Ron Paul Wants To End the Federal Student Loan Program

On the heels of declaring his intent to axe a few departments from the federal government, Ron Paul has revealed more plans should he become President. The_THOMAS writes "Ron Paul wants to end Federal student loans stating that the Government involvement artificially inflates the cost of a college education and that once the government is out of the situation, students will be able to work their way to a college degree. What do you think?"

Comments

Ron Paul should give away his money

[loftwyr]

Maybe if he had to actually work for a living at a minimum wage job, he'd stop asking those with little to no money to give up their chance to be raised up.

Re:Ron Paul should give away his money

[hedwards]

Which is a really good justification for him shutting the hell up when it comes to issues of welfare. I can't personally afford to work for free, in fact most Americans can't afford to do so either. We just don't have the money in the bank to allow for that. Perhaps if the GOP kleptocracy would stop looking for new and innovative ways of stealing from the poor to give to the rich, we might be able to afford to give back more.

At the end of the day, any politician that can afford to do that, whether or not they do, has no right to suggest that we cut back on our minimalist safety net.

Re:Ron Paul should give away his money

[tibit]

The problem is that the federal student loans, while genuinely useful to some, have been exploited pretty much to death by the for-profit colleges. Those do powerful marketing and have pretty much established the idea that everyone should go to college, no matter what. It's the same with diamond jewelry: somehow a semi-rare rock is elevated to cult status, and every woman in the U.S. feels that getting a big one on a golden ring is cool and shit. The colleges merely took a good marketing lesson from DeBeers and applied it to a different market. The outcome is pretty much the same. Couples get into debt for shiny rocks. Students get into debt for college education that can be very well useless to them. Nothing new here, move along.

As much as I think some of RPs ideas are overreaching, I do believe that axing or at least reforming the federal loan program is a must. As an alternative to axing, I'd limit its availability to people who to non-profit schools. I'm sure a more extreme option exists, say limiting it to people who go to non-profit public schools.

Re:Ron Paul should give away his money

[fuzzyfuzzyfungus]

I have relatively little interest in the question of what Dr. Paul may or may not be doing personally; but that is sort of the whole point of paying politicians a salary.

On the minus side, you do run into situations where City Counselor McSleazy passes an obscure bill such that the clock for his retirement started when he worked as a volunteer at the library one summer back in high school, leaving him to retire at 40.

On the plus side, if being a politician actually pays in vagely the same bracket as other jobs requiring similar qualfiications, you don't have a class of "representatives" that is 100% either bought-and-paid for because they couldn't afford it otherwise, or economic gentry who can afford to retire from day to day work in order to focus legislating in the favor of the local gentry.

That's why, historically speaking, legislative salaries have been something of a contested issue between the proponents of approximately egalitarian democracy, and the proponents of limited-sufferage democratic aristocracy. Career politicians generally leave a slime trail, and it is hard to like them as a class; but if you can't can't earn wages as a legislator, you can be pretty much assured that legislating will be done entirely by people who have other ways of obtaining support...

Re:Ron Paul should give away his money

[janeuner]

The average annual income for an individual with a high school diploma is $35k. For an individual with a bachelors degree, it is $50k.
Source: http://en.wikipedia.org/wiki/Household_income_in_the_United_States

For a married man in that tax bracket, the difference in income is taxed at 15%.
Source: http://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax)

The average annual cost of tuition at a public university in 2009 was $7020.
Source: http://en.wikipedia.org/wiki/Higher_education_in_the_United_States#Finances

Last year, 7.2 percent of those loans to public universities resulted in a default.

Assumptions: 4 years to complete a bachelors degree plus 1 year to start repayment and loans have a 3% APR and are dispersed in full at the start of the school year. Let's also say the government bears the full cost for all defaults, and the defaulter never pays a cent in taxes.

Subsidized Interest: $7020 * (1+2+3+4+4 years) * 0.03 = ~$3000
Marginal cost of default: $7020 * 4 * 0.072 = ~$2000

Marginal annual tax revenue from graduate: ($50k - 35k) * 0.015 * 0.928 = ~$2000

So, for a college student on a loan-driven ride through college, the total cost to the government is about $5000. That cost is recovered from said graduate within 3 years via increased income tax revenue. Since most workers will remain in the economy for another 30 years, this investment represents a 10:1 return on investment.

There are separate issues wrt private schools, MAP grants, etc. But this exercise almost always shows a substantial return on the investment. This isn't about poor lazy people. This raises people out of poverty, with a side dose of increased tax revenue and decreased welfare costs.

