Friday, April 27, 2012

"Are we subsidizing student debt too generously?"

It is not fashionable to say this but both political parties have suffered a lapse of logic and Economics 101 when it comes to student debt. Recently, Mitt Romney joined President Obama in calling for additional subsidies for student-loan borrowers.

I went to two critics of the current craze for federal subsidies and extension of student loans, Lindsey Burke, the Will Skillman Fellow in Education at the Heritage Foundation, and Hans Bader, senior attorney and counsel for special projects at the Competitive Enterprise Institute.

Why am I subsidizing student loans for Harvard kids?

BURKE: Exactly. The burden - and risk - is passed along to taxpayers, including the three-quarters of Americans who don't hold a college degree (and likely earn less than those who do hold a degree). Taxpayers will be on the hook for $6 billion if the rates are kept low.

BADER: I have no idea why. It never made sense to me even when I was at Harvard. Harvard has a huge endowment, and just hoards it. It's not mostly for the students. As the Dean of Harvard Law School publicly said then, students are merely "incidental."

Don't federal subsidies drive up the price of tuition?

BURKE: Keeping interest rates artificially low will fail to drive down college costs in the long run. Colleges will once again be able to increase costs, and students with easy access to low-interest loans will once again be able to pay. The Obama administration has significantly increased federal involvement in the student loan industry, effectively nationalizing student lending through language buried in Obamacare, by continuing to increase federal subsidies, and by "forgiving" student loans altogether after 20 years on the backs of taxpayers. But these policies only exacerbate the college cost crisis, continuing a vicious cycle whereby college costs rise in tandem with ever-increasing federal subsidies.

BADER: Yes, federal subsidies do drive up tuition. It's Econ 101: basic economics dictates that conclusion. Cato Institute education expert Neal McCluskey links to 4 studies so concluding at this link. Andrew Gillen persuasively argues that subsidies drive up tuition in a study available at this link. Gillen's study is discussed at this link. Government loan ceilings are higher for law students than for undergrads, and, surprise, surprise, law school tuition and student debt are much higher there. The more taxpayer-backed student loans available, the higher the tuition rises, and the more crippling students' debt upon graduation. Even the liberal law professor Brian Tamanaha was driven to observe that "This financial insanity will not stop until significant changes are made to the federal student loan program." As a story in the ABA Journal noted, "Law students . . . are treated generously as future professionals and able to borrow, with virtually no cap, significantly more money than undergrads. . . For several decades, most higher education loans were made by private lenders with the federal government providing guarantees against loss - and, in some cases, interest rate subsidies." Now, students routinely graduate from law school with well over $100,000 in debt - an average of $165,000 at John Marshall in Chicago.

Why are colleges allowed to keep tax-exempt status while sitting on mounds of endowment money?

BURKE: It's an interesting question, particularly when one considers the increase in non-instructional staff at universities over the years. The Goldwater Institute found that administrative positions at colleges increased 39 percent since 1993. But ever-increasing federal subsidies give colleges little incentive to cut costs. If the administration wanted to drive down college costs, they could consider reforms that would encourage savings-based - instead of debt-based - college financing, and ending the witch hunt against the for-profit higher education sector.

BADER: Logically, I can't explain why colleges are allowed to [keep] tax exempt status while sitting on mounds of endowment money. Private charities usually have to spend a certain percentage each year. Why not wealthy colleges? They are accumulating extravagant wealth due to preferential tax treatment in a way that reminds me of the Medieval Church, which ended up controlling much of the land due to its favored, tax-free status (which later kings - even some Catholic rulers - ended up confiscating in large part later in the Renaissance and Enlightenment). But if you tried to limit their tax-free hoard, they would send high-paid lobbyists to fight you, and claim you were stealing from the children and America's future.

Bader went on to explain: "Sometimes, financial aid increases lead directly to tuition increases. The federal government imposed the 90-10 rule, which forced low-cost for-profit educational institutions to raise their tuition to comply with a new federal regulation requiring them to charge enough over federal financial aid so that at least 10 percent of education costs don't come from financial aid. Corinthian College had diploma programs in health care and other fields that can be completed in a year or less. Until 2011, many of those programs had a total cost of about $15,000, which meant that federal grants and loans could cover nearly 100 percent of their cost. In response to the Education Department's rule, the college raised tuition to comply with the 90/10 rule. The net result of the government's rule, as Corinthian College notes, was to "create a perverse, no-win `Catch-22' that could prevent low-income students from attending college," by encouraging such colleges to raise tuition to outstrip rising financial aid by more than ten percent.

In sum, Bader finds that President Obama has "harmed America's students, not only by perpetuating financial aid policies that drive up tuition" but also by encouraging students to seek degrees that don't make them employable "even though a credit rating agency, Moody's, is now warning student borrowers that college may not be worth the money for some majors. Meanwhile, he says, the administration is "seeking to cut back on useful vocational training needed for in-demand, high-paid blue collar jobs, such as the skilled workers who factories need before they can expand and hire more unskilled workers (among whom unemployment is very high)." His analysis on that topic is here.

Not unlike with health care, if someone else is paying the bill (in part), you're going to overspend. But more important, rather than searching for nonexistent illegal oil speculation, how about an investigation of tuition-gouging and a re-examination of guilty institutions' tax-exempt status? If Harvard is sitting atop an endowment of $32 billion, why is it charging students more than $50,000 a year?


Indoctrination 101: Chicago School Teaching Students How To Protest

Jones College Prep – a Chicago Public Schools “selective enrollment” school – recently held “Social Justice Week” in March, a collection of events geared towards turning students into activists.

