Paul Giorgio: Elizabeth Warren is Right on Student Loans
Wednesday, April 16, 2014
With most private institutions now hovering at about $50,000 per year and public high education costing about $15,000 a year, we are pricing an entire generation out of college. The alternative to pricing them out of the market is that we are saddling them with enormous debt. This is just wrong and immoral.
We decry our falling education levels, but do nothing to make college affordable. In Europe, college is free. In America it is big business, with College presidents’ salaries now competing with Fortune 500 CEOs. We are saddling the next generation with astronomical debt, even before they get into the workforce. How does an undergraduate pay off a $200,000 debt for a four year education? How does a young doctor pay of that amount plus medical school? The sad fact is that they can’t.
Government and student loans
Warren has been the champion on this issue. Prior to her election, the government had privatized the student loan business and graduates where expected to pay off their loans at 8% or higher. In fact, it literally took an Act of Congress to get this situation under control. According to the Consumer Financial Protection Bureau, college graduates in this country owe a total of $1.2 Trillion, with the average debt in excess of $29,000.
Last year the government took back the college loan business from the private sector and has lowered the interest rate to 3.8%, a substantial savings, but not low enough, since according to Warren’s argument, the US Government is turning a profit on these loans.
The U.S. Department of Education is forecast to generate $127 billion in profit over the next decade from lending to college students and their families, according to the Congressional Budget Office.
I don’t want to totally blame the government for the mess, since they do provide money in the form of Pell Grants and other assistance for outright student aid that does not have to be paid back.
You can’t have a prosperous economy, if those who should be spending money on things like food, clothing entertainment and housing can’t afford to because they are straight jacketed by debt from a college education. Most of us can agree that a college education is a way out of poverty, since people with a college education make more money in the course of their lifetime than people with only a high school diploma.
What can be done?
We need to first get the cost of a college education under control. Today colleges compete for market share just like McDonald’s, Pepsi or Dunkin Donuts do. They do it by providing students with big expensive sports complexes, beautiful state of the art gyms, great food and nice dorms. That’s how they get students to attend. Colleges also build expensive research facilities. Colleges today are a lot like airlines, they have to sell every seat to make a profit.
We need to cap college growth, so that the cost of an education will stabilize. It almost reminds me of the arms race during the cold war. We cannot spend our way to success.
We need to develop a government program, where there are more outright grants for lower and middle class students.
We shouldn’t force families to take a second mortgage on their home in order to send their child to college. We are only mortgaging our future by doing that. We talk about competing globally, but we can’t when our students are competing against free education in the rest of the world.
Elizabeth Warren is on the right track, with her move to stop the government from turning a profit on college loans. For the sake of the next generation, she has to figure out how we make college first affordable and then free.
Paul Giorgio is a longtime Democratic Party Activist who has worked on numerous campaigns. He was a Lead Advance Person for President Clinton & Vice President Gore. He was Deputy Director of Special Events for President Clinton’s first Inauguration. He has been elected a delegate to numerous Democratic National Conventions and recently served as one of President Obama’s representatives on the Platform Committee. In 2013 he was chosen as a Presidential Elector. He is the President of Pagio, Inc., publishers of Pulse Magazine, Vitality Magazine and Worcester Medicine.
Related Slideshow: SLIDES: Ranking the Highest Student Loan Default Rates in Central MA
The U.S. Department of Education announced the official FY 2011 two-year and official FY 2010 three-year federal student loan cohort default rates (CDR). The national two-year cohort default rate rose from 9.1 percent for FY 2010 to 10 percent for FY 2011. The three-year cohort default rate rose from 13.4 percent for FY 2009 to 14.7 percent for FY 2010.
Below are the FY 2010 default rates for all post-secondary schools in Worcester, ranked lowest to highest.
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