Tag: Neal McCluskey

Did My Student Loan Rate Rise? I Barely Noticed

We should all be so lucky as to have our crises be like the looming interest rate change on some student loans. Yes, the rate on subsidized federal loans will double on July 1 absent congressional action, but that needs to be put into context to see that it’s a potential “crisis” – as I heard it described on a radio news report last Friday – akin to your yacht sinking. Your toy, bathtub yacht.

Starting July 1, rates on subsidized loans – a subset of federal loans in which taxpayers eat beginning interest payments as well as bearing non-repayment risk – are set to rise from 3.4 percent to 6.8 percent.

That might sound bad, but note that the rates have only been at 3.4 percent for a year. A 2007 law set them on a gradual decline from 6.8 percent to 3.4 percent over five years. So it’s not like 3.4 percent has been the norm for decades…or even two years.

Next, the rate increase will only affect loans originated after July 1. People with existing loans won’t suddenly see the rates on all their subsidized loans double.

Third, while a rate doubling sounds big, the practical effect according to the White House’s own calculations will be to add about $1,000 to an average loan over its lifetime, which is about ten years. That translates into an additional $8.33 per month – less than the cost of a DC movie ticket.

Finally, freezing the rate for another year will do almost nothing for currently suffering middle-class families, unlike what the White House intimated in President Obama’s most recent weekly address. The large majority of loans originated after July 1 won’t even begin to be repaid for at least another year-and-a-half, after rising seniors have graduated and gone through the six-month repayment grace period.

It’s well known that a crisis is extremely useful for affecting political change – just ask Chicago’s mayor – but it often translates into bad policy. And that’s exactly the kind of policy that creating artificially cheap student loans is. They help fuel skyrocketing college prices, subsidize massive college waste, and contribute to millions of people enrolling who either never complete their studies or who finish largely worthless degrees.

All those consequences are problems that Washington really should worry about. But that’s the other thing about a crisis: It’s usually only embraced when it means giving stuff away to buy lots of votes.

Don’t Pop That Champagne Yet

 With its 40th birthday coming on June 23rd, we’ll likely be hearing more and more plaudits for Title IX, the federal law banning gender discrimination in federally funded education activities. But it is hardly clear that the law was either necessary, or beneficial.

It’s certainly not an open-and-shut case, for instance, that Title IX broke open lots of opportunities in higher education that wouldn’t otherwise have existed – yet been in demand – for women. A quick look at women’s percentage of total college enrollment shows that females were gaining classroom seats at a big clip well before 1972. According to federal data, between 1947 and 1972 women’s share of total enrollment was growing at a pace of 0.56 percentage points per year, rising from 29.0 percent to 43.1 percent. From 1972 until 2010, in contrast, the growth was only 0.37 percentage points per year, hitting 57.0 percent in 2010.

Those figures don’t prove, of course, that there was and is no discrimination against women in higher education. They do, however, show that women were moving headlong into college well before Title IX, and today are so much larger a percentage of total enrollees than men that most colleges would be in serious jeopardy were they to deny them things they want. It also suggests that cultural acceptance of women in college and other new roles was changing well before the law was passed, and cultural evolution has probably had a lot more to do with new opportunities opening for women than Title IX.

There are many other powerful arguments to be made against Title IX – the strange preoccupation with sports opens up a slew of them all by itself – but also potent points to be made in its favor. That’s why on June 20th Cato will be hosting a lively debate on the law with both pro- and anti-Title IX speakers. You can register to attend here, or follow the debate online.

It might be Title IX’s birthday, but one of its presents should not be an absence of tough, fair scrutiny.

C/P from the National Journal‘s “Education Experts” blog.

These Reports Prove Aid Doesn’t Fuel Tuition Inflation…Except They Don’t

Today we are once again treated to a declaration that there is simply no way the crazy Bennett Hypothesis – the theory that student aid helps fuel college price inflation – is true. This time, the end-all-debate pronouncement comes from David L. Warren, president of the National Association of Independent Colleges and Universities, who cites three apparently definitive reports as proving aid is not “driving up” costs.

Aside from the problem that the argument is really that aid fuels price increases rather than driving them – the aid is the gasoline, the colleges the car drivers – what do the studies offered by Warren really tell us?

First is the 2001 federal report everyone who wants to declare the Bennett Hypothesis dead loves to cite: “Study of College Costs and Prices, 1988-89 to 1997-98,” from the National Center for Educational Statistics. As Warren accurately cites, the report does say:

Regarding the relation between financial aid and tuition, the regression models found no associations between most of the aid packaging variables (federal grants, state grants, and loans) and changes in tuition in either the public or private not-for-profit sectors.

