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Learning To Owe

Discussion in 'Government Offices and Programs' started by TheBell, Nov 4, 2011.

  1. TheBell

    TheBell Council Member

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    The Occupy Wall Street movement has no formal goals but several consistent memes have emerged among the crowd demonstrations in various cities across the country. Most of these have to do with the concentration of wealth and the collusion/corruption between big business and government. However, a more selfish trend also has surfaced among the demonstrators – many want their college student loans forgiven.

    A small, informal survey among New York protestors last week by equity research analyst David Maris found ninety-three percent of them advocated student-loan clemency. This idea actually is neither original to OWS nor unique among its members.

    New York University Professor Andrew Ross recently proposed a radical solution to student loan debts the he calls “A Pledge of Refusal.” The idea requires those who owe to sign a pledge to stop making payments on their student loans once the pledge garners a million signatures. Meanwhile, an online petition supporting student loan forgiveness has collected over a half million signatures.

    President Obama announced a plan last week to provide student loan relief. First, he is reducing the maximum repayment on student loans from fifteen percent of discretionary annual income to ten percent. Second, he will allow borrowers to combine loans from the Family Education Loan Program with direct government loans, with a lower consolidated interest rate. Obama plans to use his Executive authority to bypass Congress for this program.

    Democratic Representative Hansen Clarke of Michigan wants to go even further. He has introduced legislation (H.R. 365) that includes creating incentives for banks to negotiate with distressed lenders, providing tax credits for education expenses and student loan debt, and making more private student loans eligible for discharge in bankruptcy proceedings.

    Both Obama’s and Clarke’s solutions fall short of general clemency but protestors are unlikely to obtain this remedy. A Rasmussen poll found only twenty-one percent of American adults in favor of blanket forgiveness as contrasted to sixty-six percent opposed. Many feel clemency would be unfair to lenders as well as those borrowers who repaid their student loans. At worst, they write off OWS protestors and other advocates for loan forgiveness as spoiled, lazy slackers who expect a free ride.

    Such epithets are unfair, counters conservative columnist Nicholas Kristoff this week in the New York Times. “While alarmists seem to think that the movement is a ‘mob’ trying to overthrow capitalism, one can make a case that, on the contrary, it highlights the need to restore basic capitalist principles like accountability.” Kristoff goes on to deplore how “some financiers have chosen to live in a government-backed featherbed. Their platform seems to be socialism for tycoons and capitalism for the rest of us . . . they can privatize profits while socializing risk.”

    Representative Clarke concurs that most protestors “are not asking for [a bailout]. They are simply asking for a system that is not rigged against them.” When big bankers and investment firms can make poor decisions without suffering obvious consequences, then the motivation for individuals requesting similar absolution may not be admirable but it is understandable.

    While the current crop of students and recent graduates may be whining about the problem more than past generations, they face an objectively bigger problem. This year, the average borrower graduating from a four-year college left school with roughly $24,000 of student debt, with ten percent facing debt of $40,000 or more, according to the College Board. Total student loan debt will exceed $1 trillion this year and it now exceeds outstanding credit card debt, according to the Federal Reserve Bank of New York.

    Only seven percent of graduating bachelor’s degree holders come from the bottom quarter of income earners, as compared to twelve percent back in 1970. Intended as relief and opportunity for the distressed poor, student loans have become an unavoidable middle class reality. In addition, a series of laws passed by Congress last decade have increased the difficulty of discharging debt, including student loans, through bankruptcy.

    The website College Scholarships reports on several programs that forgive or reduce student loan debt for graduates willing to work in high need/disadvantaged areas. The problem is such programs are limited to highly targeted professions, such as nurses, attorneys, and teachers. What is more, they often require a minimum of five years experience. Traditionally, graduates take such jobs immediately after graduation to acquire experience, when they are most inclined to social activism and less acclimated in their lifestyles to larger salaries.

    I attended college for six years, ultimately earning a master’s level degree in 1984. I won several scholarships, based on merit; qualified for several grants, based on need; and I worked. In spite of this, I fell short of the necessary money for tuition and books on a couple of occasions. I took out a couple of federal student loans to make up the difference that I was able to repay within a few years of graduation.

