Student Loan Debt is Part of a Vicious Cycle

 

Here’s a scary number—1,000,000,000,000. That’s the estimated dollar value of current student loan debt in America, an average of more than $25,000 per student.

Here’s another scary number—53.6. That’s the percentage of recent college graduates that are either unemployed or underemployed, according to the Associated Press, meaning that they are likely struggling to repay those loans.

These numbers are, in part, both the cause and effect of the slow recovery from the recent economic recession. And, unless something drastic is done, these numbers may get even scarier.

Experts, including Nobel Prize-winning economist Paul Krugman, have argued that the easiest way out of a recession is to put money in the hands of people who will spend it, therefore increasing demand for products, which would then create jobs, giving more money to consumers and increasing tax revenue. The current plague of student loan debt is the exact opposite of this idea. Instead of creating a new wave of consumers eager to buy cars and homes, raise families and spend money, the current loan crisis has borne a generation of debt slaves who are not able to spend on the things that would actually stimulate the economy.

According to the Pew Research Center, economic difficulties including loan debt have caused 24 percent of young adults to move back in with their parents to save money. More than 20 percent have postponed either getting married or having a child. And 49 percent have taken a low-paying job outside their field of study just to pay their bills. But, most troubling are the 35 percent who have gone back to school hoping to increase their job opportunities and wait out the recession, while accumulating additional debt they will then struggle to repay.

Krugman suggests that the national deficit is not nearly as urgent a problem as individual debt. He encourages increases in government spending to create jobs, including rehiring many of the public employees that were laid off due to spending cuts. However, most legislators in Washington refuse to approve any additional government spending, and instead insist that cuts are the solution to the deficit problem. These cuts have led to increased tuition rates and decreases in financial aid, which have caused the increased necessity for student loans.

There is light on the horizon, however. President Obama has proposed an Income-Based Repayment plan that would tie payment rates to income, with no one paying more than 10 percent of their monthly discretionary income. He also plans to reject a potential increase that would double the interest rate on student loans from 3.2 to 6.4 percent. The interest freeze alone would save the average student $1,000 per year. A plan from Rep. Hanson Clarke (D-MI) would go even further, forgiving all remaining debt for anyone who has made 10 years of payments.

These are not perfect solutions, as lenders would take a big hit from loans that were not totally repaid. But, both Obama and Clarke believe that the benefits of freeing graduates from the burden of excessive debt would outweigh any negative effects. At the very least, it would make the future for college graduates a lot less scary.

 

Students Suffer When Budgets are Cut

Education budget cuts have become a national crisis. The immediate results of these cuts are seen in tuition hikes and teacher lay-offs. However, the long-term effects are even more troubling.

Lack of funding has handicapped educators at all levels, as early as pre-school. The Head Start program, which provides services to poverty-stricken children, has already suffered. Research from the National Education Association shows that students enrolled in pre-kindergarten programs like Head Start perform better in school and are more likely to attend college. Additionally, Nobel Prize-winning economist James Heckman has found that each dollar invested in the Head Start program has a return of $7 to $9 as the enrolled students graduate from school and enter the workforce. Yet, the NEA reports that only 30 percent of eligible children are able to participate in the program due to insufficient funding. Despite the demonstrated success of the program, Head Start is on the chopping block again. Rep. Paul Ryan (R-WI), chairman of the House Budget Committee, proposed cutting 200,000 spots from the program to provide additional funds for defense spending.

Decreases in education funding impact college students, as well. Tuition at all California state universities and community colleges has been raised, but the increased fees do not offset the shortages caused by additional funding cuts. Some schools have had to find alternate money saving measures. Valley College, for example, has had to cancel most of its summer classes. And, CSU recently eliminated grants for 20,000 graduate students, encouraging them to take out interest-heavy loans in order to pay their tuition.

Funding cuts also hinder student performance. An Organization for Economic Cooperation and Development study shows a direct correlation between the amount spent per student and test scores. Students nationwide were tested in math and reading comprehension in fourth grade, and again in eighth grade. On average, state test scores increased by one percent for each additional thousand dollars spent per student.

Interestingly, there was little correlation between test scores and teacher salaries. Schools that hire additional teachers, enabling each student to receive more personal attention, scored better on tests than those that simply raised salaries for their existing teachers.

Instead of hiring teachers, however, many school districts are laying teachers off as a way to save money. Many California teachers received “March 15” letters, indicating that they would not be guaranteed a job for the next school year. In the Los Angeles Unified School District alone, more than 11,700 letters were issued. While some of these teachers will be fortunate enough to still be employed in the fall, many will not. Statewide, more than 32,000 teachers have been laid off since 2007, according to a report from the state legislative analyst’s office.

Despite the obvious damage done by reducing education funding, the cuts continue. It is clear that there is a budget crisis, and it is just as clear that this is directly impacting students. As long as education is deprived of the funds it needs, students will suffer.

Misplaced Priorities

American education is suffering. Budgets are being cut and schools are first on the chopping block. Funds that should be spent on education are spent on wars or prisons, and American students are paying the price.

Educating people costs money, and this country simply doesn’t have enough of it, or at least not enough dedicated to education. This is an important distinction. America is coming out of a recession and has an extraordinary amount of debt, but there is still plenty of money to spend. The problem is how the government is choosing to spend it.

