Managing the Burden of Student Debt.
http://thedianerehmshow.org/shows/2012-04-23/managing-burden-student-debt
President Obama is calling on Congress to stop federal student loan rates from doubling this summer. Republicans argue extending the current 3.4 percent rate would cost taxpayers too much. We discuss the implications for families and the economy.
Guests
Mark Zuckerman
deputy director of the White House Domestic Policy Council.
Derek Thompson
senior editor at the Atlantic
Jason Delisle
director of the Federal Education Budget Project at the New America Foundation, former senior analyst on the Republican staff of the U.S. Senate Budget Committee, where he played a key role in developing education legislation.
Vince Sampson
president of the Education Finance Council, former principal deputy assistant secretary in the U.S Department of Education in the Office of Postsecondary Education.
Sujatha Jahagirdar
political director, the Student PIRGs and former program director for the Student PIRGs new voters project during the 2008 election.
Comments
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What about the theory that the increease of grants/loans etc have encouraged colleges and universities to simply 'go after the money' by raising their turition fees?
Thank you to who ever on the show said going back to school in your thirties is a smart idea. About 6 months ago when I lost my job, I stood back a said exactly what you stated, there is nothing in the job market for me. I currently work odd jobs that pay an hourly rate that compares to what I earned when I first graduated in 1999. But this time around it is not full-time and I do not get benefits. My bachelors has been reduced to a High School Diploma.
I am working towards a career in medicine and hope to get as many grants and scholarships as possible. But I know I will need more loans to pile on top of what I still have left from my bachelors.
A self funding way that the country can invest in Americans to be educated would be for each year of education would add 1% to the graduate's tax rate with a minimum annual income. This additional rate would never disappear. There would be no penalty for working in a job that contributes to the nation but is low paying (e.g.: preschool teacher). The money paid back would finance the next year's annual cost of education. So 4 years of college would add 4%. 6 months of cosmetology school would add 1/2%.
Hi. I am in Carver, MA. My son plans on attending Boston University in the fall of 2012. He has some grants money, but will borrow approx. $10,000 per year to earn a bachelors degree. I am very worried. He will end up paying $55328 at $460 per month for ten years to pay it off.
This reminds me of the housing crisis; people taking on extraordinary amounts of debt under some delusional scenario of guaranteed positive return. When that scenario is proven inaccurate, it's pass the buck time.
Part of the problem with this situation is that it is one more signal to young people that the previous generation does not care about them. The previous generation is content to raise tuition every year, then offer young people internships that may require full time hours and relocation for no pay, all while making sure social security, medicare and a clean environment doesn't exist for us when they're gone. Of course I believe my parents and grandparents care, but I don't believe their cohorts who are in power do. Young people don't have lobbyists, but we should still matter.
My daughter is majoring in biomedical illustration, both offered only by two colleges here in the US, both private. Tuition is $43,000/yr at both schools. She will graduate with about $32,000 in her own debt, plus the $80,000 I am borrowing on plus loans. She is also going to premed school at the same time, which is going to add another $50,000 of debt. She then plans to attend medical school to become a reconstructive plastic surgeon.
By the time she is out of school in 10 years, she will be carrying $300,000 in debt. Her payments will be in the $4,000/month range, plus over $1,000 per month in malpractice insurance. And its a wonder that there are no American doctors anymore.
The vast majority of new doctors in the US are foreign because their governments support their college students, unlike the US, where we charge the highest tuition rates in the world, and charge student loan interest rates that are outrageous, considering the benefit the country gets by having a more educated workforce.
One of the dirty little secrets which state governments don't want you to notice is that increasingly they are becoming dependent on state lotteries to help fund their state's higher education programs. In this era where State Republican Parties are against any raise in state taxes, underfunding of a state's institutions of higher education is becoming increasingly common. In order to provide adequate fundsing for higher education, state governments are increasingly approving new state lotteries as the source for generating these funds. Such a strategy allows state governments, particularly those controlled by the Republican Party to keep their pledges not to raise taxes by avoiding their responsibility to adequately fund higher education. Unfortunately, this strategy is not working as can been seen in the need for most state institutions of higher education to raise their tuition costs.
I had no undergraduate debt, however, I then went to lawschool...SMU in Dallas, Texas. I incurred $100,000 in debt. After graduating, I got a job paying an okay salary, but it is not six figures. I pay $750.00 a month. After ten years of payment, I now owe $93,000. I had consolidate my loans in 2001 at 6.3% when the interest rates were higher. Because I consolidated once, I cannot consolidate at a lower interest rate. Plus, I do not qualify for the student loan interest payment reduction. I pay over $6,000 a year in interest and cannot deduct a cent of it.
In retrospect, yes I would have gone to a cheaper school. Everytime I get a solictation letter from SMU, I want to respond with "see student loan payment."
I believe student loans hinder entrepeneurship and creativity. It also limits the job options. You cant be like some of the computer geeks who lived at home and tinkered in the garage, before making it. You have to work to service the loan. You have to make a certain amount to service the loan, even though you might be happier working for some non-profit. It ends up deciding the course of your like and the decisions you make.
During the discussion (I did not hear the entire show) I found myself wondering why the interest rate would be so high, at 6.8%?
We are in an era when the Wall Street banks get loans for zero interest from the Fed and when many other banks are getting deposits for less than 2%. Mortgages are at very low levels. So why such a large spread on these student loans, especially when they have a unique provision to make them very low risk, i.e., that they are not dischargeable in bankruptcy filings?
Americans are fast approaching the most uneducated in the industrial world, why is it that "law makers" are so ready to keep the bar as low as possible? We don't have 3% unemployment because America spent a disappropriate amount of money on wars, Wall Street provided themselves with a disappropriate amount of money, and the current Congress, otherwise known as "the law makers" are continuing to line their pockets while they pass / don't pass laws that would not be of an interest to them or their constituents. Just review the amount of money given to super pacs.
