debt

It's not every day we report on a campus newspaper editorial here, but sometimes one is problematic enough to require a response.

The Georgetown student newspaper -- the Hoya -- published a disappointing editorial today, calling for the disempowerment of students while arguing that national leaders should be left to continue their assault on our generation.

...Student body presidents are elected to represent their peers in campus-specific proposals that are designed to make college life easier. National political representation, however, should be left to the congressmen and senators that many of those two million-plus college students elect of their own free will.

The campaign, which kicked off August 2, claimed to represent "our generation," but what it became was a grandstanding gesture by student leaders who saw a publicity opening. They got what they wanted: endless web, newspaper and television press, including buzz over a conference call with President Obama. The coalition expanded quickly, not because the student body presidents were being urged by their respective constituents to mobilize, but because they found company in their equally ambitious counterparts at other universities.

But in the end, what was actually accomplished? Elected campus leaders may have written a letter and filled the Twitter feeds of Congressmen with the now famous hashtag, but students did not march en masse in the streets of Washington. Student body presidents did not compel their peers to action by coordinating a phone-a-thon to congressional leaders. Nor did they solicit the cooperation of the College Republicans or College Democrats, two political forces on campus who may have been better equipped to take on Capitol Hill during the debt crisis.

While we understand GUSA's good intentions, it is important they remember their place as representatives of Georgetown students to the administration, not to politicians. GUSA executive representatives did not advertise a political campaign when they were running back in February. While Healy Hall and Capitol Hill were designed to mirror each other across Washington, GUSA leaders should stick to leading who they were elected to lead — our student body.

The editorial board disapproved of their fellow Georgetown student, student body president Mike Meaney, organizing a coalition of national student government presidents. The campaign--"Do We Have a Deal Yet"--was created to pressure Congress to stop bickering during the debt ceiling debate/budget crisis and to strike a deal with the next generation in mind, not the next election. It seems that the editorial board would have rather seen more of a focus on campus-specific matters than on "grandstanding gestures" protesting policies and discussions that ostensibly have no direct relevance to Georgetown students' lives.

Of course, the discussions and eventual compromise--if one could call it that--absolutely impacts the quality of life of each college student. For example, did you know that part of the ceiling deal takes money out of the pockets of loan-paying students? Grad students--used to being able to attend class without worrying about interest accruing on their loans--now find that reality taken away. Students who made 12 consecutive payments on their loans in a timely fashion used to be rewarded with a credit. As of July 1, 2012, that no longer exists.

Yes, these issues are made abstract and mind-numbing by the media, which generally aren't capable of facilitating a meaningful, substantive discussion on issues. And a system of higher education, resting on a bunch of siloed departments and divisions unwilling to cooperate, doesn't exactly serve as the best socializing force. Mix those together with an inability to see healthy conflict and a distaste for anything containing the word "politics," and we get the editorial quoted above, which surely represents something close to the views of many students.

What's sad is that this view--that officeholders are the experts and that students' roles are to merely take space on college campuses and exclusively agonize about matters like campus pub closures--is misguided at best and simply unaffordable right now given the problems we all face. Yes--there are problems on our campuses that student governments were elected to solve. But any student government with which I've affiliated is tasked with the responsibility of improving the lives of the students they represent. There is no such thing as a "campus bubble."

Various cultural, economic, and social forces infiltrate campus confines every second of every day. In taking on the task of representing students, student government representatives are obligated to lobby their local, state, and federal governments. Because politics is everywhere, the reality is that everyone is a politician, navigating various systems of power whether they like it or not--even the student journalists writing the editorial.

While compartmentalizing these systems would simplify the job of covering their campus, unfortunately things in the "real world" aren't that cut and dry. Yes, students are citizens of their campus and should have a say on something like a campus pub being slated to close. But students are also citizens of the town, state, country, and planet in which their campus is located. Policies passed at various levels of society impact the student experience, thereby creating a need for any elected student representative to serve as an advocate on and off campus; it also creates a need for student journalists to help their peers understand these impacts. Even though it might make these journalists' jobs a bit more complicated, that's what we need.

Students and young people are marginalized enough in our society; we don't need to do it to ourselves. If it were up to the Hoya editorial board, young people would go back to the kids' table and mind our p's and q's. We can't afford to take that approach any longer, however. The college student body presidents should be commended for 1.) observing the impact the debt discussion has on our generation--their campuses included--and 2.) for speaking out against the process. If anything, these student leaders had the opportunity to, and could have done more to stand up for their constituents, including broadening the number of participants to include the constituents themselves. I hope this collaborative activism continues and intensifies, and I hope to see the Hoya and other student newspapers cover it as they should.