President Barack Obama’s proposed budget details total expenditures of more than $3.8 trillion. Of that, only $71.9 billion is intended for education, 1.8 percent of the total. For the sake of comparison, $672.9 billion, or 17.7 percent, is proposed for defense spending. Of course, national defense is important, but it certainly isn’t nearly ten times as important as education. America would be better served by spending less on killing people overseas and more on educating people here at home.

This skewing of priorities is also present on a state level. California has budgeted $10.7 billion for prisons and $39.2 billion for the state’s K-12 schools. These numbers are shocking when it is considered that there are approximately 155,000 prisoners in California and more than 6.3 million students. This translates to annual expenditures of about $69,000 per prisoner and only $6,200 per student.

A study by the National Bureau of Economic Research shows that students who drop out of school are four times as likely to be incarcerated at some point. Increasing education funding to encourage students to complete high school can dramatically cut the need for incarceration funding. The study conservatively estimates $2,100 in savings per additional graduate. Increasing the national graduation rate by just one percent would result in savings of at least $1.4 billion. By spending a little more on education now, less will be needed for prisons later. Additionally, graduates have higher employment rates and salaries, meaning that tax revenues would increase, providing further economic benefit.

Gov. Jerry Brown has offered a potential way to supplement the state education budget, but it is mostly smoke and mirrors. He has proposed a temporary .5 percent sales tax increase and a raised income tax  on people making more than $250,000 annually. This is supported by more than 72 percent of people if the money is used for education, according to the Public Policy Institute of California. This is where Brown gets sneaky. The California Legislative Analyst’s Office estimates $6.9 billion in additional revenue if the proposal is approved. The budget assumes that the tax increase will pass, yet grants less than $5.3 billion in additional education spending, meaning $1.6 billion has already been cut and diverted towards less popular purposes, including prisons. And, if the proposal doesn’t pass, an additional $4.8 billion in cuts will be triggered.

Still, this willingness to raise taxes is encouraging; especially since tax cuts for the rich are a large contributor to the national deficit, and efforts to reduce this debt are the primary justification for spending cuts. Citizens for Tax Justice estimates that these tax cuts took $2.5 trillion out of the federal budget over the last decade. This money could have eliminated the need for education cuts, but was instead used to pad pockets that were already overflowing.

America has chosen to spend its money blowing people up or locking them up, instead of raising them up through education. By prioritizing might over mind, and letting greed trump reason, this country is depriving itself of the very thing that made it great.

Broke Schools, Stupid Kids

President Bush signing the No Child Left Behin...

The Beginning of the End for American Education

Two separate stories caught my eye today, both helping to illustrate what’s wrong with the education system in America, and what this system has done to the students that suffer through it.  It can no longer be denied that our schools are broken, and that they can no longer properly educate the children of this country.  We are falling behind the rest of the world, and if something isn’t done, we risk falling even further.

The first article, by Eric Hanushek and Paul Peterson, appearing in Newsweek, shows just how far behind the rest of the world we’ve already fallen.  The American ego leads us to believe that we are world leaders, that we breed the best and the brightest.  But, the data shows that simply is not the case.  Where we may have once been atop the heap in terms of education our youth, that is no longer true.  Only thirty-two percent of our students show proficiency in math, placing us 32nd out of the 65 nations tested.  The numbers are even worse among minorities (who tend to attend school in lower income areas), which shows a correlation between the amount spent on education and the results of that education.  But, even among white students, proficiency lags far behind many parts of the world.

Our schools have set minimum proficiency standards as part of the No Child Left Behind initiative.  But, these standards have been set so low that even those who meet the minimums can’t compete with students from most other nations.  It has become quite clear that we need to refocus our attention on education, but Republicans would rather make excuses than make improvements.  They refuse to acknowledge that this is a situation that will soon spiral out of control.  This generation of students will spawn another generation that will be held to even lower standards, and they will be even further behind their competition across the globe.

Republicans claim to have a solution to this impending crisis, but their so-called solution will likely just increase the speed of our decline.  Andy Kroll writes in Mother Jones about a proposal by a Michigan State Senator to privatize the public school system.  Phil Pavlov (chair of the State Senate’s Education Committee), citing Michigan’s budget deficit, suggests that public schools should begin hiring teachers from private companies.  This would absolve school districts from paying compensation packages to unionized teachers.  In this scenario, teachers would not be hired based on competence, but rather by their willingness to work for a less pay and no benefits.  It is easy to see that this is a disservice to the students that are supposed to receiving an education, as the government makes it clear that this education is not a priority.

But, education should be a priority.  It should be our top priority.  But, Republicans have shown that they are not interested unless there is a way to make a profit off of it.  But, as always, they are looking at the short-term and ignoring the bigger picture.  Studies suggest that America’s GDP growth could be increased by around one percent.  That may not seem like much, but that would be up to fifty percent faster than current projections.  Over the next 80 years, that translates to potential gains of $75 trillion.  Admittedly, this is not money that will be seen immediately, but it is a figure that is too large to disregard.  A bit of spending now could lead to a windfall down the road.

So, it seems obvious that educating our children is good for them and, in turn, good for the country.  Yet Republicans continue to float ridiculous ideas like getting rid of the Department of Education.  Despite increased class sizes, bankrupt schools, unqualified teachers, and falling test scores, they call for cuts and more cuts, when what we need is to spend.  But, don’t call it spending.  Call it an investment, an investment with great potential returns.