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Counterpoint Recap 7/26: The Value of Higher Education

By Meg McGee | Counterpoint | July 29th, 2013 |
Counterpoint's Meg McGee has "the last word" after every new edition of Counterpoint.  After reading her latest recap, hear audio of the discussion she's referencing embedded below the post:

On Friday’s show, we covered a slue of topics, the smoking ban on campus, the Miami-Dade county’s decision to take funding out of libraries, Detroit’s bankruptcy, and the passing of a student loan deal in Congress.

Our entire panel agreed that the cost of college/university is skyrocketing and something should be done to change it. However, our topic grew into a larger discussion over if college is valuable in order to succeed. Matt De La Fe, our conservative contributor, argued that college degrees aren’t necessary for success and that there are plenty of jobs one can go into without a degree. While I think this argument is valid (to an extent), it is far from the reality we live in these days. Yes, there are celebrities, athletes, musicians, artists, and other innovative people in our society that make millions of dollars without having finished college. But the chances of that happening to an average Joe are not that high and if nothing else, a Bachelor’s degree is a safety net in case your multi-million dollar idea goes awry.

Everyone knows the economy and job market is bad, especially for young Americans and post-grads. So naturally, having a college degree gives you a slight advantage over someone who only has a high school diploma. The days of skipping out on college are over, there is no Woodstock, there are no protest movements, millennials have to get to work. We have to go to college and college is not cheap. So while there is no one putting a gun to our heads forcing us to take out enormous loans for college, our society leaves us with few other choices. For me, I have to go to school for what I want to do and not just undergrad but grad school and PhD. program. I think a lot of young Americans are taking huge risks by having $100k in loans but it certainly beats the alternative to working at McDonald’s with no degree. A college degree is the new high school diploma.

Until our country is able to get the costs of education down across the board, we will see more students not being able to go to a 4-year institution and instead having a high-unemployment rate for young adults. Though Congress passed this deal, there are still provisions in it to keep interest rates rising on student loans. I think student loan debt is a problem that Wall Street is cashing in on and once the “bubble” explodes, we could see another financial crisis affecting the next generation of Americans.

Below is audio of the discussion on student loans and the value of a college degree.  Counterpoint airs live Fridays at 1p.m. EST

Counterpoint Clip: Student Loans and the Costs of College by Wvumnews on Mixcloud

 

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By Mike Kanoff | Counterpoint | July 12th, 2013 |
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Image Source: http://www.cagle.com/2013/06/monsters-university/

While I am sure it will come up on the show at some point, I want to give a quick stance on the recent doubling of student loan interest rates. Congress recently failed to block a doubling of interest rates on federal student loans from the then-current 3.4% to the new 6.8%. Currently, both houses are trying to put something together to bring the rate back down, but there has been no official movement at the time of writing.

 

Students go to college more so now than ever before; it is almost expected that an applicant for most jobs have a college degree. Unfortunately, and I think many people can relate, college isn’t exactly cheap, so the government was nice enough to help out. Of course, like all loans, the government charges interest, which used to be a bearable 3.4%, but which is currently 6.8%. As it is, the stereotype is that after graduation, the students start working at the lowest rung and earn just enough to eek out a living after paying their rents/mortgages/bills and loans back.

 

This shouldn’t be a partisan issue: you can’t take money from people who don’t have any. As I said above, the stereotype is that college students don’t have much money, since they are most likely going to school to be able to get a job in the first place. But on the other hand, the government has no obligation to give these loans, nor does it have an obligation to keep them at 3.4%, but since it has offered, and considering the other offers, like banks getting loans with near-0% interest, interest should at least be allocated appropriately.

 

Ultimately, it is still up to the student to accept the loan, and it isn’t wrong for the government to ask for the double rate, but it simply doesn’t make sense to. Either private lenders will beat the government, like any free market has the capacity to do, or the percentage of students going to school may drop for fear of being unable to repay. We certainly don’t want to end up with a generation deeply indebted from their college educations, but at the same time, there is no obligation for the government to make it cheap. The government guarantees 12 years of schooling; a high school diploma, and everything else is optional, even if it is preferred.

 

I think I can sum up my stance here with an simple analogy: if you want orange juice, you’ll likely get more from the fat, juicy, plump orange than you will from the one that’s yet to ripen and still green.

Student Loan Rates Double. Now What?

By Jordan Lewis | Counterpoint | July 1st, 2013 |

Student loans mean a lot to a lot of people. I personally will be taking out some loans for law school, and many of the people I know at school are taking out undergraduate loans. Student loan interest rates for most undergraduate students doubled from 3.4% to 6.8%. Members of Congress found this unacceptable but were not able to stop it. I spoke with Senator Angus King’s office last week and a key congressional aide to understand the specific legislation.

Here’s my rundown of the different proposals in Congress:

There are 3 major types of student loans: subsidized Stafford loans (for undergraduates-formerly 3.4%), unsubsidized Stafford loans (for some undergraduates and most graduates-now 6.8%), and GradPlus plans for graduates with other expenses, that is at 7.9%.

Most of the reform plans involve calculations using the 10-year Treasury-Bill rate, which fluctuates with economic growth. The current T-bill rate is 1.81% (for the sake of calculations, let’s say 1.8%). It rises with growth and falls with economic decline. Let’s get into the bills. I’ll offer my political prognosis on some of the bills, but not my policy recommendations. I think that all of the proposals are imperfect.

The House Republican bill would set all rates at 2.5% above the T-Bill rates (4.3%). It offers the lowest current rate for graduate students, but reflects an increase in the rate for undergraduates. However, interest rates are scheduled to rise as the T-bill rate rises along with economic growth, with a cap at 8.5%. The interest rates reset after every year. It appears to reduce the deficit. It passed the House but only had 4 Democratic votes. It is opposed by the Senate Democrats and the President. It would be dead on arrival.

President Obama’s plan is very similar to the Republicans’ (gaining Democrats’ scorn for pushing it to the right in the process). Obama’s plan offers fixed rates for the life of the loan, and caps obligations at 10% of their discretionary income. It does not yet cap interest over the life of the bill, but would start subsidized rates around 2.74%. Graduate rates would start about 4.7%. The President is trying to negotiate a solution for all parties involved.

The Senate Democrats plan is to extend the 3.4% unsubsidized rate for one more year. It does not use the T-Bill rate and would be the most expensive. It would have a difficult time passing the Republican House.

The Bipartisan Loan Certainty Act (S. 1241) is an attempt to bridge these gaps. It sets rates around 3.7% for undergraduates and 5.2% for graduates. It has a cap of 8.25%. It has 5 Republican Senate sponsors and 3 Democrat Senate sponsors. Interest is fixed from the beginning of the loan. It has support from the Senate Republicans, but is opposed by the majority of the Democratic caucus, due to the probability of increased rates as the economy improves. For a deal to be made, I believe that the cap needs to be lowered and other arrangements made to have the necessary Democratic support.

Sen. Elizabeth Warren (D-Mass) has a plan out to tie rates to the Federal Reserve lending rates, but it doesn’t look like it has the votes to pass. Regardless, Congress needs to act to keep rates low. The Government made over $50 billion last year on student loans, siphoning money from hard-working middle-class families and students.