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Jan. 29 2010 - 10:37 am | 8,133 views | 4 recommendations | 11 comments

Make Room on the Student Loan Bailout Bandwagon for President Obama

obama-in-schoolAs a liberal, it took me a while to get over the centrist drivel of Wednesday’s State of the Union. For energy, we’re back to nuclear power, offshore drilling, and clean coal. While we’re at it we might as well get poor people to ride stationary bikes that power turbines. The vastly outnumbered Republican minority is sure to like that too.  Health care is back to the “if you have a better idea, let me know,” stage. I’ve got a better idea: it’s called single freaking payer you alleged Democrat who was elected with a MANDATE to fix this. And there will be a spending freeze, which is awesome. Accepting the Republicans flawed macroeconomic logic is a superb way to impress no one.

Okay, obviously I’m still not over the State of the Union.

There were a few things I that I did like. It’s about time don’t ask, don’t tell, didn’t exist. I’m a huge fan of Obama’s smackdown of the Supreme Court over their potentially election shattering Citizens United decision. Too bad he can’t actually do anything about it.

There was one legislative proposal that I unequivocally support. Obama said: “In the United States of America, no one should go broke because they chose to go to college.” Ain’t that the truth?

At some point, our laudable goals of making college “affordable to every American,” morphed into making college “able to be debt financed by anybody willing to start their careers in an enormous financial hole.” During the State of the Union, Obama said that education was the best “anti-poverty” defense. But we also know that massive educational debt is also the easiest way to prevent young people from reaping the financial rewards of their hard work and the sacrifices of their parents.

Now we have the President of the United States at the “these debts are killing me” party. I’m happy he showed up. But will his plan actually help recent graduates and their families? Go make yourself a drink and then we’ll talk.

Obama proposes capping debt repayments at no more than 10% for struggling graduates. He wants to offer total loan forgiveness to students 20 years out of school, and that number comes down to 10 years out of school if you spend that time doing public interest work. And Obama proposes giving middle class families who are paying for their children to go to school a $10,000 tax credit.

I graduated from college ten years ago this summer. And let me tell you, I am stoked that in just ten more years, my college will have to stop calling me, demanding money that I don’t have. I can’t wait. I can easily keep switching phone numbers when the creditors find me for another ten years. By the time I’m 42, I’ll be free of my college debt, then add 7 years for all that crap to get off of my credit score, and you know what, there’s an excellent chance I’ll be able to own property by the time I’m 50. Woohoo! (I’m pretending that my post-graduate debt doesn’t exist. Indulge me.)

And that time would have been cut in half if I had spent the past ten years trying to give back to my community instead of desperately trying to hang onto my 2-1-2 Manhattan area code and attendant roach infested hovel. That’s an important lesson to young kids: work for your community, not for your landlord — the “lord” part of the word isn’t an etymological accident.

What these plans do is to give recent graduates hope. All throughout the campaign of 2008, Republicans and Clintons disparaged the real-world value of hope, but these programs are a manifestation of that intangible goal. It’s the government’s way of telling young people that if they try to better themselves and work hard, financial mistakes that they might have made in their teens and twenties will be forgiven. They will not have to wait until their life insurance vests to pay off a decision they made when they were 18.

That’s the upside.

The downside is that Obama’s proposals don’t actually attack the heart of the debt repayment problem. The reason why college tuition has skyrocketed (and continues to go up, notwithstanding the whole Global Economic Meltdown thing that has retarded cost growth in nearly every other aspect of the American experience), is that University presidents still have no incentives to keep costs down. I mean, Obama even said something like “and colleges have to do their part too.” What is their part? Obama didn’t say. What, do we expect colleges and universities to keep costs down voluntarily?

Once everybody who wanted to go to college could do so with an amalgam of public and private loans (good), universities lost any incentive to keep their costs down so students and families could afford to attend (really, really bad). If you come from a poor family and you get into great schools, is there any amount of money those schools could charge to make you go to someplace crappy instead? Not really, not if you can take out all the money on loan. Education is the silver bullet, right? Well guess what, university presidents know that too. There probably is some upper limit at which point a student will say, “you know what, screw Yale, I’m going to UCONN.” But you know what Yale does then? It just admits anyone of other other thousands of people on its waiting list that would love to go and are desperate to get in.

University presidents aren’t solely at fault, of course. I don’t think that I was the only 18-year-old that could have benefited from a conversation with a financial adviser — or just a basic grasp of this “budget” thing I hear so much about — before I made expensive life decisions. I’m not saying I would have gone to different schools, but I might have had a better plan for paying them back.

And that’s where you really can blame the students themselves for their own complicity in their financial ruin. How many smart middle-class kids go to expensive universities and then major in something like Philosophy, or Romance Languages, or Intellectual Masturbatory Practices? I mean, there are a lot of students out there who will graduate with no marketable skills. Many of them will end up in law school (click here to see how that works out). And many of them will end up trying to become … university professors. Professors who of course need to be paid, as they still have educational debts. Which will increase the costs for the universities trying to hang onto their best faculty. Which will lead to a rise in tuition. And now the circle-jerk is complete.