    Contrast my experience with that of Robert Applebaum, who graduated from Fordham Law School in 1998 with about $65,000 in debt. After going to work as an Assistant District Attorney in Brooklyn, his salary forced him to put his student loans in “forbearance,” which prevents default but allows continued accrual of interest. Applebaum began repaying his loans upon leaving the DA’s office in 2004 but remains $88,000 in debt today.

    Tommaso Boggia is an MPA candidate at Presidio Graduate School and an advocate for student loan clemency. He writes at the website Triple Pundit, “Regardless of work ethic, more and more middle class families are slipping into poverty, in part because of the heavy debt burden of house ownership and of pursuing a higher education degree . . . A whole generation is seeing their plans and ambitions shackled by the extra weight of their student loan payments. These young people are unable to buy a home, start a family, or do the socially important but underpaid jobs in the social services sector.”

    In the post-World War II era, a college education was the chief means by which children from working poor families could leapfrog into the middle class or even affluence. Increasingly, however, the cost of this requirement is becoming the very thing holding them back from the opportunities promised by the American Dream.

    The most cited reason for exploding debt is the ever-increasing cost of college. Average in-state tuition and fees at four-year public colleges rose an additional eight point three percent in 2001 alone, passing $8,000/year ($17,000/year with room and board). In addition, the American Council on Education notes that budget cuts and other austerity measures have reduced state appropriations to higher education by eighteen percent over the last three years.

    Richard Vedder, Director of the Center for College Affordability and Productivity and author of the book Going Broke by Degree – Why College Costs Too Much, maintains that we are looking at the problem exactly backwards. Writing in the National Review, he argues that just as an abundance of easily obtainable, low interest mortgages spurred the housing bubble that caused the 2008 financial crisis, “Arguably, federal student financial assistance is creating a second bubble in higher education.”

    Vedder also points out that government doles out loans without discrimination to a student’s prospects of success in college, despite the fact that over forty percent of those pursuing a bachelor’s degree fail to receive one within six years, or chances of success after college, regardless of whether a student’s field of study offers poor versus good job/career availability. During a 2011 PBS NewsHour appearance, Vedder argued American society must “open up opportunities for people to consider a variety of different options after high school, one of which is college, but there are many others.”

    Most of us may not agree with those advocating total clemency for student loan debt. While this solution may be overly simplistic and impractical, it seems clear that some reforms are necessary – whether the efficiencies proposed by Obama, the incentives proposed by Clarke, or Vedder’s more draconian measures toward higher education in general. It also means we need to give OWS protestors and other loan forgiveness advocates more credit for identifying a real, substantive, and systemic problem beyond their selfish interests.

    If we value an education for our children as much as we claim, our society has to find a way to re-engineer it back from the crushing burden it has become to more of the opportunity we aspire it to be. Right now, the main thing we are teaching our kids is learning to owe. This is neither opportunity nor American exceptionalism.
     
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  2. imreallyperplexed

    imreallyperplexed Council Member

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    Bell,

    As usual, this is a thoughtful post. However, I sense that you are a little conflicted. This conflict is apparent when I compare your opening paragraph - which seems to point to the self-interested motives of students and your concluding paragraph which seems to point to the community-interested motives of making sure that citizens are educated to that they can be productive. I have a sense that part of you is sympathetic to the argument that students in the OWS are deadbeats who refuse to live up to their "agreements" while another part of you is sympathetic to the notion that students are in a sense being maneuvered into a state of permanent "indentured servitude" that is contrary to the notion of the United States as a land of opportunity and contrary to the notion of American exceptionalism.

    That said, though you didn't have concrete solutions to offer, you did offer a balanced discussion of the problem. The one thing that I would add is that the problem not only concerns those who have already graduated with heavy loans but those who are in college and to those who will follow.
     
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  3. Corruptbuddha

    Corruptbuddha Governor

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    So what would be the answer? Free college for anyone who wishes it? Unfortunately this is an untenable solution as it does nothing to solve the core issue, namely college costs. I think the rise in college tuition rests on the fact that it's internal costs are so high. Operating costs such as electricity, water and waste disposal have soared, not to mention the costs of education system employees (namely the teachers) themselves. Add to these the costs of technologies that didn't exist 20-30 years ago and you have tuition rising far faster than the cost of living over the same period.

