Wintery Knight

…integrating Christian faith and knowledge in the public square

Student debt forcing college graduates to put their plans on hold

First, from Yahoo News, some anecdotes to help everyone understand what faces young people trying to get an education and find a job. (H/T Captain Capitalism)

Excerpt:

We asked Yahoo News readers to tell us their experiences with student loan debt. Over 600 graduates (and not-quite graduates) of all ages emailed to share their stories. We’ll be sharing more of their stories in the next week over at our Tumblr.

Overwhelmingly, Yahoo News readers told us they felt burdened by their debt. “We do not like debt,” wrote Katelyn Fagan, who graduated from Brigham Young University in 2011. She and her husband have a combined student loan debt of just under $70,000. Fagan tried to work while in college, but wanted to focus on her academics. “Maybe I could have sought out other employment options (and I sometimes did) but school was my top priority.”

“Student loans have basically ruined my life,” says Tanya Carter, who graduated from the University of Toledo in 2008. She went to community college for two years before transferring, and attended classes part-time so she could also work. When Carter maxed out on federal loans, she turned to private loans to finish her degree. As a result of all that debt, she writes: “I never see myself owning a home, vehicle, or maybe not even getting married.”

The need to delay starting a family because of financial worries was a common concern. Lauren Dollard graduated from Fordham University in 2008 with $157,000 in debt, including interest. “My boyfriend won’t marry me because of my debt,” she says. “He doesn’t want it attached to his name (I know, this could also be an excuse).” She said she would trade her “fancy private school education” in a heartbeat to live “as an independent adult.”

April Flores graduated from San Diego State in 2008 with $80,000 in private loans and $30,000 in subsidized loans. “It is going to be hard to buy a house and start a family with our debt,” she writes. “We joke and say that our baby is Sallie Mae, but it is true! Education is invaluable, but I was not wise in my early 20s and did not make the right decisions when it came to my private loans.”

Flores was far from alone in bemoaning her failure to understand the implications of those promissory notes. Salvatore Aiello graduated from the University of South Carolina in 2009 with $68,000 in debt. “I blame ignorance in my pursuit of loans; my high school did a terrible job explaining our options when it came to financial aid,” he told us. “They made it seem that if I wasn’t rich or beyond poverty I would not have been able to go to college.” Aiello followed up with a second email—he and his girlfriend are now expecting their first child. They are, in his words, “very excited at the unexpected blessing but terrified.”

Here’s an article from the New York Times in which a professor explains what causes tuition rates to rise: (H/T Cato Institute)

ACADEMIC economists like to make fun of businesspeople: they want competition when they enter a new market but are quick to lobby for subsidies and barriers to competitors once they get in. Yet scholars like me are no better. We work in the least competitive and most subsidized industry of all: higher education.

We criticize predatory loans by mortgage brokers, when student loans can be just as abusive. To avoid the next credit bubble and debt crisis, we need to eliminate government subsidies and link tuition financing to the incomes of college graduates.

Nearly eight million students received Pell grants in 2010, costing $28 billion. In addition, the federal direct loan program, which allows nonaffluent students to get government-guaranteed loans at low interest rates, cost taxpayers $13 billion in 2010-11. Total subsidies to university education amount to $43 billion a year, including around $2 billion in Congressional earmarks — and that does not even include tax subsidies (for college funds); tax breaks (for university endowments, for example); and subsidies dedicated to research.

Just as subsidies for homeownership have increased the price of houses, so have education subsidies contributed to the soaring price of college. Between 1977 and 2009 the real average cost of university tuition more than doubled.

These subsidies also distort the credit market. Since the government guarantees student loans, lenders have no incentive to lend wisely. All the burden of making the right decision falls on the borrowers. Unfortunately, 18-year-olds aren’t particularly good at judging the profitability of an investment without expert advice, and when they do get such advice, it generally counsels taking the largest possible loan. The stock of student loans has reached $1 trillion, while the percentage of borrowers in default jumped to 8.8 percent in 2009 from 6.7 percent in 2007.

Last but not least, these subsidized loans keep afloat colleges that do not add much value for their students, preventing people from accumulating useful skills.

That article also contains the solution:

Investors could finance students’ education with equity rather than debt. In exchange for their capital, the investors would receive a fraction of a student’s future income — or, even better, a fraction of the increase in her income that derives from college attendance. (This increase can be easily calculated as the difference between the actual income and the average income of high school graduates in the same area.)

The solution is to privatize the entire student loan system, and make the loans conditional on future earnings. That way, universities will be chosen based on their ability to provide jobs to students, and students will have to justify to banks (who represent ordinary people who put money on deposit with an expectation of a return!) why they should get a loan and how they expect to pay it back.

But what has Obama actually done?

Let’s see:

The president, by way of administrative fiat, plans to continue redefining the federal student-loan industry, making taxpayers absorb the financial risks of federal direct lending and leading the country over a cliff into future funding shortfalls. On Wednesday, the president announced his executive order to reduce monthly student-loan payments, consolidate loans into direct loans, and offer loan forgiveness after 20 years, all in the name of college access.

