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- Obama's Deficient <b>Student Loan</b> Plan - Reason.com
- Mark Cuban Explains the <b>Student Loan</b> Crisis Better in 90 Seconds <b>...</b>
- Steve Chapman on Obama's Deficient <b>Student Loan</b> Plan - Hit <b>...</b>
| Obama's Deficient <b>Student Loan</b> Plan - Reason.com Posted: 23 Jun 2014 04:00 AM PDT
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MORE ARTICLES BY Steve ChapmanThe problem with Obama's analysis is defining "too big." Compared to what? Most of these young people, often in conjunction with their parents, have voluntarily shouldered student loans to pursue their studies. If they thought the burden was too heavy, they didn't have to take it on. They have done so not because they are careless wastrels, but because they place an accurate value on higher education. They comprehend that it is very likely to pay for itself and that forgoing it would be the most costly option of all. The president says the debt burden makes it hard for these people "to start a family, buy a home, launch a business or save for retirement." But they would most likely have even less money for those purposes had they avoided borrowing by avoiding college. That's because people with bachelor's degrees make more money than people without—nearly twice as much, on average. Not only that, but the value of higher education has risen substantially. Over the past 50 years, the real value of a degree has tripled. Some perspective is in order. Though some students acquire huge debts, two-thirds graduate owing $10,000 or less, and only 2 percent owe more than $50,000. Not all of the latter need to worry. A newly minted doctor, lawyer or MBA from a good school can expect an income more than adequate to the need. Obama wants to let some five million borrowers cap their monthly repayments at 10 percent of their income and, after 20 years, be relieved of any remaining balance. What would the change cost? "We'll figure that out the back end," said Education Secretary Arne Duncan, in one of the more alarming budget projections ever issued. The administration blames the problem on the growing cost of higher education. It has a point. College costs have risen much faster than other prices. In 1973, annual resident tuition at the University of Illinois at Urbana-Champaign was $496—which is $2,566 in today's money. For the 2013-2014 academic year, the sticker price for U of I freshmen was $11,834—four times more, in real terms, than their parents might have paid. But thinking that more federal aid will make college affordable is like believing that a dog can catch its tail if it goes faster. One reason colleges charge so much more today is that federal aid makes it easier for students to cover the bill. The more the government does, the less reason students have to demand cost control, and the higher tuition will climb. Forgiving more debts after 20 years (10 for those in "public service" jobs), as Obama proposes, adds to the expense inflicted on taxpayers without doing borrowers much good in the meantime. Among those taxed to provide these benefits are people who earn less than college graduates because they didn't go to college. If it seems unfair for people to shoulder big loans to finance their degrees, it's even more unfair for people without degrees to share the sacrifice. A better idea than Obama's is to make repayments simpler and more efficient by shifting to paycheck deductions, like Social Security taxes, at a rate chosen by the borrower, for up to 25 years. This gives borrowers more flexibility in the short run and the long run. University of Michigan professors Susan Dynarski and Daniel Kreisman, who devised the plan, figure it would cost taxpayers no more than the current program and might cost less. The other thing that would really help is a stronger economy, which would put more debt-ridden grads into the jobs they prepared for. Any loan terms are tough for the unemployed and underemployed. But the rising cost of college mainly stems from the fact that people are willing to pay a lot because it's so valuable, and it won't stop going up until it declines in value or they become more cost-conscious. Obama says he really cares about the issue because he and his wife paid off their loans just 10 years ago. Obviously he wishes their education had cost less. But note: He doesn't say it wasn't worth it. Steve Chapman is a columnist and editorial writer for the Chicago Tribune.  |
| Mark Cuban Explains the <b>Student Loan</b> Crisis Better in 90 Seconds <b>...</b> Posted: 22 Jun 2014 12:46 PM PDT Dallas Mavericks owner Mark Cuban gave an interview to Inc. Magazine where he predicted the collapse of the student loan bubble. The money quote, as transcribed by Mic:
A majority of young Americans- 57% – view student loan debt as a major problem, and the average college student graduates with $30,000 in debt. As Cuban and others point out, the failure to address these aspects will lead to diminished economic productivity in the long run, since young Americans have to spend a growing percentage of their income to service student loan debt. When you factor in a high youth unemployment rate of 13.2%, you have an economic perfect storm that can decimate Millennials before they even get started. President Obama has addressed the student loan crisis by targeting the symptoms: implementing measures to cap monthly payments, expand government grants and create tuition tax credits. However, the President's "solutions" do not get to the roots of the problem: the rising cost of tuition and the unending supply of student loans that are paying for it. |
| Steve Chapman on Obama's Deficient <b>Student Loan</b> Plan - Hit <b>...</b> Posted: 23 Jun 2014 04:00 AM PDT Jun. 23, 2014 7:00 am
Obama wants to let some five million borrowers cap their monthly repayments at 10 percent of their income and, after 20 years, be relieved of any remaining balance. But forgiving these debts would add to the expense inflicted on taxpayers without doing borrowers much good in the meantime, according to Steve Chapman. Thinking that more federal aid will make college affordable is like believing that a dog can catch its tail if it goes faster. One reason colleges charge so much more today is that federal aid makes it easier for students to cover the bill. The more the government does, the less reason students have to demand cost control, and the higher tuition will climb, writes Chapman. Steve Chapman is a columnist and editorial writer for the Chicago Tribune. |
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