Posts Tagged Pell Grant
How Detroit Can Help Solve America’s Student-Loan Crisis: A Political Solution – Garance Franke-Ruta – The Atlantic
How Detroit Can Help Solve America’s Student-Loan Crisis: A Political Solution
Offering college graduates reduced debt in exchange for moving to distressed cities could address two public-policy problems at once.
GARANCE FRANKE-RUTA AUG 20 2013, 8:00 PM ET
A view of the Midtown area is seen looking south on Woodward Ave. in Detroit. (Carlos Osorio/AP)
The day I paid off my undergraduate student loans felt like a momentous inflection point.
I had just sold my first apartment, which I’d bought in Dupont Circle in 2000 on pretty much the lowest possible income you could make and buy a place in Washington, D.C., in what turned out to be the waning days of the era when you could afford to buy tiny apartments in Dupont Circle on such salaries. Three years of piecemeal renovations later, I sold it for enough that that I was able to turn around after settlement and write the largest check I’ve ever written, then or since, to the U.S. Department of Education, for the full amount I owed.
Rousseau called money the instrument of liberty, but the converse is also true. Debt is the enemy of individual freedom. For the first time in my adult life I was debt-free. But what it felt like was more like this: For the first time in my adult life I was free.
The experience taught me several things:
- The real American dream is not buying your first home, it is selling your first home at a profit. (I’m only half joking.)
- What people with major student loans need most is exactly the thing they have always lacked, and why they have such loans to begin with. They need capital, or, barring that, a means of reducing the principal on their debt, such as through one of the loan-forgiveness programs the federal government runs for people who do valuable and important work in under-served communities.
- It is almost impossible to get rid of major debt on the installment plan in any kind of timely fashion unless you make far more money than many people — and especially those with Big Debt — wind up earning during their first decade after graduation. Despite Pell grants and work study and summer jobs and an extremely generous discount from my university, I graduated with about the same debt as the average American college graduate today (more, actually, if you run the number through the inflation calculator), then found myself unable to put much of a dent in the sum while running through journalism’s notoriously low-paying starting-salary positions.
- The government routinely uses the housing market to achieve broader social-policy goals, and it can be a major factor in transforming aspects of people’s lives that extend far beyond where they live and in what kind of square footage. Housing policy can be used to transform communities and help individuals build wealth at the same time. Back in 2000, D.C. was all-in on the still-pretty-novel first-time-homebuyer tax credit to encourage people to return to the underpopulated city and help shore up its tax base. That helped encourage people like me to buy. People like me buying in Washington in large numbers changed the city, but owning real property also changed my life in all sorts of ways I was not able to anticipate.
* * *
I bring all this up because on Thursday and Friday, President Obama will take his summer policy speech-making tour to Binghamton University, the State University of New York, in Vestal, N.Y., and Lackawanna College in Scranton, Penn., for a town hall and remarks focusing on higher-education policy. “We have to fundamentally rethink how higher education is paid for in this country,” the White House announced in previewing the speech.
So here’s one idea. Tie together college debt reduction and housing in a way that’s potentially liberating to individuals and beneficial to the recovery of distressed communities at the same time to a create a virtuous cycle like the one I accidentally stepped into in Washington.
Cities like Detroit, Cleveland, and Gary, Indiana, need people. Young people, college-educated people, people with an entrepreneurial spirit who might be willing to put down roots and pay local taxes and taken on renovation projects and bring new views and businesses and opportunities to distressed, underpopulated communities.
Debt-burdened recent college graduates, for their part, need cheap housing and to pay off their student loans. They need to live in a place they can afford, and they need some means of reducing the principal on their debt in a timely fashion so they can get on with their lives. Even the existing program that allows people to pay no more than 10 percent of their income on federal student loan debt isn’t enough, because as helpful that may be to those in the program, it does nothing about the real problem — enormous underlying principal balances, thanks to the massive ramp-up in college costs – for 20 years.
Maybe it’s time to try to yoke these two problems together and allow for partial loan forgiveness for people who commit to living in distressed communities for a set period of time. The rents in Detroit couldn’t be cheaper, nor could houses, should anyone want to lay down deeper roots. Think of it as something akin to Washington’s first-time-homebuyer tax credit, but available to renters, too, and accomplished through educational-debt reduction rather than the tax code.
- How Detroit Can Help Solve America’s Student-Loan Crisis (theatlantic.com)
- How Cleveland Can Help Solve America’s Student-Loan Crisis (theatlanticcities.com)
- The Decline and Fall of Detroit, cont. (weeklystandard.com)
- Time to Bring Bankruptcy Back for Student Loan Debt (gawker.com)
- Matt Taibbi On “The Dirty Little Secret” Inside The Student Loan Bubble (zerohedge.com)
- Report Argues For Bankruptcy Protection For Student Loans (huffingtonpost.com)
- More students taking on more student loan debt, Department of Ed reports (dailykos.com)
- Student Loans, Detroit, and an Idea to Fix Both (pattidudek.typepad.com)
- The Government Profits from Student Debt Defaults (marginalrevolution.com)
- Credit Card Debt: Falling, But Still Very High (dailyfinance.com)
End student loans, don’t make them cheaper
RICHARD VEDDER , Bloomberg News
Updated: June 18, 2012
Paul Tong illustration on student debt.
