Hillary Clinton's plan to help student-loan debtors is baloney. Bernie's plan shows promise.

Bernie Sanders is breathing down Hillary Clinton's neck in the New Hampshire primary election, and suddenly she's become the college student's best friend.  But her plan to help college students pay for college falls far short.

Essentially, she has cobbled together a host of  small-ball ideas and plans to spend $350 billion over the next ten years, using most of the money to encourage state governments to offer more affordable college options. And she also wants to lower student-loan interest rates and expand long-term repayment programs.  Don't worry, Harvard and University of Phoenix. You'll still get your cut.

All the leading presidential candidates know that young people are worried about college costs and student loans, and they've all proposed plans that will supposedly help relieve the financial burden on  college students.

But no plan is worth anything unless it addresses the suffering that students and former students are experiencing right now.  A good reform plan must contain these elements:

• Kick the for-profit colleges out of the federal student loan program.
• Amend the Bankruptcy Code to allow distressed student-loan debtors who acted in good faith to discharge their loans in bankruptcy.
• Abolish unconscionable fees and penalties on student-loan debt.
• Stop garnishing Social Security checks of elderly people who defaulted on their student loans.
• Stop pushing borrowers into 20- and 25-year repayment plans.
• Stop lending money to allow people to enroll in overpriced postsecondary programs that will never pay off---law programs at third-rate schools, overpriced MBA programs, overpriced liberal arts degrees, overpriced online programs, etc.

Has Hillary talked about any of those things? No she has not. Her proposal takes care of her key constituents--the pompous, lazy, and overpriced college industry. It doesn't do anything for the  millions of  people who can't pay back their loans.

Bernie Sanders, on the other hand, has proposed a simple plan that will address at least some of the issues I identified. He basically proposes to offer everyone a free four-year college education at a public college. Vassar College president Catherine Hill said in a New York Times essay that  she opposes this idea, which she says will cost about $30 billion a year.

But that's cheaper than Hillary's plan.

And here's the beauty of Bernie's scheme. If everyone could go to college free, no one would enroll at a for-profit college; and these sleazy institutions would have to close their doors.  That's a big plus.

Moreover, private colleges like Vassar would probably have to lower their tuition. Few people would borrow a quarter of a million dollars to go to a fancy private school if they could enroll in a good state university and pay nothing. No wonder Vassar's president opposes the idea.

And if college is free, people won't be borrowing money to go to college. They won't run the risk of default, of paying huge default penalties, or of being driven into 25-year repayment plans.

So what's not to like?  Especially when you consider that the government is spending $165 billion a year right now on the federal student loan program, which is nothing but a train wreck.  Bernie's idea may seem hare-brained, but it is actually the only proposal put forward by any of the presidential candidates that makes sense.

Bernie's plan won't solve the student-loan crisis completely. About 40 percent of student-loan money is going for graduate education. We've got to get tuition costs down at the law schools, the business schools, and all the professional schools. We've got to quit turning out too many lawyers, veterinarians, and MBAs.  And we've got to forgive the student-loan debt that has buried millions of people.

But Bernie's plan is a start. It will at least deal with the student-loan crisis at the undergraduate level.

References

Mitchell D. Weiss. What's Missing From Clinton Student Loan Plan. USA Today, August 15, 2015. http://www.usatoday.com/story/money/personalfinance/2015/08/15/credit-dotcom-hillary-clinton-student-loan-plan/31456547/

Let's admit it: Bernie Sanders' "College for All Act" proposal has some good ideas

Bernie Sanders' "College For All Act" proposal: "That's not gonna happen."

In an old episode of The Walking Dead, an armed wacko asks Sheriff Rick if he and his buddies can join Rick's tribe of survivalists. "That's not gonna happen," Sheriff Rick rasps with his impeccable Georgia accent.  And then Rick shoots the wacko dead with his trademark service revolver.

Something similar might be said about Bernie Sanders' "College For All Act" proposal. That's not gonna happen. Nevertheless, Bernie has come up with some good ideas that are worth examining.

First, and most importantly, Bernie proposes free college tuition for Americans to attend 4-year public colleges or universities. That's a great idea and would actually cost Americans much less than we are spending now in federal student aid.

But, as I said in a previous blog posting, the for-profit college industry and the private non-profits are happy with the status quo and couldn't survive a week without federal financial aid. The only way Bernie's free tuition plan could work would be to shut down the present student-aid program, and that's not gonna happen. So Bernie's College For All Act is--as I said earlier--Dead On Arrival.

Bernie's college funding proposal has some other good ideas, however. Along with a lot of other responsible people, Bernie proposes a simplified Student Aid Application process. Last year, Senators Lamar Alexander and Michael Bennett proposed a FAFSA form that only has two questions.  Almost everyone agrees that the present Student Aid Application process is confusing and overly complicated, so we should listen to Bernie when he says the process should be simplified.

