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



prettydetroit.banner.ap.jpg

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:

  1. The real American dream is not buying your first home, it is selling your first home at a profit. (I’m only half joking.)
  2. 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.
  3. 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.
  4. 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.

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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.

I’ll say.

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 DetroitCleveland, 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: A Political Solution – Garance Franke-Ruta – The Atlantic.

 

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End student loans, don’t make them cheaper | StarTribune.com


End student loans, don’t make them cheaper

 RICHARD VEDDER , Bloomberg News 

Updated: June 18, 2012

We have millions of under-qualified college students borrowing or getting Pell Grants to finance college.

Paul Tong illustration on student debt.

Photo: Paul Tong, Tribune Media Services

·         93

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.

 End student loans, don’t make them cheaper | StarTribune.com.

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Free college? We can afford it. – The Washington Post


Opinions

Free college? We can afford it.

By Katrina vanden Heuvel, Published: May 1

Student loans set off the latest Washington spitball fight. The House Republican budget called for letting interest rates double on government-subsidized student loans (and for deep cuts in Pell Grants and other student support). Students who borrow the maximum in subsidized loans would end up paying as much as $1,000 a year in added interest. Last week, President Obama sensibly called for extending the lower rate and starting stumping through colleges and talk shows to enlist students in the cause.

Republican leaders quickly calculated the perils of angering young voters. Mitt Romney flipped over to support extending the lower rates. House Republicans passed an extension, taunting the president by paying for it using a preventive health fund in the Affordable Care Act. Senate Democrats propose to pay for the extension by closing a tax dodge that doctors, lawyers and small businesses use to avoid payroll taxes. The standoff allows for what has now become the routine exchange of insults, slurs and posturing before a deal is worked out at the last possible moment.

Ignored in this is the stark reality that even with the lower rates, more and more students can’t afford the college education or advanced training that everyone except for Rick Santorum believes they need.

College costs have soared at a rate faster than health-care costs. Since 1980, the cost of living has nearly doubled; health-care costs have quadrupled, and college tuitions and fees have exploded eight times over.

This has had two major effects. As the National Commission on Adult Literacyreports, “The US is the only country among 30 OECD free-market countries where the current generation is less well educated than the previous one.” Once the leader in percentage of college graduates between the ages of 25-34, the United States has dropped to 12th out of 36 developed nations.

The second effect is ruinous debt. The average college graduate with loans now leaves college $25,000 in debt. Student loan debt exceeds $1 trillion and is now greater than credit card debt. And the debts are inescapable. Bankruptcy doesn’t extinguish them; even Social Security payments can be garnished to repay them.

These debts weigh down not only the holder but the entire economy. Students now graduate with a burden that forecloses choices. More and more are forced to return home to live. Marriage becomes less imaginable; public-interest work is less affordable. As Pam Brown, an organizer with the Occupy Student Debt Campaign, put it, “The debt makes us very individual; we can’t afford to help someone else.”

It is long past time that we debate real reform. Rep. Hansen Clarke, a Michigan Democrat, introduced a bill that would forgive up to $45,000 in student debt after a borrower makes 10 years of income-based payments (no more than 10 percent of income). A petition in support of Clarke’s bill has more than 900,000 signatures.

The Occupy Student Debt Campaign is calling for free public higher education and a write-off of existing debt. In Brown’s words: “Education is really a right, and it shouldn’t be something for Wall Street to make a lot of money off of.”

 

Students in California are pushing for a popular initiative on free public higher education. The draft would make four years of state university free for all full-time, in-state students who maintain at least a 2.7 grade-point average or do 70 hours of community service each year. It would pay for the lost tuition with a modest surtax on those making more than $250,000.

Making public college (or advanced training) free for all those who merit admission isn’t a radical idea. The United States led the world in making K-12 public education free. After World War II, the GI Bill provided college or advanced training for a generation of veterans. This not only avoided mass unemployment as the troops demobilized, it also provided the United States with the best educated citizenry in the world and was central to building the broad middle class that made America exceptional.

Making public colleges free would cost, it is estimated, somewhere around $30 billion a year. We could afford it. Mitt Romney’s proposal to eliminate the estate tax would cost about four times that sum and benefit only the heirs of the very wealthy. Afinancial transaction tax that would slow destabilizing speculation on Wall Street would raise many times that also.

Free public colleges might slow the rise of private college costs, as they would have to compete with the free offerings of public schools. More students would attend school or advanced training. The United States would gain the benefits of a better educated citizenry and workforce. Young people, not burdened by debt, could be more entrepreneurial and more public spirited.

Washington is too paralyzed by the elite fixation on austerity and too polarized by partisan divides to consider investments to create a better job market — or anything this bold. The Occupy Student Debt Campaign has it right: Reforms will come only from outside the Beltway.

Congress should act to ensure loan rates don’t double. But real reform will come only if students, parents and those who understand how student debt weighs down our recovery join together to demand it.

 Free college? We can afford it. – The Washington Post.

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What Washington really does – The Washington Post


Robert J. Samuelson

Robert J. Samuelson

Opinion Writer

Here’s what Washington really does

By Robert J. Samuelson, Published: April 29

The Washington of conventional wisdom and the real Washington are two entirely different places. The Washington of conventional wisdom is overrun by well-paid insiders — lobbyists, lawyers, publicists — who systematically manipulate government policies to benefit corporations and the rich, defying the “will of the people.” The real Washington has government paid for by the rich and well-to-do. Benefits go mainly to the poor and middle class, while politicians of both parties live in fear that they might offend the “will of the people” — voters.