But, then, it also says this:

[T]here are considerable data limitations in these models: for example, the availability of only one year of financial aid data and a lack of comparably recent financial data (especially for private not-for-profit institutions). IPSFA data on loans include all sources of student loans; federal subsidizedand unsubsidized, institutional, and private loans cannot be disaggregated. In addition, the IPSFA aid variables focus on the packaging of various forms of student aid in terms of the percentage of students receiving aid and the average amount received, and therefore cannot be used to explore the possibility of a revenue interaction at the institutional level between federal aid and institutional aid. Due in large part to the accounting standards used by the institutions themselves, information on financial aid collected through the IPEDS system for the available years is incomplete, especially regarding student loan volume, which cannot be isolated from tuition revenue in the IPEDS Finance survey data. Finally, financial data such as instruction expenditures cannot be isolated to undergraduate students, making any comparison with undergraduate tuition inexact.

Essentially, the report contains a regression based on a change in student aid for just one year and can’t adjust for a whole bunch of important things. In other words, it tells us little and in no way closes the door on Bennett.

Next, Dr. Warren cites a February 1998 commission report in which the commission purports not to have found any evidence that student grants effect college prices, and no “conclusive” evidence that loans enable rising prices. Then again, the Commission did no meaningful empirical analysis of the question, and as dissenting member Francis McMurray Norris objected, “issues such as tenure, cost and value of research, duplication of facilities, teaching loads, and relationship of student loan programs and rising costs have not been addressed.” [Italics added]

Grounds for putting the Bennett Hypothesis in a pine box? Hardly.

Finally, Dr. Warren cites a 2011 GAO report that looked only at the effect of an increase in the federal student loan limit for first- and second-year students, and only tracked three years of prices and enrollment. It concluded that enrollment and prices rose at rates generally consistent with recent “prior years.” Of course, looking at the effect of such a narrow change in overall aid over such a short time period without controlling for myriad variables that impact prices tells us basically bupkis.

The fact is that several empirical studies do show student aid enabling schools to raise their prices, and I have listed many of them. It is also the case, as most studies point out, that it is very difficult to definitively isolate the effects of aid when so many factors – from school type to student characteristics – are in play. That’s when basic logic also has to come in: People in colleges are like everyone else, and will be happy to take more money if it’s available. Aid makes it available.

One thing that cannot be supported is insisting, as Mr. Warren does, that we know for certain there is no connection between student aid and rising prices. That is something that truly has been disproven.

Gov. Romney, Federal ‘Incentives’ Mean Federal Power

In a speech today, presumptive GOP presidential nominee Mitt Romney will lay out the foundations of his education platform. Based on an outline of his proposals released by Education Week this morning, Gov. Romney seems just a little less disinterested in the Constitution – and the 40-plus years of proven federal education failure – than the man he seeks to replace. And no, calling what you want federal “incentives” neither absolves them of being unacceptable federal intrusions, nor makes them any less coercive.

The heart of what Mr. Romney wants in elementary and secondary education is federal enticements to get states to implement everything from “open-enrollment” policies for schools, to individual school “report cards,” to encouraging “talented individuals to become teachers.”

As I wrote last week, while “incentive” sounds kinda harmless, an incentive program is really all that No Child Left Behind is. No state has to do anything in NCLB. It only has to follow the law if it wants the federal money attached to it. The funding is only an incentive, but it is so big an incentive it is irresistible, even with the law being a huge millstone around the neck of American education. And, of course, taxpayers had no choice about furnishing the ducats to begin with. (Well, I suppose they were incentivized by a trip to prison…)

Where Romney’s K-12 offering is most enticing is his proposal that federal money be attached to low-income and special-needs children and made portable even to private schools. (Portable, that is, “in accordance with state guidelines,” a proviso the outline doesn’t flesh out.) But the very real threat, as with all federal funding , is federal control. What Washington funds it will regulate – though usually for political show, not efficiency or effectiveness – and that is something we should strenuously avoid for  private schools when states can implement more varied – and less regulation prone – choice mechanisms such as education tax credits. And, of course, the Constitution gives the federal government no more authority to deliver school choice than to dictate curricula. That is, except in Washington itself, and to his credit Mr. Romney is proposing to save the D.C. voucher program that Mr. Obama, for whatever shoddy reason, seems determined to suffocate.

The good news about Gov. Romney’s outline is that it directly addresses the primary problem in higher education, and one of its primary causes: insane tuition inflation fueled by massive federal student aid. Indeed, though he will no doubt get flayed for it by the higher ed establishment, who will publically deny it like so many naked emperors, Mr. Romney’s outline is refreshingly straightforward in identifying the root problem:

Governor Romney realizes that more spending will not solve the problem of tuition increases – to the contrary, it has helped fuel the problem. When Washington puts more money into student aid programs to help families and individuals pay for higher education, colleges and universities raise tuition rates.

