Bob Plain is the editor/publisher of Rhode Island's Future. Previously, he's worked as a reporter for several different news organizations both in Rhode Island and across the country.

22 responses to “Reed, Cicilline Speak Out on Student Loan Debt”

  1. jgardner

    How something labeled “temporary” (like the student loan interest reduction a few short years ago) becomes permanent.

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  2. DogDiesel

    Can you say BUBBLE?

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  3. PinkHatLib

    Student Loans: The Next Bubble?

    [Quote]
    First, one thing that’s important about the possible student loan bubble is that it poses much less of a threat than housing debt did to drag down the entire economy. Yes, many individual borrowers may find themselves in trouble. But total student loans probably amount to less than 10 percent of outstanding mortgages. Every single student loan could default and it still probably wouldn’t match total mortgage defaults during the recent downturn. More importantly, unlike mortgages, Wall Street isn’t knee-deep in securities comprised of bundled student loans, as it was with mortgages. (It also helps that it’s also harder to speculate in student loans; an investor can flip a house, but not a brain.)
    The other big difference with student loans is the dominant role the federal government has assumed in the market in the last few years: it accounts for roughly 85 percent of student debt.
    That matters for several reasons.
    First, the government is answerable to voters and not shareholders, so it’s more likely than private investors to take steps such as those announced by President Barack Obama to try to relieve student debt burdens.
    Second, notes Mark Kantrowitz of the website Finaid.org, it’s important to remember what actually causes a bubble to burst. It’s not simply a run-up in prices. What bursts the bubble is a liquidity crisis, when borrowers suddenly can’t get the money they need. Even during the depths of the 2008 financial crisis, when private student loans dried up, the government’s dominant role kept student loans flowing.
    That doesn’t guarantee the bubble won’t slowly and painfully deflate over time. But it insures against the chaos of a “crash” where suddenly students can’t get loans at all – a scenario that could shut down untold numbers of colleges whose students rely on financial aid.
    None of that, however, changes the fundamental risk for individual student borrowers: they could borrow heavily to pay for a college education and find the return much less than expected.
    [end quote]

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  4. RightToWork

    And the neverending cycle of more government loans and exponential tuition increases in response to those loans continues to fuel the higher education bubble in the United States. Surely the answer is more loans and cheaper credit!

    Average student loan debt is now 30k for a college graduate and rising. Way to go, progressives.

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    1. PinkHatLib

      More loans? That’s not the progressive position. How about free college for all who meet admission requirements?

      “$422,320 for a College Degree? With Tuition Skyrocketing, It is Time to Rethink Higher Education”

      [quote]
      Mike Konczal at the Roosevelt Institute noted that the federal government has many hidden subsidies for student borrowers in the tax code, from $1.4 billion that goes to making student loan interest tax-deductible to $5.4 billion for the HOPE tax credit, which provides a federal income tax break for the first $4000 spent on higher education in a given year. All told, Konczal wrote, it adds up to some $22.75 billion that the federal government is paying through the tax code to help students buy their education.
       
      What’s wrong with this? Konczal explained:
       
      “When we subsidize through the tax code, people who are well off and pay more taxes benefit more….These subsidies benefit private educational institutions over public ones, as they’ll make private education feel more ‘natural’ while obscuring the role of the government in setting up these markets. ….
       
      The subsidy approach replaces the claim to a necessary good to be full, participating citizens in our market economy with the claim of a consumer, whose claim is ultimately one of willingness to pay either through wealth or debt.”
       
      In other words, the hidden subsidies are not helping those who most need help in getting a degree. It’s also helping lenders, by providing an incentive to borrow. So why not take that $22.75 billion or so that we’re already spending and putting it directly toward making public higher education free. In his new book, Jeffrey Sachs estimated the cost of making all public colleges free at between $15 and $30 billion a year, so if he’s right, that’s not much of a stretch from what we’re already paying.
      [end quote]

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      1. jgardner

        “So why not take that $22.75 billion or so that we’re already spending and putting it directly toward making public higher education free”
         
        Man, the incentives and price distortions that would cause.

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      2. RightToWork

        Oh my goodness. That has to be one of worst ideas I’ve ever heard. Why would anyone work after high school if they could go to college on the public dime for four years? It would just delay a huge portion of the labor force by 4 years (more?). Then the whole loan bubble would start all over again as college degrees became completely worthless and more people were forced to get advanced degrees to compete. Or should that be free too – so then people with publicly-funded Ph.Ds can make our sandwiches?

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        1. PinkHatLib

          Why would anyone work? You act as if no one drops out of high school. People drop out for all kinds of reasons, but if our biggest problem were to become that our workforce is too educated, I say bring it on.

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          1. RightToWork

            The biggest problems would be the creation a neverending cycle of degree devaluation and the overincentivization of sitting in classrooms for additional years instead of performing productive work.

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          2. jgardner

            @PinkHatLib
             
            Education is a means, not an end in itself. For example, are we better off having spent a boatload of taxpayer dollars getting a bunch of kids bachelors degrees in underwater basket weaving?

