Davis: Fixing higher education
Students don’t need a bailout
By Robert M. Davis
Davis is a master’s student in public administration/public affairs at Virginia Tech.
The Student Loan Forgiveness Act of 2012 (H.R. 4170), introduced by Rep. Hansen Clarke of Michigan, is otherwise known as “the bailout for college students.” I recently came across a petition being spearheaded by Robert Applebaum, founder of a grassroots movement that has led to this popular petition now touting more than 450,000 signatures in support of a loan forgiveness measure.
This measure is intended to be a stimulus plan that would pump millions of dollars back into the economy. This would be accomplished by increasing the purchasing power of students by alleviating them of their monthly payment toward their loans. Students and individuals could buy houses, start a business or make purchases with their new disposable income. Ideally, it would translate into job creation and stimulate the economy.
April 6, 2012 - 6:14 AM
A subset of students have been skipping class, going to keggers, partying it up for four or five years, and majoring in a “social” degree for as long as I can remember. Students do it today. Students did it when I was in school 20+ year ago. Students did it when my parents were in school 45+ years ago.
Nothing has changed in this regard. Some students are highly responsible, working hard to obtain a useful education. Others only manage to do so through persistent parental prodding. Some waste their college experience entirely.
Why is this suddenly a problem now? Because students are often borrowing $25000+ to make this happen. [My college peers borrow much less. My parents didn't borrow at all.] $25k is an awful lot of money to blow on four years of partying or a useless degree. Alas, the government continues to cheerfully lend lots of money to any student that asks, and the colleges continue to cheerfully accept it. And the debt load continues rising. Why am I not surprised?
I think that Robert Davis gives students too much grief in his commentary, but he’s right on target about the “Student Loan Forgiveness Act of 2012″. It’s a terrible idea.
I understand the desire to help students who are struggling with their debt load, but Rep. Clarke’s bill simply shifts the burden from college students to the taxpayers, who would get even less of their lent-out tax money back than they do today. Additionally, it does nothing to pressure colleges to get their tuition rates under control. Indeed, the “taxpayer to student to college” money train would probably accelerate under Clarke’s proposed law.
If you don’t want students to be excessively burdened by debt, don’t lend them so damn much money in the first place.
When you put the 25K for a four year degree into perspective, it is not much more than a nice car and you get a hell of a lot longer to pay back the loan. A lot of this message is manufactured for political purposes and a lot of the problem is people who have such loans but no degree to show for it ergo no prospects for a job in the field of their money spent. The other problem is the competitive job market but a degree gives you a leg up (read the want ads).
I paid 25K for a special edition VW Beetle in 2004, long ago paid it off from a job and have no degree whatsoever.
1- It is not insurmountable debt if you actually get an education and a degree
2- A degree gives you a leg up that is still important in this nation
3- Shutting down the avenues for student loans to the underprivileged only assures us a Plutocracy
4- There are parameters for “forgiving” college loan debt, similar to the parameters for bankruptcy which gives people (and businesses) a second chance.
5- Most people will still be responsible for the debt and most are willing to pay it when they are employed and have the means
6- Locking people out of an education based on their ability to pay for it is elitist in the extreme
To #2 (Sandi): You may think that student debt of $25k (average for undergrads), $50k (average for grad students), or even $100k or $200k (for attendees of particularly expensive private schools) is a modest burden to bear, but many of your liberal colleagues disagree with you:
http://bostonoccupier.com/2012/01/12/occupying-student-debt-how-ows-is-saying-%E2%80%9Cno%E2%80%9D-to-1-trillion-in-debt/
http://www.alternet.org/newsandviews/article/737128/ows_education_activists_launch_student_debt_refusal_pledge/
http://open.salon.com/blog/srussellkraft/2011/10/25/ows_perspective_on_student_debt_from_across_the_pond
http://www.huffingtonpost.com/2011/09/06/majoring-in-debt-college-_n_951129.html?ref=student-debt
http://www.dailykos.com/story/2012/03/21/1076318/-Support-the-Student-Loan-Forgiveness-Act-of-2012
And to your point #4, “parameters for forgiveness” are only for federal loans (which sticks the taxpayers with the cost of forgiveness, cranking the deficit even higher). There is zero escape from private student debt. No bankruptcy, no forgiveness.