President Obama’s executive action would cap monthly repayment at 10 percent of discretionary income and offer students an incentive for consolidating Federal Family Education Loans (FFEL) and direct loans into the direct-loan program, which administers loans directly to students, instead of having them issued by banks. Students will be given a 0.5 percent interest-rate reduction for switching to the direct-loan program.

But why the urgency to employ executive action to shift to the direct-loan program now? The federal government is currently lending to students at an interest rate of 6.8 percent while it is borrowing at less than 1 percent, and the difference is kept by the federal government and spent on other programs, like converting the popular Pell Grant program into an entitlement. The president is lobbying for more students to move to direct loans so that the government can spend the money elsewhere. As Rep. John Kline, chairman of the House Committee on Education and the Workforce, said, “It’s a pretty big slush fund.” Under the Healthcare and Education Reconciliation Act, all new federal student loans are now direct loans, but there are still $400 billion outstanding loans that are not.

But these “savings” are misleading, as future shortfalls are inevitable. These loans are riddled with risk. When pressed by a reporter about why students would want to pay back the loan if they will be forgiven anyway, Secretary Duncan simply said that “people want to do the right thing.” However, student-loan default rates have been increasing for nearly ten years and are now at 8.8 percent. On top of these high defaults, the jobless rate for Americans with at least a bachelor’s degree is now 5.1 percent, the highest since 1970.

As former CBO director Doug Holtz-Eakin wrote, “The Secretary of Education is now one of the top financial executives in the U.S., and Congress spent nearly all of the over-estimated ‘savings’ on the President’s health care reform and unaffordable education entitlements and will add more than a trillion dollars of risky loans to the national balance sheet by 2017.”

Just like the housing bubble, the Democrats have again made it easier for a certain segment of the population whose votes they wanted to borrow money – money that they now don’t have to pay back. Being a leftist means taking money away from people who earned it and giving it to others (students, universities) who don’t have to pay it back.

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Despite record youth unemployment, young people support Obama 52-27

Labor Force Participation 2012 (click for larger image)

Labor Force Participation 2012 (click for larger image)

From Breitbart.

Excerpt:

Even as unemployment among college graduates remains stuck above the national average at 9.3 percent, a Reuters/Ipsos poll of four-year college graduates finds that President Barack Obama leads his Republican challenger Mitt Romney 52 percent to 27 percent.

The poll’s findings are especially surprising given reports last month that, for the first time in American history, unemployment for college graduates eclipsed that of high school graduates.   As Jed Graham of Investor’s Business Daily reported, “Out of 9 million unemployed in April, 4.7 million had gone to college or graduated and 4.3 million had not, seasonally adjusted Labor Department data show.”

Still, some unemployed college graduates say they are sticking with Mr. Obama in 2012: “I was really excited when Obama won,” said Joe Zmudczynski, a 2011 graduate of Michigan’s Ferris State University who now lives at home with his parents. “He’s still my favorite. It’s not like you can snap your fingers and everything gets better.”

Leftist PBS explains:

Returning to the nest with mom and dad after college and even into the thirties is becoming increasingly more common, but also less stigmatized. Young adults who live with their folks are cheerful, upbeat even, about their choice.

That’s the finding of a new Pew report, released Thursday morning. Three in 10 young adults (aged 25 to 34) say they’ve lived at home recently during the down economy, and 78 percent said they were satisfied doing so. Another 77 percent said they were optimistic about their future finances.

The number of young adults living in a multi-generational household — which can be any combination of grandparents, parents and adult children — saw a steep uptick during the recent recession, after being on the rise since 1980, said Kim Parker, the study’s lead author and a senior researcher with Pew’s Social & Demographic Trends Project. Historically, such high rates of moving back home haven’t been seen since the late 1940s.

Here’s an Associated Press piece on Yahoo News:

The college class of 2012 is in for a rude welcome to the world of work.

A weak labor market already has left half of young college graduates either jobless or underemployed in positions that don’t fully use their skills and knowledge.

Young adults with bachelor’s degrees are increasingly scraping by in lower-wage jobs — waiter or waitress, bartender, retail clerk or receptionist, for example — and that’s confounding their hopes a degree would pay off despite higher tuition and mounting student loans.

[...]Taking underemployment into consideration, the job prospects for bachelor’s degree holders fell last year to the lowest level in more than a decade.

[...]The figures are based on an analysis of 2011 Current Population Survey data by Northeastern University researchers and supplemented with material from Paul Harrington, an economist at Drexel University, and the Economic Policy Institute, a Washington think tank. They rely on Labor Department assessments of the level of education required to do the job in 900-plus U.S. occupations, which were used to calculate the shares of young adults with bachelor’s degrees who were “underemployed.”

About 1.5 million, or 53.6 percent, of bachelor’s degree-holders under the age of 25 last year were jobless or underemployed, the highest share in at least 11 years. In 2000, the share was at a low of 41 percent, before the dot-com bust erased job gains for college graduates in the telecommunications and IT fields.

Out of the 1.5 million who languished in the job market, about half were underemployed, an increase from the previous year.

The EPI is a left-wing think tank.

