The Student Loan Debate
by Richard Veddar
Two issues are important at the moment regarding student loans. First, should repayment of loans be tied to income, and to what extent? Second, should the current system of private providers and a federal direct lending program be replaced by one where the private providers are cut out of federal guarantees and subsidies?
On several occasions, I have suggested that perhaps college students could sell equity rather than debt instruments to investors, with investor return dependent on earnings. Charles Miller, chair of the Spellings Commission, good friend, and, most relevantly, investment guru, says the idea is hare-brained, and he has some good arugments showing practical problems with it. The concept of relating loan terms to repayment potential is not necessarily unsound, however. The Obama administration wants to tie repayment of conventional loans to post-graduate income, limiting the payments to 10 percent of income beyond subsistence (is a wide-screen television, nice car and a smart phone part of a subsistence income these days?). Currently the payment limit is 15 percent. I think this is a very bad idea. Some students will have interest payments on their loans that alone approach 10 percent of all income, much less income beyond subsistence. What this proposal is is a disguised way for the federal government to make more grants via loan forgiveness. It increases the contingent liabilities of the federal government, very bad from a macroeconomic standpoint. Moreover, it is a disguised, not transparent, loan program. The idea that if you work for the good guys (government) you will eligiible for loan forgiveness, but if you work for the bad guys (private sector), you will not get this perk is repugnant and indicative of the Obama Administration’s hatred of capitalism. Is it no wonder the inflation-adjusted Dow-Jones Industrial Average today is nearly 30 percent lower than it was a decade ago or that the price of gold is up well over 40 percent since Election Day 2008?
We don’t need more federal student grants, even ones disguised as loans. The big access problem is not money, as Bob Zemsky kept telling me years ago when we wrnagled in a friendly fashion on the Spellings Commission.
The reason why Hispanics and blacks and low income whites don’t get college degrees is vastly more connected to family background and behaviors, poor academic training, and, in some cases affirmative action programs that push students into inappropriate learning environments. Attrition rates are higher among lower income students, even ones with generous financial support.
We are dealing with symptoms, not the disease. The disease is the fact that the cost of college is rising faster than people’s income, which is unsustainable in the long run. Obama is trying to keep the Titanic from sinking rather than build a new ship. No one has the guts to force the higher ed establishment to change its ways –which the politicians have the power to do via the money spigot. Until my three I’s of innovation are dealt with –incentives information, and and innovation — the Law of No Consequences rules in higher ed –nothing much happens to you no matter how irresponsible your behavior. Making loan programs more generous is setting us up for another financial crisis, albeit on a smaller scale, like that occuring in the housing market. My sidekick Andrew Gillen has been talking about a tuition bubble, with good reason.
Too many kids are going to college, borrowing too much money, enabling too many universities to employ too many people, do too many non-academic things, enjoy too large economic rents, etc. etc. Stopping the expansion of student loans would force either a mini-crisis of a financial nature that will lead to true reforms, or significant enrollment declines that are needed if the cost explosion is to be contained.
President Obama is, in his heart, a socialist in the German Social Democratic party tradition. He wants to kill off private lending, thinking that the government is more efficient than private lenders, that profits are exploitation of students, etc. The evidence is clear that both students and the colleges themselves like having the private lending system, and have been slow to voluntarily move to the Obama student loan model. Moreover, the U.S. Senate has not adopted a plan that would end private lending and likely will not in this election year. I suspect something is at work here similar to health care -Americans are not wild about private insurance companies and other aspects of the current system, but they are against radical change that increase the government’s role. Moderate Democrats valuing job security along with a newly empowered Senate Republican minority can keep the Obama plan from happening this year, which may mean, keep it from happening forever. Long live the voters of Massachusetts!
Also on CCAP the Yorktown Patriot
‘Most graduate programs in American universities produce a product for which there is no market.’
Mark C. Taylor, the chairman of the religion department at Columbia, and author of the forthcoming “Field Notes From Elsewhere: Reflections on Dying and Living,” wrote in The New York Times last year that it’s time to, “End the University as We Know It“:
Graduate education is the Detroit of higher learning. Most graduate programs in American universities produce a product for which there is no market (candidates for teaching positions that do not exist) and develop skills for which there is diminishing demand (research in subfields within subfields and publication in journals read by no one other than a few like-minded colleagues), all at a rapidly rising cost (sometimes well over $100,000 in student loans).
