Business

Loans To 3.4%... Eventually... And Then They Double Again

pO157.

Posted to Business on Sat Jan 27, 2007 at 08:21:06 AM EST (promoted by 1fastdog). RSS.

By a vote of 356-71 (8 not voting) the House of Representatives passed HR 5, which will lower the rate at which college students borrow education loans over time.

The bill (pdf), which must be passed by the Senate and signed by the President of the United States, lowers interest rates in a series of annual steps to a final amount of 3.40% by 2012. However, buried in the bill is a provision that after 6 months at 3.40% the rate rises to the current setting of 6.8%.

House Democrats, however, promise that this is "only a down payment." Rep. Martinez says that the reason the rates are not permanently set at 3.4% past 2012 is so the Democrats could stick to their pledge of not increasing the deficit through any new legislation (the cost of this bill as it stands is offset by increasing fees that the government charges banks to make the loan and decreasing their profit margins). It would then be up to future sessions to make the changes permanent.

Critics claim that if the new Congress wanted to help the poorest college students they should have increased Pell Grants as well, a program which has languished over the past few years of Republican control. An identical bill to HR 5(pdf) has been introduced in the Senate. But a loan reduction measure including the Pell Grant increase provisions is currently only before that body in a non-binding resolution)pdf) format.

Tags: written by pO157, edited by 1fastdog, college, loan, banking, Sallie Mae, HR 5, Congress, interest rate (all tags)

This story: 13 comments (3 from subqueue)
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2

Devil's advocate

port1080.

Sat Jan 27, 2007 at 01:27:54 PM EST

5.00 (astute)

This may sound odd coming from a guy who's essentially making a career out of being a student, but I think that too many people go to college. A lot of my friends who went to the same (rather expensive) private four year undergraduate school that I did are now employed in jobs that really didn't require them going to college. A lot of them ended up going full time at jobs they had already had part time before they went to college. A large number of middle class kids end up taking on large amounts of debt and going to college just because they can, because cheap educational loans are so widely available. While having an educated public is a good thing, I think that in general this trend has led to a decline in the quality of your average undergraduate student, and put universities in the position of providing the sort of remedial education that high schools are supposed to provide.

Here's my simple proposition for fixing the problem - give a full ride to a traditional four year college to anyone with financial need (say, combined parental income of less than $75,000 or so, adjusted to factor in how many children are in the family) that gets above a 1200 on their SATs (or some similar national, standardized college entrance exam). Students that can't hit that score should be encouraged to go into technical training of some sort, and should received grants and/or subsidized loans to go to those programs. Students that can't hit those scores, but still want to go to a four year college, would be allowed to go if they can raise the money themselves in some way, but they should not receive subsidized loans or grants. While this would favor the rich somewhat, it would really help those lower middle class students who are well qualified to go to college, but are just above the line for receiving good financial aid packages. If we're really interested in boosting the economy, those are the kids that we want to train to do well (and that we don't want coming out of college with a debt load that it will take them a decade to pay off).

Ce n'est pas une pipe. C'est une signature.

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Re: Devil's advocate

Thalia.

Mon Jan 29, 2007 at 05:46:14 AM EST

4.00 (interesting)

How about this:  We'll just discourage scholarships and loans for degrees that are likely to lead to working at McDonalds or working as a secretary.  My secretary, who is a very bright lady, has a 4-year degree from a decent college in political philosophy.  The other secretary I work with has a degree in art history.  Both of them have substantial loans that they're going to be paying off for a long long time.  And really, all I care about is that they're bright, detail oriented, and deal well with assholes (mostly the clients, not the employers, I hope).  It's not the people who go to med school with loans that have problems repaying them, it's the people who then turn to aerobics instructions (one of my law school classmates did that).  It's awfully hard to justify $100K+ in student loans, if you're doing effectively non-skilled labor.

Thalia

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Re: Devil's advocate

DEMachina.

Sun Jan 28, 2007 at 08:01:44 PM EST

none

Overall I like your idea (especially since I got above a 1200 on the SAT :)).  Problems with standardized tests (and how I'm not sure they're very good predictors of performance) aside, your solution only works if employers stop requiring college degrees for just about anything.  If you look around classified ads (be it Craigslist, Monster, whatever), basically anything other than a skilled trade requires a college degree.  I think the reason is less the education one gets per se, more that it's a sign you're at least reasonably intelligent and responsible enough to get through a 4-year program (which admittedly aren't the standards they used to be).  But regardless of the reasons, that's the reality right now, so until that changes, we still need a large number of college graduates.

Q: What do you think of western civilization? Gandhi: I think it would be a good idea.