Just watch

• Friend of FM Cryn Johannsen reports on what happens when young people who are in debt with student loans get into an accident and can't work... a really really really sad story.
• Something from the League:
  What would the Green Movement look like if Van Jones were still in the White House?

  That's the question we asked of Cornel West, Malia Lazu, Julian Mocine-Mcqueen, Ethan Case and Chuck Creekmur. Check out 99problems.org for their thoughts.

• The incredibly attractive fake Republican Meghan McCain schools the GOP with 7 tips for Presidential Hopefuls
  

  "...Most young voters my age don't remember Newt Gingrich's claim to fame; after all, the Clinton impeachment trial was so ‘90s.
  What the Republican Party needs is a candidate unafraid to put the president up against the wall and call him out on all the damage his administration has done, especially to the economy, in the last three years."

  This post is around the same time McCain appeared on MSNBC and talked about the coolness factor in Presidential candidates. Politico: You are not cooler than Obama.

  Meghan McCain wants the Republican candidates running for president to stop trying to be cool. She hopes they will step away from the comfort of Fox’s Greta Van Susteren and befriend MSNBC’s Rachel Maddow. And she thinks Tim Pawlenty is kind of wimpy.
  Along with a willingness to challenge the president, she wants candidates to remember that they are “not cooler than President Obama.” “No, you are not. No, seriously, you are not, not even you, Sarah Palin,” she advised. Instead, she wants a Republican to emerge as the “smart candidate, the serious candidate.”

  Of Palin, McCain wrote, “If she enters the race, there will be a proverbial tsunami of media coverage for months. Don’t panic and ride it out. The cream always rises to the top and at some point she is going to have to do something other than come up with clever sound bites.”

  It wasn't Maddow it was that one dude that isn't Keith Olbermann but here's the video:
  
  

  Visit msnbc.com for breaking news, world news, and news about the economy

• 2011 Grads Success not assured
• For Profits deepening debt
• Paying for college without loans. My solution - sell a kidney...
• So this is interesting - when I was pulling the clips last night I came across this article from the West Virginia Metro News: WV takes steps to monitor for-profit schools. The problem is the article is gone and I searched for the headline and couldn't find it. Maybe the for-profits sent people over to break their legs...
• One columnist says that your youth is an indicator that Now's the time to goof off.
  

  "Graduates of 2011, you don't need me to tell you that you are facing an uncertain job market. The economy has been tough, good jobs are scarce, and you likely have heaps of student loan debt. So I get that there might be a temptation to put your job search on hold and continue with your education while deferring your student loans. But (and don't tell my daughter who will be a college freshman in the fall that I am telling you this) let me make one thing perfectly clear:

  Stop going to school!

  Don't go to business school. And don't go to law school. Don't even go to dental school. No, what I want you to do is rule school out. There may be a time to go back to school down the road, in fact, hopefully there will be, but that time is not now.

  And while we are at it, rule out that first big job too. You will have plenty of opportunity - too much opportunity frankly - to work in your life. But not now.

  So, what should you do instead of going to school and getting a job? Let me give you a few ideas:

  For starters, you can goof off."

  I'm all for this ... but I'm sending him my "goof off" bills.

• What to do about young voters who feel abandoned? Good question. I know the numbers are showing the president is losing support among youth and as a result the White House has really stepped up its outreach hoping no one noticed they ditched us when the hard policy was happening (HCR... environmental stuff... etc...). The "hey what about me?!" narcissism of politics and voters.... Is it narcissism when you demand accountability?
  

  "Is there an explanation for such a development? It seems that young people feel the President is no longer focused on them. Other issues have captured his attention including issues related to older people. One young lady summed it up this way: “He made young people feel important, then he got into office and there was no one talking to us.”

• Young Entrepreneurs help fuel economy. Good time to mention Our Time's Buy Young campaign soft launched focusing on businesses that are run by young people that are sustainable and make products from recycled materials. If you sign up you get 30% off or more!
• Ron Paul says young people are tired of the wars
• As many of you know, student financial aid funding is at risk of being cut in high pressure budget negotiations - including eliminating almost 1.5 million students from receiving important grant programs like the Pell Grant. While members of Congress traveling home to their districts this Summer we must hold them accountable by telling them how much student aid means to us.