Bernie also proposes lower interest rates and an unlimited opportunity for students to refinance their student loans at lower interest rates. This is a great idea because, as a recent New York Times article made clear, it is the accruing interest on student loans, not the amount that students originally borrowed, that is crushing millions of student-loan debtors. The Times told the story of Liz Kelly, who borrowed about $25,000 to get an undergraduate degree and then borrowed more to go to graduate school. The total amount Kelly borrowed was less than $150,000, but she now owes $410,000 due to the interest that accrued while her loans were in forbearance or deferment.

Critics will say that lower interest rates and easy loan consolidation will cost taxpayers billions, which is true. But let's face it: The people whose loans have ballooned out of control due to accrued interest and fees will never pay the loans back anyway. Do you think Liz Kelly will ever pay off the $410,000 she now owes?

There is one huge caveat to Bernie's proposal to allow students to refinance their loans. There are now 41 million outstanding student-loan debtors, and many of them took out multiple loans. Allowing millions of borrowers to refinance their loans would create an administrative nightmare. In my opinion, it would make more sense to just forgive the interest on those loans or give overwhelmed debtors reasonable access to the bankruptcy courts.

But, as Sheriff Rick said to the armed wacko, "That's not gonna happen." Apparently, our national government would rather create a real-life class of The Walking Dead than take responsible action to give honest but unfortunate student-loan debtors some relief.

The Walking Dead: These folks will never pay off their student loans.

References

Lamar Alexander & Michael Bennett. An Answer on a Postcard. New York Times, June 19, 2014, p.  A25. Accessible at: http://mobile.nytimes.com/2014/06/19/opinion/simplifying-fafsa-will-get-more-kids-into-college.html?_r=0

Kevin Carey. (2015, November 29). Lend With a Smile, Collect With a Fist. New York Times, Sunday Business Section, 1. Accessible at: http://www.nytimes.com/2015/11/29/upshot/student-debt-in-america-lend-with-a-smile-collect-with-a-fist.html?_r=0

Catharine Hill, president of Vassar College, shovels horse manure in the New York Times about rising college costs

Catharine Hill dumped a load of horse manure on the op ed pages of the New York Times today, which is a good place to put it. In an essay expressing opposition to free college tuition, she made three bogus points:

1) College costs have gone up because state governments provide less funding to higher education than they once did.
2) Although the cost of going to college has gotten more expensive, it is still a good investment because college graduates make more on average than people who don't have college degrees.
3) The way to address the rising tide of student-loan indebtedness is better counseling and long-term repayment plans.

Let's look at Hill's three points.

First, declining state support for higher education has little to do with Vassar, which is a private institution. It costs a quarter million dollars to attend Vassar for four years, and that cost can't be explained by declining financial support from state governments.

Second, yes it is true that people who graduate from college earn more money on average than people who don't. But that doesn't justify skyrocketing college costs. Many college graduates attended relatively inexpensive state colleges. For those people, their increased earning potential justified the expense of going to college. But people who get liberal arts degrees from elite private colleges like Vassar often take on unmanageable student-loan debt. Many of them would have been better off going to an institution like Sam Houston State University in Huntsville, Texas, than borrowing money to listen to postmodern screeching by Vassar professors.

Finally, Hill's suggestion for handling the student-loan crisis is pure horse manure, and it isn't even fresh.  Hill recommends"better counseling," longer repayment periods and income-based repayment plans as the way to help students manage their crushing student-debt loads. Of course,this is exactly what the Obama administration is saying, along with higher education's professional organizations and sycophantic policy think tanks like the Brookings Institution.

Come on, Catharine. Come clean. Why don't you tell us the real reason you are opposed to free college tuition? You are opposed to it because the feds can't possibly provide free tuition for students to attend overpriced joints like Vassar. And a comprehensive  federal program offering free tuition would mean less money for elite colleges. You would prefer the status quo, whereby the exclusive colleges get the benefit of Pell grants and federal student loans--federal money you cannot operate without.

In fact, you reveal your true motivations in the last few paragraphs of your essay. "Without federal loan programs, many students could attend only schools that their families could afford from their current income or savings."  That's right, Catharine. You want students to attend colleges they can't afford. Otherwise, they might have to enroll at the University of Connecticut or Florida State. The horror! The horror!

Frankly, I would have expected more from Catharine Hill. After all she is an economist. Surely she knows that most of the people who sign up for 25-year repayment plans will never pay off their student-loan balances because their income-based loan payments won't be large enough to cover accruing interest. Surely she understands that making people pay for their college education over a majority of their working lives does not make economic sense.

But Catharine doesn't care. She just wants to keep the federal money rolling in so that places like Vassar, Yale, and Dartmouth can pay the professors and administrators more than they are worth to teach arrogant students who think they are smarter than the faculty and are probably correct.

And once a year, these condescending institutions have a dress-up day when the faculty wear medieval clothing and hand out bits of paper they insist on calling diplomas to the dunderheads who went hopelessly into debt for the privilege of wearing a t-shirt emblazoned with the name of some fancy college like Vassar.

Horse manure from Catharine Hill, president of Vassar

References

Catharine Hill. Free Tuition Is Not the Answer. New York Times, November 30, 2015, p. A23. Accessible at: http://www.nytimes.com/2015/11/30/opinion/free-tuition-is-not-the-answer.html?_r=0