As if this were not bad enough, remember that the secular socialists have run the national debt up from 8 trillion to 16 trillion since taking over the House and Senate in January 2007. Labor union bailouts, green energy payoffs to Democrat fundraises, health care takeovers, and massive welfare spending, have to be paid back. Who is going to pay all of this back? Students with degrees in feminist studies and peace studies? And yet, incredibly, the government-run public school system and the universities have brainwashed these young fools into voting for their own dependence and enslavement. That’s what secularism and leftism offers young people: the road to serfdom.

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English professor decries the radicalization of the liberal arts on campus

From Pajamas Media, a post by a Canadian English professor at the University of Ottawa.

Excerpt:

When I finally landed a tenure-track position at a Canadian university, I was ecstatic and full of hope — exhilarated by the opportunity to teach students about literature and ideas and to have conversations with colleagues equally in love with literature and ideas. I didn’t realize that my experience as a university teacher of English would have much less to do with these passions than with the distortion of the university’s core mission in the name of pedagogical and political orthodoxy.

To begin with, the student writing that came across my desk left me aghast. I had taught before, but I was unprepared for the level of illiteracy, the stunted vocabularies, near-complete absence of historical knowledge, and above all the extraordinary apathy of many English majors. The most basic of expression rules — the difference between it’s and its, the incorrectness of “would of” for “would have,” the role of the apostrophe or semi-colon, the fact that “a lot” was two words — were beyond the grasp of the majority, no matter how often I reviewed grammar or devised mnemonic devices. And the sheer sloppiness and muddled thinking in the essays, where the titles of poems and authors’ names were frequently misspelled and dates were wildly inaccurate, suggested a fundamental indifference to the subject matter.

Not only was my students’ writing appalling, but I soon encountered their resentment at being told about it. “Who are you to tell me I can’t write?” was the attitude — once expressed in those very words. More than one student insisted that her other teachers had always rewarded her with high marks for her “creativity.” Most believed themselves more than competent. After sitting with one young woman explaining the cause of her failing grade, I was befuddled when her only response was a sullen: “This doesn’t exactly make me feel good.” When I responded that my job was not to make her feel good, she stood haughtily, picked up her paper with an air of injury, and left my office without another word. In her mind, I later realized, I had been unforgivably cruel.

I was up against it: the attitude of entitlement rampant amongst university students and nurtured by the utopian ideology that permeates modern pedagogy, in which the imposition of rules and identification of errors are thought to limit student creativity and the fostering of a hollow self-esteem takes precedence over the building of skills on which genuine self-respect might be established. In the Humanities subjects in particular — and in English especially, the discipline I know best — such a philosophy has led to a perilous watering down of course content, with self-validation seen as more important than the mastery of specific knowledge.

With this philosophy has come a steady grade inflation. The majority of students in English courses today can expect a B grade or higher merely for warming a seat and handing in assignments on time. The result, as I soon discovered, was a generation of students so accustomed to being praised for their work that when I told them it was inadequate, they simply could not or would not believe me. They seemed very nearly unteachable: lacking not only the essential skills but also the personal gumption to respond adequately to criticism.

I wonder what will happen when these students find out that the jobs they feel they are entitled to have have been shipped off to some country where young people don’t have all of this attitude, and where business owners pay a corporate tax rate less than half of what American businesses pay. My guess is that they will blame the very capitalists who warned them not to do what they did.

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Does going to university necessarily educate you and provide you with job skills?

The Heritage Foundation explains why universities don’t necessarily provide students with a useful education, at least in the non-STEM areas.

Excerpt:

Guess how many top-tier universities offer a course on Lady Gaga? Four! The University of Virginia, the University of South Carolina, Wake Forest University, and Arizona State University all now offer semester-long explorations of Lady Gaga’s apparently profound influence—since 2007—on music, fashion, and the LGBT lifestyle. Yet none of these universities requires students to take a course in U.S. history before graduation. Professors and faculty at top-ranked institutions are giving preference to frivolous classes at the expense of true education.

In a new study by the National Association of Scholars, only one in 75 top universities required students to study western civilization. In 1964, more than half required students take a two-semester course that covered the history of western civilization from Greece to the modern era. The other half of universities required courses that guaranteed graduates understood the history of their society. But studying the foundations of our society no longer seems to be a priority for American universities.

It is not just studying western civilization that has been tossed out the window. There is a dearth in all general requirements. Asking “What Will They Learn,” the American Council of Trustees and Alumni has found that only 20 percent of universities require students to take a U.S. government or history class. Only 5 percent require students to take a class in economics. Many, including top liberal arts colleges, have no general education requirements. With this setup, it is increasingly unlikely that college graduates will leave their alma maters even grasping the basics.

I recommend going to university and I have the BS and MS in computer science, myself.  But if, you have a child in university, my advice is to 1) monitor every course they choose, and 2) have a career mentor meet with them periodically to make sure that what they are learning is what is actually needed in the field.

Regarding the general need for history and economics, I think this is something that it might be better for students to learn before they get to university. It’s probably safer to learn history on your own, and then just take economics. I would try to avoid any course where the teacher can teach their point of view and isolate it from reality. Stick with math, science, engineering and physics.

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