  Here is a new online action that helps you write a letter to the editor of your newspaper

• Fair Elections news - The latest Voter Suppression Update, provided by FELN and Campus Progress, is available. Some really really good news for Missouri, Maine, Pennsylvania, and North Carolina - but bitter sweat with some sad news about NC and Ohio... so much work to be done to help prevent voter disenfranchisement especially among young voters.

Other ORG news:

• On July 12th the Break The Chain Campaign is hosting the first CARE CONGRESS: the historic public launch of the Caring Across Generations campaign. This is your opportunity to join us at this historic gathering! You can register here.
  

  This year is the first year of the "age wave;" every eight seconds, an American will turn 65. In the coming years, more and more members of our communities will need care, just as more and more workers will need quality, dignified jobs. At a time when we desperately need new jobs, new paths to citizenship, and new solutions to persistent crises in care, a broad coalition of people from all walks of life are coming together to push for change.

  When: July 12 - 9:00 am - 5:00 pm [Meals Included]

  Where: The Washington Hilton - 1919 Connecticut Ave NW

  Who: Secretary of Labor Hilda Solis and 700 people who care

When I saw this article was posted by Amanda Fairbanks at Huffington Post I immediately turned my head and thought…. surly this can't be true. I'm in debt - I've been in debt since college - both credit cards and student loans. (I was irresponsible) My debt has prevented me from taking jobs I wish I could take because I can't afford them. It's prevented me from doing a lot of things like traveling the world (a dream of mine), going to law school (a previous dream of mine), and grown up things like … not moving states every year or so because I'm looking for a new or higher paying job or better benefits. I know I'm not alone.

Surly - SURELY those other young people out there wouldn't see this as a good thing. And certainly this wouldn't be something that would increase someone's self esteem?! I saw a great documentary on CNBC about students in debt that can't sleep at night and sob on camera because they feel so lost and afraid.

Via Fairbanks piece:

""Debt can be a good thing for young people -- it can help them finance goals they couldn’t otherwise, like a college education,” said Dwyer, whose findings appear in the latest issue of Social Science Research, an academic journal."

When looking up information on this study I found that you had to pay $31.50 to the damn Social Science Research magazine er research book or whatever just to see the methodology behind the survey. I put it on a credit card…. Email me if you want a free copy I'll give you mine....

Here's what I learned on page 732 under the "Data and Methods" section.

"We use multiple years of the National Longitudinal Survey of Youth 1979 – Young Adults sample (NLSY79-YA) up to 2004 to evaluate the impact debt holding has on youth during a time of high credit use. The NLSY is administered biannually by the Bureau of Labor Statistics and the Young Adults sample is made up of the children of female respondents of the 1979 NLSY cohort…..

We limit our sample to youth at least 18 years of age, who are not in high school, and are responsible for at least some of their financial obligations to ensure that all respondents included in the analysis were eligible to access credit, resulting in a sample of 3079 respondents. The age range for this group is from 18 to 34, but the majority of the respondents are in their early to mid-twenties, with a median of 22 years and 80% aged 25 or younger. We control for age in all analyses and conduct supplemental analyses stratified by age, which we discuss further in the results section."

So, how do you rank good or bad self-esteem?

"…The Pearlin Mastery Scale is composed of seven items intended to assess respondents’ sense of control over their life: ability to solve problems in life, feeling pushed around or bullied, amount of control they have in their every- day lives, ability to do what they set their minds to, amount of helplessness when dealing with everyday problems, sense of control over what happens in the future, and ability to change important things that happen in their lives (Pearlin and Schooler, 1978). The alpha value for the mastery scale is .68. The Rosenberg Self-Esteem Scale includes ten items to assess respondent self worth: I am a person of worth; I have a number of good qualities; I am inclined to feel I am a failure; I am as capable as others; I feel I do not have much to be proud of; I have a positive attitude; I am satisfied with myself; I wish I had more self-respect; I feel useless at times; and I sometimes think I am no good at all (Rosenberg, 1989). The alpha value for the self-esteem scale is .83. Measures were coded so that a higher value indicates greater mastery or self-esteem."

I take issue with this - because I'm satisfied with myself, I have done a lot I can be proud of, and I don't feel like a failure - but I feel a lot of anxiety around my debt and I've made decisions based on that debt. Yet by this classification system I would have high self-esteem around my debt. That's not exactly a great methodology...

