I call shenanigans.
@HarvestMoon1 the balance “forgiven” after 20 years of reduced loan payments is taxable. No free lunch on that.
I’m waiting to see whether the new DoE withdraws the Title IX Dear Colleague Letter, replaces it with something else, leaves the status quo in place, etc. If the DoE reduces regulation of Title IX enforcement, will that shift the current trajectory at colleges and universities? How quickly? Might there be new regulation that imposes higher burdens on accusers? This prospective Secretary, as I understand it, has focused on K-12 education, so it’s possible we won’t see any attention to this issue, at least for a while.
The uncertainty affects my business planning because students involved in Title IX matters (both accusers and accused) are a significant fraction of my client base, so I have to be ready for abrupt changes in demand in that sector. This is tough to plan for.
Here’s a short article with one Wisconsin academician’s thoughts about potential changes in education: http://www.jsonline.com/story/news/education/2016/11/26/borsuk-table-set-major-school-choice-push/94433486/
I like the fact the government guarantees the loans. If private banks did them and they were not guaranteed by the government, then a large swath of kids would not get loans due to their parents not being able to qualify for a loan.
I’d like to see the OCR moved under Justice and the “threat” to hold federal loans removed. Take it to Congress and push to let the Justice department take over. Justice already has a civil rights division so the OCR is duplication and probably costing enough money to run a small country. I’d like to see the Title IX expansion rolled back but with minor modifications (like the federal loan thread removed) and go through the notice and comment proceedings and I’d like to see Trump give the OCR a six month ultimatum to clear the backlog. The DeVos Foundation has given small amounts of money to FIRE in the past so I imagine she may lean toward FIRE’s positions but who knows.
I would dearly love to see everything not directly related to Title IV federal aid removed from the Title IV Program Participation Agreement. That includes everything related to alcohol and drug prevention, missing persons policies, Clery reporting, fire drills/reporting, Violence Against Women Act, technology usage policies, and all the other non-financial-aid related requirements that are directly tied into the receipt of financial aid. I don’t see it happening, though, because the government knows that if the best way to make sure it all happens is to tie it to the continued receipt of financial aid. And that is why these things will not be separated from Department of Ed oversight.
Currently, the government is the lender of the direct student loans and has to cover any losses from defaults, as well as collecting any profits from the interest rate spread.
Prior to 2010, some government guaranteed student loans were made by private lenders. This effectively privatized the gains, but socialized any losses from defaults.
There are and were also private student loans with no government guarantee, typically requiring a cosigner for undergraduates. Those stories of students or graduates with $100,000+ of student loan debt for undergraduate presumably had mostly private student loans, since government guaranteed student loans are limited to much less than that.
Note also that, since 2005, student loans are not dischargeable in bankruptcy.
There’s large correlation vs causation problems here. If the children of wealthy, highly educated parents do well on standardized tests, is it because
A) those children won the genetic lottery of being gifted or at least smarter than average
B) their parents are more involved(value education more, help kids with their homework, hire private tutors)
C) As a result of A and B, teachers can move the class at a faster pace. or
D) the richest public school systems have smaller class sizes and are able to hire the best teachers (by whatever definition you want to use).
Back in the 60s, 70s, and maybe even the 80s, there were excellent public schools in firmly middle class neighborhoods in which spending on schools was only average.
What happened?
Public school quality began to decline. Parents interested in education and with money (often because they were two-income households) moved to neighborhoods with the best public schools. The quality of the schools in the less affluent neighborhoods declined more. Real estate prices in the good pubic school neighborhoods (maybe already high) as well as their property taxes went up. The difference between good school and not good school neighborhoods, the haves and the have-nots, increased more.
The bidding war for real estate in good school districts and its consequences for the middle class are described in detail by Elizabeth Warren in her book, The Two-Income Trap.
In New York Stat the Teacher’s union has given us a fiscal situation that the taxpayers will not be able to sustain over time. The fiscal pie is going toward salary, healthcare and retirement for teachers and administrators. If we don’t move to a different system our schools will be unaffordable in the future which isn’t that far off. The NYSUT will do nothing to help this problem. The only solution is to continue to raise our very high property taxes.
Parents want the Common Core gone and frankly, so do teachers. The Obama administration tied all federal funds to this so that schools were forced to adopt the CC. States had to spend a tremendous amount of resources on teacher training, student testing and instructional materials for Common Core. It was a shame to see the resources go to CC during already strapped fiscal times.
