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Monday, June 18, 2007

Student Loans

Deputy Secretary Kunin makes a convincing case for the abandonment of the discredited commercial loan scheme for students, but she does not go far enough.

What is needed is a restoration or even expansion of the student scholarship and grant programs that used to provide a substantial contribution to the costs of college.

In the 1980's Pell grants covered about two-thirds of the cost of a public four-year University, in recent years, it covers about 40%. This is one of the several ways in which the present generation is violating the idea of inter-generational equity with respect to student support.

The second has been the erosion of value in the minimum wage -- one argument for allowing the erosion to persist is that many of the minimum wage earners are young people living at home with their families. This may be so, but many young people may well be working in order to pay for or save for a college education. According to the College Board the average amount (in constant dollars) actually paid (after taking into account scholarship support) has increased 29% at Public 4-year Colleges (and almost 26% at Private 4-year Colleges) over the past 10 years. Over the same period, the value of the minimum wage has eroded from being worth $4.75 in 1996 to being worth $4.04 in 2006 -- a decline of almost 15%.

To maintain the affordability of College, we should be increasing the minimum wage to about $8.00 rather than to $7.25.

Finally, of course, is our failure to pay our way with debt piled upon debt that, in the end, our children will have to pay. If we are to go into debt, what better use for those funds than the education of our children.

Sent to New York Times

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