Here's the kicker from page 733

"Because many respondents have no debt, we create spline functions for both education debt and credit-card debt. The spline splits each form of debt into two component variables: (1) a dummy variable indicating whether the respondent has any debt, and (2) a continuous measure of the total debt held with zeros for non-debt holders. The simultaneous esti- mation of the effects of these two variables models debt more accurately than a simple linear function, enables us to distin- guish the effect of having any debt from the effect of having more or less debt, and reduces the bias due to the skew of the underlying debt variables (Wojtkiewicz, 2003)"

Seriously? No….. seriously?

First of all - those who graduated between the years 1979-2004 are probably not in debt anymore! The only people I can see who MIGHT still be in debt would be people who graduated in the last 10 years with their BA and didn't get an advanced degree. Graduates in 2004 had an average rate of 66.4%. Debt keeps going up....

"About a decade year before that, it was less than half who had student loans to pay back. Also over that past decade, the debt levels for graduating seniors with student loans more than doubled from $9,250 to $19,200, which is an 108% increase."

Secondly, that dollar amount also has increased. In 2004 that number of debt was $17,600. Today that number is closer to $25,000 asFairbanks quotes.

So, essentially - a majority of these people had lower amounts of debt than today - have had more time to pay off that debt, and graduates prior to 2004 weren't being hit with the economic recession that we've been dealing with for the last since even 2006 and 2007.

This whole study seems remarkably out of touch with TODAY's youth who are saddled with high costs of education, high unemployment, predatory lending, and the Department of Education's SWAT team coming after them for loan defaults.

I call this a BS study for those reasons. I don't think it's helpful to try and pretend that young people are positive about being poor, in debt, jobless, and without health care. It does a serious disservice to economic or education policy and to those of us who do advocacy around youth or economic issues for young people.

To belabor a point made previously on this blog - deficit hawks are jeopardizing not only the nascent economic recovery but the economic prospects of young people. Don’t take my word for it. There’s a growing chorus of journalists and political commentators across the political spectrum weighing in on the deficit hysteria consuming Washington.

The NYTimes runs a piece today aptly titled “American Dream is Elusive for a New Generation ”. The article profiles the travails of a 24 year old recent college grad struggling to find desirable work and living back at home with his parents.

As the passage below highlights, young people attempting to navigate their way into and through this job market are facing historic headwinds.What's striking is that young people display a persistent sense of optimism, a belief that better days are ahead. But that unrelenting optimism may change in the future, and it depends on what type of economic recovery takes place. The story 30, 40 or even 50 years from now may be that of a generation whose economic possibilities were constrained by this Great Recession.

“I don’t think I fully understood the severity of the situation I had graduated into,” he said, speaking in effect for an age group — the so-called millennials, 18 to 29 — whose unemployment rate of nearly 14 percent approaches the levels of that group in the Great Depression. And then he veered into the optimism that, polls show, is persistently, perhaps perversely, characteristic of millennials today. “I am absolutely certain that my job hunt will eventually pay off,” he said.

For young adults, the prospects in the workplace, even for the college-educated, have rarely been so bleak. Apart from the 14 percent who are unemployed and seeking work, as Scott Nicholson is, 23 percent are not even seeking a job, according to data from the Bureau of Labor Statistics. The total, 37 percent, is the highest in more than three decades and a rate reminiscent of the 1930s.

Calls for increased government spending have for the most part been articulated from the left. Yet it appears that the dismal job numbers last month have caused some conservative deficit hawks to recognize the value in additional fiscal spending. Economist Mom runs this snippet taken from an open letter to Scott Brown in the Boston Globe

…take it from David Walker, former US comptroller general and now, as president of the Peter G. Peterson Foundation, a leading deficit hawk. “While the current deficits are large, they don’t represent the real threat to the future of the country,’’ he said. “The real threat is the medium-to-longer term structural deficits that will be here after the economy has recovered.’’…

No fiscal falcon with a proper balance of economic and fiscal priorities is going to fault you for supporting that extended aid.
“As a deficit hawk, I wouldn’t worry about extending unemployment benefits,’’ said Bob Bixby, president of the Concord Coalition. “It is not going to add to the long-term structural deficit, and it does address a serious need. I just feel like unemployment benefits wandered onto the wrong street corner at the wrong time, and now they are getting mugged.’’

And here, Matt Mills a traditional deficit hawk makes an argument for increased fiscal spending via The Washington Post

I come before you, in other words, a deficit hawk to the core. But it is the height of economic folly -- and socially dangerous, in my view -- to elevate deficit reduction as a goal today over boosting jobs and growth. Especially when there are ways to goose the economy while at the same time legislating changes that move us toward fiscal sanity once we're past this stagnation.

