Friday, July 12, 2013

Editorial: Lighten College Costs

Federal student loan interest rates doubled on July 1 because Republicans would not agree to a proposal by Democratic Senate leaders to keep the loan rates at 3.4%. The House, along partisan lines in May, voted to switch the rates on Stafford loans to a market-based system, with the rates recalculated every year, at 2.5 percentage points above the 10-year Treasury bill rate (which closed at 2.58% on July 10). The loan rate would be capped at 8.5%. The White House said that would create uncertainty for families and put them at risk of paying more when market rates go up. President Obama proposes to base student loans on market rates, but would fix the rate for the life of the loan.

Republicans on July 10 filibustered the Senate proposal that would have returned the rate to 3.4%. So the student loan rates will stay at 6.8% for the foreseeable future.

Sen. Elizabeth Warren (D-Mass.) has a much better idea: the government should lend money to university students at the same rate that the Federal Reserve offers the nation’s banks — 0.75%. The federal government should not be making a profit off our college students — as it does under the current rates. The Treasury will make $51 billion in profits off student loans this year, Sen. Warren noted.

More than 38 million Americans are saddled with student loan debt adding up to nearly a trillion dollars. The class of 2013 graduated with an average debt of $35,200 (up from $26,000 in 2012). That accumulation of debt is the result of more than 30 years of Republican efforts to cut the “free ride” for college students.

The federal government took a leading role in developing higher education opportunities when Abraham Lincoln signed the Morrill Act of 1862, which granted federally controlled land to the states for development of “land-grand colleges.” Dwight Eisenhower signed the National Defense Education Act in 1958, which provided funding for education to keep American students ahead of their Soviet rivals, particularly in math and science, during the Cold War. It also provided financial assistance for millions of students attending college through the National Defense Student Loan program. In 1965, the Higher Education Act under Lyndon Johnson expanded National Defense loans (later renamed Perkins loans) and introduced Stafford loans, which were guaranteed and subsidized by the government.

Republican leadership ended in 1981, when President Reagan, who had railed against college students whom he felt had it too easy when he was governor of California, signed the Omnibus Budget Reconciliation Act, which cut funding for Pell Grants and excluded middle-class students from the program, limiting the grants to lower-income families. He also cut direct student loans and restricted eligibility for them. He also phased out Social Security survivors’ education benefits, which provided one-fifth of student aid in 1981.

As governor of California from 1967 to 1975, Reagan ended free tuition at state colleges and universities, arguing that if students had to pay for their education, they’d value it too much to skip classes for protest events. He also annually demanded across-the-board cuts in higher education funding, slashed construction funds for state campuses and declared that the state “should not subsidize intellectual curiosity.”

Texas was proud of higher education opportunities it offered for students of modest means through the 1970s. When Rick Perry attended Texas A&M in 1970, the state paid 85% of the cost of higher education and a student could get a bachelor’s degree with little or no debt. Tuition and fees for the regular workload of 15 hours was $104 per semester for Texas residents. (That was the equivalent of 65 hours working at the minimum wage of $1.60.) Tuition and fees rose to $2,357 a semester (or 458 hours at the $5.15 minimum wage) by 2002. But a student could still pay tuition and fees by working 20 hours a week, not counting room and board.

After Republicans gained control of the Texas Legislature in 2003, with Perry as governor, the Legislature “deregulated” tuition. Since then the Legislature has cut appropriations for the state’s universities to less than 20% of the cost of higher education. In 2012, the average cost for a semester for a state resident was $7,533, an increase of 55% since deregulation, the Dallas Morning News reported. (That’s the equivalent of 1,039 hours at the minimum wage of $7.25.) The estimated cost of undergraduate education at the University of Texas in 2013, including campus housing, is at least $25,704. (The estimated cost for California residents to attend the University of California, including housing, is $31,700.)

States are spending $2,353 less per student on higher education nationwide in the 2013 fiscal year than they did in 2008, amounting to a 28% cut since the recession hit, the Center on Budget and Policy Priorities reported in March. Eleven states have cut funding more than one-third per student, while two states — Arizona and New Hampshire — have cut their higher education spending per student in half. Texas, despite its relatively healthy economy, cut 22.7%.

Public colleges and universities across the country have increased tuition by an average of $1,850, or 27%, since the 2007-08 school year, after adjusting for inflation, to compensate for declining state funding. In two states — Arizona and California — tuition at four-year schools is up more than 70% in that time.

As costs have shifted from the states to students, sharp increases in tuition have accelerated longer-term trends of reducing college affordability. At the same time, many state universities and community colleges have been forced to cut faculty and staff positions, reduce course offerings and reduce support services.

President Obama and the Democratic Congress in 2009 and 2010 expanded funding for Pell Grants and cut fees the government has been paying to private lenders that issue government-backed loans, but after Republicans took control of the House, Budget Chairman Paul Ryan (R-Wis.) proposed further cuts to the Pell Grant program, claiming it costs too much and is “unsustainable.” In 2011, he told a student, “Look, I worked three jobs to pay off my student loans after college. I didn’t get grants, I got loans, and we need to have a system of viable student loans to be able to do this.”

In fact, after the death of his father when he was 16, the skinflint collected Social Security survivors’ benefits, which he put away for college, until age 18. He also worked side jobs in college and during his early years as a Capitol Hill staffer.

In 1950, 5% of American adults had bachelor’s degrees. Today, 31% do and as manufacturing jobs are exported overseas a university education will be increasingly necessary to get into the middle class and stay there. But more than 40% of college freshmen won’t graduate, and high costs are a leading reason.

Most European nations, as well as China, who lagged behind the United States for years in the number of adults with college degrees, recognize the value of higher education and offer free post-secondary education. The College Board in 2010 warned that the growing gap between the US and other countries threaten to undermine economic competitiveness, as the US ranked 12th among 36 developed nations.

State legislatures should step up to restore their share of the cost of higher education and make it affordable to students working no more than 20 hours a week. At the current minimum wage of $7.25 an hour, that means tuition should be no more than $3,625 a semester (or $7,250 a year).

Congress should adopt Sen. Warren’s proposal to offer student loans at cost. It also should restore Pell Grants for middle-class families and/or increase the minimum wage so that students can attend these high-priced state schools with a part-time job.

After World War II a college degree was attainable for Americans who could make the grade; those graduates helped the postwar economy boom and American productivity was the envy of the rest of the world. Since the Reagan era the pursuit of a college degree has become a struggle for low- and middle-income families. It’s time once again to invest in the future. — JMC

From The Progressive Populist, August 1, 2013
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