So what grade does Mr. Romney get on education, at least from this initial outline? About a 30 percent for K-12, and a 90 percent for higher ed. That works out to 60 percent – a woeful D-minus – but that’s probably a tad bit better than most presidents would have gotten since the 1960s.

NCLB Is ‘Voluntary,’ Too

Why the big concern about the Common Core? For many it’s about the quality of the standards, which is a topic well worth delving into. But the real problem is that – continued protestations of supporters notwithstanding – adopting the standards has been anything but truly voluntary, and they are very likely to lead to complete federal control of education.

First, the sham voluntarism of today. Did your state want federal Race to the Top money? It had to adopt the Common Core to be fully competitive. Did it want out of the irrational, failed, No Child Left Behind Act? It had to have signed on to the Common Core to have a decent chance. Oh, and the tests that will go with the Common Core? The consortia creating them were selected by the federal government, which is also paying the bills.

And here’s something interesting: States didn’t technically have to sign on to NCLB, either. They “volunteered” to take federal dough and got NCLB with it. So why don’t you hear many people crowing that adopting NCLB was voluntary?

Because they know that it’s almost impossible for state policymakers to turn down hundreds-of-millions of federal dollars. It looks like a whole lot of money to state citizens, and those citizens had no choice about paying the federal taxes from which the money came. So neither signing on to NCLB nor the Common Core were truly voluntary, and the only reason the nation has fallen slightly short of Common Core unanimity is that, unlike NCLB, neither Race to the Top money nor NCLB waivers were guaranteed for every state. Nonetheless, most found it impossible not to take a gamble.

That said, the biggest threat is down the line. With almost all states having adopted the Core, there’s a huge chance that when Congress reauthorizes NCLB the Common Core – and the federal tests to go with it – will become the backbone of federal accountability, with schools rewarded or punished based on how they score on the tests. The rationale many policymakers will offer is easy to anticipate: “States have already signed on to shared standards, so it makes little sense not to base accountability on them.” Classic slippery slope.

From the vantage point of Common Core supporters, that is actually the only outcome that makes sense. As Fordham Institute folks have complained on numerous occasions, the vast majority of states will not on their own raise standards and maintain strict accountability. But if states won’t do it, the federal government – their boss – must.

But even if Common Core supporters achieve that which is the logical end of national standards and testing – federal control – it almost certainly won’t give them the educational outcomes they want.

Ultimately, the groups that have the most influence over any government policy are those most directly affected by it – they are the most motivated to be politically involved – and in education that’s the teachers and administrators whose very livelihoods come from the system. And because they are normal human brings – no better nor worse than the rest of us – what they ideally want, and fight for, is as little accountability to others as possible. That’s why so few states have ever had much success with standards and testing, and why it’s irrational to think that Washington will do any better. Indeed, at least to a limited extent states compete with each other for residents and businesses – Washington doesn’t face even that minimal upward pressure.

So what will the Common Core most likely get us? Red-tape driven federal control without rigorous standards and testing. It will also move us farther from the reform that actually makes sense: School choice for all, which would overcome disproportionate political power by forcing educators to respond to parents. And that’s not all it would do. It would also give educators new freedom to employ different pedagogies and curricula; enable children with diverse interests and needs to link up with teachers specializing in them; and unleash crucial competition and innovation. It would, basically, stop ignoring the fundamental realities that all children are different, and no one actually knows what are the ultimate, “best” curricula.

Unfortunately, not only are we moving away from what we need, we’re stuck fighting over what really isn’t even a question: Adopting the Common Core hasn’t been truly voluntary at all.

C/P from the National Journal’sEducation Experts” blog.

If Only Politicians Were More Like Good Parents

Sometimes I wish politicians were more like good parents. I know that doesn’t sound very libertarian – the last thing we want is for politicians to become humanity’s moms and dads – but there’s at least one thing good parents do that most politicians constantly avoid: saying “no.”

When kids want their food pyramids to have a base of candy, center of ice cream, and peak of ice cream with candy sprinkles, good parents say “no.”

When young ‘uns want to show off their mumblety-peg skills with the Bowie knife they found in dad’s old camping gear, good parents say “no.”

And when the children want to borrow the family sedan for a little off-road speed competition, good parents say “no.”

Of course, saying no all the time doesn’t make life with the kiddos easy or fun. The kids get angry. Mom and dad fume. “I hate you” may even be uttered. But refusing to help the children seriously endanger their arteries, digits, or worse – even if it makes the parents’ life tougher – is what good parenting is all about.