Even NYTimes columnist David Brooks tepidly endorses extending unemployment benefits in his most recent column, albeit while making an argument against a second stimulus.

It goes without saying but deficits and the debt matter. Yet the additional measures in spending that most are now advocating for have no serious bearing on our real long-term budget problems.

These are not arguments made in the abstract, the Senate’s failure to extend unemployment benefits have real human tragedies behind them (calls into the National Suicide hotline have increased). States will be forced to lay off hundreds of thousands of employees if Congress doesn’t extend additional aid.

What will Congress or more specifically the Senate do once it returns from its holiday recess? Only time will tell. We can only hope that the convergence across the political spectrum for additional fiscal spending outside of the halls of Congress informs the action within it.

I’ve been struck by the wave of austerity capturing not only American politics but politics across the globe. Not only has the Senate failed to pass an extension of unemployment benefits and aid to states, the post-mortem G8/G20 headlines were that the world’s leaders would primarily be focused on deficit/debt reduction as opposed to additional large overtures to stimulate the economy.

Deficit hawks or Austerians seem to be winning the day! Don’t get me wrong, deficits and the debt does matter. But the preoccupation with the deficit now is ill placed. Paul Krugman in the NYTimes warns of a Third Depression. The Times also runs a piece detailing the effects of “belt tightening” in Ireland. The key graphs are below…

As Europe’s major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight.

Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.

There’s very little to possibly lose from additional government spending. But if governments turn their attention away from reviving the still fragile economy the consequences could be disastrous. Democrats and Congress can’t get weak knees now.

This all could have tremendous generational impacts. Recent college graduates entering the job market now in the midst of recession will earn less than graduates who enter the job market in better economic times. And consider that young workers are beset with new and challenging problems. Student debt, declining wages, widening inequality, rising costs etc. etc. etc.

The most recent jobs would have had an only marginal impact on the deficit. It just doesn’t make any sense for Democrats to get timid now when it comes to the economy. Debates over the debt and deficit are often made with future generations in mind. All of this profligate spending now jeopardizes the standard of living of future generation, the meme goes. Well, I’m sure young people appreciate that concern. But what young people really need right now is for the Congress to focus on creating jobs and stimulating growth, so that young people will actually have an economic future worth looking to.

The Wall Street Journal today reports on a drastic increase in student borrowing and debt:

Students are borrowing dramatically more to pay for college, accelerating a trend that has wide-ranging implications for a generation of young people.

New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. The amount of money students borrow has long been on the rise. But last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95, according to figures used in President Barack Obama's proposed 2010 budget.

The sharp growth is "definitely above expectations," says Robert Shireman, deputy undersecretary of the Education Department. "But we're also in an economic situation that nobody predicted." The eye-opening increase in borrowing is largely due to the dire economic environment, which is causing more people to seek federal loans, he says.

The new numbers highlight how debt has become commonplace in paying for higher education. Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate, according to an analysis of the government's National Postsecondary Student Aid Study, conducted by financial-aid expert Mark Kantrowitz. Only a dozen years earlier, according to the study, 58% of students borrowed to pay for college, and the average amount borrowed was $13,172.

A new press release from Rep. George Miller's office calls shenanigans on Republicans for attempting to cook the books on student loan reform. The amazing thing of it is, even taking their concerns seriously, the CBO still says that ending the FFEL for the government Direct Lending program is going to save almost $90 billion that can be reinvested in real tuition help for students. The result? These lending reforms look more attractive than ever, and Republicans, by defending a bloated give-away to lending corporations, just lost even more credibility on issues of fiscal responsibility.

You can read more on this directly from the CBO at the Director's Blog.

WASHINGTON, D.C. – Today, in a desperate attempt to confuse the American people about a landmark bill to make college more affordable and reduce the deficit, Republican lawmakers deliberately asked the Congressional Budget Office to ignore current student loan market conditions and standard scoring methods. Republicans in the House and Senate released a manipulated analysis they requested from CBO that uses a methodology preferred by banks, and does not take into account the changed landscape of the student loan market, under which the federal government now finances 60 percent of all federal student loan activity.

The analysis does not change the official score of the bill, the Student Aid and Fiscal Responsibility Act of 2009, which estimates that it will save $87 billion over 10 years, or the fact that it is fiscally responsible. All of those savings will be invested in additional aid to help student and families pay for college, to improve early learning opportunities for young children, and to pay down the deficit.

