Tag: Student Loans

Student Debt Cancellation Is Constitutionally Infirm

 

In one of the most audacious acts of his presidency, President Biden recently issued a fact sheet offering “Student Loan Relief for Borrowers Who Need It Most.” To Biden, that group consists of all individuals who have received student loans but have not yet paid them off, with an exception for loan payments made during the pandemic. The president wants to give this group “breathing room as they prepare to start repaying loans after the economic crisis brought on by the pandemic.” The terms of the proposed loan forgiveness program are clear: the Department of Education will allow for $20,000 in debt relief to Pell Grant recipients—undergraduates with exceptional financial needs—and $10,000 for other students, so long as their individual income is under $125,000 per year (or $250,000 for a married couple). The plan also makes a number of technical adjustments that cut repayment rates for future loans.

The equity of this program has been under fierce attack for forcing the impending financial shortfall on the shoulders of individuals who have already repaid their loans, blue-collar workers who never took out loans, and the general taxpayer who already faces heavy rates. And the burden is no small thing: the Wharton financial model projects that the cancellation program will cost over $500 billion, and could jump to over a trillion dollars depending on future regulations and practices on both existing and new loans.

One might expect that a program of this magnitude would receive extensive congressional discussion followed by legislative approval. One would be disappointed. Here, the president is proceeding by executive order, which he claims is authorized under the HEROES Act of 2003 (an acronym for The Higher Education Relief Opportunities for Students Act). Biden relied on an extensive memo by Christopher Schroeder, the head of the Office of Legal Counsel, an office within the Department of Justice that provides legal advice to the president and all executive branch agencies. The memo does not hold water. The key provision of the HEROES Act on which it relies reads:

Credentialist Privilege and Snobbery, and Student Loan ‘Forgiveness’

 

In late 2020, I wrote a post titled Living in the Hate of the Common People, and in early 2021, I wrote a sequel.  I think these posts, and the general pattern they describe, are very relevant to the current issues about student loans and the overall topic of education funding.  In summary:

Someone at a social media site, who I will not dignify with a link, wrote, “I think we need to find a way to stop the working class from voting altogether.”  An example of this attitude appeared on MSNBC back in August 2021, with anchor Chris Hayes and Washington Post writer Dave Weigel avidly agreeing about the characteristics of Trump supporters (of whom they don’t approve) … men without a college degree who have enough income to buy a boat (Hayes qualifies it as white men). Personally, I tend to admire people who have managed to do ok or very well for themselves without the benefit of a college credential. (And anyone believing that a college degree necessarily implies that an individual has acquired a broad base of knowledge and thinking skills hasn’t been paying much attention of late.)

The Stupid. It Hurts.

 

As a longtime political operative, I love the “art of the comeback” or the retort. They often occur during televised political debates. When I was coaching congressional candidates for debates, we often proposed retorts to accusations or statements our opponents were likely to raise. Conversely, we warned of ones they might use.

One of the best retorts in political history occurred in 1988 during the vice presidential debate between two US Senators – Lloyd Bentsen (D-TX) and Dan Quayle (R-IN). Chris Lamb tells the story:

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I invest little time in the toxic swamp known as Twitter, but I follow a few favorite contributors via an anonymous account. One such account is @IowaHawkBlog, the handle of David Burge. He profiles himself as “Karma’s janitor.” The snark is strong with Mr. Burge. He is one of the most clever wordsmiths on Twitter, […]

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Join Hubwonk host Joe Selvaggi as he talks with Chris Abkarians and Mikhil Argawal, co-founders of LeverEdge, about how their new student loan platform uses loan aggregation and competition to secure better rates for student loans.

Guests:
Chris Abkarians is a co-founder of LeverEdge, the first collective bargaining group for student loans. He is a graduate of  Harvard Business School and received degrees in Public Policy and Political Science from Duke University.

As Massachusetts senator and presidential candidate Elizabeth Warren tries to bribe college students into voting for her with promises of student loan debt forgiveness and free college, the Young Americans draw from their own experiences to discuss Warren’s plan, the student loan debt crisis, and what, if anything, we can do about it.

This week on Banter, AEI resident fellow Jason Delisle joined the show to discuss the role of inspectors general in the Department of Education and their influence on policy debates. He also discussed his new report on graduate schools with the lowest rates of student loan repayment. Delisle’s work at AEI focuses on higher education financing and student loan programs. You can read his piece on the inspectors general and the graduate schools report at the links below.

Learn More:

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Redesigning State College: Lessons from the Sharing Economy The state of Texas is in the college business. Texas has chartered over three dozen colleges and universities. Those colleges have been granted land and are supported annually through the state budget, and the Permanent University Fund, a public endowment which supports colleges in the University of Texas […]

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What Trump’s First 100 Days Might Mean for Education Policy

 

School ChoicePresident-Elect Donald Trump has released his plans for his first 100 days in office. After outlining proposals for term limits, a trade war, and mass deportations, the plan includes the following paragraph on education policy:

School Choice And Education Opportunity Act. Redirects education dollars to give parents the right to send their kid to the public, private, charter, magnet, religious or home school of their choice. Ends common core, brings education supervision to local communities. It expands vocational and technical education, and make 2 and 4-year college more affordable.

