Making A Fool Of The Conscientious
By JAMES K. FITZPATRICK
We continue to get letters about the proposals by Bernie Sanders and Hillary Clinton to forgive the student loans held by recent college graduates. Sanders’ and Clinton’s plans differ slightly from each other, and seem to change from day to day, but the goal is the same: to permit American students to graduate from college “debt free.” Both plans would require large tax increases, or an enormous increase in the national debt, if financed through government borrowing.
W.B. of Virginia writes, “Loan forgiveness makes a fool of my son who received his master’s degree in engineering by working 20 hours weekly for five years. It is the government’s way to reward bad behavior and punish good behavior. The $1 trillion debt in student loans will have to be added to the national debt for the taxpayers to pay. The national debt for each man, woman, and child now stands at about $56.6 thousand. It can be safely estimated that at least 75 percent of citizens will never be able to pay their fair share of that amount, leaving the minority of the American people who actually pay income taxes with a debt of more than $200,000. Remember, we can’t count on the Chinese to keep lending us the money to solve this problem.”
T.H. of South Dakota is also displeased by Clinton’s and Sanders’ proposals. He argues that they are asking the taxpayers to pay for “four years of partying at public expense by irresponsible young men (and some women).”
To underscore his point, T.H. points to a “video from the University of Alabama” that is being used “to boost student enrollment.” The video has been shown on several television talk shows, including The O’Reilly Factor. T.H. reports it “featured near-naked coeds frolicking at poolside.” He asks, “Should the taxpayers be expected to pay for this?”
T.H. sees a Democratic Party strategy at work. He predicts that many of these students will end up “with college degrees that will not secure them gainful employment in the free-market economy and will end up with government jobs. They will become lifelong Democrat voters. Hillary Clinton would love that. Bernie Sanders too.”
T.H. proposes a solution:
“What we could do is to absorb the government loans only for those students who get degrees in fields with some value in the free market: engineering, medicine, science, etc.” He quickly adds, “However, this proposal will never fly. Those getting non-marketable degrees — social studies, environmental studies, black studies, feminist studies, Hispanic studies, etc. — for whom government employment is the only option, will outnumber them and demand ‘equal’ treatment. And they will get it.”
T.H. points back to a time in our not so distant past when a college education was affordable: “I attended the South Dakota School of Mines and Technology. Tuition was only $90 per year. Back then, any kid could earn $90 in the summertime just mowing lawns, delivering newspapers, and other part-time work in lower and middle-class neighborhoods.”
My memories are similar to T.H.’s. My tuition when I started Fordham University in 1960 was $1,000 per year, and went up approximately $100 each year that I was in attendance. Some might protest that inflation has to be taken into account, if we are to accurately judge whether college costs have risen inordinately. There is a way to do that; to look at the amount of purchasing power that was required to pay Fordham’s tuition back then. Consider this: I was able to pay my own tuition at Fordham with the money I earned waiting tables and tending bar, with a substantial amount of money to spare. No young man or woman working a part-time job can do that today, regardless of how one factors in the inflation rate.
In 2014, U.S. News and World Report listed Fordham’s tuition at approximately $44,000. That is just the tuition charge. Room and board is an additional $16,000. It is true that approximately half of my professors at Fordham were Jesuit priests, lowering costs considerably in comparison to today. But there has to be something else that is responsible for this dramatic increase in cost. Fordham has gone from being a university that a working-class student could pay for with a part-time job, to one that even upper-middle-class parents find it near to impossible to afford. I have yet to hear a good explanation for why.
The student loan debt was the topic on the Fox News program Bulls and Bears on August 22. The discussion centered on a proposal from Purdue University President Mitch Daniels in the August 20 edition of The Washington Post. The panelists in the discussion did not find Daniels’ plan all that attractive. Daniels is usually a clear-headed and original thinker on matters of public policy. See what you think.
Daniels starts by describing the mess we are in, with student loan debt now “totaling more than $1.3 trillion, which is more than the debt for credit cards, auto loans, and any other category except home mortgages. Default rates parallel those for the subprime housing loans of the financial crisis, and the debt numbers show no signs of decelerating, growing again this year by an estimated 8 percent.”
The average indebted student owes “the federal government (or, in a declining number of cases, a private lender) an average of $27,000.”
Daniels proposes as a replacement for student loans “income-share agreements [ISAs], under which a student contracts to pay investors a fixed percentage of his or her earnings for an agreed number of years after graduation.” Daniels contends that this approach would ensure students “a manageable payback amount, never more than the agreed portion of their incomes. Although every provider is different, terms tend to range from 5 percent to 10 percent of income for 10 to 15 years.” It also would shift the risk of default to private investors instead of the taxpayers. Daniels is confident that “as the ISA market develops, students will benefit from the market signaling that tells them which fields are most likely to be rewarded economically. A chemical engineer, for instance, is likely to negotiate a much lower repayment rate or shorter repayment term than her art history roommate.”
Daniels is not impressed by the alternatives being proposed to ISAs: “In contrast to the innovative ISA proposal, the student debt run-up has spawned a number of truly bad ideas. The most specious and counterproductive of these are suggestions to simply hand out even more public funds — a ‘hair of the dog’ policy if ever there was one.” (It seems safe to assume that Daniels means by this the debt-forgiveness proposals coming from Clinton and Sanders.)
He calls it borrowing from “an already bankrupt federal government,” thereby “merely shifting it to taxpayers, including these very same students as they enter their working years…the last thing today’s young people need is another massive federal entitlement program. It’s time for a new approach that can allow ambitious young people to work their way through college once they have completed college, free of the burden that today’s student debt imposes on them and on our whole country.”
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Readers are invited to submit comments and questions about this and other educational issues. The e-mail address for First Teachers is fitzpatrijames@sbcglobal.net, and the mailing address is P.O. Box 15, Wallingford CT 06492.