“It’s clear that Republicans didn’t like the truth – that our legislation generates almost $90 billion that could be used to help students, families, and taxpayers – so they shamelessly decided to have a little fun with the numbers,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee and the author of the legislation. “This is nothing more than a desperate attempt to confuse the public and manipulate a clear determination by CBO that switching to the Direct Loan program is the most sound, fiscally responsible policy decision we could make for families and taxpayers. This is yet another predictable political gimmick from a party that is proving that they will do or say anything – no matter how misleading – to block reforms that will make a tremendous difference in improving the lives of America’s families.”

BACKGROUND

There are several factors to keep in mind when reporting on this estimate:

CBO’s official estimate still projects that the Student Aid and Fiscal Responsibility will save $87 billion over 10 years. This alternative estimate does not change the savings the bill will generate, or how those savings will be spent, in any way.

This alternative estimate ignores current student loan market conditions, under which the federal government is currently supporting 60 percent of all federal student lending. This estimate assumes normal credit market conditions, under which the federally guaranteed student loan program functions entirely independently, as it used to. It does not reflect today’s reality: that the federally-guaranteed student loan program is on life support. The federal government, through both the Ensuring Continued Access to Student Loans Act, and the Direct Loan program, is now financing 60 percent of all federal student loan activity. This current ECASLA-supported, federally-guaranteed student loan program is very similar to the DL program – it generates the same cash outflow upfront, but the funds are sent to lenders who then give it to borrowers. If this alternative estimate was based on this current reality, it would likely show a higher market-risk adjusted subsidy rate for the Federal Family Education Loan Program – again reflecting that the program is on life support.

The letter highlights the difference between the streamlined payment structure of DL and the complicated payment structure of FFEL: “In the direct student loan program, the federal government makes a large, one-time outlay for the amount of the loan (net of various fees) and then receives a stream of principal and interest payments over time. In the guaranteed student loan program, the federal government faces a far more complicated set of payments. It does not disburse a principal amount (loans are disbursed by private lenders) but instead receives some up-front fees, makes a stream of subsidy payments (known as special allowance payments) to lenders, partially compensates lenders for loans that go into default and pays certain borrower benefits, in addition to various other receipts and payments.” Again, this does not reflect the additional risk that the federal government currently takes on under the ECASLA program.

Even when using this alternative methodology that lenders and critics of H.R. 3221 favor, this estimate still reinforces that Direct Loans save more money than FFEL loans. “CBO estimates that over the 2010-2019 period, the subsidy cost for each dollar of a guaranteed loan will exceed the subsidy cost for each dollar of a direct loan by between 10 and 20 cents. Generally, in CBO’s estimation, the direct loan program will have a negative subsidy rate (that is the net receipts to the government on a present-value basis are projected to be greater than its disbursements), whereas the guaranteed loan program will have a positive subsidy rate (that is a net cost on a present value basis).”

Even CBO acknowledges concerns with using this alternative estimate; it leaves many questions unanswered about how future credit market turmoil could impact the student loan programs. “The approach does raise some concerns. As the recent financial turmoil has shown risky assets, including student loans, can fluctuate wildly in value. Those fluctuations can lead to large changes in market-based estimates of subsidy rates for student loans from one year to the next.”

One of the major reasons we've had the government-subsidized, Family Federal Education Loan program for so long is that the corporations who benefit from the program spend a lot of money lobbying higher education institutions to keep or adopt the program. Once a school is in the program, it's kind of hard to get them out. Administrators get taken out on corporate junkets every year, and what administration would want the headache and red tape of switching over to another program?

Turns out, the transition process is pretty painless. Over at the Student Lending Analytics blog, they are reporting on a new survey by the National Association of Student Financial Aid Administrators indicates that the transition process is pretty smooth. This is good news as it will likely mean less resistance from colleges who take part in the FFEL program (a majority, I think, but don't quote me).

• Ease of implementation: 73% of the institutions that have switched from FFEL to DL in the last year said the switch to Direct Lending was easier than they thought
• 4% said it was more difficult
• Resources to assist in implementation: 84% said the Department of Education was helpful in providing assistance for the conversion and 88% said other schools were also helpful
• Administration of DL program: 61% said the burden of administering the DL program was less than the FFELP program; 24% said it was the same; 14% said it was greater.
• Staffing requirements of Direct Lending: 84% said they neither had to increase nor decrease the number of staff to administer the DL program.
• Greatest difficulty: Working with software developers and in-house IT staff
• 10% said software developers were unhelpful
• Time to convert: 80% able to convert within four months
• 14% indicted that it took longer than seven months

There are a few caveats about the sample size, diversity, and response rate in this survey. So take them with some grains of salt, but overall very good news.

