Tuesday, January 27, 2009

Not Sure Where to Start....

Try 1 percent solution for student loans

January 27, 2009

The debate on the recovery has begun in earnest. The $825 billion plan introduced in the House is a good beginning. It makes a down payment on investments vital to our future (Empty and Buzzwordy enough for ya'?) -- in new energy, health-care efficiency, education. It provides assistance for those hit hardest by the crisis. It provides a tax break for the vast majority of Americans.

Republican leaders have reacted in partisan rather than patriotic form. (Oh My Ever Living GOD! Are you fucking serious?!?! The fucking NANOSECOND the Republicans pulled the "you're with us or else you're unpatriotic" bullshit, Jesse was FIRST IN LINE to admonish that sort of rhetoric. Guess that doesn't work both ways, huh?) Their objections are simply wrongheaded. House Minority Leader John Boehner (heh-heh) says the plan is too large, spends too much and has too few tax breaks for business. In fact, the reverse is true. If anything, given the accelerating downturn, the plan is too small and contains too many business tax breaks that are notoriously ineffective at producing jobs. (so, Jesse, you're suggesting expanding the plan, spending more and taxing businesses more....hm...sounds like a rock solid idea)

To help get the economy moving, Congress would be well advised to pass -- either as part of the recovery plan or separately -- a bold initiative to help make college and advanced training affordable. I'd suggest a simple proposition: Let's make college loans available to students on the same terms that the banks receive. (um...how about reducing tuition first?)

Banks now borrow money at about 1 percent, even as the Treasury and Federal Reserve pour in literally trillions in equity, loan guarantees, credit swaps and the like to keep them from going belly up. (which, is a fantastic idea, too. I see good things happening with that model!)

Over the last few decades, students have gone from paying for college with two-thirds grants and one-third loans to the reverse, with most racking up tens of thousands of dollars in debt to stay in school. They are forced to borrow -- even on the subsidized loans -- at rates of 4 percent to 5 percent. When those limited funds are exhausted, they are forced into a private market, where interest rates are even higher, and sometimes end up relying on credit card debt, with rates more than 20 percent. (You're missing the target, buddy. It's not the banks fucking students over. It's the institutions themselves. Tuitions in this country are out of control, but, it's because 70% of the cost for an institution is in human resources (healthcare, worker's comp, etc... Paying 1% on $30,000 will suck just as bad as paying 5%)

With the recession spreading, students are struggling to cobble together the funds to stay in school. (and how is that different than non-recession years?) Parents' contributions get slashed when they lose their jobs. Grant aid doesn't make up the difference. The Economic Recovery Plan would increase the maximum Pell grant by $500, but that doesn't make a dent.

There is real perversity here. General Motors is offering car loans at zero percent while students seeking to get an education must pay 5 percent to 6 percent. Students are essentially subsidizing the banks that drove us into this ditch, even as those banks continue to pay multimillion-dollar bonuses to the very leaders who are responsible. (Ever get a peek at some of these 'noble' education administrator's salaries? Holy flirking schnit. Again, going after the 'unwarranted bonus to evil bankers' argument here isn't holding much water when the philosophy professor has a mansion)

Thus far, the Federal Reserve and the Treasury keep spraying the leaves and ignoring the roots. They keep bailing out the captain's quarters while ignoring the hole at the bottom of the boat. (so, why doesn't this stimulus package mention that?!? I'm getting tired....)

We should go another way. Michelle Obama has noted the harsh burdens that students are faced with. "Salaries don't keep up with the cost of paying off the debt, so you're in your 40s, still paying off your debt at a time when you have to save for your kids." She and Barack were still paying off their loans in their 40s, until his best-selling books got them out of the hole. And they were successful graduates of Harvard Law School. (where tuition is more than reasonable. Geez, I can't figure out why someone would still be paying off a loan to THAT school!)

Now the situation is much worse. Talented students are forced to drop out. Schools without large endowments are making draconian cuts and raising tuitions.

Young people are the nation's most valuable asset (Ok. Sing it now, "Children...children.....future...future..Children are the futuuure") ; their education is essential to our future. Their potential should not be snuffed out, their dreams shattered because of an economic crisis they didn't cause and cannot avoid. We shouldn't ask them to subsidize the very banks that caused the mess (that's the Federal Reserve's job!) . It's time for a 1 percent student loan program.

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