Only a fiscal lunatic would eliminate subsidized loans.

Re:Ron Paul should give away his money

[Anonymous Coward]

Ron Paul can be creditably accused of many things, but being an aristocrat isn't one of them. He paid for his education with military service, and retired from medical practice (OB/GYN) to go into politics. He is at least consistent in his principles, and as honest a man as you're going to find in politics.

Re:Ron Paul should give away his money

[tnk1]

You're right. He does have money and he doesn't need his government salary.

However, the problem isn't with what he does with his salary, the problem is with the situation where people are attacking Ron Paul instead of attacking his position. He is entitled to both his salary and whatever he has made in private life. And that doesn't make him any less qualified to make a point about what is needed to improve the country.

I don't live in Africa, but I doubt anyone would call me out about condemning abuses and corruption that happens there. The fact that I am not needy does not make me unqualified to make decisions to help alleviate the problem. Indeed, being somewhat successful might well make me more qualified to help other people be more successful. Of course, that doesn't mean I am the only voice that should be listened to, we do need the viewpoints of the unemployed, the students and the otherwise disadvantaged to make a good policy, but we seem to be arguing that only a needy person has any right to talk about the safety net, and that is just plain wrong. After all, it's the well-off people in previous Congresses who set it up to begin with, was it not?

Mind you, I don't like his idea of pulling the rug out from under the student loan system, but I don't like hearing talk about him being rich and therefore unable to empathize with anyone else. It makes me think that his opponents in this case have no better points to make than an appeal to emotion and the language of class division.

"Free" money

[tmosley]

Subsidized student loans are "free" money that enslaves most for a lifetime, moreso today than at any time in living memory. There was a time when working part time over the summer would be enough to pay ALL college expenses, now you have to work some 35 hours a week during the semester plus full time in the summer and over breaks. This is outrageous.

Re:"Free" money

[RazorSharp]

You can preach personality responsibility all day long, but that doesn't change the fact that it's bad for society when we just let the vast majority fail. That's why prison populations are growing at outrageous rates. Why unemployment is skyrocketing. Why the United States is in decline.

What you consider 'very little money' is a whole lot to some people. And mentioning post-secondary options for high schoolers is just insulting. I wasn't able to attend post-secondary because I didn't have a car. All the kids who were in post-secondary classes when I was in high school were the ones with parents who could buy their education anyway. Also, a student has to be an above-average performer for post-secondary. How do you expect someone with uneducated parents to perform at that level in high school?

This attitude of, "it's your fault if you don't succeed, society has no business ensuring that you do" is the same attitude that has led to all the problems this country is facing. The college students who spend their time getting drunk and partying aren't the ones who cut their teeth just so they can attend. They're the rich fucks who have all their bills paid by mommy and daddy.

Of course it does

[Elros]

In a lot of ways, they do inflate the cost of education. However, the quality is also going down. The bigger problem is that the demand is being artificially inflated at the same time. Nearly every job requires a BS or BA...even if they don't care which subject. A University should be a place of higher learning and research, not a factory for just the next step in education.

I agree that eliminating the student loan program will help. However, there need to be a lot more changes then that.

Re:Of course it does

[swillden]

On the other hand, why would employers be demanding a college education if they didn't see that it actually makes a significant difference in employee performance? They could hire people for less money if they didn't require a degree, so if less-educated employees could do the job, employers would be all over it.

The only reasonable conclusion, IMO, is that it does matter. Of course, it's entirely possible, perhaps even likely, that the education isn't so much the cause of good performance as the education and good job performance both result from the habits and character of the individual. By that I mean that the sort of industrious, intelligent person who will be a good employee is also the sort of person who will pursue and achieve a good education.

But I don't think so. My former employer, IBM, long had programs where they provided educational opportunities for factory workers so those people could advance within the company. I worked with a couple of gentlemen who had taken this route, starting on an assembly line, bolting computers together and ultimately achieving technical and managerial leadership positions in the company, getting the equivalent of a college education in the process. I noticed a couple of things about these people. The first was though they were given greater responsibilities at the same time they were getting their educations, those responsibilities were limited -- and even still they felt underqualified and somewhat overwhelmed by them. They, at least, felt that the education they received was essential in their ability to succeed.