Great news coming out of the Education and Labor Committee today. Chairman Miller has introduced legislation that will make student lending more efficient by ending the FFEL (government subsidized corporate lending) program, and redirect money to the more efficient Direct Loan program and Pell Grants. This will mean billions of more dollars in aid to students at no cost to the government.

Chairman Miller Introduces Legislation to Make Landmark Investments in College Affordability

Legislation will invest billions of dollars in student aid by embracing President Obama’s proposal to switch to Direct Loans

WASHINGTON, D.C. – U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, today introduced legislation that will make college dramatically more affordable by investing billions of dollars in additional student aid – and at no new cost to taxpayers.

The legislation, the Student Aid and Fiscal Responsibility Act of 2009, will generate almost $100 billion in savings over the next ten years that will be used to boost Pell Grant scholarships, keep interest rates on federal loans affordable, create a more reliable and effective financial aid system for families, and enact President Obama’s key education priorities.

“As President Obama has made clear, we have a rare opportunity to make a landmark investment in America’s economic future by making common-sense changes to the way our student loan programs operate,” said Miller. “Students and families need stronger, reliable college aid, our economy needs a highly-skilled, educated workforce, and our taxpayers need policies that make the best use of their dollars. This legislation will help us reach all of these goals by transforming our financial aid system from one that puts banks before students into one that makes paying for college a better deal for families and taxpayers.”

Similar to what President Obama proposed in his FY 2010 budget, the bill will originate all new federal student loans through the Direct Loan program starting in 2010, instead of through lenders subsidized by taxpayers in the federally-guaranteed student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to affordable college loans, at the same low interest rates, terms and conditions, no matter what happens in the economy.

The legislation will ensure that all federal student loan borrowers receive the best possible customer service when repaying their loans by forging a new public-private partnership that allows private lenders to compete for contracts to service loans. Additionally, it will ensure that non-profit lenders have the opportunity to continue servicing loans – preserving a role for lenders and maintaining jobs in communities throughout the country.

According to estimates from the Congressional Budget Office, the legislation will generate $87 billion in savings over the next 10 years. The legislation would invest those savings directly in students and families by:

• Investing $40 billion to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $6,900 by 2019. Starting in 2010, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index plus 1 percent;
• Investing $3 billion to bolster college access and completion support programs for student;
• Strengthening the Perkins Loan program, a campus-based program that provides low-cost federal loans to students;
• Keeping interest rates low on need-based – or subsidized – federal student loans by making the interest rates on these loans variable beginning in 2012. These interest rates are currently set to jump from 3.4 percent to 6.8 percent in 2012;
• Making it easier for families to apply for financial aid by simplifying the FAFSA form;
• Investing $1.2 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate; and more.

In addition, the Student Aid and Fiscal Responsibility Act will direct $10 billion of these savings back to the U.S. Treasury to help pay down the deficit. It will also invest in early education opportunities and in school modernization projects that will help the nation transition to a clean energy economy.

To view a summary of the legislation, click here (pdf).

For more details on:

• How this legislation will help students and families, click here (pdf).
• For more details on covering to Direct Loans, click here(pdf).
• For more details on how this bill will strengthen community colleges, click here(pdf).
• For more details on investments in early education, click here(pdf).
• To view a myth versus fact sheet on this legislation, click here.

The House Education and Labor Committee has been examining various proposals for student loan reform and seeking feedback from all key stakeholders over the past few months. In May, the Committee held a hearing to examine these proposals, at which the Obama administration, lenders and colleges and universities testified. For more information on that hearing, click here.

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A number of youth groups have already issued statements lauding the committee's actions.

US PIRG:

NEW BILL MAKES HISTORIC INVESTMENT IN STUDENT AID

U.S. Public Interest Research Group Commends Chairman Miller

WASHINGTON, July 15 – Christine Lindstrom, U.S. Public Interest Research Group Higher Education Program Director, released the following statement on the higher education bill introduced on Wednesday by George Miller (D-CA), chair of the U.S. House Education and Labor committee:

“U.S. PIRG commends Chairman Miller (D-CA) for introducing a game-changing proposal that enlarges the impact of student aid programs for the tens of millions of students and families who rely on grants, loans, and access to community college to attain a college education.

