Wednesday, January 20, 2016

Close, But No Cigar: Presidential Candidate Jeb Bush's Plan For Funding Higher Education Will Not Fix the Student Loan Crisis

"Close, but no cigar," a Google search tells me, means an attempt that is not quite successful. This should be our response to presidential candidate Jeb Bush's plan to fix the student loan crisis.

Briefly, here is Governor Jeb Bush's plan:
  • He proposes to scrap the present student-loan scheme and replace it with a new program whereby all high-school graduates will be given a $50,000 line of credit that they can draw on for postsecondary education.  Students will pay back the loan by paying 1 percent of their income for every $10,000 borrowed, to be paid back over 25 years. Borrowers would make their loan payments on their federal income tax forms.
  • Second, Mr.  Bush proposes to make it easier for students to discharge their private student loans in bankruptcy, although the details aren't specified. This idea has also been endorsed by President Obama and several scholarly commentators.
  • Third, Mr. Bush wants to improve information about higher education outcomes at colleges and universities, and he will encourage innovation and flexibility in postsecondary programs to help bring down tuition costs.
  • Finally, Bush's plan proposes to require colleges to pay back some of the loan money their students borrow if the students default.  He believes requiring colleges to have "some skin in the game," will make them operate more responsibly and give them an incentive for their students to be successful.
So what's not to like about Jeb Bush's plan? Several things.

 For-Profit Institutions Must Be Reined In. First, Governor Bush's plan does nothing to rein in the for-profit college sector, where the worst student-loan abuses are taking place. Indeed, Governor Bush's own state of Florida is notorious for allowing for-profit colleges to operate without proper regulation. Investigative reporters revealed that the Florida for-profit industry has gotten legislation passed to favor their interests by making strategic campaign contributions.  Dade Medical College, which recently closed, is one of the most notorious examples of a for-profit college industry gone wild.  Dade Medical College was run by a high school dropout with a criminal record and received more than 80 percent of its revenues from the federal student-aid program.

Bankruptcy Relief Must Be Made Available to All Student Debtors, Including Those Who Participated in the Federal Student Loan Program.  Mr. Bush's proposal to make it easier for private student-loan debtors to file bankruptcy is a good one, but federal-student-loan borrowers must also have reasonable access to the bankruptcy courts. Millions of people have defaulted on their federal student-loans, and those who took out student loans in good faith and fell on hard times are entitled to a fresh start through the bankruptcy process.

We've Got To Stop Garnishing Social Security Checks of Elderly Student-Loan Defaulters.  Currently, the federal government is garnishing Social Security checks of 155,000 elderly student-loan defaulters, which federal law empowers it to do.  No one who is totally dependent on Social Security should have his or her Social Security check garnished because of a defaulted student loan.

Let's say no to all long-term repayment plans. Personally, I believe the American people should say no to all proposals that require students to pay back their loans over 20 or 25 years.  These plans are designed to lower students' monthly loan payments but they require student-loan borrowers to make payments for the majority of their working lives. And I feel quite sure  that any long-term income-based repayment plan--whether it is crafted by President Obama or Governor Bush, will mean that a majority of student-loan debtors will never pay back the principal on their loans.

Close, but no cigar.

Governor Bush is to be commended for presenting a proposal to fix the student-loan crisis. At least he admits that the federal student-loan program needs fixing. But no proposal will get my approval that doesn't rein in the for-profit college sector, which has exploited low-income and unsophisticated students all over the United States, including Florida.  No proposal is adequate that does not provide reasonable bankruptcy relief for all categories of student debtors. No proposal passes muster for me that doesn't cease garnishing elderly people's Social Security checks,

Finally, the American people should vote no on any student-loan reform plan that pushes student-loan borrowers into long-term repayment plans.  Who would have believed just 20 years ago that our national leaders are so inept at managing the student-loan crisis that they think it is a good idea to push young Americans into plans that force them to pay on their student loans for 20 or 25 years.

References

Francisco Alvarado. Dade Medical College Has Powerful Friends but Struggling Students.  Broward/Palm Beach  New Times, August 29, 2013.  Accessible at: http://www.browardpalmbeach.com/2013-08-29/news/dade-medical-college-has-powerful-friends-but-struggling-students/


Read more here: http://www.miamiherald.com/2013/06/08/v-fullstory/3441091/homestead-mayors-ties-to-downtown.html#storylink=c
Fred Grimm. Before his fall, Ernesto Perez bought himself lots of friends. Miami  Herald, November 4, 2015. Accessible at: http://www.miamiherald.com/news/local/news-columns-blogs/fred-grimm/article42988848.html

David Halperin. For-Profit Colleges Spend Big on Lobbyists to Fight Obama RegulationHuffington Post, April 28, 2015. Accessible at: http://www.huffingtonpost.com/davidhalperin/for-profit-colleges-spend_b_5221407.html

David Halperin. $33 Million Per Year of Your Tax Money to For-Profit College Whose CEO Hid Criminal Record. Huffington Post, October 21, 2013. Accessible at: http://www.huffingtonpost.com/davidhalperin/33-million-per-year-of-yo_b_4136451.html

Jon Hartley. Jeb Bush's Plan To Fix The Student Loan Crisis. Forbes.com, January 19,2016. Accessile at: http://www.forbes.com/sites/jonhartley/2016/01/19/jeb-bushs-plan-to-fix-the-student-loan-crisis/#12c2800f3e724a82f8d33e72

4 comments:

  1. I agree with all you have to say. Every candidate should have a student loan agenda and offer some plan to deal with the crisis. My feeling is that there is a great crash about to take place and the economy is on the verge of total collapse. This country (and for the most part) the world cannot sustain this "fiat" economy. Plunging oil prices, plunging stock markets and the junk bonds being "trashed" is just the tip of the iceberg. Of course it is part of the "elitists" plan for a one world government and currency, which they control. It is not "if" any longer it is a matter of "when" now.

    The only thing to add to your repayment comments are that the "taxes" on the forgiven student loan debt is still there in the form of a "capital gains tax", and after 25 years will the person be able to cough up the taxes on the amount of debt forgiven?

    Meanwhile Wall Street Banks, Car companies and large corporations get a "pass" and are bailed out by the Fed, or are allowed to file Bankruptcy and get a fresh start.

    So tell me professor, why are student loan debtors the ones who get no breaks? Could it be the elites like creating "debt slaves"? I think so!

    ReplyDelete
  2. I agree with all you have to say. Every candidate should have a student loan agenda and offer some plan to deal with the crisis. My feeling is that there is a great crash about to take place and the economy is on the verge of total collapse. This country (and for the most part) the world cannot sustain this "fiat" economy. Plunging oil prices, plunging stock markets and the junk bonds being "trashed" is just the tip of the iceberg. Of course it is part of the "elitists" plan for a one world government and currency, which they control. It is not "if" any longer it is a matter of "when" now.

    The only thing to add to your repayment comments are that the "taxes" on the forgiven student loan debt is still there in the form of a "capital gains tax", and after 25 years will the person be able to cough up the taxes on the amount of debt forgiven?

    Meanwhile Wall Street Banks, Car companies and large corporations get a "pass" and are bailed out by the Fed, or are allowed to file Bankruptcy and get a fresh start.

    So tell me professor, why are student loan debtors the ones who get no breaks? Could it be the elites like creating "debt slaves"? I think so!

    ReplyDelete
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    ReplyDelete