The other was that I always felt they were less effective than they could have been if they'd had a "normal" college education. IBM didn't bother providing, or requiring, a liberal education curriculum and the result was people with deep knowledge and skill in a narrow focus. It was less problematic for the technical guy; he'd earned the equivalent of an MSCS, and within the context of software and hardware he knew his stuff -- but don't expect him to understand much about the social or historical context of his work. For the manager, he'd earned the equivalent of an MBA and again he knew business, negotiation and the economic theory of pricing, and again he lacked the broader education, but for him that lack really caused him to make some, IMO, poor decisions.

But the key point of my anecdotes is this: IBM is big enough and at one time had a large pool of low-skilled employees they could search for capable people to educate in job-specific skills and advance. And you know what? They more or less abandoned that approach. Partly because they shipped all manufacturing overseas and no longer had many unskilled positions from which to draw, but I think also because those trained-up people, however motivated, intelligent and hardworking, were actually less effective than their college-educated counterparts. Instead IBM disbanded its "IBM University" programs and shifted to the more common method of offering to subsidize a normal college education.

I'm convinced that they did this because they found that the sort of education offered by universities did a better job of preparing people to be effective technologists, businessmen and administrators.

Of course

[TheSpoom]

Because deregulating financial matters always ends well.

If you can get a $60,000 loan for school

[assemblerex]

All of the sudden all the schools cost $60,000.

Re:Interesting...

[Phrogman]

A lot of those schools exist to process students and take their money. They are money making institutions that happen to award credits when you pay the exorbitant fees. A lot would shutdown if the loans system was removed.

Another problem is that until the prices lowered, superior education would only be the purview of the rich - RPs kids would do just fine, but the average person's ability to help get their children into a higher level of living would be removed. People say there are far too many university graduates, and far too many positions for which a degree is the expected minimum, and thats definitely true. I have no degree and many many jobs are closed to me, despite the fact that I could easily do many of those jobs. However no one wants to be amongst the first people who no longer get the benefit of a good education, when the other side of the equations (business/Government) is not going to change their standards any time soon. Why should they, they can ask whatever they want, at whatever rate of pay, and someone will come along and take the job, no matter how awful it is.

At my old Alma Mater the pressure seems to be on generating income, so the Engineering Department gets brand new buildings, while the Fine Arts department only got out of its WWII Quonset huts a few years ago - they had been there for 30 years at least. The university education system is focusing on things which can turn quick bucks (business degrees, Engineering degrees and people getting the school patents, new business development), all because the Government has stopped supporting the schools and they are expected to survive on their own. The problem is that the nature of education gets changed in the process.

In a perfect world

[milimetric]

I love Ron Paul. He's the most idealistic person I've ever known. He's basically lying to everyone though. Most of the things he says go like this:

1. Cut funding
2. ??? Allow free market to do it's thing ???
3. Problem solved

He doesn't mention two crucial things. One is that step 2. may take a very long time. The other is that for 2 to happen effectively, we have to equalize any unfair and corruption-driven advantages that others have gained in a crooked system over two hundred years. Once highly paid yuppies get busted for illegally claiming "expenses" as tax free money and corporations get busted for gambling with pension funds at the same rate that people get busted for stealing a piece of bread or robbing a grocery store, then we'll have a truly fair environment for the free market to do its thing. In the meantime, Ron Paul is selling pipe dreams. Awesome pipe dreams, but ultimately dreams without good plans to back them up.

Re:FP

[TangoMargarine]

Cthulhu will flay you for your inability to even remotely accurately spell his name.

Re:Interesting...

[Inglix the Mad]

The problem isn't the loans in a practical sense. The real problem is companies driving degree inflation. Example: early Internet days, how many ISP technical personnel had 4 year degrees? I'm talking about the guys maintaining the lines / switches / routers. Not very many at all. The guys in charge often did, but even that wasn't guaranteed. I, personally and through company programs, trained many High School kids on the intricacies of R&S. Try getting in today without at least a 2 year degree. A 4 year degree will be preferred, if not required. Heck, even help desk which is entry level, often requires a 2 year.

Companies drove us here because a 4 year degree student is "better" even if it doesn't really matter.

Re:Subsidies inflate pricing.

[RingDev]

How many 18 year olds do you know with good enough credit to buy a car, let alone a house?

How many private banks are going to be willing to fork over $20,000-200,000 for an education for an 18 year old kid with no credit history, no job, and a low likelihood of gaining employment in their first 5 years that will pay anything close to enough to be able to aford the payments on that loan?

The reason the federal student loan program exists is because it ISN'T profitable to make that loan. Most kids are going to default, and the banks will be left holding the bag.