Widespread hiring freezes and layoffs have brought these problems into sharp relief now. But our graduate system has been in crisis for decades, and the seeds of this crisis go as far back as the formation of modern universities. Kant, in his 1798 work “The Conflict of the Faculties,” wrote that universities should “handle the entire content of learning by mass production, so to speak, by a division of labor, so that for every branch of the sciences there would be a public teacher or professor appointed as its trustee.”
Conservative Dartmouth Alumni lawsuit dismissed
Counselors Needed
Scott Jaschik of Inside Higher Ed is reporting that the number of students seeking counseling for mental health issues is up, and higher education counseling centers are short-staffed:
About 10.4 percent of students enrolled at four-year colleges and universities sought help at counseling centers in the 2008-9 academic year, up from 9 percent the year before — a 16 percent increase.
The figures come from the National Survey of Counseling Center Directors, for which the 2009 data were just released. And statistics back up anecdotal reports that many counseling centers have been seeing increased traffic. While the statistics suggest a greater prevalence of many serious mental health issues, they do not show increases in suicide rates, or shifts in the demographic patterns of which students are killing themselves.
The data in the survey come from 302 campus counseling centers at four-year institutions, which together serve 2.6 million students. The figures cover both undergraduate and graduate students, but the vast majority of those served in the centers (and all students at strictly undergraduate institutions) are undergrads. The survey is co-sponsored by the University of Pittsburgh and the American College Counseling Association, and the numbers count only those who sought direct counseling, not the many others who attended workshops or who saw counselors appearing in classrooms, dormitory events and at other programs…Continue reading Looking for Help >>
‘Complacency about the adequacy and quality of public higher education puts the future of the American people in jeopardy.’
Scott Jaschik of Inside Higher Ed discusses a report in Grapevine, showing historic declines in state support for higher education:
By any financial measure, this fiscal year is a terrible one for public higher education. And while that’s no surprise to anyone working at a state college or university, new national data document the extent of the loss of state support.
Total state support for higher education for 2009-10 — including federal stimulus dollars — is $79.4 billion, which is a decline of 1.1 percent from the prior year and 1.7 percent from the year before that. This represents a dramatic shift from the three-year period of 2005 to 2008 when state support grew 24 percent, to $80.7 billion — without federal stimulus dollars in the equation. Without the federal stimulus contribution, which is now over, state support this year would have been down 3.5 percent over one year and 6.8 percent over two years.
These figures are being released today in Grapevine, which since 1960 has been the definitive source of annual data on state support for higher education. Grapevine has been published by the Illinois State University Center for the Study of Education Policy, and starting this year it is also being produced by the State Higher Education Executive Officers. The statistics in the study are state funds for operating support, and do not include tuition revenue.
The percentage declines — with or without the federal stimulus funds — understate the extent of the financial pressure on public higher education…’”Complacency about the adequacy and quality of public higher education puts the future of the American people in jeopardy — economically, intellectually, morally. Public higher education is not an optional priority.’
Continue reading: Historic Declines
Beck: Getting hammered by the left and the right
James Taranto, of The Wall Street Journal, interviews Glenn Beck on conspiracy theories, his critics on the right and left, and how he resembles Howard Beale of ‘Network’:
Mr. Beck, 45, has many detractors, but there’s no denying that he has made a success of himself. In addition to his Fox show, he hosts “The Glenn Beck Program,” syndicated on radio, publishes a magazine and a Web site, and has written seven books. “Somebody told me that our footprint in a month”—the number of people he reaches in all media—”is about 30 million,” he says.
His politics are libertarian. “I really kind of dig this whole freedom thing,” he says. “I’d like to pass it on to the kids.” But he is pessimistic about the prospects for doing so: “I’m a dad, and I no longer see a way for my kids to even inherit the money that I’m making, let alone go out there, have an idea, and create it in their own lifetime.”
Mr. Beck blames a political system that he describes as corrupt and out of touch, a sentiment that is widely shared: “People in Washington . . . not all of them, but a lot of them, are not men and women of honor anymore,” he says. “I just saw a poll today that said 25% of Americans now believe that their government officials will, for the most part, do the right thing. Only 25%. It’s the lowest number ever recorded.”