4

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Can't Agree

uncarved block.

Sun Jan 28, 2007 at 09:00:34 PM EST

none

   If you're going to go for social engineering, you could get a lot more results with less effort by removing sports teams (NOT physical education!) from colleges and universities. I'm not an elitist snob (I don't think), and enjoy watching team sports of many types . . but I can't think of any single part of "college life"* that does more to distract from the educational mission that's supposed to be the whole point. There are good student athletes, certainly, but there are also many who would have no business being at a college if they couldn't play ball. Athletic directors often have desires and goals that are only tangentially related to the needs of the average student, yet at many large (and not so large) state universities have a lot of pull thanks to the money in their programs, and also a higher public profile.
    And the list could go on, but that's not really the point. What is the point, IMO, is bringing education back to the central focus of the college experience. Is it currently so? Unless things have changed dramatically since I left school, probably not, especially for the first two years as a student. Now, this will always be a factor when dealing with that age level-- which is another reason why distractions should be minimized, thinking about it. It may never be cool to talk about your coursework, but it would be nice if more students would find it expected of them outside the classroom.
    One thing I could get behind that kept the government, and tests, more out of deciding who goes where might be to publicize, perhaps even rank schools, on the stringency of their admission requirements. My alma mater went through this transition in the 80s, when slight requirements to attend were (essentially) dropped altogether. While money is always an issue for schools, it suddenly seemed that hauling in more and more freshmen every year was the goal, and whether or not they finished that year, much less a degree, went pretty much by the wayside. How corrosive this is to the educational focus of a school at the student level hardly needs to be highlighted.
   So formalizing the kind of informal ranking that already takes place, and perhaps changing government assistance to income based on how hard a school you want to attend might be an answer. Lots of folks could go to big state universities that are less picky, for instance, but if that kid from a poor family  can meet the entrance requirements for someplace like MIT, then there should be more cash available to make that happen. Using a rating system of A, AA, and AAA would be one option, though perhaps a bit, um, confrontational if my first proposal was adopted as well :)
    At least that's what I'd do if I became Supreme Emperor of the US.

  *Except getting laid, but that's a factor anywhere and everywhere when you're 18, eh?

Ex ignorantia ad sapientiam; e luce ad tenebras

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Re: Can't Agree

zyxwvutsr.

Sun Jan 28, 2007 at 09:25:23 PM EST

5.00 (funny)

...sports teams...I can't think of any single part of "college life"* that does more to distract from the educational mission...
Never been to a frat party, eh?

6

^ 5

Next On The List, zyx

uncarved block.

Sun Jan 28, 2007 at 10:55:01 PM EST

none

But in the name of brevity, I decided not to go into every single thing that could get ditched from the academic scene in the name of scholarship. Besides, my school didn't have frats, so I can't speak from direct experience whether they have any upsides or not. One of the dorms supposedly made a Playboy "Top 10 Party Dorms" list in the late 70s(!), so I never got the impression frats made too much difference on hard partying.

Ex ignorantia ad sapientiam; e luce ad tenebras

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Re: Can't Agree

port1080.

Mon Jan 29, 2007 at 09:54:25 AM EST

none

If you're going to go for social engineering, you could get a lot more results with less effort by removing sports teams (NOT physical education!) from colleges and universities. I'm not an elitist snob (I don't think), and enjoy watching team sports of many types . . but I can't think of any single part of "college life"* that does more to distract from the educational mission that's supposed to be the whole point.

I agree completely - even at schools where sports aren't really emphasized, they're still highly disruptive to classwork. The main excuse is that "playing sports helps the student learn discipline and self-organization" - and yet I've found that to be true only for those student-athletes who would already be good students in any case (and for those students, the sports tend to cut into their study time and actually make them worse off academically).

Ce n'est pas une pipe. C'est une signature.

12

^ 8

Note The Proviso

uncarved block.

Tue Jan 30, 2007 at 01:08:38 PM EST

none

   Yep, I buy into the "sound mind, sound body" argument for the most part, which is why I put in that bit about keeping PE. If nothing else, it provides poor students with an option to exercise without having to pay gym fees elsewhere. Intramural teams would still stay, though the chances they'd distract students would be pretty good.
   Maybe I'm still just a bitter geek, but the whole notion of "team spirit" injected into higher education was what rankled the most. If I wanted to feel good about my school, I'd rather it was about the success of the Biology department in getting interesting results from a government study, or the Engineering department having companies beating down the doors looking to hire graduates-- not whether the football team was going undefeated, or whether the hoops team made the regional finals. If I want to root for a sports team, the private sector more than meets that need . . and that same private sector does a very poor job doing more than paying lip service to the actuality (in contrast to the image) of being smart, or at least educated.
   Which is, of course, why sports will never leave academia. Companies love the idea of team spirit (or, to put it bluntly, getting folks to work harder without paying them more), and the military does as well. It's an easy way for politicians to look populist as well (see: the recent Obama backing of the Bears), at very little risk, even if these same politicians see games from luxury boxes rather than three seats from the top row. No, something so useful will ever be forced out of the universities-- but I can dream, can't I?

