A Modest Plan For Paying College Costs
The average young person now graduating from college anywhere in America has to repay almost $22,000 of student loans. That's a record, partly because college costs have continued to rise even during the downturn, because states are cutting their support for public universities, and because other sources of college funding have taken big hits -- like home equity loans and 529 plans that allowed families to sock money away for college.
But how can a young people repay this much money when the job market is so bad? The law doesn't allow college loans to be discharged in personal bankruptcy.
Even when they do find jobs, college grads have no choice but to take the job that pays the most. They can't afford to do what they might really want to do -- become, say, a social worker or writer or legal services attorney.
This problem won't go away when the economy recovers. College debt burdens have been rising for years, and the career choices of many newly-minted graduates are narrowing to those that help repay college loans. We need a new system. So here's my proposal: Any college student can get full funding from the government, with only one string attached. Once they've graduated and are in the work force, they pay 10 percent of their incomes for the first 10 years of full-time work into the same government fund they drew on to finance their college education.
Now maybe that formula will need to be adjusted up or down to cover all the costs. And surely some people will game the system as they do every other one. But the essential idea is that linking the costs of college to subsequent wages makes college affordable to everyone.
And linking repayment to a fixed percent of subsequent wages for a limited number of years enables all graduates to follow their dreams into whatever work they want, without worrying about earning enough to repay a loan. Those who end up in relatively high-paying jobs subsidize those who end up in relatively low-paying ones.
It's fair, it's simple, and good for society as well as the individual.
For those who are getting their degrees: Happy graduation.
If you are going to burden those who do not come from the wealthiest families this way, why not also burden those who come from the wealthy families? Free college for ALL and ALL must pay 10% of their INCOME (not just earned income) for 10 years. Seems fair to me.
May 22, 2009 11:43 AM | Reply | Permalink
Make it a payroll deduction. No avoiding it.
And make professional license renewal contingent on currency of student loan repayments. I have not looked in some time, but remember many doctors and lawyers being among the delinquent.
May 22, 2009 11:46 AM | Reply | Permalink
I considered for a long time now that grades 1 thru 12 are no longer enough for our children today.
Years ago that level of education got you in the door at least, but no longer. For many years now, you've had to have at least a junior college degree to get in that doorway. Now however, that junior college degree is starting to look exactly like what a high graduation diploma looked like years ago.
I'm expecting any day now to hear where States begin to consider merging junior college level courses/years with that of the 1 thru 12. I think it's a necessity.
All kids should be required to attend a two year technical or junior college - paid for by the State. In today's society, that level of education is needed to just get an average job.
However, that additional two years should be treated just like a junior college is today -- let the kid decide their major/minors.
It's our responsibility to provide a full education to our kids and grand kids -- just as it's always been our responsibility to provide them with a HS diploma -- that should now be extended into an additional two year college/technical degree.
May 22, 2009 12:15 PM | Reply | Permalink
Four years ago.
May 22, 2009 8:32 PM | Reply | Permalink
18, 19, and 20 year olds are not 'kids', they are adults. not sure how you 'require' them to attend two years of school beyond high school when you can't even require that they finish high school.
but beyond that minor quibble i don't disagree. in fact, i'd like to see community colleges become more integrated into the local school systems to make the transition virtually seemless.
May 27, 2009 9:48 AM | Reply | Permalink
And if you take 10% (or whatever works) from all earners from 21 - 31 years of age, if they go to college or not, I bet you end up with a much better educated workforce.
But probably smaller families and less home ownership.
So,
Spread it out over 30 years - 1% per year from everyone, and everyone goes to school for free.
Thanks. I think we solved it.
May 22, 2009 12:34 PM | Reply | Permalink
This would maybe work if limited to tuition, books, and lab fees at public 2 and 4-year institutions.
Living expenses are highly variable depending on whether the student is a commuter, or living off-campus, in a Greek house or an on-campus dormitory.
Also, student life-styles vary a lot.
How do we limit costs when colleges, especially private ones, engage in competition to attract students by offering ever more expensive campus amenities?
On most major campuses that I've visited, the buildings and services are a lot nicer than those in which the average worker spends their day.
