Student loan rate bill is a distraction

Congress’ ongoing debate over whether to double federally subsidized Stafford student loans to 6.8 percent next month does more for party platforms in an election year than lowering rates may do for students or the economy.

The issue isn’t token student loan rates and how each party wants to “pay for” not charging more for education; the issue is the loan balances students find themselves saddled with, which reflects larger problems of our crumbling political economy.

Student debt has reached new highs, but doubling rates would only add a small burden to the average four-year student borrower, less than $10 per month by some estimates. Some estimate that in recent decades tuition has grown three times as fast as the price of goods, which has grown faster than income. That means, as our dollar buys less groceries, students must work more than three times as much to buy an education out-of-pocket – even more if using loans.

This could bring the next economic meltdown like the mortgage crisis. But, national student debt is much less than national homeowner debt, and bankruptcy doesn’t apply to student loans, and you can’t lose your education – so economic crisis averted, some say.

That’s no comfort to the millions of students struggling to pay for education that gives them less job prospects than before, while costing more than ever.

No, the education bubble may not pop, but our consumer-driven economy might get a decades-long slog.

Students on the growing lower end of the income bracket will pull most of the weight, students who are practically forced into debt for an education because people perceive education as more necessary than ever. The higher tuition goes, the larger that group at the bottom gets. The new indentured servitude will next consume the middle class if things don’t change.

Bottom line, any market-based solution at this point will likely either grow or shrink the educational market’s money supply, raising tuition or lowering available resources – either way has a net effect of less educational access to those with lower incomes.

That is the brilliance and the bane of market economics, the pricing law of supply and demand (revised): in a “free” market, the balance between supply and demand will set the price of a good or service, such that there will always be some people who can’t afford the good or service.

Not doubling interest rates may not help at all. The cheap, easy money may push tuition higher. Yet, as college President Gerald Pumphrey said, lenders may not like the low rates, which will take money out of the student loan market, reducing lower-income educational access.

It feels like a catch-22. U.S. Rep. Hansen Clarke introduced a proposal including debt forgiveness after ten years of income-based payments for all students, and capping forgiveness for future students. That would help students already with debt, including me. But, if left in place, the plan could cap the available money in the market, lowering tuition. But, the “invisible hand” of stratification would stay, making education available to some but not to others.

Offering students bankruptcy seems fair, since we offer it to business’. But, again, it would make lending less attractive and cut resources available to those with less.

Listen, higher education is a public service or good, like roads and clean water; it benefits everyone, even those who do not go to school. So, everyone should have education available to them, and completely publicly funded.

I’m not suggesting the state take over all the schools and create one state-run system. That would be scary, if not wrong. We need an academic check and balance to the state, and property rights may be just as important as other civil rights.

We already have a model in the K-12 system. It’s not perfect, but we could make state schools free, while private schools charge what they can. Sure, public schools may find fewer resources than private schools and some public schools will get less than others because of the differing wealth of their tax-bases. But, at least this system guarantees everyone’s right to an education, and the academy stays somewhat independent from the state. Also, making public education free to the consumer might help suppress private tuition prices, which would suppress the cost of public education to the public.

A problem remains: inflated demand for higher education. Perhaps we as a society have not allowed the path to “the American Dream” to evolve with the times. Have we handed down a fetish market value of a degree based on a dream that doesn’t reflect the real use value of a degree today?

I got my bachelor of arts already, so take this as a voice of experience. And, take it with a grain of salt, because I got mine already, and I’m basically about to tell you to “tune in and drop out.”

I get immense value out of my degree from Evergreen, but I’m not sure it was the best financial decision for me.

I believe – I hope – the computer programming degree I’m pursuing here with a lower cost will have a higher financial return. Maybe I can multiply that return with my bachelor of arts; we’ll see. However, I can think of a dozen alternatives to a degree that would have been at least as good an investment in every way, maybe better when you actually break it down.

I see old high school friends who went right into a trade and got paid to learn, who are doing pretty good now. I see tons of great learning resources and opportunities around town, like Oly FreeSkool, that can increase your skills, knowledge and experience, and can also lead to some pretty unique networking opportunities and project/adventures that will make you stand out. Heck, audit a class and check out the books if you must.

Even with a degree, which are “a dime a dozen” now (actually, they’re cheap but expensive), you must show a potential employer or partner what you have accomplished beyond simply earning your degree.

If students are to stop paying more for less, we must lower the demand that props up the price of education. Let’s join others in pointing out “the emperor’s new clothes” of higher education, and become more discerning consumers – as students, as hiring agents, as entrepreneurs.