Ex ignorantia ad sapientiam; e luce ad tenebras

9

^ 2

The Value of a 4 Year Degree

pO157.

Mon Jan 29, 2007 at 11:55:32 AM EST

none

In college, not too long ago, I marveled at the differences in programs and workload between  majors. It seemed like certain majors seemed to spend the majority of their time building or reinforcing basic writing and communication skills that should have been mastered in high school and below. Many programs also seemed to have coursework that covered simple common sense topics, or tasks that anybody reasonably intelligent could self-learn (presentation skills, use of PowerPoint(tm), writing a memo, asking yourself is this good for the company?, etc) or seemed to be straight out of Office Space. 3.5s and 3.9s were quite liberally spread around, and one woman I knew at the time (herself a business/communications/public relations/marketing/who knows major) sat down and compared the percentage of people on the Dean's List from each type of major, and found that certain programs were grossly overrepresented, whereas others (the hard sciences, some social sciences, etc) were not (wherein it would still be respectable to get a 2.7 or 2.9 in a biology department).

Many of these folks went out, and graduated and are stuck doing low level jobs/internships or positions slightly higher than clerical level waiting for that golden "management" opportunity to open up. It seems that those who get good positions right of college do it largely out of charisma and I wonder, for these types of majors and programs if a simple 2 year program teaching people these vital skills like PowerPoint operation, financial practices, etc would not be better. It would work for the employer because they could get new workers quicker from school, and the employee would not be burdened with years of unneeded accumulated loans.

Now, do not get me wrong, there are some things that probably require a 4 year degree. But for many careers, I really wonder about the investment of time and money just to complete a checkbox on a Human Resources job interview sheet. For everybody else, they should be encouraged to go to a quality (and this means we would have to work on our junior colleges) community college or to a technical/trade school.

Lowering the number of college students would work towards increasing the value of a basic college degree by dropping the amount in circulation and allowing colleges to stop putting so much effort into teaching remedial coursework that should have been covered in high school.

I don't own a gun; my ancestors were Quakers!

10

^ 9

Re: The Value of a 4 Year Degree

humorlesscretin.

Mon Jan 29, 2007 at 12:43:38 PM EST

4.00

But for many careers, I really wonder about the investment of time and money just to complete a checkbox on a Human Resources job interview sheet. For everybody else, they should be encouraged to go to a quality (and this means we would have to work on our junior colleges) community college or to a technical/trade school.

Trouble is, there's 2 sides to that problem.  Not only do we have to work on our junior/community colleges, we also have to work on the HR departments that generate those checksheets.  Presumably these requirements started popping up because companies were tired of hiring high school and community college graduates who couldn't do the work, but now that those requirements are in place there would have to be an effort made to change them.  Expending that effort provides no value to the companies involved, since all it really does is open them up to the risk that the new crop of 2-year grads aren't as good as they should be.  (And frankly I'd be impressed if we could really fix the junior college situation; if you can't teach the required basic skills in 12-13 years, what good will 2 more do?  How do you make those 2 years matter so much to the students that they learn what they couldn't manage to learn in over a decade of prior schooling?)

Humorless. Cretinous. What'd you expect?

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Re: The Value of a 4 Year Degree

pO157.

Mon Jan 29, 2007 at 01:47:42 PM EST

none

Trouble is, there's 2 sides to that problem.  Not only do we have to work on our junior/community colleges, we also have to work on the HR departments that generate those checksheets.  Presumably these requirements started popping up because companies were tired of hiring high school and community college graduates who couldn't do the work, but now that those requirements are in place there would have to be an effort made to change them.  Expending that effort provides no value to the companies involved, since all it really does is open them up to the risk that the new crop of 2-year grads aren't as good as they should be.

You are correct. There are more than 1 side to that problem. The change would have to rely on HR departments in corporations to begin to trust the degrees Junior College graduates hold. They are not going to do that immediately, the best we could do would be to start work on building up the JuCos and providing incentives for people to go that route and after a period of several years or maybe an entire generation hoping for a gradual shift toward where we want to be.

