Sunday, June 22, 2014

The government normally doesn't care whether you or I accumulate large bills for home improvement, a new car or exotic vacations. But Barack Obama feels no hesitation in concluding that the cost of higher education has placed "too big a debt load on too many young people." Therefore, something must be done. 
 
The 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.

3 comments:

  1. I disagree with this article. It is true that students and parents are responsible for their debt, but we are NOT getting what we paid for!

    Placing yourself into debt for 10 to 20 years just to gain some training is an abomination. Other countries such as Germany have free university training (or at least it used to be free.)

    Universities are leeches! I would also include insurance companies and unscrupulous doctors and hospitals in that fold. They are the same kind of people who would take a widow's last mite. You people can’t tell me with a straight face that you think insurance companies are honest with consumers. They will f**k you over in a heart beat!

    Remember Dori, I do! I remember reading that she had problems with her insurance as well. Guess what…the insurance companies don’t care about humans; they care about their bottom line. Doctors and Dentists for the most part are also greedy jackasses who would take a widow’s last mite. Charge 300 dollars for a 2 MINUTE examination…give me a break!

    I hate to say this, but insurance companies have created a monster with doctors and hospitals; just as banks have created a monster with student loans. Sadly, both health care and education are slipping out of reach for many Americans.

    Here is really what Americans want: to be treated fairly and honestly. I will stick with conservatism, but believe me as conservatives we need to start addressing the issues of education and health. If we don’t, we will lose. These are the things Americans really care about!

    By the way…there are no f’ing jobs out there bozo…for college graduates or anyone else! Do you read the news? People with Master Degrees are flipping burgers! Yes…it happens! We have to lower taxes for the rich man so he will hire the poor man to do his laundry. Either that or the poor man will have to go on disability for the government to take from the rich man to give to the poor man so that he can eat (that is until the rich pricks like that asshole who owns Facebook renounces his citizenship and moves to another country to avoid taxes and takes his money with him; YET advocates we take in ALL of Mexico’s indigent population.) Face it people, if you tax the rich too much, they will leave along with their money. It’s dammed if we do and dammed if we don’t!

    Please…Bring back Reagan! I know it sounds bad to the liberals, but it is better for the poor man to work for his bread than to do nothing for it. God help us…we need an economy again! We need people to go back to WORK! Can’t anyone see the economy sucks for EVERYBODY? I agree…the health care system is broken, the education system is broken; we are broken, but we NEED an economy to get us off the ground.

    Thank you,

    F.E. Snodgrass

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    1. So, you want free universities, like Germany? You know that they're not actually free, the education is paid by the state, right? You know it's because Germany is socialist, right? I thought you guys didn't like socialism?

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  2. Hey Diane…you better look at Drudge today (you probably do anyway)!

    I dedicate this song to u!

    http://www.youtube.com/watch?v=wTSLRbm8L9E

    I’m sure the Mexican and all their families want to take part in Obama’s great dream of welfare. This reminds me of Carter and the Mariel Boat lift, but there is no sea dividing us...thanks to the joke-in-chief...there coming to America whether we like it or not. HA HA. We're screwed!

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