to eat while in school, and many students don't work (much) to cover it (I did, and it wasn't a big deal), or 2) going to a non-public or out of state school at grossly inflated prices, because "education is always a good investment!"

    I think the problem is that people are just expecting *any* education, even for something completely useless, to be necessary and worth whatever costs, loans are too cheap, readily available, and normal that students don't think about the payback, and there's no long term planning- (most majors don't prep you for a careers, just for more education). The whole thing is unrealistic.

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