The government program exists in a market where the private market doesn't want to go. That's a significant purpose of the government in a capitalist society.

-Rick

Well duh...Economics 101.

[Panaflex]

Anytime a government subsidizes a product or service - the price will increase to match the subsidy. Period. The producers know how much the subsidy is(A), and how much a consumer can spend(B). They will always add a+b in the end because the elasticity of price can be known to support that level.

There isn't even an unknown pricing curve here - the University already knows your finances when you apply for financial aid. They can simply and easily price an education to target the population of students they want.

How many (fiscally) bankrupt universities have you seen lately? I only know of Huron University in South Dakota in 2005.

http://en.wikipedia.org/wiki/Category:Defunct_universities_and_colleges_in_the_United_States

Supporting Ron Paul feels cool, is stupid

[ansak]

Disclaimer: I am a Canadian, so I do not have a dog in this race; except we are your nearest neighbours (nearer than México in two minor ways only: longer border, no local outcries for a fence) so if you systematically self-destruct, it'll be bad for us, too.

Support for Ron Paul by the young and sometimes geeky has intrigued me for some time. Is it a result of reading Ayn Rand? Is it because his ideas seem so much more sensible than so many others? Is it because he does not appear beholden to any lobbyists? Is it primarily because he wants to end drug Prohibition? Possibly all of the above.

But it's also confused me because a number of the things Ron Paul wants to do away with are things that help the young find their first footholds -- things like student loans (or even grants). When I read this headline, I thought for just a second that perhaps Dr. Paul wants to throw open the universities for all, call a full education a civil right that you get to take advantage of based on merit. But I dismissed that thought before I saw the rest of the post, and I was right to do so. My response: his analysis may have some truth in it but it's so simple as to be suspect, in my view. On balance, like much of what Ron Paul says, it's too simple to be right.

Whoever thinks Ron Paul is cool, whatever lobby groups he is not beholden to, make no mistake: the über-rich and powerful wish his ideas well because their adoption would entrench and deepen the growing class divisions in America and put an end to the American dream as anything but that: a wistful dream of what expectations used to be.

Something is rotten in the way the US is going these days. For instance, in my lifetime, before 2008, I had never heard a leading politician in the US say of their president from the opposing party that they wanted him to fail. Whether you agree with Mr. Obama or not, that attitude on the part of any member of your government is pernicious. I'll stop there because the list of things going wrong is so long (most of them decades in the making) as to make this too-long post ridiculously so.

But Ron Paul is not the answer to those problems: his ideas (and incidentally those of the Tea Party) are only going to help the rich get richer and inherit the meek (and the not so meek). Do yourselves a favour, folks, and elect leaders that remember what they learned in Kindergarten (without forgetting all the things they learned since) and value their neighbours over hard lines -- internal neighbours, of course! I wouldn't advocate that you would elect the people I, your Canadian neighbour, want you to elect. I'm just confident that if, overall, you voted in line with your interests (and that may take a lot of thinking to figure out who's going to serve those best) and do well, then you won't become neighbours that we have to fear from across that longest unarmed border in the world.

be good to each other, folks...ank

Re:Subsidies inflate pricing.

[Altus]

So the answer is to cut off higher education at the knees and hope that eventually the market comes around before we enter a new dark age?

Maybe there is some other way we could go about doing this.

Re:Subsidies inflate pricing.

[StillNeedMoreCoffee]

Besides not having a clue about Education, how it works or whats going on in a University. The idea that shoving people in a room and thinking that $1 per student for "rental" costs makes any real sense.

As for the purpose of an Instructor neigh Educator in the class, if showing the material, in written or video form was effective then you would find those institutions that are for profit and run by business men, implementing that years ago. They haven't because it is not as effective a teaching tool as having someone there to answer your questions, on the spot and to clarify things not understood through example, analogy.
Everyone comes to the classroom from a different background. All disciplines have their own sub-dialect. The Educator translates that sub-dialect for the un-initiated so they can understand and adopt that sub-dialect going forward in their studies. I have yet to pick up a book on material that spoke exactly my sub-dialect, causing me to miss-understand or do extensive work tracking down the problem. So having an Educator there is the most efficient, I would estimate about 500% more efficient than the material alone. Then there are the aspects of focus and the synergy of the group of questions fielded answering questions you did not even know you had.

Having a $20/hr temporary worker cheapens that whole idea of an Educator and comes from a missunderstanding of what is really going on, what its value is and what its long term effects are.

What