And to your point #5, I’m well aware that most people intend to make good on their debts. I’ve never said otherwise. However, due to the sheer size of their debts, an increasing number of people cannot, regardless of their intentions. This is why delinquency rates are up.
And to your points #3 and #6, locking students into life-long debt shackles them far worse that does a refusal to lend them money to attend America’s most expensive “elitist” colleges.
I have a cousin who is a well-educated, self-described “flaming liberal”. It took her many, many years to pay off her student loan debt. She recently sent me this article: http://www.washingtonpost.com/business/economy/senior-citizens-continue-to-bear-burden-of-student-loans/2012/04/01/gIQAs47lpS_story.html
Since you appear to consider the crisis to be “manufactured for political purposes”, does this mean you’re content with the status quo? I’m not.
You all might want to see this timely Op-Ed from the NY Times concerning student loans.
http://www.nytimes.com/2012/04/08/opinion/sunday/disclosure-to-student-borrowers.html?partner=rssnyt&emc=rss
…College students often do not understand their eligibility for federal loans, or mistakenly believe that private loans work the same way that government loans do. But most federal student loans are capped at 6.8 percent, while private loans often have variable rates that can start at 15 percent or higher. Federal loans also protect students from default — and a permanent mark on their credit record — allowing them to defer payment if they lose a job or have other troubles. Private loans include few such protections. ….
To #4 (Scott M.): That’s timely, indeed. I’d long been aware that private student loans are an even crappier deal for students than federal student loans (though they cost the taxpayers less), but I’m saddened to learn that students are enduring variable rates and other such crap. Those sort of gimmicks were extremely non-helpful during the housing crises, and they won’t help with the student loan crisis either. Yuck.
Durbin and Hawkin’s efforts to better warn students about the risks of debt is probably a step in the right direction, but it won’t be enough. The housing crisis showed us quite thoroughly that a significant fraction of the population will borrow too much money when given the opportunity. [And this was among the population of presumably mature and responsible house-buying adults.] And yet some people seem to expect 18 to 22 year-old kids to make wiser decisions regarding debt…
Brian, if I had been thinking that “$50k (average for grad students), or even $100k or $200k (for attendees of particularly expensive private schools) is a modest burden to bear” I would have said so. Since I did NOT say so, a reasonable person would infer that I was only talking about the average of $25K. If a person cannot reliably count on a job to pay back that level of debt, they should not incur it.
I have no problems with reforms that limit what any student can borrow, but I also do not have a problem with the “forgiveness” when appropriate and within parameters, not a free for all.
I appreciate that you want to make more of my point than I did, but I advocated what I believed and nothing more. Unlimited debt for a citizen or a student is unhealthy for us all. I have never said otherwise. $25K is not “life-long debt”.
We do need students and their parents to be better consumers with better information, which appears to be very lacking in this industry.
Anyone, “educated” beyond their possible means to pay off, is just not very smart IMO.
I also never said I was “content with the status quo”. I just believe we need to be careful not to shut out all but the wealthy and well connected.
Anything else you need to tell me I said or believe?
To #6 (Sandi): You have “no problems with reforms that limit what any student can borrow“? How interesting. When I proposed stricter lending standards in http://blogs.roanoke.com/roundtable/2012/03/lindholm-tie-student-loans-to-earning-expectations/ that would limit what a student could borrow, you said “the answers offered here will only hurt people of meager means and lock them out of the higher education realm“.
Also, you said, “If a person cannot reliably count on a job to pay back that level of debt, they should not incur it.” I agree, but many (most?) students don’t have a realistic feel for what they’ll earn after graduation. This is why student loans need lending standards. To keep people from getting in over their heads.
I apologize if I misinterpreted your post. But given how strongly you argued against my commentary, it seemed a reasonable stretch to assume that you’re content with things the way they are today. After all, if somebody argues against proposed policy changes without offering alternatives, then they’re effectively arguing for the status quo.
So what policy change would you implement? A hard cap on lending of $25k for the total college experience (undergrad and grad school combined)? Or something else?
This gets back to the discussion we had a couple of weeks ago.
Why is school debt suddenly a problem? As Brian said, students have borrowed money to attend college for a long, long time…so why is it suddenly such a national issue?