Naturally, learning for the chance to expand the mind and experiences to benefit anyone in college would only be for the good of humanity....that wide expanse of people is overwhelming when "law makers" are focusing on special interests.
Nice job by Ms. page and the panel in addressing this sticky wicket - in sharp contrast to Mr. Zuckerman who proved to be a first class miscreant and whose salary is the worst use of my tax dollars imagineable. He started by saying that the "cost was fully accounted for" ; what?!?! Even after 3 times, he wouldn't give a square answer to how it is to be paid for, and his repeated "cost isn't the issue" statement only shows how shallow ultraliberals can be. All he contributed was misinformation and obfuscation so pls never have him on the show again - unless it is to discuss what lessons he has learned after hopefully being fired.
What people don't understand is that there are limits to everything. And I'm not just referring to Americans; the rest of the world is included. The world population is continuing to rise while technology continues to create "new" opportunities. What we aren't being told is that technology is eliminating more jobs than it is creating. Anyone with a basic understanding of arithmetic would realize that we are headed for a catastrophe.
We were told (and often educators were the ones doing the telling) that if something can be imagined, then it can become reality. It sounded really great, so we bought in to it. But it simply isn't true.
If we have passed the limit of sustainability in the world economy, then our only option will be to go back. This means a lower standard of living for most of the world's population. Will we be able to handle it? The indications at this time aren't too hopeful. Forget about optimism. Forget about pessimism. The time is coming when we will have to deal with reality.
Our society needs artists and writers, as well as mathematicians. How boring a culture would we have if everyone thought like everyone else. College teaches critical thinking and discipline, a good basis to enter life and the workplace with.
When will everyone understand that just like many other desirable causes, we cannot afford the current subsidization level of college education. Ever here about the predicament in Greece? That is where we are headed unless we can stop the bleeding. It is not an issue of it
being evil, although there is undoubtedly some waste that could be eliminated. We just don't have the money, and what local, state and federal governments already subsidize through various tax channels to support community colleges and state universities undoubtedly needs to be reduced as well. Undoubtedly community colleges have learned how to operate lean and mean; universities should learn about humility and efficiency from them. Besides all that, the $1 trillion student debt is a time bomb because much of it won't be repaid at 6% or 3% or 0%. So that will be added to our deficit just like social security deficit. We don't have the money!
What needs to be regulated are "for-profit" colleges and unproportionally awarding students so much in federal student loans. For-profit colleges enroll only 10 percent of students, but those students collect 23 percent of federal aid money. My husband went to a "for-profit" graphic arts college for only a year; then realized what he really wanted/needed was a 4-year university degree. That one year accounts for almost a 1/3 of his students loan debt!
On a separate note, I think anyone who receives the Pell Grant should be locked in to graduating in 4-5 years, or they need to repay the full amount received. I know one too many students who were awarded the Pell Grant, only to drop- or flunk-out of school. It's just wrong that people, like my husband, work their tails off to support themselves while in college, take out student loans to pay for it (because they don't qualify for the Pell Grant based on income), and yet they are the ones stuck with the financial burden of an education!
Happiness is being free from debt.
Good discussion! One thing I don't understand is how both Mark Zuckerman (White House Domestic Policy Office) and Sujatha Jahagirdar (PIRG) kept saying that the ANNUAL cost of the interest rate rise would be $1,000. Good sound bite, but the math is just not there to support that assertion. They are off by a factor of 10 or more. President Obama is proposing to stop the interest rate increase on subsidized Stafford loans that are taken out next year (i.e., for for one year only). His proposal will not affect the interest rate on loans taken out in the past and it will not affect the interest rate on future loans (beyond academic year 2012-13). It will only affect the interest rate on a single loan taken out by a student for academic year 2012-13. The maximum subsidized Stafford loan amount that a student can borrow is $5,500. Using a standard loan calculator and assuming a 10-year repayment (which is the standard repayment term for a Stafford loan), the monthly payment on a $5,500 loan at 6.8% is $63.29, and the monthly payment at 3.4% is $54.13. That is a difference of $9.16 per month. Over the entire 10-year repayment period, that equals a total difference of $1,099.20. And the case gets weaker from there as the loan amounts go down.
The amount of debt that is being assumed by both students and parents in order to achieve the American dream of higher education is an important discussion that is worth having, and the Obama administration deserves credit for "putting colleges on notice" that they cannot keep raising their prices and expect more and more federal aid. But the student loan interest rate issue is pretty clearly being politicized by the Obama administration for the purpose of vote getting. They owe it to the public to at least get their facts right.
In case the last poster is still checking, undoubtedly the $1k int difference used was a gross exaggeration, but presumably was calculated on not one yr but 4 yrs undergrad then some more (3% int of 1k means principal of $33k, but even then the bal would (or should) be declining after graduation so would not avg that. Obviously one more reason that Zuckerman is a dud and doesn't deserve to be on radio or employed with tax dollars.
It would be nice if the distribution of indebtedness was better detailed. During the program the frequent lazily cited statistic that the "average" college graduate owed around $20,000. Is that the bulk of students? Sorry but $20,000 is chump change compared to the $1 million extra lifetime income labor economists lecture us that college grads earn more than their high school graduate peers.
Why should high school graduates bail out these privileged competitors. Lots of college grads are now displacing high school grads from traditional high school graduate jobs. Think bus driver, subway train driver, street reporter, store manager. You even find these "best and brightest" stars working at Starbucks where they get health insurance.
This program had the predictable sympathetic to whiny college grads slant typical of public radio with its disproportionately middle class college educated hosts and listeners.