The Old College Try: The Student Loan Bill Part II

Mortar BoardSenate Majority Leader Harry Reid, D-Nev… said that the mounting student loan burden – more than $1 trillion across the economy – prevents college graduates from being able to otherwise move on with their lives by getting married or purchasing homes. [CBS]

And so, the Senate GOP filibustered the Student Loan Bill. Let’s delve a bit deeper. There were two items from Republicans on the topic in the article quoted above.  (1) Senator Mitch McConnell said the bill was a campaign publicity stunt.   This implies two things. First, that Senator Elizabeth Warren (D-MA) wasn’t really serious about her piece of legislation.  Somehow, this doesn’t sound like a legislator who wasn’t serious about her bill: “Mitch McConnell is there for millionaires and billionaires,” Warren said. “He is not there for people who are working hard playing by the rules and trying to build a future for themselves.” [HuffPo] Nor does the fact that Senator Warren is about to take her umbrage on the campaign trail for McConnell’s opponent lead a person to believe she didn’t want that bill to at least get a vote.

Secondly, the process of getting legislators of all stripes on the record is as time honored as the republic.  Members of Congress were vilified for voting for, and against, the Alien and Sedition Acts of 1798.   The charge that the bill was merely a publicity stunt allows the opponent to denigrate the value of the measure without addressing any of its provisions or the problem it attempted to address.

(2)  There was the side-step ploy attempted by Senator Lamar Alexander (R-TN):

“This is not a serious proposal. It’s not going to help people. College graduates don’t need a dollar a day tax subsidy to pay off their loan. They need a job…and they’re experiencing right now the worst situation for finding a job that they’ve seen in a long, long time,” Alexander said.” [CBS]

This isn’t a serious rebuttal either.  His response ignores the fact that the students aren’t the ones being “subsidized” — it’s the lenders who agree to issue student loans because the federal government will guarantee repayment.  The subsidy, as the former Education Secretary in the George H.W. Bush administration should know, goes to the lenders not the youngsters.   Yes, we do need some legislation which would improve the job market — but changing the subject still doesn’t respond to the needs the bill sought to mitigate.

There are some options, ranging from probable to problematic, but options nonetheless.

I. Skip the “pay for” requirement.  It’s not like this hasn’t been done. For example, the bill to allow veterans to secure private health services if the VA cannot schedule their care on a timely basis passed the Senate — without a pay for element attached. [USAT] In fact, H.R. 3230 (Sanders/McCain) passed 93-3. Only Senators Corker (R-TN), Johnson (R-WI), and Sessions (R-AL) voted against it. [roll call 187]  Within the space of 24 hours one group (students) was told that a pay-for was absolutely necessary, while another (veterans) was told it wasn’t.  So, what about students who are veterans?

II. If the older Republican argument is resurrected that the more the federal government subsidizes college costs the higher the colleges and universities raise their tuition and fees, then how can higher education be made more affordable without necessarily increasing subsidies for the lenders?

As noted yesterday, one of the major problems for public institutions is the dis-investment in higher education in the last quarter of a century.   One approach to this might be to apply an Effort Test.  If a state doesn’t support its institutions of higher education, why should the federal government necessarily pick up all the slack?

The last Nevada budget, for example, included $750 million for higher education, including seven institutions.  [Bloomberg] Applying the plastic brains, we’ve agreed to spend some 11.36% of the total state budget on higher education.  There are numerous options for implementing an Effort Test. There’s the ‘deadline’ approach in which if state funding totals don’t meet a particular standard the subsidization of loans offered by lenders to its students isn’t guaranteed.  In the Nevada example, if the deadline were set to 12%, would that have met objections that the state wasn’t adequately funding some northern institutions and given the federal government more assurance that the state was serious about appropriate adequate funds for its institutions of higher education?

There are all manner of ways in which ‘deadlines’ can be approached, and these can range from solid to sliding scale.  It would take some thinking outside the box, but we’re boxed in already.