Well, because college has become something every child HAS to do, a notion forwarded by those that would have you think that a plumber, electrician, mechanic, what have you, cannot be a success in the markteplace without a college degree. It’s not only wrong but elitist.
I say this just having written a check to my exterminator (no college, lives at Ashley Plantation in a house he paid for with 50 per cent down) and another to my mechanic (no college, sending his kids to private schools).
This notion generated the idea that if we only handed out more money, more kids would be able to go to college and not suffer the indignity of spraying bugs or spinning wrenches. Note this is NOT necessarily based on merit, or on an ability of the kid to ultimately repay the loans.
(The collateral for an college loan obtained by me or anyone of my generation was me and my ability to pay…the interest rates – government or private – were pretty low because, the notion went, that when that kid ultimately obtained his professional engineer’s license, or passed the bar, or finished his residency, he would be earning enough to easily pay the loan. His salary WOULD be higher, significantly, that his colleagues in the bug and mechanic business. It was an investment in the future with some guarantee of return.)
The initial impact of this notion and promotion was an influx of college grads with degrees in engineering, and medicine, and law, and other degrees that would net worthy jobs and ensure the loans would be repaid. It truly did reach that percentage of kids that wanted to go to college but could not afford to (well, a portion of them anyway). A good thing, to be sure.
But as Henry Hazlitt tells us, “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” (Hazlitt, Henry (2010-08-11). Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics (Kindle Locations 134-135). Random House, Inc.. Kindle Edition.)
So what else happened?
For one, employers, seeing a greater pool of potential employees with college degrees began, first, using the possession of a college degree as a discriminator over experience, ultimately evolving to requiring a college degree and eschewing experience. So people with no college degrees but years of experience and talent found themselves out of work.
And, because of this notion and promotion and ensuing discrimination, college degrees have become easier to obtain, starting with demeaning the meaning of a college education (a degree in “Rhetoric” anyone? “Womyn’s Studies”?) to the point of actual bogus and fraudulently obtained degrees. Not a big market for rhetoricians or angry, self-righteous feminists, or for someone with a “degree” from Yesweareforreal U.
As the pressure to get and obtain degrees descended (rememnber, sh…, um, crap flows downhill) the degree mills and bogus degrees suddenly became a bigger and bigger business because the demand kept increasing. And the prices rose even as the supply increased. This is a classic illustration of Lord Gresham’s Law (the bad will chase out the good). (I believe Keynesians call this phenomenon a liquidity trap, when referring to currency).
So…what’s the solution? Unraveling this all the way back, we see that the notion that every child has to have a college degree is at the nexus of it all.
Some solutions have been promoted, both on this thread and others. Rich Beason recommended community colleges, an excellent idea, to better prepare kids for more educaton, or even to let them determine if they want more education, without piling up huge amounts of debt. Brian recommended tying loans to the ability of the student to ultimately repay it (this might take the form of differing loan terms dependent on college curriculum), which is an intriguing idea too. I think we need to emphasize the trades…certainly my exterminator and mechanic have been successful (my best friend from high school, who qualifies for MENSA, is a successful gunsmith in Nevada…no college).
I think we do a real disservice to tell a student who is not ready for college, or who will never do well in college, that he will not succeed if he is does not have a piece of paper and a mountain of debt. And the disservice extends not only to the student, but to the “professional” industries that truly require degrees, and to the trades as well.
I won’t get into the best way to help people gain the required education they need but the fact is, we need to spend the money. It seems neither the people, nor the government, nor the industries can afford it or are willing to pay for it. And it’s hurting our economy.
See this article (which I’ve not fully read yet):
http://www.nytimes.com/2012/04/09/business/economy/federal-funds-to-train-jobless-are-drying-up.html?hp
…But a usually reliable source of workers, the local government-financed job center, could offer little help, because the federal money that local officials had designated to help train drivers was already exhausted. Without the government assistance, many of the people who would be interested in applying for the driving jobs could not afford the $4,000 classes to obtain commercial driver’s licenses. Now Atlas is struggling to find eligible drivers. ….
But with 12.7 million people still searching for jobs, the country is actually spending less on work force training than it did in good times.