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            1. PinkHatLib

              Yes, although better imho to have them graduate with a marketable skill. You seem to have a problem with the concept of liberal education or public universities generally, not so much who pays or how we pay.
               

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              1. jgardner

                “Yes, although better imho to have them graduate with a marketable skill. ”
                 
                Then in the instance of a degree in underwater basket weaving, didn’t we just waste a bunch of money? How is that better than if they didn’t go to college at all? Do taxpayers then again foot the bill for this kid to go back to school to get a real degree?
                 
                I’m not saying every student will simply go to college to party, but a greater-than-zero percentage currently do. Should the public really be subsidizing their 4yr party?

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                1. PinkHatLib

                  I’m not someone who thinks every school should be focused on turning out productive workers for industry. That’s the path I chose, and I don’t hesitate to suggest the students consider a career in STEM. But what a world it would be without the artists and the dreamers!

                  imho, money spent on a liberal education (yes, even with a degree focus you find silly) is never wasted. That said, you’re objecting to the oversight or lack of oversight of degree programs at public universities… bit of a red herring.

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                  1. RightToWork

                    I think the concern is directly on point. Whether free public college is a good idea or not will depend on how strictly it is controlled and to what extent it is abused in practice. It’s not enough to keep it theoretical and say, “Well, implement it correctly.” Some things cannot be implemented in practice because the incentives are too perverse.

                    In my experience, whenever government is writing out generous checks to people for not working, an entire segment of the population and cottage industry inevitably springs up to capture those checks, and they quickly become skilled at doing so. To name one example of many, see what has happened with SSDI over the past decade: the number of claims has doubled, even as workers have gotten healthier and the workplace has become much safer. The majority of claims have gone from readily verifiable medical illnesses, such as cancer and heart disease, to impossible-to-verify illnesses like chronic joint pain and anxiety. Yes, this is all on the implementation end, but that’s what is killing the whole system and why it was ill-thought-out in the first place. Law firms are making millions pushing these claims through, and we now have millions of able-bodied people sitting around and effectively getting a public salary for doing nothing all day.

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                  2. jgardner

                    “But what a world it would be without the artist”
                     
                    Who says an artists lacks marketable skills? If a college education would enhance those skills, then the individual looking to benefit is in the best position to decide whether those perceived benefits outweigh the actual costs. Pushing those costs onto others will simply skew the decision-making process (and will drive up the cost of that education).
                     
                    Additionally, this conversation we’re having will happen on an even greater scale if taxes are used to pay for college. Since it’s taxpayer money, Joe Taxpayer will want to make sure his money isn’t being wasted. Politicians will want to appear engaged, so they will offer up laws that declare only degrees they think are useful are eligible for public funds, which means colleges will tailor their degree program offering to match, inevitably dropping programs that lack eligibility. So rather than the market determining what degrees are useful based on price signals, we’d have politicians determining which degrees are useful based on nothing more than their own ignorance. Perhaps it’s just me, but I believe a liberal arts degree program has a better chance of survival in the current system than in a system which is funded 100% by taxpayers.

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  5. PinkHatLib

    Much of the world already operates in this fashion. If we don’t want to compete, we can always make their sandwiches I suppose. Ever been to Canada?

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    1. RightToWork

      I’m not aware of any country that provides free college education to all of its citizens who graduate from high school and wish to attend. If there are a couple of countries in Europe of which I am unaware, then I’m sure that they have very tight restrictions in addition to draconian immigration laws.

      The Wikipedia article to which you link specifically states that public colleges in Canada are not free and charge tuition.

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  6. PinkHatLib

    “I’m not aware of any country that provides free college education to all of its citizens who graduate from high school and wish to attend.”

    That’s a strawman. The operative words from above are “all who meet admission requirements.” As for tuition, loans don’t generally cover full tuition either. Six of one, half dozen the other.

    btw, Canada was just an arbitrary example. Perhaps you’d like to discuss Argentina, Brazil, Denmark, Finland, Sweden, etc?

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    1. RightToWork

      I don’t know much about higher education in those countries. I’d have to look into what is actually offered free of charge and what the restrictions are (beyond tight immigration controls).

      But besides the issue of cost, which is being driven primarily by the availability of Federal loans (stopping that lending would be a good first step), U.S. higher education is widely regarded as the best in the world. Why should we change something that is working well? Every school already has financial aid and scholarships to help poor students.

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  7. DogDiesel

    “Last week, the House passed a bill that would keep interest rates low but at the expense of health care programs for women.”


    This is a laugher. Congress has been robbing Peter to pay Paul for decades on both sides of the aisle. Because a percentage of those funds were designated for nonspecific health care testing, a percentage of those including women, we call it evidence of a war on women. If it wasn’t pure politics in an election year then Reed wouldn’t have to say Romney’s name six (6) times to Obama’s one (1). Last check, MISTER Romney holds no public office even though he supports subsidizing these loans. Reed sounded like a desperate clown.  

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    1. jgardner

      “Reed sounded like a desperate clown”
       
      Because he is.

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