We might also think in terms of differentiation.  The College Board reports that the average level of student indebtedness for a four year degree at a public institution is about $26,500.    The average for Nevada is approximately $20,568 with about 41% of students using student loans. [] (Debt averages for UNLV = $21,126, and for UNR = $19,500) These figures put Nevada in the “low” debt category in comparison with other states. [ pdf]

High debt public colleges and universities range from indebtedness levels of $33,650 to $41,650. The Project on Student Debt provides some comparisons with ‘high debt’ private non-profit schools: “The 20 high-debt private nonprofit colleges listed here have average debt ranging from $41,500 to $49,450. The tuition and fees at these colleges range from $12,350 to $40,450, with six charging less than the national average for this sector.” [ pdf]

As painful as it might be, it is possible to suggest that we differentiate between public institutions and non-profit private ones.  We are, after all, speaking of back-stopping student loans with tax dollars, and if so, then why are we guaranteeing the loans to students at private non-profit institutions at the same level as the taxpayer funded public ones?   We also know that more high debt  public institutions accept students from low income areas, contrasting with high debt non-profit institutions at which this acceptance rate is lower.  [ pdf]

When we get to the graduate degree level the numbers become more complex.  For example, graduate degrees in the health sciences represent about 5% of the total graduate degrees conferred by educational institutions in this country, and 87% of theses graduates owe student loan debts. Those graduates in the 50th percentile in terms of indebtedness owe $161,772.  [NAF pdf] Now we’re between a rock and a hard place in terms of differentiation — we need physicians, dentists, and pharmacists.  If we suggest that we will back stop student loans at the bachelor’s degree level but offer less to lenders to make graduate school loans, we’re treading on our own acknowledged needs.

Law degrees are expensive as well, the 50th percentile rate being $128, 125 in debt.  But try telling a municipal or local judicial department that we don’t need more lawyers.  Public defenders offices are chronically understaffed, witness the Missouri example, and often seek to refuse cases because there simply isn’t anyone with the time available to do a decent job.  Local prosecutors have to balance the demands on their staff with restrictions intrinsic in their budgets.

When discussing graduate level student loans we need to factor in such things as the Public Service Loan Forgiveness Program.  If a person’s employment includes emergency management, military service, public safety, or law enforcement services; public health services; public education or public library services; school library and other school-based services; public interest law services; early childhood education; public service for individuals with disabilities and the elderly, then he or she might qualify for loan ‘forgiveness’ after making 120 ‘regular payments.’

There’s a balancing act in this differentiation realm as well — Do we want to reduce loan guarantees at the graduate level, or do we want to continue to offer the loans at the going educational cost rate and then ‘forgive’ them if the person is employed in an area of acknowledged national need?  This question addresses the issues regarding the medical, legal, and educational professions, but what about those who want an MBA? Or an MS in computer technology?

One of the obvious problems with differentiating at the graduate degree level among all the possible graduate level programs offered by educational institutions is that no one has a crystal ball.  How many graduates in computer sciences do we really need? How many in the bio-technology field?  What if we find out that members of the U.S. military who have MBAs make better procurement officers?

Of all the differentiation proposals made during the student loan indebtedness debate, the issues surrounding guaranteeing graduate school loans is potentially the most problematic.

We do know what won’t solve the issues — anti-intellectual biases spewed forth about pointy-headed academics and ivory towers isn’t going to get us more archivists, public defenders, assistant district attorneys, computer system engineers, civil engineers, dentists, doctors, special education teachers, registered nurses, geneticists, and veterinarians.

Bemoaning the level of pay necessary to hire and retain professors and research specialists; and, demanding to know ‘just how much’ these ‘parasites on the body politic’ are earning isn’t going to help either.  The hard sad fact of life is that grandma’ was right: You get what you pay for.   The education and training of the next generation of public defenders, civil engineers, special education teachers, and all those other specialties we need, doesn’t come cheaply and never has.  Those harboring the delusion that they can get “something for nothing” — that we can bellow we’re Taxed Enough Already and still get an emergency dental appointment really is hallucinatory.

Recommended Reading: Student Debt and the Class of 2012, Project on Student Debt, December 2013. (pdf)  The Graduate Student Debt Review, Policy Brief, New America Educational Policy Program, 2014 (pdf). “How much student load debt is from grad students?” US News World Report, March 25, 2014.

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