The details are far from clear, but it appears that his education policy will focus on three areas:

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Education Dept: Students Can Sue for Loan Forgiveness. I just returned from a trip touring a state university with my oldest son. After doing some simple math, before potential scholarships my son (and I) are looking at a couple hundred large. Two. Hundred. Thousand. Dollars. Nothing like roaming a college campus to make one feel old. […]

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The Reality Behind the Student Debt “Crisis”

 

072116WHCEALost amid all the political news this week is a new White House report on student debt in higher education. One thing I was curious to see was what conclusions it drew about the macroeconomic impact of high debt levels. Politicians, especially presidential candidates, sure seem to think it’s a pretty big problem. From the report comes a different view:

The rise in student loan debt has created challenges for some borrowers with lower earnings, but has not been a major factor in the macroeconomy.

— Despite its steady rise over the past decade, aggregate student loan debt remains small relative to aggregate income. In 2015, total student loan debt was 9 percent of aggregate income, up from 3 percent in 2003. By itself this is considerably smaller than the rise in mortgage debt prior to the crisis and it has also been accompanied by a reduction in other forms of consumer debt.

Time to Rethink College (Part 3): Do-It-Yourself Gap Year

 

shutterstock_33959002In parts one and two, I warned students and parents about wasting time and money on a bad college strategy, and noted that a great option is to allow a gap year between high school and university. But how does a gap year work? There are two aspects: the work itself and lining up college for later.

The Work “Curriculum” I hadn’t expected my daughter to land as wonderful a job as she did, so let me explain how the gap year approach would have worked even if she had only landed a job sweeping floors. She had an advantage over kids going to college: they vacated the job market, so she had little competition in the fall for jobs typically given to them. So, the idea was to go after intern positions that were vacated at the end of summer. Lots of companies have college interns during the summer. Employers like the low pay and limited commitment. So when she interviewed, she announced three things:

  1. That she was taking a gap year to get job experience to verify her career choice and was looking for an intern experience.
  2. That she was already accepted at a college and would only be available only until fall the following year.
  3. That she was willing to take a part-time position, short-term position, or full-time position (anything).

That immediately solicited respect in the person she interviewed with. Also, with little experience to speak of, she would never get in the door by sending out résumés. So she went in-person from target company to company with the following approach. Walk in with no appointment, ask the receptionist if she could leave her résumé. If so, ask a few questions about the company, then say “I happen to have my portfolio. Since I am here, do you think someone might be able to see me now?” She got interviews 20 percent of the time that way. That approach got her a wonderful job at a firm that probably had a stack of a thousand résumés in waiting.

Time to Rethink College (Part 2): Wasted Money, Wasted Time

 

As I mentioned yesterday, two of my kids are already through college, but I’m employing a new strategy with my third. If your children plan to jump straight from high school into college without work experience, let me share the perspective of a parent who has been there, done that, and paid the bills. I don’t want you to waste your money or your kids to waste their time.

27PercentI surveyed some of my peers (50+ age) and only half of them were working in a job related to the degree they got. But back in the ’70s, only a quarter of my cohort went to college, which means this smaller group would have been more careful in degree selection and more likely to get it right. It is worse now. A study by the New York Federal Reserve Bank found only 27 percent worked in a job even related to their degree. And, by the way, the study found almost no one with a History or Liberal Arts degree who actually work in their degreed fields.

Time to Rethink College (Part 1): Don’t Be a Lemming

 

LemmingsStudent2If you have kids and plan for them to step from high school straight into college without any work experience, take a seat: I’m about to disabuse you of that idea. I’ve got three kids, two already through college, so I have done this before. We finally figured it out with the last kid. Allow me to give you the new strategy, because we are bucking the trend.

The Problem

From all sides — her peers, her high school, and the larger culture — there was tremendous pressure on my daughter to choose a career and go straight to college. The private high school my daughter just graduated from boasts a college admission rate of 98 percent! That admission rate is part of the school’s marketing, and it wants that rate to be as high as possible.

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I went to my tax preparer today. These folks have their finger on the pulse of the government in a very different way from my everyday experience. Here are some highlights: Our refund went down this year because we are prospering more and planning better. I commented that I looked forward to the day when […]

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Recovery Summer: “It’s Happening Agonizingly Slowly”

 

The Los Angeles Times reports that “The labor force participation rate remained at 62.8% in May, the lowest level since 1978 and a sign that many people have given up looking for work.” Total U.S. employment six years after the Great Recession is 6.9 million jobs short of where we should be, accounting for population growth. 

“Things are improving, but it’s happening agonizingly slowly,” said Heidi Shierholz, a labor market economist at the Economic Policy Institute.