    As an added problem we have the government subsidizing a system that would function far better in an open market. In my opinion, the moment government begins to subsidize, or guarantee the payments for anything, that thing (be it solar panels, automobiles or education) automatically increases in price. Any endeavor that comes in contact with the seemingly bottomless pockets of the federal government tends to abuse those pockets. $500.00 hammers and $1,000.00 aircraft toilet seats leap to mind. Perhaps it would be better if the government didn't subsidize education. In a non-subsidized system, the costs tend to reflect the true market. And the market itself would tend to keep costs lower.

    Another solution could be to grant these government backed student loans only to students who partake of the more technical degrees. Why should the taxpayer back a loan for a student who aspires to earn a degree in 'Underwater Basket Weaving' instead of Electrical Engineering? Technical or Science degree holders are, by far, the most sought after graduates in the modern, tech savvy workplace. That's not to say you can't get a liberal arts degree, but that it can't be funded on loans guaranteed by tax dollars.

    The only easy answer at this time is to weigh your needs and desires against your ability. If you can't afford college, perhaps you shouldn't go. if your grades are stellar, apply for endowments or grants offered by charities and community organizations as well as the universities themselves. However, if you choose to attend college knowing that you will graduate with $100k in student loan debt, then you made that decision on your own and you are responsible for its consequences. Thus you should probably think of getting a degree in a field that will allow you a sufficient salary to pay the debt off and still make enough money to have a life.
     
  4. TheBell

    TheBell Council Member

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    Selfish Enlightenment

    Hi, imreallyperplexed. Yes, I am conflicted in that I don't see general clemency as a viable solution but believe substantial changes are needed to get the cost of education and student loans down.

    I certainly don't blame those who owe for being selfish in wanting their debt reduced (I assume they are motivated by this more than a desire to improve society -- I know I would be in their position). However, I also think any modern country/society bears a responsiblility to help keep the cost of education from becoming prohibitive. We needs a top-notch labor force to be competitive. In this sense, it is a case of selfish enlightenment.

    I did not want to offer specific solutions because my real point was simply that I think something substantial needs to be done. As you suggest, such solution(s) are needed because the problem is only going to get worse as we go forward. Education reform is much like healthcare reform in that regard.

    Thank you for your reply!
     
  5. TheBell

    TheBell Council Member

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    Agreed But Some Government Role May Be Necessary

    Hi, Corruptbuddha. No, I don't favor state-sponsored education any more than I do general clemency on student loans. However, I think it is important for us as a nation to get the cost/benefit curve for higher eduction bending back in the right direction.

    Another solution could be to grant these government backed student loans only to students who partake of the more technical degrees.

    That closely parallels one of the solutions suggested by Richard Vedder. Sadly, I suspect it is one that many politicians who support OWS would find acceptable. The rise of community colleges, Internet schools, and distance learning are other developing trends away from the traditional four-year program at a large state-sponsored university.

    I'm not sure if the free market would lead to better, cheaper education but I know if we want to compete in global free markets, we need a top notch workforce. This means, among other things, workers educated with the skills that allow us to compete and flourish. Government might be the best vehicle to steer students in this direction. The market has never rewarded people with degrees in English or Philosophy with huge salaries but that does not stop people from choosing them.

    Regardless, whatever government's exact role should be, we can agree it is not to pay for everyone's higher education just for the sake of every American being able to say they have a college degree. Thanks for your reply!
     
  6. Dave

    Dave Council Member

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    Good posting Bell

    1 trillion in student loan debt = WOW. And yes, the cost to send your child to school today is astronomical. A neighbor of mine has a daughter that got straight A's in high school, played sports, was in various clubs at school, and still had no luck with scholarships. She couldn't even afford to go to most of the colleges right here in Minneapolis, let alone Duke or anything like that. She is in a community college at the cost of 20k per year, yes, 20k for community college, without scholarship. Her parents of course make too much money so that she doesn't qualify for financial aid, and as most of us know that are over that financial aid "line", that is a total load of crap. If a couple makes 100k a year combined sure they can live in a home, pay their bills, feed and cloth themselves and their kids, but 20k a year for college is another thing. :/
     
  7. leadelisa

    leadelisa Council Member

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    Owing student loan debt is really a difficult situation and it is important to repay the amount on time to avoid any difficult financial situations. Specially if you have a private student loan without cosigner than it becomes completely your responsibility to repay the amount on time to avoid any critical or difficult situation. You should talk with your loan provider for easy installment repayment if you are unable to pay the huge amount. Student loan consolidation is also an important way to repay the loan with less hassle.
     