“In keeping with the higher education budget proposal that President Barack Obama released in February, the policy makes the single biggest investment in student aid in history. It reforms the Federal Pell Grant program to increase each year along with the cost of living, cuts the interest rate on subsidized Stafford loans, infuses our nation’s community college system with more funding and support, and makes the student aid programs more efficient for students and taxpayers.

‘We urge the House Education and Labor committee and Congress to pass this historic legislation.”

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Campus Progress

Miller Introduces Legislation that puts Students Over Banks

Campus Progress Statement on the Student Aid and Fiscal Responsibility Act

Washington, DC -- This morning, Rep. George Miller (CA), Chairman of the House Committee on Education and Labor, introduced the Student Aid and Fiscal Responsibility Act, which will eliminate wasteful subsidies to student loan companies and use the $87 billion in savings on a bold policy package to make college more affordable and accessible for low and middle income families. The legislation closely follows a proposal by President Obama, despite fierce opposition from the student loan industry, and represents the largest ever investment in higher education.

Campus Progress has launched a new campaign Students Over Banks (studentsoverbanks.org) to support passage of this legislation. In addition to providing young people information about the proposals, the website offers profiles of some of the worst actors in the Federal Family Education Loan Program (FFELP), ways to take action online, and the latest news on college affordability issues.

Last week, as part of the 2009 Campus Progress National Conference, Campus Progress also partnered with USPIRG and other groups to bring one hundred people to the Capitol to meet with lawmakers on this and other economic issues affecting young people. We believe that the choice is clear: We can either increase opportunities for young people and displaced workers and build the American workforce for a 21st century economy, or we can cater to special interests trying to hold on to wasteful federal subsidies. Campus Progress commends Chairman Miller and other lawmakers who are standing against special interests in order to expand educational opportunity.

The Student Aid and Fiscal Responsibility Act would:

• Invest $40 billion to increase the maximum Pell grant award to $5,550 by 2010, and $6,900 by 2019. It will also pave the way to tie the maximum award level to inflation plus 1%.
• Invest in community colleges and historically black colleges and universities, as well as efforts to improve college access and completion rates.
• Strengthen the Perkins loan program to help students avoid risky private loans.
• Simplify the FASFA.
• Provide $10 billion in deficit reduction.
• Originate all future loans through the Direct Loan program, which will create $87 billion in savings over ten years.

Campus Progress is the youth division of the Center for American Progress, a nonpartisan, nonprofit progressive organization. Through programs in activism, journalism, and events, Campus Progress helps young people make their voices heard now on issues that matter, and works with young leaders and organizations nationwide to build a strong, united progressive movement that can bring long-term positive change. Campus Progress runs a daily web magazine, CampusProgress.org; supports student publications on 50 campuses; supports local and national youth issue campaigns; and has held over 700 events and film screenings. For more information, please visit Campusprogress.org.

Just the Facts:

• The top 20 FFELP loan holders in 2008 spent at least $4,665,000 on lobbying since January to win favor in Congress, sometimes while receiving bail-outs from taxpayers, according to figures from Opensecrets.org
• Loan Giant Sallie Mae has spent $1,150,000.
• Around 260,000 additional students would receive Pell Grants for the 2010-11 school year if Obama’s plan is enacted, according to US PIRG and the Institute for America’s Future
• An interactive map with a state-by-state breakdown is available at: http://www.campusprogress.org/cribsheets/3943/pell-grant-changes
• The Pell grant, which helps low and middle income families, covered 72% of the average cost of attendance for a public four year college in 1976, but only 33% of this cost in 2006.
• Loan Companies offered at least 13 counter-proposals designed to preserve their profits at the expense of low and middle income students
• Most of these plans aimed to preserve some part of the FFELP program in order to preserve the profits of the particular company or sector of the student loan industry making the proposal.
• In a last ditch effort, most of the lending community united around a single “Frankenstein” counter-proposal. Despite claims by lenders that it would create “similar” budget savings lawmakers believe that these proposals would take $15 billion that could be spent on expanding educational opportunity and redirect it toward banks.
• The Lumina Foundation estimates that the American Economy will face a shortage of 16 million college educated workers by 2025. Yet we are leaving too many talented young people behind, especially those from low-income or minority families.
• The most academically prepared low-income high school graduates go to school at about the same rate as the least prepared students from wealthy families.
• For young people that do attend college, large class and racial disparities exist in completion rates. Almost 67% of non-Hispanic White students earn a bachelor’s degree from any school within six years, while the same can be said for only 45.7% of non-Hispanic Black students.