Photo: Paul Tong, Tribune Media Services
U.S. employers complain that they can’t find enough skilled employees. Then how do we explain why almost 54 percent of recent college graduates are underemployed or unemployed, even in scientific and technical fields, according to a study conducted for the Associated Press by Northeastern University researchers?
The cause is more fundamental than the cycles of the economy: The country is turning out far more college graduates than jobs exist in the areas traditionally reserved for them: the managerial, technical and professional occupations.
The Bureau of Labor Statistics tells us that we now have 115,000 janitors, 83,000 bartenders, 323,000 restaurant servers, and 80,000 heavy-duty truck drivers with bachelor’s degrees – a number exceeding that of uniformed personnel in the U.S. Army.
Was college worth it? A huge part of the problem relates to federal financial-aid programs. Annual student loans, Pell Grants, tax credits and other federal assistance totaled some $169 billion a year in 2010-11 – more than 1 percent of national output. These programs are based on two erroneous premises: that almost everyone needs higher education for vocational success, and that they reduce student costs.
More than 25 years ago, Education Secretary William Bennett argued that federal aid programs benefited colleges more than students. Recent studies by Stephanie Riegg Cellini of George Washington University and Claudia Goldin of Harvard University, as well as by Andrew Gillen for the Center for College Affordability and Productivity, support that hypothesis.
A new study by Nicholas Turner of the Office of Tax Analysis in the U.S. Treasury Department argues that when tax-based aid goes up, institutional scholarships go down, dollar for dollar.
Consequently, we have millions of underqualified college students borrowing or getting Pell Grants to finance college.
More than 40 percent of them don’t even graduate within six years, and many who do have marginal academic records. Because the average college student spends fewer than 30 hours a week on all academic activities, for about 30 weeks a year, never have so many dollars gone to teach so many students for so little vocational gain.
Besides leading to more underemployed college students of increasingly dubious academic quality, the dysfunctional federal student financial assistance programs have other pathologies:
First, universities, unlike the taxpayers, suffer no financial consequences when the underqualified students they have lured into their academic programs ultimately default on their loans.
Second, students who study six years but ultimately drop out receive more financial aid than the diligent “A” student graduating in three years: We reward mediocrity and punish excellence.
Third, there is no adjustment of student-loan interest-rate terms to meet market conditions or differing risk factors relating to individual repayment prospects. That means too much money is lent, especially to high-risk individuals with little prospect for academic success.
Fourth, the Free Application for Federal Student Aid form, associated with these programs, aside from being unbearably complex, gives colleges private information about family finances that allows them to gouge students more.
Fifth, colleges’ tuition and fee policies drive the amount of loan volume, rather than the other way around, thus contributing to the college-cost explosion and the subsequent academic arms race.
Sixth, intended partly to promote greater opportunities for the poor, these federal-aid programs have been accompanied both by rising income inequality in the United States, and a decline in the proportion of recent college graduates from poor families.
Proponents of federal student-loan programs argue that private student-loan markets are underdeveloped, that banks are afraid to lend to students, largely because of their lack of credit history. This argument is vastly overblown. It is amazing how students have no trouble getting credit cards and racking up debt, or little difficulty borrowing to buy a car. Why would college be any different?
Yes, the goal of providing educational opportunity for all seems commendable. Any revamping of the federal student- assistance program would have to be phased in to avoid severe hardship and enrollment disruptions. But here are some better policies:
— The federal government should get out of the student loan business.
— It should provide educational vouchers (similar to Pell Grants) directly to students (not schools), and make those vouchers progressive (very low-income students receive the most, fairly low-income students a little, and middle- and upper- income children nothing).
— Add performance incentives, rewarding timely degree completion and good performance.
— Remove the tuition tax credit that largely assists relatively affluent students and their families; perhaps use savings from all of the above to reduce the budget deficit.
— Eliminate the Free Application for Federal Student Aid form and require that applicants give the Internal Revenue Service permission to provide family-income data.
My guess is that the total number of students attending four-year programs would fall modestly, a good thing given the disconnect between the labor market and college enrollment; that the proportion of students from lower-income families would probably increase (also good) both because the Free Application for Federal Student Aid form is a barrier for lower-income families, and the burden of aid reductions would fall mainly on the colleges and more affluent students.
Also, the total cost to the federal government would drop significantly.
More radical solutions might involve rolling many government-income security programs into compulsory tax- sheltered 401(k)-like lifetime individual security and investment accounts, allowing withdrawals for college costs. However it is done, the current system needs replacing.
- How To Get Pell Grants For College (answers.com)
- How To Apply For Pell Grants (answers.com)
- Pay for College – What Is a Pell Grant? (bigfuture.collegeboard.org)
- Reason for pell grant denial (saulfitzsimmon1.typepad.com)
- pell grant international students (malcomschneider.typepad.com)
- Congress pulls plug on Pell Grants; thousands of students affected (mercurynews.com)
- How to fix student loans (salon.com)
- Republican budget: Ryan plan would cost one million students their Pell Grants (dailykos.com)
- Pell Grants plug pulled for thousands of students (mercurynews.com)
- How To Get Financial Aid For College (answers.com)