Young people today face a three-pronged attack on their financial security—educational debt from their past, unemployment in the present, and a future plagued by the burden of massive government debt. The government is largely responsible for all three problems.The one that might not be obvious is student loan debt, but government policies have also led to massive increases in it. This is both by making such lending (to youth without capital) easier by subsidizing the process; and also, at the state level, by massively increasing tuition in order to suck up every dime that the Federal government was willing to help the kids borrow.
Government policies, meanwhile, have managed both to over-regulate and under-regulate the economy, resulting in the massive unemployment. Regulations on industry and manufacturing have made it far, far harder (and far, far more expensive) to open a new and productive business. Under-regulation of financial gamesters, as well as political pressure from Congress, allowed for the inflation of the housing bubble.
So, yes, if you're young, government is very much your problem. Any government spending is coming out of your hide, as is the debt created by the past generations. Think carefully about what you really want the government to do.
The one that might not be obvious is student loan debt, but government policies have also led to massive increases in it. This is both by making such lending (to youth without capital) easier by subsidizing the process; and also, at the state level, by massively increasing tuition in order to suck up every dime that the Federal government was willing to help the kids borrow.
ReplyDeleteOK, I will buy the proposition that there are moral hazard effects to making any activity too easy/too cheap.
But government doesn't force ANYONE to take on more student loans than they can reasonably pay back. I used to be a financial aid officer (3 years) and this isn't something government "does to" people: they're being afforded an opportunity which they can use wisely or foolishly.
There are SO many grants and scholarships out there. Loans are a last resort, not a first.
That so many use financial aid foolishly is not the government's fault. At some point conservatives really do need to recognize the concept of personal responsibility. Not aimed at you, Grim, but at the YAF article.
One more point: the vast majority of student loan applications are filled out by dependents (IOW, these kids' parents have to participate in the process). The rules are strict to prevent parents from shirking their primary role in financing secondary education.
ReplyDeleteSo where in the helk are these kids' parents? It's their job to teach their children about fiscal responsibility, how to handle credit wisely, how to plan for the future.
Arguments like this one are seductive for conservatives looking for any way to undermine progressive dogma but we need to be careful not to pull a Newt and legitimize the very ideas we claim to oppose.
I don't know about the kids' parents, except that these kids are generally 18 or older in any case. However, that's not really the main point.
ReplyDeleteThe main point is that the government has caused a massive spike in the tuition costs. Thus it's not just that there is a moral hazard issue -- it's that practically, the government's lending policy has raised the cost of the young person's diploma. The cost of getting to "Go" with a B.A. or B.S. degree is now far higher than it was.
Oh, sure, they're willing to help you pay that cost, if you're willing to put yourself in non-dischargable debt for twenty years. Many students who could have paid it out of pocket -- by working their way through, for example -- now have only the choice of debt or trying to get by on a High School diploma.
I may not be a perfect conservative, because there are times when when I think it's appropriate for government to take actions designed to modify market outcomes for social reasons -- for example, by giving small businesses breaks that big corporations don't get, in order to encourage a situation where people can be their own boss. That's Jefferson's old ethic about yeoman farmers, as far as I'm concerned. If the business of America is freedom (rather than "business," as Coolidge said), that makes sense.
That said, I don't think this particular concern is out of order with conservatism. It strikes me as perfectly in accord with conservative principles to be concerned about government manipulation in a market that raises prices, and increases private dependency upon the government's aid.
I don't know about the kids' parents, except that these kids are generally 18 or older in any case.
ReplyDelete18 is irrelevant for the purposes of financial aid. Students under the age of 24 are presumed to be dependents.
Going to college right out of HS is not a civil right. You can always save up and pay tuition out of your savings. I financed my own education out of my earnings at a job paying less than $13K a year. I didn't take a single student loan, nor did qualify for grants b/c of what my husband made. So I know it's both possible and eminently practical, Grim.
I dealt with student financial aid for 3 years and am infinitely familiar with a wide variety of circumstances. I don't disagree that federal subsidies may well be feeding the inflated cost of higher ed, but there are many, many affordable state schools out there.
People need to live within their means and this is no less true of young people than it is of older ones. With a little (VERY little) planning and the willingness to defer instant gratification, it's quite possible to get an education without going into a lot of debt.
Many students who could have paid it out of pocket -- by working their way through, for example -- now have only the choice of debt or trying to get by on a High School diploma.
ReplyDeleteThat's not true, Grim. A student can combine work and loans and grants and scholarships. Students can take longer to graduate so their tuition bills are smaller and their income to tuition ratio is lower.
That's what I did for a long time and it works great.
I really think you're presenting a false choice here - there are many options but playing the victim card shouldn't be one of them.