If only our politicians would exercise the same restraint. But they don’t, with the latest case-in-point being the drive to keep interest rates on subsidized federal student loans at super-low levels.  It will be the centerpiece of a three-state presidential tour beginning today.

Currently, interest rates on subsidized loans – loans on which Washington pays the interest while a borrower is in school and for a six-month period after graduation – are at 3.4 percent, a surface-skimming level reached after the College Cost Reduction and Access Act of 2007 cut rates in half over a five year period. Rates are scheduled to return to 6.8 percent in July.

The argument proffered for keeping the rates at 3.4 percent is that interest rates generally are at historic lows, and 6.8 percent would simply be too high. Much more important, though, seems to be the political reality: President Obama appears intent on currying favor with both college students and, frankly, any voters looking at exorbitant college prices and asking “how the heck am I going to pay for that?”

But it’s not just the current president who appears to be playing politics. Mitt Romney, the presumptive GOP challenger to Mr. Obama, yesterday also urged Congress to freeze the rate at 3.4 percent.

This certainly looks like election-year politics, and no doubt the unusual focus on student loan rates – not exactly a political thriller – stems from that. But the reality is that policymakers have been lavishing cheap money on students for decades because it helps keep relations cordial with the kiddos. The ultimate result, however, hasn’t been greater college affordability, but damage inflicted on millions of Americans.

First and foremost, all the cheap aid has enabled colleges to raise their prices at breakneck speeds, rendering the aid largely self-defeating and college pricing insane.

Second, giving dirt-cheap ducats to wannabe students – no matter how poorly prepared they are, or how little they actually want to tackle college work – has resulted in massive overconsumption and noncompletion of postsecondary education, and left millions without the earnings-upping degrees they need to pay their college debts. At four-year institutions more than 40 percent of first-time, full-time students fail to complete their studies within six-years, and in community colleges almost 80 percent don’t finish in three years. Most not done in those time frames will never finish.

Finally, there’s the cost to taxpayers. Overall, federal student loans originated in just 2010-11 involved $104 billion in taxpayer money, and if those loans don’t get paid back, or interest rates are slashed, it is taxpayers who will take the hit. That, of course, seems unfair at any time, but making it even worse is that the nation is facing a nearly $16 trillion debt. But good luck getting the politicians to pin down the cuts that will offset the billions of bucks that will be lost if student loan rates are kept at 3.4 percent. Sure, you’ll get uber-confident promises that the move won’t cost taxpayers “one nickle,” but you sure won’t find anything concrete in the legislation that would keep rates low.

Federal student aid is, frankly, a classic example of garbage parenting. No matter how much damage the policies inflict, the politicians do anything they can to stay best friends with the kids.

College Scholars, Mindless Borrowers?

A few days ago Rep. Virginia Foxx (R-NC), chairwoman of the House higher education subcommittee, had the audacity to say in a radio interview that she didn’t have a lot of sympathy for students who racked up $80,000 to $200,000 in college debt. Opportunists have leapt at the chance to attack her, branding her as either mean, or out of touch because what led to her discussion of college debt was retelling how she grew up poor and paid her way through school.

Now let’s be clear: Foxx wasn’t deriding bachelor’s grads holding average debt – about $25,000 for the two-thirds of students with debt – but people with big multiples of that. You know, the ones seemingly featured in every news story or congressional hearing dealing with higher education. And it is, often, very hard to sympathize with such people if you are able to track down crucial information about them such as what they’ve studied, where they’ve chosen to go to school, and what they spend their money on. This CBS News piece is a classic of the Woe-is-Huge-Student-Debtor genre, which Radley Balko and I took apart at the time of its airing.

There’s no question that the price of higher education has been rising at breathtaking rates, and profit-maximizing schools – and politicians who fuel the maximization – bear a good chunk of the blame. But is it really beyond the pale to suggest that maybe some students, who seem to accumulate debt without a care in the world until payment comes due, bear some responsibility for their predicament? Indeed, aren’t these supposed to be pretty smart people – you know, “college material” – who should at a minimum be capable of estimating costs, loan burdens, and potential earnings? Of course, but try bringing that up in the higher education cost debate. You’ll instantly become the Dean Wormer of the group, reviled for killing all the fun of poverty-crying students.

And here’s the thing: Giving the impression that students face an even greater burden than they do – which is exactly the effect of repeatedly focusing on fringe debtors – only encourages Washington politicians to pour even more money into student aid, letting schools raise prices even faster.

The vitriolic response to Rep. Foxx is exactly why so little progress is made in politics generally, and higher ed specifically. There are just some things you can’t talk about, no matter how important than may be, and if you dare bring them up you can expect anything but an honest discussion. You can  expect only cheap shots and smears.