Archive for June, 2017

242 – “What price knowledge?”

Friday, June 23rd, 2017

By Hetty Gray

# 242

June 20, 2017

“What price knowledge?”

Talk abounds about the costs of college these days. Where once students could actually work their way through school — even medical school — with part time jobs, graduates find themselves stifled by exorbitant debt.

The base line is the student loan system. Once privately funded, the switch to the federal student loan system brought jobs — but not for the graduates — the jobs were office jobs overseeing and managing the student loans.

Historically speaking, early college loans were rare. Funding sponsored by churches was limited, but churches did offer financial support for those entering the ministry. The government steered clear of funding, but in 1862 President Lincoln signed the Morrill-Wade Land Grant College Act establishing agricultural schools on land that was endowed to the states. The stigma of college education only for the elite was beginning to change. This remained little changed over the next 100 years. Beginning in the early 20th century, John Dewey championed education echoing Thomas Jefferson’s thoughts — that education promoted both social progress for the individual as well as economic progress for the nation.

After World War II, The Serviceman’s Readjustment Act (better known as the G.I. Bill) provided grants to cover the costs of education for returning veterans. At that time its three-year stipend was sufficient to cover a college degree. Many of the 4.4 million men and women would not have been considered “college material” before the war.

The changing electorate prompted Congress, and it responded with the broad opportunity for those coming home from overseas military duty. The year 1954 saw the formation of The College Scholarship Service, a board of private institutions designed to remove the individual student’s financial considerations when selecting where to attend in favor of providing aid commensurate with need. Moreover, financial aid would be provided based on academic prowess, a predecessor to today’s politically popular, state-sponsored merit-based scholarships.

The system remained static until the late 1950s with the passage of The National Defense Act of 1958. Loans of this type were deemed Perkins Loans. With the Soviets making strides in aerospace science and technology, leaders saw the urgent need to spur students in science and engineering.

The next major step was The Higher Education Act of 1965 comprised of four parts, three of which were designated to aid the institutions themselves. Only Title IV applied to student loans. Guaranteed student loans to middle income students came with loan subsidies. Details were that the government paid interest accrued during the student’s collegiate career and paid the difference between a set low interest rate and the market rate after graduation. (Random

However, the form we see today in student loans dates to 1972 when Congress reauthorized The Higher Education Act. It offered matching funds to the states’ need-based programs. Within three years, all fifty states participated in the program. Expansion now included junior colleges, trade and career schools. This was done via changing the applicable terminology from higher education to “post secondary education.”

The 1980s saw a shift to more loans spending than grant spending. A continuation of such change came in programs that increased borrowing limits and brought about unsubsidized loans for middle-income students. Essentially, more students were made eligible for aid and, as more students entered into postsecondary education of all kinds, tuition naturally increased, Unfortunately, this happened at a rate higher than the rate of inflation, outpacing the average family income throughout the 1990s. (Random

In 1997 tax credits for college expenses became law, and this was the first instance of non-need-based federal financial aid. In its present state, the system of federal financial aid is “an amalgam of state programs, federal programs and tax credits, practices of private institutions, and programs of some private foundations and charities. (Random

There is a plethora of ideas for reform, but the most widely supported is closing the gap between loan spending and grant spending. Today students rely on loans rather than grants. The old Pell Grant system cannot keep pace with the costs. College costs today outstrip the maximum allowed for the Pell Grants.

One factor that troubles reformers is that students of smaller, less expensive schools often graduate with degrees that garner lesser incomes and it is much harder for them to repay their student loans.
It is impossible to predict what will become of the present system, but there is one statistic that should really gall any parent or student seeking a loan today. Estimates were that direct loans made by the Education Department would yield $58 billion between 2010 and 2019.
All federal money is fungible, but with such a large pot of money suddenly (theoretically) available, Congress wanted to spend it on other things. Here’s the breakdown of where the money went:
$36 billion on increases in Pell college grants for low-income students.
$10.3 billion for deficit reduction.
$8.7 billion to support the health care law.
$3 billion for historically black colleges and minority-serving institutions.
Yes, since the passage of the Affordable Care Act, nearly $8 billion (yes, with a “B”) dollars has gone to fund health care.

To burden parents of students between the ages of 19 and 24 with the cost of government health care is an pathetic exercise, an indictment of fiscal impropriety of the first order. The government exists to protect the people, but the people are the government’s employers. To see their money go toward a social program that younger workers have a hard time affording and many step aside from enrolling to join is a travesty.

The media puts out the message that repeal and reform is a fantasy. Well, give me the fantasy instead of the facts. The facts are dismal and do not speak well for the administration that passed the bill in the dead of night and then stood smiling as their Speaker of the House said that “you have to read the bill to know what is in it.” If we looked at contracts that way, we would all be bankrupt. And without repeal and reform, the health care system is a heartbeat away from bankruptcy.

What price education? Salty to say the least, but we should demand a mandate stating that all proceeds stay within education. It seems as if the student loan largess is falling victim to the same dismal fate as Social Security. It is the new version of that all too familiar — and unconscionable — cookie jar for lawmakers with no sense of ethics. It’s your money after all. Think about it.