Now, the President is dealing with two wars, a jobless recovery, a health care reform plan being destroyed by spineless Democrats, and (soon) homophobes who don’t think gays can shoot straight. He’s got a lot on his plate, and I’m not expecting him to reform the system of American higher education today. Wednesday was a good first step.

But at some point, we’re going to have to take a much more rigorous look at how higher education is financed in this country. Education can keep you out of poverty, but it can also kill your chance at financial security.


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  1. collapse expand

    Elie Mystal, you make good points, as usual. Though, may I make an observation? I may be mistaken, but your piece is striking me as a bit elitist. There ARE state schools, you know. If there’s going to be more money put to higher education, I’d want it all to be put into lowering state college tuition and elevating in quality and quantity the services they provide, so that each and every one offers the very best quality education all the state’s residents have earned and deserve.

  2. collapse expand

    I agree with all of this, other than the fact that Romance Languages is a useless major. Learning multiple languages is one of the only hard, marketable skills that your average B.A. is going to have. If you can speak fluent French, Spanish, Portuguese, and Italian at 22, a lot of the world is going open up to you.

  3. collapse expand

    Elie… You have an Ivy League Education, for heaven sake!! Quit whining, grow a pair, and go out and hustle an honest buck (like all the hard working people who make the GNP go). This is still the land of the greatest opportunity on earth. What a miserable cry baby you are. Your pigment and that of others is not the big deal you would like to think it is.

  4. collapse expand

    I go to a state school. The tuition is extremely reasonable. If you can’t afford to pay that after a couple years then you’re doing something wrong.

    If you want to (and can) go to Harvard you’re going to pay a lot for it. The loans you take should not be forgiven, just as my state tuition loans should not. Just because you bought a Range Rover and can’t pay for it 10 years and 200,000 miles later doesn’t mean your creditors are going to forget about that 80k you owe them.

    If a person is too immature to make life decisions at the point where they are going off to college then perhaps they are not yet ready to attend an institution of higher learning. I made plenty of mistakes in my late teens and early twenties. I learned from them and did what it took to overcome, I did not bitch and ask the government to give me a handout, nor will I ever.

  5. collapse expand

    As tempting as it is to point fingers at students amassing enormous debts for unmarketable degrees, a lot of blame lies elsewhere. In high school, legal minors are solicited by admissions representatives and others with conflicts of interest under the premise of career advice. Parents are similarly misled.

    Oh- and the relationships between student lenders and college financial aid offices? The fees banks charge to process debts that are fully guaranteed by the Federal Government just adds to the reckless lending and tuition inflation that runs better than 9% a year.

    You’re on to something here- and there may be useful parallels between the education bubble and the sub-prime mortgage mess. But there’s no single bad actor here- it’s systemic, and yet another toxic cleanup awaits us.

  6. collapse expand

    Excellent post, Elie; how do we get Obama’s attention is the real question; he will evaporate soon I’m afraid.

  7. collapse expand

    Amazing opinion, much of which is clearly from a liberal point of view.

    Single payer? There is no such thing. When we all get taxed to death to pay for it, there are no single payers – just a few million tax paying slaves.

    As for loan forgiveness? Good idea seeing how congress has corrupted itself and allowed the banksters to take the Higher education Assistance law and turn it into a money making cash cow, which was never its intention.

    And it’s not just colored folks getting caught up in this, its the white folks too. They too are being destroyed financialy untill they are in their 50’s, because of these out of control student loan laws.

    We have whole generations that sacraficed everything to try to get ahead, only to find out financialy they were behind for the majority of their lives. Such a waste. And the benifactors are the banksters and loan service companies like Sallie Mae.

    How sad. This nation is in a strange kind of way, devouring its young.

  8. collapse expand

    From a conservative point of view, wouldn’t it make better sense never to take out a loan one can’t pay back? I am aware of the competitive edge a very expensive university education can give a person, but isn’t that the gamble families take — emphasis on the word gamble — that such an education will give their kids a pass into the upper classes? Loan forgiveness may be a welcome expedience, but it speaks to irresponsible ambition, not to any higher cause or motive, much like “saving” those who took out mortgages to homes they could afford. IMO not much difference.

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    My first name is pronounced like Eliot without the “it,” my last name is pronounced like the Crystal I don’t have the “M”oney to afford. I’m an editor of Above the Law, a legal website that covers all of the gossip and business of the legal profession. Prior to that I wrote about politics. I used to be a lawyer, but I quit that profession in lieu of stripping naked and lighting myself on fire. I received a degree in Government from Harvard University because I enjoy pain, and a J.D. from Harvard Law School because I dislike change. I’m also a Met fan (pain + born in Queens).

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