Eliot Spitzer: The way Americans pay for college is a mess. Here's how to fix it.

[marmar]

from Slate:




Loan Ranger
The way Americans pay for college is a mess. Here's how to fix it.

By Eliot Spitzer

Posted Wednesday, March 4, 2009, at 6:57 AM ET


The long-term economic strength of the United States depends on our ability to compete in the world of intellectual capital. Indeed, that is perhaps the last remaining arena where we can hope to win, since we ceded pure wage competition long ago, capital is now as mobile as an e-mail, and scale, which we once had, is no longer our friend. The Chinese middle class already numbers in the hundreds of millions, and last month, more cars were sold in China than in the United States, the first time that has ever happened.

If we are going to improve American intellectual capital, we need to fix how Americans pay for higher education. For too long we have asked students entering college and graduate school to choose one of two unappetizing options: pay astronomical tuition bills upfront or amass enormous debt that demands fixed, sky-high monthly payments the moment they graduate and enter the work force. These options serve as barriers to educational opportunity, since many cannot afford upfront tuition payments or qualify for the needed loans. That also distorts career choices, since for most the obligation to repay loans immediately has reduced the ability to choose socially desirable jobs such as teaching, forcing the pursuit of the highest-paying job regardless of personal or social utility.

Yet there may be a "third way" that eliminates the educational financing problem. Milton Friedman first proposed the following idea, and James Tobin then refined and tried to effectuate it. If two Nobel laureates of decidedly differing worldviews agree, it must be worth at least a quick look. It is, moreover, successful and commonplace in Europe and Australia.

Marketed under the decidedly unappealing name of "income-contingent loans"—how about we call them "smart loans" instead?—the concept is simple: Instead of paying upfront or taking loans with repayment schedules unrelated to income, students would accept an obligation to pay a fixed percentage of their income for a specified period of time, regardless of the income level achieved. Suppose a university charged $40,000 a year in annual tuition. A standard 20-year loan in the amount of $160,000 (40,000 times four) would produce an immediate postgraduate debt obligation of $1,228.50 per month, or $14,742 per year, not sustainable at a salary of $25,000 or anything close to it. Under a smart loan program, the student could pay about 11 percent of his income, with an initial payback of $243 per month, or $2,916 per year, which is feasible at a job paying $25,000. If, after five years, the student's salary jumped to $100,000, payments would jump accordingly and move up over time as income increases. After 20 years, assuming ordinary income increase, the loan would be paid off. .........(more)

The complete piece is at: http://www.slate.com/id/2212534/

[HaydukesWrench]

1. how many girls pay for college by prostitution, or at least dancing at strip clubs?

wouldnt (Jon) Spitzer saved himself some trouble with one less hooker out there?

[paulsby]

6. you'd be surprised

as somebody who has enforced prostitution laws and dealt with more than a few stripper related incidents (being a cop can be fun), there are a fair %age of college students in both occupations.

i suggest they move to rhode island, where under a quirk of the law, there are legal ways to perform prostitution

[ContinentalOp]

7. Oh jeez, that's the first thing I thought of too! I like what he's saying but man,

it's hard not to go there.

[GoesTo11]

9. You know, he did a bad thing but let's get over it

He went to a prostitute, paid her and was decent if not gallant. She seemed fine with the arrangement. That doesn't bother me at all.

What was offensive was that he was a zero tolerance kind of guy and he had a family that inevitably got dragged into this. Too bad. We know it happened, and we won't take him seriously as a moral guide. But he is getting on with his life and we can listen to his ideas about this for what they are.

[HaydukesWrench]

10. "gallant"???

[GoesTo11]

11. I meant that he was not gallant, but he was not abusive either.

I can see how what I wrote came out wrong. Funny. Gallant is certainly not the right word for him.

[readmoreoften]

13. I did. Wish I did it longer.

I might've avoided a few loans.

[customerserviceguy]

2. If that's a good idea for higher education

then why not do everything that way, like cars and housing?

Maybe we ought to just put colleges on a single payer plan!

[JerseygirlCT]

3. Interesting thought... nt

[Taverner]

4. This would work - Spitzer knows his shit

Say what you will of past indiscretions...he has always been a very smart individual who is (mostly) committed to the right thing. Losing him was like losing a party Father...

[camera obscura]

5. Thanks for this. I have been loving Spitzer's column, wish he updated it more often.

[malaise]

8. How lovely to read something from Spitzer

KO, Rachel and Bill Moyers, please have Spitzer on your shows. I want to hear from him about his Valentine's Day 200 exposure of Bushco.

[Igel]

12. I'm of at least 4 minds on the subject.

I'll let a few speak.

On the one hand, I've known many PhDs who graduated debt free. You go into a science, linguistics, or engineering program and the TAships, RAships, and grant money cover the tab. Hell, I knew one guy who bought a condo in W LA given his RA money (esp. nice during the summer); he had a Saturn while I had trouble keeping my bicycle lubed (he was in science, I was in humanities).

On the other hand, countries with free higher ed often have some sort of structure to their education system. Often there's still a series of good schools that are damned tough to get into and a series of "also rans" where you attend school but won't benefit from your degree. Usually the also-rans are poorly funded, poorly equipped, etc. While that's true in the US, one difference is that also-rans cost less and tend to be poorly populated.

On the third hand (4 minds, remember; hands = # of minds x 2), governments don't like paying for useless things. Well, not mostly. If you don't need 20k sociology MAs, the response is to reduce the funding and grad program slots. There's no difference between the two, since funding = grad program slots. If you want to pay your own way, well, that's not really much of an option. When I applied to grad school I got no funding at the school I (stupidly) most wanted to attend, and showed up anyway. I managed to go for years, racking up little debt, by being creative and frugual. Even spent two summers abroad.

I'd note that we have far too more PhDs in some specializations than the economy can produce--so they wind up working in fields they weren't trained for. That's a consumer-oriented approach; a supply-oriented approach wouldn't tolerate it.

On the fourth hand, governments also put in criteria--governmental, bureaucratic criteria--on receipt of stipends. You can be a sucky student for a couple of years in the US and still graduate, even do well in your third and fourth years and go on to grad school. If the government's in charge of your stipend and you're not producing in year one or two, you tend to lose your stipend (first) and then your slot in school. Since the government's in charge, when you get your act together and reapply it's not like you can ignore your first attempt, and it's not like the government's all that well disposed to providing second chances to former losers when there's a promising 18-year-old applying. The US is strange, in that regard.

[alarimer]

14. How about free higher education?

At least for the first four years. If you can't finish by then or if you want to go to grad school, then there will be reasonable fees. Universities are sitting on gigantic endowments, all while crying to state legislatures about how they must raise tuition to make ends meet. Sorry I don't buy it.