Given that Elizabeth Warren said that student loans should have an interest rate of 0.75% (same as US treasury rates), it is hard to take her seriously on anything.
How did she come up with such a ridiculous proposal? Is it a blatant attempt of gaining influence at the cost of increased debt? Or worse, is she mentally incapable of understanding the difference between risk-free US government borrowing and the high risk of student borrowers?
So, does more money really create a more learned environment? It seems not to occur to the “need more money” crowd that another major possibility is the families, parents, and neighborhood culture places a high value on academic learning, and thus, the children in high achieving districts are brought up with this goal instilled, regardless of the money spent.
For example, how come the consortium of homeschoolers outperform the public schools on a rather skimpy budget of less than $1000/yr per family - their standard tests scores are higher; their college admit rate is much higher; and their college graduation rate matches the best out there. The top homeschoolers even match the best super magnet public schools step-for-step and spend a tiny fraction of the cost to get this result.
Now, how can homeschoolers do that is without regulation, the heavy hand of government, and teachers union that protect bad teachers? It seems to have not dawned on the “need more money” crowd that homeschoolers are successful because they avoid all the aforementioned and begin with the goal set by parents, not teachers, that success in school matters.
Catholic schools and other religious school have similar outcomes to homeschoolers and outperform public schools at a fraction of the cost, as well.
All the money in the world will not change a failing public school or school system, if the culture is based upon a touchy-feely, social engineering pedagogy that makes learning hard academic skills a secondary objective.
Hey, cannot have the slow students separated out because it makes them feel bad, even though this practice literally ■■■■■■■ the growth and limits the potential of other students. Now, the multiple lives are less than what they could be, instead of just a couple. This is but one example of the nonsense parents have to deal with. Even schools think they can decide for parents what is good homemade lunch. What a joke that is. Stick to math, reading, writing etc.
In a nutshell, culture matters; money only amplifies whatever culture already exists. If the culture sucks, it will just suck more spectacularly with more money. Therefore, it should be no surprise that the highest spending districts, such as Washington DC, Baltimore, and Chicago still cannot get their act straight, as more money has been pumped in over the last decade.
“The interest rates are only considered low compared to the rates that should be charged to cover the high default rates. However, in comparison to actual market rates other loans (non-education), the interest rates are actually rather high in real terms.”
You keep citing “actual market rates” without saying which loans you are talking about. Without repeating what I wrote about interest rates, you need to compare apples to apples. Comparing student loan rates to a conventional mortgage, for example, is bogus, because mortgages are secured, and if you are talking a mortgage with 20% down, the bank is insured against default because conventional mortgages require full vetting, and you only get that rate if you have good credit history.
For the fun of it, I checked out a site with personal unsecured loan rates, with a good fico score (not top tier, second tier), for 50k (a not unheard of amount for student loans).
https://www.nerdwallet.com/personal-loans?annualIncomeFilter=50000&creditScoreFilter=GOOD&loanAmountFilter=50000&loanUseFilter=CONSOLIDATE_DEBT&page=1&sort_key=apr&stateFilter=NJ
It shows rates in the realm of student loans right now. Student loans are unsecured, so this is a direct comparison. The other factor with loans is the higher the amount, the higher the rate with unsecured loans, for obvious reasons (risk, lot more likely to lose on a 50k long term loan then 5k). Another thing with government issued loans is that unlike banks, they are issuing loans to people with a variety of credit risk, if someone’s fico score was in the low 600’s they would be paying a lot more than 6%. I suspect the government rate is much like car insurance and health insurance, where that 6% takes into account those who default. If in fact 40% of people default on student loans, unless the government does what private banks will do, and refuse those with poor credit (when student loans were insured by the government, banks still refused people), that rate also likely represents the cost of defaults built in.
This is not rocket science, it is how loans work. The idea of the government "fixing’ interest rates is ludicrous, unless the government issues loans well below market rates, it doesn’t have that power, interest rates are based on market forces, pure and simple, that deal with risk. High inflation? Loans go through the roof, because the money they are being paid back with is devalued (high inflation helps home borrowers who got loans in cheap loan periods). You have a high risk borrower? Unless there is something to ameliorate the risk (government insurance, collateral) , going to have a high rate. Auto loans have a lower rate than unsecured loans because the car is collateral (though one that depreciates, so not so low), house mortgages have the house which generally appreciates or stays steady, instrument loans on something like violins are low because they don’t depreciate.