  8. 888888

    888888 Council Member

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    Why do people need to be educated? Who benefits the most from an educated work force? I know many educated people who own nothing more than a piece of paper and a big debt. there is no jobs in the field they have been trained for. Why hasn't the universities that suck these people in to the belief of a better living been truthful to them that they most likely will not get a position that they were hoping to be able to get that was dangled in front of them?

    The wealthy in our country has completely demolished the manufacturing part of our society in an attempt to make more profits and increases their ability to be paid more, and it has worked. The people who made these choices have gone from the 50 times a wage earners pay to 400/600 times mainly do the fact that they cut labor and benefit cost by outsourcing jobs, and not only manufacturing but anything that can be done via the internet.

    Now we have kids running up 40,000 to 160,000 in debt to get jobs that there are 4 people for each position.

    So should it be the kids who are punished just like the people who were told to get a piece of the American dream and own a home, only to lose their jobs, and their homes and then their families do to the stress. Many people who loss their jobs were do to the fact that others lost their jobs, it was more of that tinkle down idea in the works.

    So really who should bear the pain, a 22 year old kid, a 40 year old worker who is let go, or a 56 year old who nobody will hire and is told tough shit guy, we feel for you, but it's business you know.
     
  9. Days

    Days Governor

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    What is missing is any real understanding of the credit structure that controls both the value and throughput of currency. Fractional banking creates at the point of loan... once the banks eliminated real money from the system (US Grant demonetized the silver dollar, FDR demonetized the gold dollar) what remains is an artificial currency that is 100% controlled by the central bank. What the students recognize is that the system is completely rigged, it operates more downhill than a casino, the value of their outstanding debt is entirely the product of a controlled market and a fiat currency. In essence, the students owe a life servitude for an education that isn't capable of returning any vigor for repayment ... also due to the controlled market and the design of international bankers. Once you realize that the real nature of this currency is theft, that it is a criminal cartel that operates the entire world market and that they work the system to cause both governments and individuals to owe enormous debts relative to normal return in the market... that it is more than a sham, it is out and out theft, and the numbers are totally in the hands of the operatives for the central bankers... why shouldn't the students call their bluff? We all should be calling their bluff. This system is criminal and it acts as a siphon that takes from everyone and gives it all to the very, very rich. There is a 1% of the top 1% that is hiding behind the 1%... hiding their control over all of us, hiding their control over all governments and commerce, hiding their control over all money on the planet. Funny enough, when you try to expose that very, very rich element, suddenly people lash out at you with vicious insane attacks... funny, how that works.
     
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  10. Days

    Days Governor

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    Our economic destruction was engineered from the top down. I thank God that my son will go through high school with a clear vision of how bad the job market is and how little it makes sense to go into servitude for this system. But the system has a powerful influence on the young... it sucks them in; mostly through fear of failure.
     
  11. Days

    Days Governor

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    Does the IRS steal your refund for defaulted student loans? I'll bet they do. But if you don't have any refund coming on account of a market gone south with no job to show for your degree... and so many people are getting that shaft... bare survival is going to trump trying to save your credit. As for the kids who are making good money from good jobs secured from their degree; what would be a reasonable period of repayment? Should kids have to repay student loans for 40 years?
     
  12. Woolleybugger

    Woolleybugger Mayor

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    Why not exactly? The money our kids borrowed for their education was created out of thin air by banks using the fractional reserve system. One day they have 100 dollars in assets and then loan out 1000 using it as a reserve, the next day you get 1000 dollars from that same bank which you think is real and then use it to spend on your education. Underlying it was one simple ruse: The money was created for your use only to serve banks trying to make as much money as possible off your future earnings which they will call "interest" and you will call "that goddamm loan". The banks pulled the money out of thin air. If you tell them to shove it, all that is lost is their cherished dream of taking a cut on your future income so they can make billions...
     
  13. gabriel

    gabriel Governor

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    so why is your education to grade 12 free?
     
  14. gabriel

    gabriel Governor

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    no one forced them to borrow
     

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