Though your youthful and spirited nature sometimes makes me forget your wisdom and experience, I think that there is a chance that the math has changed on that in the last few years. Just from 1998 to 2008, average tuition grew nearly $2,500 per student per year. That is to say that a four year degree is now ten thousand dollars more expensive now than it was ten years ago, roughly speaking.
ReplyDeleteNow, let's say you're the kind of student of modest means, but one whose discipline meant you could use work and grants to get through school in 1998. Now, you need those things plus $10,000.
You can get that ten thousand dollars in many ways, but nevertheless, it's ten thousand dollars. That's the average, so it's about right for what you call "affordable state schools" (which it the only kind of college I've ever known, myself).
Ten grand is a lot of money for an average young American, and that's if they can take it out of hide through earnings or by slowing their graduation process (which also defers their capacity to commit to a career -- although in this economy, they may have no capacity to undertake a career in any case). If they do take a loan, estimating 3% simple interest, that's a $16,000 burden on today's student that wasn't there on the student in 1998.
Well Grim, colleges were not inexpensive (nor nearly as plentiful) in the days before federal student loans, so in addition to increasing bills, federal student subsidies have also increased the number and variety of schools.
ReplyDeleteBefore federal aid, college was widely regarded as a rich man's prerogative. The GI bill changed that for vets, but that was the reality.
My two sons graduated around 2002/2003 and my daughter in law (who put herself through grad school) graduated in 2005. We didn't qualify for grants and we took a combination of parental loans and student loans but paid most of their tuition monthly through a company that gives you the money up front and you pay as you go every semester.
One of my sons went to a very expensive private school (over 40K a year) and one went to an inexpensive state school (less than 10K). I could have gotten in just about anywhere but I went to an inexpensive school because that's what my budget allowed me to do.
Loans were an option for me (and would certainly have made my life easier - it's no fun to work 40 hours a week and take courses at night) but I looked ahead and knew I couldn't pay off both my loans and my sons' loans at the same time.
I'm not saying it's easy - just that it has NEVER really been easy. Federal aid has (IMO) been a net positive on balance. More people have the opportunity to go to school.
But opportunity isn't a guarantee and you still have to take some risk and do some advance planning.
By the by, I was thinking about this earlier for a post I was considering writing. I was a FT stay at home wife and mother so we lived on one income for the vast majority of the child rearing years: two decades.
ReplyDeleteAnd we managed to put both our children through mostly private schools. On one income. Easily. Yet every day I read that it's "too hard" to get by on one income - that wives "have to" work. Our income has ranged from well below poverty level to solidly middle class over the years. Now that I work and our kids are gone, we're solidly upper middle class.
During those years we never ate out at restaurants or bought a lot of luxuries, but we were always able to pay both their tuitions. Private schools are quite expensive these days and they were back then, too. We paid the equivalent of a state college tuition for a single student pretty much every year my boys were in school.
This is a subject that's near and dear to my heart. The suggestion that it's "too hard" really bugs me. People need to weigh their options, decide what's most important to them, and proceed on that basis. School is a valuable benefit that confers a significant economic advantage (provided that one chooses one's major wisely).
I think the Obama administration is nuts to say that we need to make it easier to go to college. It's already very easy, but not cost free.
I'd like to see that post, Cass, if you care to write it. I've read your comments along those lines in several disparate posts of yours, over several years, but I don't think you've ever put it all together in one place before.
ReplyDeleteMaybe I can get it done tonight after work. I will try!
ReplyDeleteSometimes both sides are correct- yes, if you got in a hole, it's your fault. Also, the government, in laying such easy temptation before those often ill prepared to resist it are culpable, but not in a way that offers particular relief of culpability to the individuals themselves.
ReplyDeleteRealizing the moral burden incumbent on us to not tempt people is something you learn when you're the son of a 30 year auditor for the Archdiocese. We're human, and anyone can be tempted.
I agree with you, Douglas, but the moral burden isn't the only issue: the other issue is that they've actually raised the cost of the degree by quite a bit.
ReplyDeleteLet's say you are one of those young Americans for whom college really is the right choice. Let's say you do this as responsibly as you can, and maybe you find a strategy that lets you come out of college without loans (as I did, although it's been before this huge price spike of the last decade).
You're still starting off life with ~$10,000 less than you would have if you'd been born a few years earlier. That's due to government intervention: it's effectively a tax on you for the benefit of public employees, even though it is disguised as a policy to "help" you go to school.
Oh, absolutely correct. If you subsidize, you create artificial demand, and for no other reason than that the price goes up, it's simple economics. But it helps the schools, who help the democrats, so who cares about the cash-cow students and taxpayers? This is a real problem, and I think a bubble, and is part of the reason I teach more as a sidebar, and don't more aggressively pursue a career in academia.
ReplyDelete