According to a flyer on the school’s website:  “Social Justice Week was created to promote community advancement through dialogue and community service based activism. Moreover, we hope to unify the voice of various JCP and community organizations in which to facilitate collaboration for the betterment of the community at large and promote a unified human rights advancement initiative.”

The school is, according to U.S. News & World Report, a Top 100 high school in the country. It’s one of the best of the best – the cream of the crop.  Demographically, Jones College Prep is pretty balanced. Statistics from 2007-2008 show black enrollment is 23.4%, white enrollment is 29.5% and Hispanic enrollment is 33.7%.

Yet the school’s focus appears to be bent on radicalizing the students through political activities devised by adult employees, reports exclusively.

On Wednesday of Social Justice Week, Black Star Project, a Chicago-based community organizing group, was brought into the school to teach students about “non-violent” protesting. Led by Phillip Jackson, former “Chief of Education” under former Mayor Richard Daley, the discussion was focused on students fighting back against gun crime.

Black Star Project, according to its website, is funded by Open Society Foundations (i.e. George Soros), Best Buy, ING and Toyota Motor Sales, among others.

But Jackson apparently had no interest in discussing the issue of gun ownership with students and allowing them to come to their own conclusions. When one student disagreed with Jackson’s premise on the topic, her opinion was dismissed. The agenda is not to teach students how to think, but rather what to think.

Jackson's co-presenter, Camille Williams of the Peace in the Hood movement, made several inflammatory statements about gun ownership and the National Rifle Association. She claimed the NRA is indifferent to gun violence. She also asserted she has received emails from the NRA and/or its members claiming she is "going to hell" for her advocacy and "these porch monkeys deserved to die," referring to the students. contacted Jackson regarding these emails, wishing to make them public. We received no response.

Students simply thinking about issues is obviously not enough for Jackson. He strongly encouraged them to develop forms of non-violent protesting. “I’m not telling you to do it, but if you were going to,” he said, leading the proverbial horse to the water.

"I'm just saying," he said on several occasions.

Jackson then offered the idea of creating a graveyard on the school lawn of headstones featuring the names of Chicago residents killed with guns.

It sounds as though Mr. Jackson was simply using the opportunity to recruit volunteers for his political mission. And that sounds more like indoctrination that education.

Do the parents of Jones College Prep students understand what’s going on? What about school leaders?


More pupils in Britain's private schools despite fees hike

Parents are being forced to pay almost £13,800-a-year to put children through private school following a rise in the cost of independent education, it emerged today.

Average fees increased by 4.5 per cent this year, figures show, adding another £600 to the bill for each pupil. The average price of boarding topped £26,000 for the first time, it emerged.

Over the last decade, the cost of independent schooling has now soared by more than 75 per cent – or £6,000 – far out-stripping the rise in earnings over the same period.

The disclosure – in data published by the Independent Schools Council – comes just days after the former headmaster of one of Britain’s top schools claimed that fee-paying education was increasingly becoming the preserve of the “super-rich”.

Martin Stephen, the ex-High Master of St Paul’s, said independent schools were now as “socially exclusive” as they were in the Victorian era.

But the ISC insisted that the latest figures showed continuing strong demand from parents.

According to organisation’s annual census, fee rises at schools this year were among the smallest levied since the early 90s, with schools spending record sums on means-tested bursaries for poor students.

The overall number of pupils in private education also increased for the first time in three years.

But a comparison of schools on a year-by-year basis shows a small drop in the number of British students, suggesting the overall increase in admissions is being driven by demand from foreign families. [China]

Barnaby Lenon, the ISC chairman and former headmaster of Harrow, insisted schools “should be very proud of the results”.

“At a time of recession, when very many parents are struggling financially, it is clear that finding fees for their children’s education remains a priority for very large numbers,” he said.

The ISC said that some 1,209 schools completed its annual census in both 2011 and 2012. Among these schools, the overall number of pupils increased by 0.1 per cent to 504,949.

But among British students alone, the number of pupils in like-for-like schools dropped by 0.1 per cent to 479,009 in 2012.

Figures also showed:

 *  Eleven schools belonging to the ISC shut in the last 12 months, following 14 closures a year earlier;

 *  The number of pupils coming from abroad increased by 5.8 per cent to 26,376;

 *  Hong Kong, China and Germany sent the most pupils, although the number of Russian students has more than doubled in five years;

 *  Fewer pupils were in boarding schools in 2012, with numbers falling by 0.2 per cent on a like-for-like basis to just under 68,000;

 *  Rising numbers of ISC students are choosing to take university degrees overseas, with 27 per cent of schools reporting a rise in pupils shunning British universities in favour of countries such as the US.

In a further disclosure, it emerged that the average annual fee increased from £13,179 to £13,788 this year, although the 4.5 per cent rise was the second lowest since the mid-90s.

Average annual costs stood at just £7,824 in 2002 – representing a 75 per cent increase in 10 years.

Day fees rose from £11,208 to £11,709 in the last 12 months and boarding fees increased from £25,152 to £26,340.

But figures show a third of pupils gained some form of assistance with fees in 2012, with a record £284.7m spent on means-tested bursaries – up by 9.4 per cent in a year.

Kenneth Durham, chairman of the Headmasters’ and Headmistresses’ Conference, which represents 250 leading schools, said: “Even in deep recession, parents recognise excellence in education. Despite increasing financial pressure, families are determined to find the best and broadest opportunities for their children in the independent sector.”


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