The Student Loan Act: Nice, But We Need More



Lost in all of the hoopla over the passage of the new health insurance law was the fact that a fairly important piece of student loan legislation also passed as part of the Senate reconciliation bill. The new law ends a decades long arrangement in which the federal government subsidized private companies to extend loans to students while protecting companies from risk. By cutting out unnecessary private intermediaries and assuming direct responsibility for extending federal loans, it's estimated that the new law will save the government around $60 billion over ten years. The majority of this savings is expected to be invested in federal higher education funding. Even better, the introduction of Income-Based Repayment will limit the amount of one's income that can go toward paying off student loan debt.

The law ends a particularly pernicious example of corporate welfare, and even though it was attached to a rotten health insurance bill we should be glad that it passed. But corporate lobbying hollowed out the bill to the point where it will have very little impact on the lives of students and their families. As an article in the New York Times put it,

But for individual students, the increase in the maximum Pell grant — to $5,900 in 2019-20 from $5,550 for the 2010-11 school year — is minuscule, compared with the steep, inexorable rise in tuition for public and private colleges alike. And because college costs are rising so quickly, the maximum Pell grant now covers only about a third of the average cost of attending a public university, compared with three-quarters in the 1970s, when the program began. So each year, more students graduate with debt of more than $20,000.

Tuition is skyrocketing for most people because the states are reducing their financial support for public colleges and universities. As the recession grinds on and the states slide ever deeper into fiscal crisis, this situation is only going to get worse into the foreseeable future. So perhaps it's time to start raising the demand that the federal government increase its support for public higher education, or even - if I may dream for a moment - cover the cost tuition for every student that gets into a public college or university.

It actually wouldn't cost that much, relatively speaking, to do this. According to government figures the total cost in tuition and fees paid by all students enrolled in public colleges and universities was about $43 billion in fiscal year 2007. U.S. GDP is currently $14.26 trillion. That means that the total cost of tuition and fees at all public colleges and universities is a microscopic 0.3% of the total wealth of the country by my rough calculation (if this is inaccurate, please correct me. 'Rithmetic has never been my strongest suit). As far as I can tell, the money for this could easily be found by rolling back the Bush and Clinton tax cuts for the super rich, though of course doing so would be far from easy politically. I think it's time to get this campaign going again.

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