Tuesday, June 17, 2014

Obama’s Approach to Student Loans Hurts Millennials

The job market and student loan debt had lawmakers waxing philosophical at today’s Conversations with Conservatives event on Capitol Hill.

“When I graduated from undergrad, I had a degree in Spanish literature and a minor in philosophy. I knew I wasn’t going to get a job,” Rep. Raúl Labrador, R-Idaho, said.  In fact, he joked, “I was not marketable at all, so I had to run for Congress.”

Actually, the Idaho Republican recalled, he paid his way through college and law school, taking multiple jobs to afford the cost of higher education. Although he was accepted into the prestigious Georgetown University law school, he instead chose to enroll in the University of Washington’s School of Law because it was one-third the price.

“You’ve got to make those decisions for yourself,” Labrador said. “You shouldn’t be expecting the government to be subsiding everything that you’re going to be doing in your life.”

Although he took a lighthearted approach to the debate over the burden of student loan debt, Labrador and his colleagues had a serious message for millennials: President Obama’s policies are making it more difficult for young Americans to prosper.

“Young people who voted overwhelmingly for Obama have a higher unemployment rate today than they did before Obama was president of the United States,” Labrador said. “They have fewer opportunities for growth, their education loans are higher, and they’re having fewer opportunities to go out there in the marketplace.”

Rep. Matt Salmon, R-Ariz.,  agreed, and  encouraged millennials to work part-time jobs to front the cost of education and get real-world experience.

“The added benefit of actually working while you’re going to school,” Salmon said, “is that when you graduate, you actually have some marketable skills in addition to your sheepskin.”

When The Daily Signal asked about Obama’s reference to “millionaires” helping to retire loan debt in his remarks  yesterday at the White House, Rep. Tim Huelskamp, R-Kansas, said the president’s rhetoric is an attempt to drum up support before the midterm elections.

“We have this massive VA scandal, and he is out talking about the executive actions, trying to distract the public from a failed economy, failed situation at the VA.”

Huelskamp added:  “I think he’s trying to make himself relevant in a town he should be fixing.”

Rep. Thomas Massie, R-Ky.,  argued that part of the problem with prevailing trends in American education is that “we boost up people’s self-esteem and tell them they can be whatever they want—they can major in anything they want.”

But in his district, Massie said, employers are “crying” for more qualified employees.

“We send [young people] to college without asking them to look at their employment prospects with their degrees,” the Kentucky Republican said. “This is an area where there needs to be some personal accountability and responsibility.”

His advice to college-bound millennials? “Do not major in political science.”



Is college still worth it?

Anyone sending their kids to college nowadays or paying off their student loans has probably noticed that the costs are out of control.

In fact, tuition is consistently outstripping the growth of incomes. Since 1976, annual college tuition public and private has increased 1,056 percent — from $924 to a current level of $10,683, according to the Department of Education. That is more than 7 percent growth a year.

Meanwhile, household median income has increased just 302 percent, or 4 percent a year, from $12,686 to the current level of $51,017, according to data compiled by the U.S. Census Bureau.

The risk of going to college is that increasingly you might not find a job that pays for it at the end of the rainbow.

In fact, nearly half of four-year college graduates say they are not even working in professions that require a bachelor’s degree, according to a 2013 study of 4,900 college graduates by McKinsey & Co. Another third said that college had not prepared them properly for the working world.

As it stands now, annual tuition is about $10,000, and growing at an average rate of 7 percent a year.  In just 14 years, holding to the historical average, annual tuition should be about $26,000 a year, or $104,000 for four years. Just for tuition, not room, board, and books.

Include those, and the annual cost, now at about $20,000, could be about $51,000 a year, or $204,000 for the four year haul. Meanwhile, wages will not keep up.

With costs outpacing the ability to repay — and the value of the degree itself diminishing — that can only mean fewer choices for our children than we had, a prospect that is not only deeply saddening for parents, but alarming as a nation that once called itself the “land of opportunity.”

The reason for the skyrocketing costs? The student loan program.

Creating artificial demand for something, in this case college, drives costs to the moon. The same thing happened recently with housing. The Freddie Mac Home Price Index from 1976-2006 grew at an average annual rate of 6.17 percent, again outpacing incomes. Unlimited financing boosted demand and sent prices spiraling upward.

But that’s not stopping politicians in Washington, D.C. from doubling down. In fact, this week, the Senate is debating an expansion of the student loan program.

That is largely the story of the financial crisis, wherein credit, and thus asset prices, grew faster than the ability of households, financial institutions, and everybody else to repay the principal. All the while, policy makers sought ways to further blow up the bubble.

Now, we see deleveraging across the board after the bubble popped, but one area where this has not happened, yet, is in student loan debt.

The reason is because the near limitless federal financing remains in place, because default is impossible, and because unlike housing, there is no private market feedback at financial institutions despite an extremely high delinquency rate on student loans.

The fact is, minus these loan programs, college would much cheaper, and housing would be more affordable.

