By Terry Paulson
5/21/2012
If you want to know what is wrong with the cost of education in America, look to some of the politicians you elected. We've been sold that cheap student loans are the answer to making education affordable. Nothing can be further from the truth.
Tom Coburn, the Oklahoma Senator, could summarize this column in one sentence: "If you want to make something expensive, have government get involved in making it affordable."
When you disregard basic economics, we learn the hard way. With limited supply, the greater the demand for a given product or service the higher the price. By making funds for education easier to get, the demand for education has increased along with its cost. Since 1985, the cumulative inflation rate (CPI-U) has increased what we pay for products and services by an average of 115%. But in that same period, the cost of a college education has increased 498%. In short, government aid is hurting, not helping. The tuition and student debt increases are leaving students with tremendous outstanding debt and depleting the savings of families who thought they had set aside enough for their children's education.
How did this happen? The Federal Stafford Loan Act opened the floodgates to government-backed student loans without parent income restrictions in 1992. The colleges welcomed the news with open arms. The sudden injection of millions of additional aid dollars exploded tuition increases and filled college endowment coffers .
The colleges have gone on spending spree claiming that tuition increases were justified due to higher fuel, labor and overhead costs. There were the buildings that needed to be renovated or replaced, faculty chairs that needed to be created, and research facilities and computer labs that needed to be updated. Welcome to hyperinflation under the guise of making education affordable!
Just as many were attracted to the low rates with adjustable-rate mortgages, many students over the last decade have been enticed into "adjustable rate" student loans issued by private lending institutions and government agencies. Unfortunately, those "adjustable rates" tend to go in only one direction--UP. In July, without bipartisan congressional action, the adjustable rate on student loans will rise to 6.8 percent, impacting 7.4 million students. Many students are finding out that they signed up for more education than they can afford. Like so many in our culture, it's "enjoy the benefits now and pay later!"
As a parent, if you played by the rules and lived the American virtue of self-reliance and personal responsibility, you're paying exorbitant tuition now. When you went to secure aid or a scholarship, your child did not qualify because you made or had saved too much money. You are punished for working hard, sacrificing for the future, and dutifully saving for your children's education. While those who saved little have children who easily qualified for scholarships, loans, and a "cheap" education. They got aid! You had to mortgage your house or deplete your savings.
Are you sitting down taxpayers, parents and students? Economists predict the cost of attending state colleges will soar to $120,000 by 2015. So, what's the answer?
President Obama has a plan--student loan forgiveness for some Americans suffering from extreme student loan debt. If you're lucky enough to owe a lot, make little, and take forever to pay off your student loan, the president has a gift for you. He wants to lower your loan interest rate, consolidate your loans, and cap your payments to 10% instead of 15% of your discretionary income. And now the big prize--if you qualify, your balance of debt owed will be waived after 20 years instead of 25.
If that is not enough, President Obama and even some Republicans are talking about passing the Dream Act to allow qualifying children of illegal immigrants to pay in-state tuition rates and qualify for funds to attend college. Getting "easy money" to fuel their dreams means taking more money from American taxpayers to fund those dreams.
Such expensive plans will just result in higher taxes, even higher tuition costs, more unaffordable debt for future generations, and less money available in the private sector to create the economic growth and jobs American students desperately want when they graduate.
It's time to let colleges compete for your business. By limiting the loan money available and requiring full payment, students will have to shop for the best deals, work hard to complete class credits faster, and pick majors that might actually produce well-paying jobs so they can pay off their debt. While the goal of getting more lower-income Americans enrolled in college is noble and education can be a key to lifting future generations out of poverty, providing more "easy money" from government is obviously not the answer.
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To read another article about government student loans, click here.
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To read another article by Terry Paulson, click here.
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