Federal money for the primary training program for dislocated workers is 18 percent lower in today’s dollars than it was in 2006, even though there are six million more people looking for work now. Funds used to provide basic job search services, like guidance on résumés and coaching for interviews, have fallen by 13 percent. ….
@89Hoo You might want to check your history before making claims about what degrees demean the meaning of a college education. Rhetoric, at least, has been a subject of advanced study since the ancient Greeks. Indeed, it was one of the seven core subjects taught in medieval universities, part of the trivium. If the value of a degree was demeaned starting with Rhetoric, then it’s been devalued from the start.
To #9 (Scott M.): Heh. Four years of NYU costs more than $200k: http://www.campusgrotto.com/most-expensive-colleges-for-2011-2012.html. A mortgage-sized debt or over fifty drivers’ worth of CDL training classes? Take your pick.
Brian, you flatter yourself that arguing against your position means that someone supports the current system. Your “stricter lending standards” alone, will indeed hurt those of bright minds and meager means which serves no one except the Plutocracy.
There is a problem here but it is multi-faceted and not the least of it is the proliferation of “for profit at any lengths” what is passing for “schools” and the manipulation of the program. The problem is not so much a doctor ending up with 150K in student loans but a dishwasher or waiter ending up with that debt load and nothing to show for it. The solution must also be multi-faceted and not just seek to exclude those who cannot prove an ability to pay back the money. THAT is why I disagree with you on what will fix this problem. Your rigidity will not do anything but exclude worthy people.
There are lots of factors going into the need for further education. 89Hoo points out that the plumber, the Exterminator, the Mechanic are great paying professions. Indeed for the self-employed person that has the expertise to manage their own business, such professions can be very rewarding. There are two things to keep in mind n relation to this. As large corporate employment from assembly line type businesses continues to slow, self-employment in various small businesses appears to be a way to make a living. To provide services for suburban dwellers that no longer have the skills to do it themselves. On the other hand, the best way to make a livable income in these professions is to be self-employed. That said, most people do not possess the talents and independent thinking to be self-employed. Most new businesses fail and fail because the owner lacks the personality and training to capitalize, market, sell, and run a small business.
Education remains the best means of obtaining a livable wage. It has been proven statistically over and over again. Not only does a college education train the student in critical and creative thinking, it allows the student to mature, experience the pressures of everyday life, learn to work hard, and to analyze data. All these are crucial to self-employemnt as well as being a productive employee.
At a time of diminished jobs availability, education is in many cases the most productive ting a person can do while jobs are not available. It increases their abilities and provides them with better technical, language, and mathematical skills. It may also train them in a new profession. In today’s highly technical economy, being a mechanic requires a kigh level of education. The Exterminator now has to know chemistry and safety rules and regulations. They need to know insects and habitats. While much of the training used to be by the Companies, many Companies now rely on colleges to bring the potential employeee the basic training needed.
A college education remains the best chance a citizen has to become a productive citizen. Look at the many Nations where the population has unemployed youth of 30% to 40% and look at the problems they are having in society. Without education, we will have to double or triple our social network to keep the young off the streets.
#8 Not everybody can or should go to college, but let’s be honest, 89Hoo, the percentage of plumbers or exterminators putting down 50 percent at Ashley is pretty darn low, unless, of course, they’re buying foreclosed or unwanted McMansions out there. Probably about the same percentage as those who actually build a company that they own (often while getting some higher business education).
Christian, I have a degree in rhetoric and understand fully the role and importance of a classical education. In that regard, I was partially tongue-in-cheek.
But most with my degree went either into journalism or to law school (the degree is no longer offered at UVA). In other words, they didn’t use the degree by itself.
To #12 (Sandi): I didn’t say that arguing against my proposal meant supporting the current system. I said that arguing against it without offering an alternative effectively supports the current system. You still haven’t offered different ideas for how student loans should be handled, except to offer platitudes about “multi-faceted”. Without alternatives, what’s left but the status quo?
And do you understand how lending standards work? They aren’t for the wealthy. The members of the “plutocracy” don’t bother with student loans. They just write a check. Loans are for people who don’t have the money right now, but can reasonably be expected to repay it in the future. These are the loans we want approved. On the other hand, we don’t want loans given to people who probably cannot repay their debt. Lending standards attempt to differentiate between these two sets of people, typically via statistical analysis.