May 22, 2009 12:58 PM | Reply | Permalink
I think any plan for making college affordable for all has to also include making qualifying for college a responsibility for all students. There are huge benefits to the individual from earning a college degree, so that individual should bear the responsibility for meeting the qualifications for obtaining both acceptance to college, and the degree from the college.
I think our colleges have far too many "students" who are not sufficiently responsible to do the actual hard work required to earn their degrees. It looks to me like social promotions are creeping into the college scene too. And, while we are at it, we need to decide whether it is right for colleges to be the "minor leagues" for professional sports. But, that is another subject.
May 22, 2009 1:53 PM | Reply | Permalink
I'm not sure I understand this - if the average loan per student is 22K and after graduation he gets a job say at 30K, then over ten years he pays 30K to the government. If another student gets a job at 50K per year, then he will pay 50K to the government at the end of 10 years after borrowing 22K. So one student pays 8K for the privilege of borrowing from the govt., and the other student pays 18K for the privilege although they both borrowed 22K.
If a student's education at a state university is fully funded say at 40K for 4 years and that student is lucky enough to land a job at 100K per year, he will then pay 100K over ten years. If another student's education at a private university is fully funded at 75K for four years and he takes a job paying 50K per year, then he will have paid 50K for that 75K. So one student pays two and a half times the total amount and the other student pays 2/3 rd of what he borrowed.
This is the same plan Geithner is using, isn't it?
May 22, 2009 2:07 PM | Reply | Permalink
Maybe you slept through your American History class when the progressive income tax was explained. As did probably half the U.S. Congress. This is one major reason why Mr. Reich's sensibly simple plan has little chance of ever being seriously considered.
May 23, 2009 3:20 PM | Reply | Permalink
This plan is even more complicated than the progressive tax system.
Whenever someone says they have a simple plan, look out, it's about to rain shit.
First, funds have to be found and allocated for the program, next a program with an administration has to be funded and put in place, then how are the funds to be paid - directly to the school, to the borrower or a combination of both? What if there are more borrowers than funds? Who then is eligible and who has to defer borrowing from the fund? Is there an age limit for borrowers, what about borrowers who never finish a degree, on what kind of schedule do they pay back the money to the fund? What is meant by income? Earned income, unearned income, adjusted gross income, are bonuses included, inheritance, trust funds, windfalls, insurance payouts? What if congress decides to reduce funds or keep funding at a certain level for so many years or stop funding altogether?
Secondly, there is no incentive for schools to hold down costs, because for the schools, there is an umlimited access to monies available to students at a fixed rate of 10%, especially if the money is paid directly to the school every semester or quarter, pretty much the position they are in now, which of course, is why they don't hold down costs - there is no risk at all to them, they hold the monopoly on education and it's a pay up front business - no money, no grade, no grade, no diploma.
This plan is about as simple as the flat tax - until of course, you start looking at the details. At least with the progressive tax, there is an element of fairness - you pay more as your income grows, but then your deductions also grow and limits the burden of the progressive tax.
Lastly, this plan reinforces the cultural meme that education is only needed for one thing - to make money. Any ideals, that education informs the character, broadens horizons, teaches us to think, to care about our culture, to spread its ideals and values, to make us a better people able to conduct ourselves from a broader perspective is lost in the race to make more money. The education is secondary to that goal. No wonder we're so lost as a society, as a nation when money is our only goal.
May 24, 2009 3:24 PM | Reply | Permalink
Practically everything in the above comments doesn't make sense, but let me address just the last one, that it encourages the idea that the only reason for an education is to make money.
It should be obvious that if the student is required to pay off the total amount of his loans himself then he is going to head for whatever job pays the most. That is not rocket science. If, on the other hand, he can afford to pay off his loans with a job doing something that he likes doing regardless of the income, then he won't focus on making money. That also is not rocket science.
The option being discussed here does exactly that, enable a person to take a low-paying, potentially socially constructive job such as teaching school. Therefore, the thesis that this program entices students to equate education with making money is not only false, but the exact opposite is true.
June 6, 2009 11:16 PM | Reply | Permalink
IIRC Milton Friedman made a similar proposal some years ago. So there's the answer agreed to by thoughtful individuals on both the left and the right.