But it is better than the alternative. In some states a BA or BS (a previously standard route to an education job) is not enough to teach K-12 anymore, as it does not guarantee the correct skills. Therefore, many states are mandating a Masters in a technical field, or an M.Ed in addition to a  Bachelors in a given subject or a Bachelors plus 30 or 36 semester hours at the graduate level. How long before "degree inflation" causes the next generation of teachers to need PhDs?

(And frankly I'd be impressed if we could really fix the junior college situation; if you can't teach the required basic skills in 12-13 years, what good will 2 more do?  How do you make those 2 years matter so much to the students that they learn what they couldn't manage to learn in over a decade of prior schooling?)

An interesting question. The only answer I can think of comes in one word: Failure. If a person is not college material, do not want to go to a trade school and barely passed along in high school it is quite likely that a few years working low wage low skill hourly jobs and going nowhere fast may quite likely provide the motivation they need to go back for another 2 years. I see more English and Intro. to Math textbooks in the hands of adults going to night school on the train every evening than I do in the hands of folks in their early 20s. Nothing motivates like a back against a wall.

I don't own a gun; my ancestors were Quakers!

13

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Re: The Value of a 4 Year Degree

humorlesscretin.

Wed Jan 31, 2007 at 07:39:43 AM EST

none

The change would have to rely on HR departments in corporations to begin to trust the degrees Junior College graduates hold.

Trouble is, the only real way to do that is to lower the expected pay required for junior college-eligible positions (or for the government to directly fund internships) because the corps already have what they want at the price they're willing to pay, so why should they increase their risk?  No corporation cares that the average worker owes umpty-thousand in school loans; in fact, this may be considered attractive as a worker trapped in fear of debt is less likely to randomly leave (though perhaps more likely to be tempted away by more money).

In some states a BA or BS (a previously standard route to an education job) is not enough to teach K-12 anymore, as it does not guarantee the correct skills.

This has been true for at least 20 years in NJ (and presumably elsewhere) and frankly, given what I've seen of B*-level Math Ed majors the extra work is essential.  In a year of grading and 5 years of observation among math students in an assortment of 400-level classes, the Math Ed majors were always the problem students.  Most likely to cheat and cheat big*, least likely to get uncheated work done on time, most likely to show up the last day of the semester begging for a passing grade they in no way deserved, least likely to have actually learned even the basics of a course... and these are the people we want to send out to teach the next generation?  Even the occasional business majors in Linear Programming weren't as bad.  Throw them back, please.

If a person is not college material, do not want to go to a trade school and barely passed along in high school it is quite likely that a few years working low wage low skill hourly jobs and going nowhere fast may quite likely provide the motivation they need to go back for another 2 years. I see more English and Intro. to Math textbooks in the hands of adults going to night school on the train every evening than I do in the hands of folks in their early 20s.

At which point the junior colleges are cast as suppliers of remedial study skills, but I guess that's to be expected.  I wonder if such a class offered (or mandated) in high school would help... obviously I don't know about all high schools, but at mine "College Study Skills" was an optional senior-year joke class taught in place of a semester of writing.  (Yes, in place of one of the things college students need the most.)

* It was common practice for all the Math Ed majors in a given course to latch on to one of the better students in class, copy that student's work with minimal changes and turn it in as their own.  Any time they couldn't find a willing victim, endless complaints about the volume of work ensued... with the actual math majors looking on in confusion since these were not difficult or even time-consuming classes or assignments.  While this was a blatant violation of our academic integrity policy, attempts to act on it were blocked since the College of Ed couldn't afford to have an entire year's worth of a major flunk a class together.  The professor who actually cared about such things ended up implementing a group work policy which ended up saving tons of grading time since there was 1 paper to grade rather than 15.  (The other professor's stated policy was that students could use any resource they could acquire, with the sole exception that you couldn't usae classmates or other people during exams.)  If I sound bitter, that would be because I am bitter.

Humorless. Cretinous. What'd you expect?

1

Re: Loans To 3.4%... Eventually... And Then They D

ethics.

Sat Jan 27, 2007 at 11:32:20 AM EST

none

You know, I was REALLY hoping the Democrats would do the right thing, especially on the front of taxes. Back in 1987, I made 8,340 dollars in that year,  trying to put myself through school. My parents made a lot of money (and they were so good to me that I never saw a nickel from them) and the loans were based on their salaries. I took out Pell and a few others but most were capped and the others carried a lovely interest rate that was astronomical.

If more kids had help like lower rates on EDUCATIONAL loans, our future, kid's careers, and over all status in America would be so much better. Perhaps we wouldn't need discussions like this.

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