Mr. Beck appeals to a slice of the remaining 75% with a style that is earnest and emotional; he is known to cry on air. Although he has reported on some major news stories, including the scandals involving Acorn and former Obama aide Van Jones, he thinks of himself as a commentator and entertainer rather than a journalist. “I’m not interested in breaking news,” he tells me. “I’m interested in telling the story of what’s going on and then trying to figure it out.”
In doing so, Mr. Beck draws strong negative reactions for both his right-of-center views and his populist style. “Right now, I’m getting hammered by the left and the right, and I get hammered for being an opportunist,” he says.
He pleads innocent…Continue reading ‘Nobody’s Watching Charlie Rose’ >>
Why isn’t anything getting cheaper in this recession?
Why isn’t anything getting cheaper in this recession? Martin Crutsinger discusses this in Inflation outpaces wages, squeezing U.S. consumers:
The spending power of families is being squeezed, government data showed Friday, highlighting doubts about consumers’ ability to drive the economic rebound.
Workers saw their inflation-adjusted weekly wages fall 1.6 percent last year — the sharpest drop since 1990 — even as consumer prices rose only modestly. Slack pay and scarce job growth, along with tight credit and a rising savings rate, are holding back spending. That’s hindering the recovery.
For some families, the overall inflation rate last year — 2.7 percent — understates their burden. Many are struggling with surging costs for health care and college tuition, both of which have been galloping far above the overall inflation rate. Continue reading on The Denver Post >>
Lawrenceville School Receives Largest Donation in its 200 Year History: A $60M Bequest
Winnie Hu, at The New York Times is reporting:
…The Ladies of Lawrenceville have all but disappeared from the campus, which became coed in 1987 and today has a female headmaster. But a handful of them, now widowed and in their 70s and 80s, remain deeply connected to the school.
Jean Stephens continues to coach students in the drama club, Periwig, and she still brings chocolate chip cookies to rehearsals. Ginnie Chambers sends Christmas letters every year to 810 boys — men, now — who once lived under her roof. Edith Eglin, whose husband, Thomas, was dean of students, serves as a trustee emerita.
And on Friday, Lawrenceville announced that Janie Woods, who died at age 87 in 2007, and her husband, Henry C. Woods Jr., had bequeathed the school $60 million, the largest donation in its 200-year history — and an amount equal to more than one quarter of the school’s endowment.
Mr. Woods, who came from a wealthy family and taught English at the school for 35 years, died in 2005.
The money is designated for financial aid, professional development and refurbishing buildings and grounds on the 700-acre campus in central New Jersey. About 800 students go to school there…Continue reading Couple Leaves $60 Million to New Jersey Prep School >>
Two posts from College Affordability
On the Center for College Affordability and Productivity this week, Daniel Bennett explains that Mike Rustigan has his head on straight, when he claims that “Forcing all high school students onto a college-prep track is not only wrong, it’s dumb”:
Mike Rustigan has an excellent op-ed in the LA Times hammering away at American society’s ill-conceived obsession with academic education, something that I am dismayed at daily. There are many people whose skill sets are just not cut out for academics, but have skills that would prove very valuable in a number of vocational trades. Yet, the “intellectuals” of society have stigmatized those who make a living in such professions as inferior beings, creating the notion that college is the only path to success. We need to alter this public perception and encourage our youth to pursue careers that will help them improve their standard of living and make needed contributions to society – we all need car repairs, plumbers and electricians on occasion…Continue reading on CCAP >>
Also, Dr. Richard Vedder discusses the “Students be Damned” attitude of much of higher education:
For decades, the academic function has been increasingly downplayed. Classes are cancelled for field trips, to celebrate football teams (the University of Alabama has done this recently, living up to its Bubba reputation nationally), taking more holidays off, etc. Teaching loads have fallen and professors have been told that research is more important than teaching for academic success.
Never has this trend been more clearly delineated than in an email I received from the new provost of Ohio University, one Pam Benoit. The university is transitioning from quarters to semesters (they were previously on semesters before 1967)…Continue reading on CCAP >>
Students or Customers?
Room for Debate has a running commentary this month on whether or not business students should be treated as “customers”:
A recent article in The Chicago Tribune described a continuing debate in business schools over whether their enrollees should be regarded as “customers” rather than as traditional students. Should the students have more say over what they are taught and even how they are judged? What’s the risk of the student-consumer approach in M.B.A. programs? And does the issue reflect broader issues in higher education?