May 22, 2009 2:36 PM | Reply | Permalink
Uh, please tell me you've spoken with someone in the Obama administration about this, Mr. Reich. Grad school ran up a student loan debt of $60k for me. Most everyone I know is in the same position.
If you wanted to "stimulate" the economy, why not free up some of these young adults from this crushing debt?
May 22, 2009 2:55 PM | Reply | Permalink
As someone who just graduated with a BA on 5/2, (a month away from 49th birthday) and with $45k in debt, I think this idea has tons of merit. I like it a lot. It's simple, directs the resources to where they are needed, and instills responsibility.
KISS -
Keep
It
Simple
Stupid
May 22, 2009 7:48 PM | Reply | Permalink
I think it's a great idea!
It should prove once and for all that when the total costs of college are compared with increased future income due to holding a college degree, going to college is an economic loser for the majority of college students.
On the other hand you get to meet your future spouse.
N.B. What we need is a college GED. Anyone who knows what the average 30-year old college graduate knows (not much) gets a degree.
May 22, 2009 8:21 PM | Reply | Permalink
How do you explain people who make $100K a year and send their kids to colleges costing $30 to $40k a year?
My oldest will be a senior at Mr Reich's employer, Cal Berkeley and I'm sending another to a state University as a non-resident in the fall. The only way to do it is to go heavily into debt as a parent along with your kids running up $22k in debt.
Since Cal has 90% in state undergrads, there are no doubt about half the families that make more than mine but whose college costs are over $20K less per year per student, even though the state support is only about $9.5K.
Yes this idea may get more kids in college, but for some of the target group of this suggested program, I am proof that the only reason these kids don't already go is their parents choices, not the impossiblity of it.
May 22, 2009 8:36 PM | Reply | Permalink
That is an interesting proposal. My modest proposal for the UC system is to audit their spending on upper level administration salaries. And to focus on, you know, teaching students.
The fact that they can hire people for several positions with salaries and benefits (free housing, etc) pushing a half million at the same time they claim they're facing a "budget crisis" where everyone has to "share the pain" is fairly absurd. In the worst job market in a generation they shouldn't have to increase administration salaries 30% or more to attract qualified candidates.
Similarly, resources are shifted away from teaching students (lecturers, TAs, etc.) and towards other prestige projects that bring symbolic capital to the UC system, but little tangible benefit in terms of education.
There are also a wide variation between different campuses and within campuses on who is having their budget cut - which has more to do with symbolic capital - Hard Sciences over Humanities, Berkeley and UCLA over the other less prestigious campuses - than an honest effort to provide the best possible education for the most students in a difficult economic climate.
Simply put education is not a priority of the UC system, undergraduate tuition is a revenue stream. The people who are charged with making the decisions are doing very well gutting the quality of the education that students are getting.
May 23, 2009 4:59 AM | Reply | Permalink
Since college graduates tend to earn the highest incomes, why not make college education free and make the income tax system more progressive? Plus, I don't recall exactly what happened to the estate tax but it should still be in place on very large estates say over $20 million or whatever.
May 23, 2009 10:35 AM | Reply | Permalink
Richard,
The problem is that college costs have gone up incredibly quickly, far higher than other costs have. The show no signs whatsoever of stopping that. It's hard to imagine a "tuition bubble", but that is in fact what we are in now, and have been for quite some time.
If there was a way to make college more affordable, the costs of college would go up by a similar percentage the very next day -- at least of private colleges (state schools have more bureaucracy, it would take them a little longer. but they'd find a way.)
What's the only thing limiting college costs? The only thing I can think of is the ability of people to pay.
University of California schools (for in-state students) are the best bargain in the universe right now. I offered my daughter a new car -- every year -- if she went to one of the UC schools that she was accepted to...and I still would have come out ahead.
May 23, 2009 5:33 PM | Reply | Permalink
This plan is remarkably similar to one proposed by the otherwise execrable president of Boston University and Massachusetts gubernatorial candidate John Silber sometime in the 80's.
His plan posited a fixed, small percent (.5% or .25%) of earnings for life, the theory being that those who worked in a low-wage field like teaching or social work would be offset by those with jobs in high-wage place, like corporate law or neurosurgery.
At the time, he even provided reliable-looking
maths.
It looked good to me but what do I know?
May 24, 2009 4:54 PM | Reply | Permalink