Sure, fewer people would go on to obtain college degrees without the financing. But, in an alternate universe, markets could have handled post-secondary school education and training without the debt.  Institutions would find other ways to offer economically viable skills that could be paid for out of pocket or through increased savings.

Another benefit of ending the program is that costs for those who actually do need to go to school for the skills that were acquired would be kept under control. This would have net benefits throughout the economy. The cost of a medical degree being cheaper would lead to lower health care costs, for instance.

Instead, what we’re doing is leading directly to a higher cost of labor for U.S. employees. So, if you’re a computer programmer, an American, with $50,000 of student loan debt, and you’re competing against someone from India with zero student loan debt, who’s more able to compete on cost?

Even so, that’s not stopping students from continuing to go to school, with the National Center for Education Statistics projecting college enrollment to increase 14 percent to 24 million by 2022.

It’s called a perverse incentive for a reason. If you want to get ahead, economically speaking, based on labor statistics, you’re better off going to college with comparatively lower unemployment rates. And if you want to afford college nowadays, you’ll be hard-pressed to do so without taking on the debt.

But, watch out, even if you go through all of the trouble, as the years go on, it will become even more difficult to compete in the current global environment. It’s simultaneously a catch 22 and a cycle of diminishing returns.

Ostensibly, in the cases of housing and education, the purpose of all this federal credit allocation is to achieve social ends. But, over time the negatives have begun to outweigh the positives. We’re seeing very bad outcomes for millions of people who are taking on the debt. It’s a policy issue that we’ve gotten horribly wrong in the past 30 years.

Without federal credit driven education and housing — we might find that a similar standard of living could be sustained at far lower, nominal wages.

In the very least, loans could be allocated based on an ability to repay given chosen fields of study. People would adjust their behavior accordingly, and only go to school for professions that actively require degrees. Institutions would adjust their prices. The truth is, there is zero risk calculus in making student loans. That has to change.

Instead, we’re becoming poorer with all of this debt, going broke paying a highly inflated premium for things those who truly need it could pay for themselves. We may be more educated as a nation, but we sure are dumb.


Children taught to read using phonics 'two years ahead' by age seven

The only sad thing is that this is news

Children taught to read using traditional methods are more than two years ahead of their peers, figures show, despite fears large numbers of schools shun the approach in favour of more “progressive” teaching.

Research shows that phonics can boost children’s reading age by an average of 28 months by the time they turn seven.

Boys benefit the most from the back-to-basics system – in which words are broken down into their constituent parts – and actually overtake girls after just two years of school, it emerged.

The disclosure was made as more than 500,000 children in England prepare to sit a phonics test this week – marking out those who struggle to read.

Pupils are supposed to accurately decode a list of 40 words, including a number of nonsense terms such as "voo", "spron" and "terg".

For the first time this year, teachers will not be told in advance where the pass mark has been set because of concerns that many pupils have been given a “helping hand” in the past.

An analysis of results last year showed that pupils’ scores dramatically spiked at 32 – the exact result needed to pass in 2013.

Teaching unions have been strongly resistant to the test, claiming it risks labelling children who struggle as “failures” at a young age.

It is also claimed that staff should be free to use a combination of reading methods to more accurately tailor classes to individual children’s needs.

This includes the “look and say" approach where children learn whole words on sight before gradually picking up the ability to recognise letter sounds.

Writing in The Telegraph, Nick Gibb, the former Conservative schools minister, said there “remains a hard core of believers” in “progressive” methods, with two-thirds of those responding to a recent survey advocating alternative approaches alongside phonics.

Mr Gibb said this amounted to a “daunting and confusing experience” for pupils, adding: “The ‘variety of methods’ approach makes learning to read a far more difficult task than needs to be the case. And it’s the least academic and least advantaged children who suffer most from this unnecessary struggle.”

He said: “We won’t achieve the levels of literacy in this country that we need until all schools understand the research behind this debate and adopt methods that have been proven to work.”

In a study, Dr Marlynne Grant, an educational psychologist, analysed the performance of pupils from a Roman Catholic primary school who were taught to read using synthetic phonics from the reception year upwards. The school was designated for children from Irish traveller families and had high levels of special educational needs.

The research found that by the time children reached year two – aged seven – they had a reading age 28 months ahead of what would normally be expected. They were also 21 months ahead in spelling.

Some children were so advanced that they could read as well as the average 13-year-old, it emerged.

The poorest children were an average of two years above their chronological reading age compared with other deprived children, while boys were three years ahead of national averages.

Dr Grant, a committee member of the Reading Reform Foundation, said: “The message from this research is clear – if you are delivering systematic synthetic phonics in a rigorous way, these are the kind of results you can get.

“Starting children on phonics in reception means many children will become strong readers quickly, and that you can identify those struggling early on, and then ensure they get the help they need to catch up.”

A Department for Education spokesman said: “In the past, far too many children left primary school unable to read properly and continued to struggle in secondary school and beyond.

“The phonics check is allowing teachers to identify children struggling at an early age so they can receive the extra help they need before it is too late.”


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