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January 17, 2007

Jacob Sullum wonders what the Democrats hope to achieve with their student loan cut "solutions."

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|1.17.07 @ 7:27AM|#

Silly man, letting the facts get in the way of a good political ploy! The cut in student loan rates isn't about producing a larger number of college graduates, it's about making sure the voters know the Democrats care more than Republicans about, you know, the people at the bottom of the "two americas" scale.

|1.17.07 @ 7:45AM|#

I had a friend in graduate school who took out student loans solely for the purpose of investing the money. The rules back then said that if the loan was paid back within 6 months of graduation, the borrower paid no interest. My friend did so, and kept the investment returns. Free money!

Most students I encounter (and I encounter a lot of them) who shy away from loans do so not because of the interest rates, but because they just don't want to graduate with debt. I know, this is terribly short-sighted, but many of them, especially ones from poorer families, just look at the numbers and are afraid. $18,000 to them is a mountain of money, and it is very difficult to persuade them that it will be no big deal once they are out and have a job. A lot of them are afraid that they will have to drop out and then will have no degree AND loans to pay off. Lowering an already low rate (is it still 6%?) a point or two is not going to make a difference to this group. I am not advocating for more grants, just pointing out some reasons why this plan will not have much effect.

Guy Montag|1.17.07 @ 7:47AM|#

too many steves,

But won't this attone for slavery, reduce the prison population, revitalize the inner city and ease global warming? I believe a concensus of politicians has weighed in on this.

|1.17.07 @ 7:50AM|#

chuck, I've essentially done the same. I didn't need to take out loans, but the rates were so ridiculously low on the subsidized loans that I took them out and just put them in a savings account. Then when I graduated I consolidated at 2 point something percent on a 25 year payback plan. I just want to thank you all for the risk free money.

Anonymous Adjunct Without Tenu|1.17.07 @ 8:15AM|#

One study found public and private four-year colleges increased net tuition (taking internal aid into account) by 68 cents and 60 cents, respectively, for each additional dollar in Pell Grants. Another study found private colleges raised net tuition by 72 cents for each additional dollar of federal loan aid.

Dear Provost and Dean,

Why the hell am I not seeing any of this money? I request that you deposit my share of this money into my account in the next 24 hours. Otherwise, I will have no choice but to tell the feds about the scam that you're running.

|1.17.07 @ 8:19AM|#

Proof once again that the Democrats have no clue on the law of unintended consequences. Tuition will rise again.

To roughly paraphrase Sorenson, president of USC:
"Tuition increases do not pose much of a problem to our students. Financial has never been more available."

|1.17.07 @ 8:39AM|#

Perhaps this is actually a plan to lower college tuition. Part of the tab for lowering the rates is going on the evil lenders. This could have the effect of lowering the number of lenders willing to make loans, in turn lowering the number of students going to college, and then driving down tuition. The dems can take credit for lowering loan rates and driving down tuition. Definitely a win-win.

"To avoid increasing the deficit, the bill's cost would be offset by reducing the yield on college loans the government guarantees to lenders and cutting the guaranteed return banks get when students default. Banks also would have to pay more in fees."

|1.17.07 @ 9:38AM|#

My wife worked for a consutrium of the 30 most selective private schools in the country for a while. I can tell you it is disgusting the amount of money these schools have. The stock market boom put their endowments through the roof. Now even a billion dollar endowment is small change. I think Harvard's is up to over $25 billion. The elite schools could stop charging tuition and still cover their operating costs from the revenue from their endowments alone. Increasing aid has just increased student debt and created guilded colleges.

Their is some hope however that the market is breaking through. More and more students are turning down admission to the top colleges and going to lower ranked colleges because they would rather go to a state school on a full ride and graduate with no debt than go to a top school and graduate with 100K plus debt.

|1.17.07 @ 11:32AM|#

More and more students are turning down admission to the top colleges and going to lower ranked colleges because they would rather go to a state school on a full ride and graduate with no debt than go to a top school and graduate with 100K plus debt.

At the lower ranked schools you also get taught by the actual professor instead of some overworked grad student. The elitism in the ivy league schools is through the roof.

|1.17.07 @ 12:48PM|#

NAL, you have that completely backwards. As an Ivy grad, I never had a grad student teach a class. The only use of grad students was as teaching assistants who were there mainly to answer questions outside of class when you wanted more time than the professor could give. It is the large state schools that rely most on grad students actually teaching courses.

Rhywun|1.17.07 @ 11:55PM|#

I didn't need to take out loans

That's interesting - I wasn't aware you could get a student loan without proving need. That's how it was in my day. In fact I was limited to $4000 a year in the last couple years which didn't come close to covering my expenses. On the bright side, I graduated "only" $15000 in debt.

It is the large state schools that rely most on grad students actually teaching courses

Not mine, fortunately. I went through the exact situation John described. I turned down an Ivy League school to attend a state school purely for financial reasons. And the Ivy League was charging "only" $13000 a year at the time (this was a while - almost 20 years! - ago).

|1.18.07 @ 8:00AM|#

Rhywun,
No, you don't need to prove need to get federal student loans (I just graduated a couple years ago). You have to fill out the FAFSA, and a large income can reduce the subsidized portion of the loan (where they pay the interest while you're still in school), but you're still entitled to the max regardless on your need. In my case, they would never have picked up that I didn't need the loan anyway. I got the loan for law school where you are considered an independent by the FAFSA, so you don't provide parental info. My grandpa paid my tuition, and they never ask about your grandparent's finances. My income and assets were virtually nothing, so I qualified for the max subsidized loans.
Of course, every state school is different. Some use grad students, and some don't.