Representative Hansen Clarke of Michigan recently introduced a bill for consideration in Congress, the Student Loan Forgiveness Act of 2012. This legislation is allegedly designed to lend a helping hand to those struggling under massive amounts of student loan debt.
MoveOn.Org has sponsored an online petition to encourage passage of this legislation, and while reasonable people can have different opinions of why these circumstances exist, the numbers cited in the submission are both shocking and accurate. The cost of undergraduate college tuition has increased nearly 900% in the last 30 years. Overall student loan debt has increased nearly 500% in the last 15 years. By the time the Class of 2013 graduates next May, overall student loan debt will exceed $1 trillion dollars.
Clearly, student loan debt and the related impact on the economy are issues that need to be addressed. But where this bill fails is in the justification and the execution.
The details of the proposed bill are straightforward:
The bill would create a new “10-10 standard” for student loan forgiveness. Meaning if a borrower makes payments equal to 10% of his discretionary income (defined in the bill as income above 150% of the poverty level based on a borrower’s filing status) for 10 years, the remaining balance owed on the loan would be forgiven. A second provision allows those who have already begun making repayments to have all payments made in the last decade count toward that obligation.
The bill would also allow those currently making repayment, and whose loan debt exceeds their income, to convert any private loans to Federal loans with interest rates capped at 3.4% and then to enroll these new loans in the “10/10” program.
Finally, the bill would reward graduates for entering public service professions like teaching, police, and firefighting and includes reducing the Public Service Loan Forgiveness requirement to 5 years from its current 10 years.
The bill is purportedly revenue-neutral, as it would require the Federal government to pay for the costs of this new program with savings from the Iraq and Afghanistan Overseas Contingency Operations.
To the uninformed, this bill likely sounds like a win-win. Students get out from under crushing debt. They use the extra money they would have spent on student loan repayment to buy homes and cars and to start businesses. And best of all, it does not cost taxpayers a cent.
But that is not the reality of this bill.
What do teachers, police officers, and firefighters have in common? They are all union members. So despite the other segments of the population who might benefit from this program, the bulk of the benefits will go to unions both as a reward for supporting Democrats in the past, and as an incentive to support Democrats in November.
People do not become first responders because it is an easy way to have their student loans forgiven. They either do it out of a desire to serve, or because it is what they love to do. Most police departments now require an officer to have a degree before entering the police academy anyway.
Most urban school districts offer student loan forgiveness packages more generous than those in this bill to act as an incentive to fill vacant positions in difficult inner-city schools. Positions in wealthy suburban school districts, which are far more desirable, seldom come available.
The Department of Housing and Urban Development (HUD) currently offers two programs, ‘Teacher Next Door’ and ‘Officer Next Door’ where qualified applicants can purchase a home for $1 with the understanding their presence will improve the quality of the neighborhoods where these select homes are located. If we are going to spend federal dollars to reward teachers and first responders, it would be better to expand this program than to forgive student loans.
It frustrated me when my daughter was in high school that her teachers would frequently skip parent-teacher night due to their own continuing education classes in the evenings. Basically the teacher is not fulfilling the responsibility of their current position, and instead is busy taking classes (reimbursed by taxpayers) so they can advance their degree and taxpayers can pay them even more?
If we are going to incentivize teachers by forgiving a greater portion of their student loans, it needs to be performance based, or as a reward for accepting a position to assist in the turnaround of a failing school.
As someone who works in a college environment, and who employs dozens of current college students, it is obvious to me what the two largest problems are: Everyone these days goes to college, and college is 4 years that could be condensed easily into 2, which would cut the cost in half.
It is unfortunate that the loss of our manufacturing base, and the rise of a service economy, has led to an increase in types of positions requiring a college degree. There are simply too many students who have no business continuing their education beyond high school, and the explosion in the number of unqualified college graduates devalues the degree.
After 4 years of college, most students have no practical skills to offer the workplace. During the NCAA Men’s Basketball tournament, Enterprise Rental Cars advertised that they are the largest single employer of recent college graduates. So a young adult spends 4 years and $100,000 on college and graduate qualified to perform a job that can easily be replaced by an airport kiosk?
Half the money they will have spent in college was on electives, and on remedial courses which they either did not need or which should have been offered at the high school level. College should focus on courses related to the student’s major, and on advancing the future career path upon graduation.
It is ironic that the argument made by a liberal group such as MoveOn.Org would be the same one they rail against when proposed by Republicans. If trickle-down economics does not work, and tax cuts for the wealthy which pour extra disposable income into the economy do not spur growth, how can the argument be made that eliminating student loan debt and allowing recent college graduates to have more disposable income would be a key way to grow the economy?
Finally, the argument fails that this program would be revenue-neutral. It is true that money will be saved by ending our involvement in Iraq and Afghanistan. However, these are dollars we are currently borrowing and adding to the deficit. These are not extra dollars we can use to fund an expensive new program.
Finding a solution to the student loan debt crisis is a worthy goal. Representative Clarke is to be commended for the effort, as there has been little urgency among his colleagues to address this issue. Unfortunately, this bill is not the right solution and we cannot afford it.
Please understand that I am not anti-union. My father was a union worker, and my older brother was a union worker and shop steward for 25 years. Nor am I anti-teacher. My niece is a high school librarian and my daughter is a secondary education teacher. I am a registered Republican, but I voted for Barack Obama in 2008 and will again in 2012.