Your hypothetical “bright mind of modest means” who is diligently pursing a useful degree at a reasonably-priced, high-quality school would almost always be approved for a loan with lending standards in place, as the odds of repayment would be quite good. Bad grades, a useless degree, a school with high dropout rates, or a very expensive school all make repayment less likely, and would therefore make loan approval less likely.
Lending standards for mortgages were ignored during the housing bubble. Anyone who wanted a loan got one. Nobody said “NO”. We’re still paying the price for that foolishness. Somebody needs to say “NO” to over-sized/unpayable student loans as well. [And in today's paper, here's yet another university official saying that student loans are a problem: http://www.roanoke.com/editorials/commentary/wb/307200. Is his message "manufactured for political purposes" as well?]
I asked it in #7 and I’ll ask it again: If you don’t like my suggestions of restoring bankruptcy protection and establishing lending standards on student loans, what’s your alternative?
Once again with what I have not said being considered what I have said, Brian. An ugly pattern is emerging.
I have repeatedly said I am not against applying fair lending standards, but I want more: add better education on the process, the possible outcomes and a much tighter rein on the for profit schools and guileful guidance that steers kids with no realistic prospect into massive debt that ends in no degree and no chance at repayment. Such a system has to ensure that it is not a rigid “show me how you can guarantee payment”, that it does not discourage those with promise but no money, or that it enables those with neither because someone advised them it was the way to go. Right now, veterans are being taken advantage of in “for profit” school scams to get the GI Bill money, student and outcome be damned. You are only talking about putting the focus on the lender and I submit the problem has more facets than that one and the solution must as well.
If you want me to draft the damned legislation, I am unable to accommodate you. I will however notice you have not offered it either.
To #17 (Sandi): You’re not against fair lending standards? Well color me surprised. After all, you said, “Your “stricter lending standards” alone, will indeed hurt those of bright minds and meager means which serves no one except the Plutocracy“. [Did you perhaps think I was calling for "unfair" lending standards? If so, you very much misread me.]
Honestly, if you agreed me with to this extent, you should have said so at the beginning. It would have spared us much arguing. But when you opened with “the answers offered here will only hurt people of meager means and lock them out of the higher education realm” two weeks ago, how could I not conclude that you were opposed to lending standards and bankruptcy rule changes, as these were the only policy changes I specifically discussed?
And I think lending standards would address the very real problem of rip-off “for-profit” schools more effectively than you realize. With high drop-out rates and poor student outcomes, the risk of default is high for students attending the crappier for-profit schools. Because of this, lending standards would prevent students from borrowing to pay tuition at said schools, and enrollment would plummet. Deprived of loan money, the crappy schools would dry up and disappear, while schools that offered a high-quality, cost-effective education would remain. No separate rules or oversight needed.
And as for policy details, here’s what I offered: [1] Restore bankruptcy protection to student loans, treating it like other forms of consumer debt. [2] Only give loans to students for whom an individualized actuarial analysis (like those done for a home mortgage) shows the risk of default to be less than 10%. #1 would reduce predatory lending, and #2 would nuke the crappy for-profit schools. What’s not to like? If you want “better education on the loan process” tossed in as #3, I won’t argue. Helping students & parents understand the benefits/risks of student loans before they start borrowing is a great idea.
There was a key word in there that you glossed over as it suited your purpose to do so. I said “Your “stricter lending standards” alone” would be more hurtful than helpful and I still believe that. You refuse to acknowledge any guilt except the overburden of debt when that is not the entire picture. Just changing the lending practices or tightening up on the money will hurt those of less means, there is no way around that. You believe your solution will fix the whole problem and I do not, therefore we do not agree, not in part and not in principle. That you can parse my points to mimic some agreement is simply poor debate.
Your plan punishes people, even deserving people, rather than fixes the problem. It does lend itself to the pursuit of a Plutocracy and it will limit higher education to those who can afford to underwrite or guarantee payment.
Keep parsing as you like, but we do not agree. I do not know that the lending standards now are unfair or in need of changing. The average college degree still will end in a good job and a good chance to repay the debt. Certainly it is not and never has been easy, but I do not credit that the loan industry is the sole problem or the main solution.