Recently, Ron Haskins of the Brookings Institution, a Washington think tank, testified before the House Budget Committee on the growth of the 10-largest “means tested” federal programs that serve people who qualify by various definitions of poverty. Here’s what Haskins reported: From 1980 to 2011, annual spending on these programs grew from $126 billion to $626 billion (all figures in inflation-adjusted “2011 dollars”); dividing this by the number of people below the government poverty line, spending went from $4,300 per poor person in 1980 to $13,000 in 2011. In 1962, spending per person in poverty was $516.

Haskins’s list includes Medicaid, food stamps (now called the Supplemental Nutrition Assistance Program, or SNAP), the earned-income tax credit (a wage subsidy for some low-income workers), and Pell Grants. There are other, smaller programs dedicated to the poor. A report from the Congressional Research Service estimated the total number at 83; Haskins puts the additional spending on programs below the 10 largest at about $210 billion. The total of all programs for the poor exceeds $800 billion.

To be sure, some spending reflects the effects of the Great Recession. But most doesn’t. As Haskins shows, spending on the poor has increased steadily for decades. Consider food stamps. There are now about 45 million Americans receiving an average of $287 a month in food stamps, up from 26 million in 2007, according to a newCongressional Budget Office report. But the number in 2007, when the economy was healthy, was roughly 50 percent higher than in 2001.

And programs for the poor pale beside middle-class transfers. The giants here are Social Security at $725 billion in 2011 and Medicare at $560 billion. Combine all this spending — programs for the poor, Social Security and Medicare — and the total is nearly $2.1 trillion. That was about 60 percent of 2011 non-interest federal spending of $3.4 trillion.

You can debate whether all this spending is too much or too little. My point is different: These numbers speak volumes about our politics.

One lesson is that Washington really hasn’t been taken over by monied groups. In a democracy, even the rich are entitled to promote their interests. It’s true that their lobbyists and lawyers sometimes win lucrative tax breaks, subsidies or regulatory preferences. But as the spending numbers show, their influence is exaggerated, especially considering their tax burden. The richest fifth of Americans pay nearly 70 percent of federal taxes (included in this group, the richest 10 percent pay 55 percent), estimates the CBO.

The larger lesson is that, contrary to conventional wisdom, American politics have not become insensitive to the “the people.” In many ways, just the opposite is true. Politicians are too responsive to popular will. The real Washington is in the business of pleasing as many people as possible for as long as possible. There are now vast constituencies dependent on the largesse of the federal government. This is the main cause of huge “structural” budget deficits, meaning that they aren’t simply a hangover from the Great Recession.

There are many sophisticated theories today about why politics have become so polarized and immobilized. Ideologues have captured both parties, it’s said; primary challenges by right- and left-wing zealots doom centrists; cable television and the Internet favor simplistic, highly partisan rhetoric and argument. Political divisions are accentuated; consensus becomes harder. There’s something to these theories, but they also subtly misrepresent and excuse our present paralysis.

More promises were made than can be kept without raising taxes, which — for the most part — were also subject to bipartisan promises against increases. Almost everyone agrees that massive budget deficits pose a long-term economic threat, though no can be precise about how or when the threat might emerge. A central question about our political system is whether, after decades of making more promises to more groups, it can withdraw some promises to minimize the threat.

So far, the answer is “no.” Political leaders don’t lead. They take the path of least resistance, which has been to do little except to find scapegoats — “the rich,” “special interests,” “liberals,” “conservatives” — that arouse their supporters’ angriest antagonisms. It helps explain polarization. This is really what Washington does. It’s a demoralizing commentary on the state of American democracy.

 What Washington really does – The Washington Post.

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Paul Ryan’s 2012 Budget Short-Changes Citizens For Political Donors | Double Dip Politics


Paul Ryan’s 2012 Budget Short-Changes Citizens For Political Donors

BY ANNABEL LEE

 

When one hears the words “budget” and “House Republicans”, it’s completely normal to cringe. The 2011 Paul Ryan budget was a disaster for the GOP and the candidates running at the time. Newt Gingrich spoke out, stating it was “conservative social-engineering”. Gingrich later stated anyone showing that statement in context is taking him out of context. I guess we’re taking him out of context by quoting him.

The House Republicans did unveil their version for a 2012 budget, complete with many of the same ideas held in 2011. Examining the budget proposal shows a stark contrast between the White House and the GOP Representatives. 

For starters, the GOP budget was again created by Rep. Paul Ryan (R-WI). The plan is a combination of drastic spending cuts to social programs and cutting taxes. Ryan’s new budget claims drastic cuts to domestic spending would reduce borrowing. The budget neglects the fact $11.2 trillion of the national debt is held by the American people.

Sharp cuts to Social Security, Medicare, Medicaid, the Supplemental Nutritional Assistance Program, unemployment insurance, and Pell Grants would take vital funds out of the hands of the poor and elderly. Tax cuts would lower revenues coming into the government. The tax cuts are focused primarily at the top 10 percent of incomes and for corporate entities.

Read more…

 Paul Ryan’s 2012 Budget Short-Changes Citizens For Political Donors | Double Dip Politics.

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