If you are going to compare the rate on government student loans, compare it to a comparable private loan of similar size and type, not to things like home mortgages or auto loans at a dealer, which a)generally represent the rate for top tier borrowers and b)are often subsidized by the manufacturer to get rid of unsold stock.
One of the reasons government student loans exist the way they do is they are designed to allow a wider range of people to get student loans, which likely includes things like young people who don’t have credit histories, or kids from less well off backgrounds who might have poorer credit scores. The idea of the government as a business making money is one of the biggest political fantasies, governments and businesses have different stakeholders with different reasons and ways of operating, and trying to run a government like a business time and again has shown the weakness of that stance.
And fully half of those students do not graduate, and they are stuck for life with debt that they cannot pay, which virtually stops for decades any wealth building they can do. And you think that is a good thing? OK, then.
My take is there are many cheap options to start college if one wants to go and parents do not have the money. However, it is a travesty to knowingly saddle 50% of loan takers with life-altering and life-retarding debt before they even start living on their own and get their first pay check. I find that just plain wrong.
According to an ariticle I read, public schools lost many well qualified female teachers when opportunities for women opened up for better pay and prestige. If that’s true, what we need to do is hire well qualified teachers with higher pay rather than messing around curriculum. Mediocre teachers can only deliver mediocre education with the best curriculum while good teachers can deliver high quailty even with a lousy curriculum. More money is poured into the top, education specialist/ consultants, not to foot soldiers of education.
But before doing that, we need the ability to easily fire bad teachers. Without that, additional pay will also enrich the bad teachers out there.
@roethlisburger :
Yep, what you write is true, the kids in those districts are generally from well of parents, who are educated, and of course that gives them an advantage, it is a lot easier to turn out a ‘top product’ from kids from that kind of background then it does from, for example, a poor inner city neighborhood or a rural area like Appalachia.
However, that is only part of the picture, if you go over to close towns, that spend less on their schools, with kids who are from relatively educated families, you see different levels. Why? Because the well off towns have things like intensive SAT prep offered, they have a lot of AP and honors class offerings, they have fancy computer labs and a slew of clubs and athletic programs other schools can’t offer, and that makes a difference, and like I said comparing these to ‘merely’ middle and upper middle income districts surrounding them tells a story, too. Not to mention these districts pay better, and often get, for example, people with PHd’s teaching science classes and the like.
Conversely, if you look at areas where they are low tax and spend relatively little on the schools, even middle class kids suffer, I have known a number of teachers over the years and when they had students who transferred in from places that spent relatively little on their schools, the kids were generally way behind comparable kids in their schools, there are districts not all that far from where i live where they refuse to spend money on the schools the way other districts do, and it shows,lack of programs, and their kids (and I am not talking inner city kids, kids with only a mom, etc, talking solidly middle class) don’t do as well.
Again, money alone doesn’t solve issues, districts like Newark and Patterson and Camden and the like have so many problems (and also are full of people looking to make money off any funding sent to the city), that money alone won’t solve it, but I know of districts in my own area that if they had better funding, would likely see a measurable improvement in how their kids do.
Personally, I am one of those oddballs who, like most industrialized countries, sees education as a national prerogative, as intrinsically important as national defense (think about this one, this election stemmed around people put out of work as unskilled or semi skilled jobs were lost, and how education plays into that), in a time when the US is in global competition economically allowing local whims to dictate education levels doesn’t make sense (and it is not surprising that the countries that routinely are considered ‘better’ than the US all have education systems that are run on a national level to some or full extent).Among other things, funding for public schools hasn’t gotten out of the 19th century where property taxes are the prime means of paying for them, which absolutely makes no sense…
@hebegebe, I don’t necessarily agree with Elizabeth Warren’s proposal to dramatically lower student loan interest rates, but I don’t see what’s so “ridiculous” about it on its face. Could you explain that a bit?
It would be interesting to see any peer reviewed research on the topic. The Zillow median home price for Scarsdale(one of your exemplars) is 1.476 million. The median home price in a rural area, such as Harlan county, is 50k. Comparing groups from different economic stratospheres isn’t useful. Anyone that can afford a $1.5 million dollar house can afford to pay a private tutor for SAT prep, if that’s something they think is useful. I do agree that richer schools can offer some of the less common ECs(Lacrosse), which helps in the arms race of college admissions.