Battle of the Columnists: The higher education debate in the 2012 election

Maia Ferdman: Barack Obama

President Obama’s higher education policies have consistently benefited students, rather than prioritized private business interests at students’ expense.

Obama’s student debt reform projects, embedded in his 2010 health care plan, created direct loans from the Department of Education and eliminated subsidies to banks for student loans. Compared to federally controlled loans, private loans are riskier for students, who could face severe penalties for missing a payment or defaulting.

The banks that received subsidies from the federal government were making an enormous profit from lending to students, according to Gary Orfield, a UCLA professor of education and political science who specializes in education policy.

The banks lent to students at no risk ““ the liability of the loans were picked up by the Department of Education, and by extension taxpayers, not the banks.

Now, students who take out direct loans do so at a lower borrowing cost. Under Obama’s system, student debt payments are capped at 10 percent of their income after graduation, and are forgiven after 20 years, instead of the previously established 25.

These policies reduce student debt payments and allow graduates to quickly become contributing members of the economy.

What Republican presidential candidate Mitt Romney has advocated for is a return to bank-based loans. This favors private business interests over those of the general public.

This regression would stunt opportunities for millions of students who can obtain an education only with affordable loans, and hinder graduates’ ability to participate in the national market by increasing monthly loan payments.

During his 2012 State of the Union address, Obama proposed to hold higher education institutions accountable for affordability.

One way he is doing so is by cutting back federal funding of private, for-profit universities with bad graduations rates, Orfield said.

Obama’s “gainful employment” policy measures schools’ eligibility for federal aid based on the institution’s average repayment rate on student loans. This “unnecessary regulation,” as Romney is quick to quip, ensures liability of for-profit schools that often leave students in excessive debt and without a job to pay it off.

The Obama administration also announced the creation of fiscal incentives for states and individual colleges to keep tuition low, in a “Race to the Top” for colleges. The program would set aside a total of $1 billion for states and an additional $55 million for universities.

These incentives would benefit students by spurring states and universities to find innovative ways to fight tuition hikes.

Romney, on the other hand, seeks to “simplify” the federal financial aid system. Although he is unspecific about the details, his policies could possibly eliminate supplemental federal grants completely.

“If Romney and a Republican Congress were elected, we’d go backwards very fast on college access,” Orfield said.

Diamante Smith, a first-year political science student at UCLA, pays for her studies with a Cal Grant, a Perkins Loan, and federal subsidized and unsubsidized loans.

“If I had any less federal aid I wouldn’t (be able to) go to school,” she said.

For students like Smith, Obama’s plans to simplify the financial aid system by launching a “Financial Aid Shopping Sheet,” would make it easier to compare the financial costs and benefits of different universities.

The sheet would include a student’s estimated student loan debt after graduation, as well as many universities’ post-graduate employment information.

Smith said she hopes to go to law school, but has to consider her student loan debt and whether she would have to delay a graduate degree to work. In the worst case scenario, her accumulated debt would make law school impossible, she said.

Obama’s fact sheet would help students like Smith weigh this decision.

Ultimately, providing detailed aid information to families is a more productive way to simplify the financial aid system than merely consolidating and eliminating programs.

Hayden Padgett: Mitt Romney

Last week, presidential hopeful Mitt Romney released his three-pronged strategy for restoring America’s higher education system. In it, he outlined a plan that would make post-secondary schooling more affordable by increasing private sector participation.

While the plan does not address immediate financial concerns, in both his diagnosis of higher education’s root ailments and his proposed regiment of treatment, Romney shows himself to be the fiscal physician the Republican Party was hoping for.

Romney’s education platform aims to initiate three general improvements, primarily to financial aid. Romney hopes to increase access to information about aid, encourage private bank involvement in providing aid and simplify existing aid regulations.

All these propositions work to solve the crucial problem of American higher education: the cost.

According to a Heritage Foundation study, university tuition has increased 439 percent over the past 30 years; the federal government countered this by increasing Pell Grant allowances by 475 percent, not only matching tuition inflation but exceeding it. Both statistics have been adjusted for inflation.

“There is very strong evidence that increasing student aid enables colleges to raise tuition,” said Neal McCluskey, associate director of the Cato Institute’s Center for Educational Freedom.

This brings us to the root of Romney’s contention with existing federal aid plans ““ they drive up the cost of higher education, only burdening students with more debt.

To put the inflation figures in perspective, the value of the US dollar has inflated 138 percent since 1982. That means tuition has increased more than three times faster than market prices, with federal financial aid dragging it higher.

McCluskey said that as per-student aid rises, the increase enables colleges to raise tuition to take advantage of those extra funds.

While the connection is strong, some have argued that aid increases are necessary to accommodate the growing student population. According to the US Census Bureau, 8 million more students attended universities in the United States in 2009 than in 1980 (20 million students to 12 million students enrolled, respectively).

But for Romney, the issue is not whether federal financial aid has been effective in meeting financial need; the issue is that contemporary financial aid acts as a temporary solution to high education costs, without providing long-term solutions.

Federal policy has continued increasing tuition subsidies without ensuring that measures are in place to counter the rise in college costs. This has left the government scrambling to provide more financial aid and issue more loan forgiveness plans.

At some point, permanent solutions must be given. Romney’s solution is to “bust” the Department of Education’s monopoly on student loans and invite private financial institutions to offer competitive loans.

His argument is that more loaners and an increase in market competition means lower rates for students.

Thus, the federal government will shed some of the financial burden of aid.

Romney’s plans acknowledge that such privatized loans need oversight. While he advocates for greater private involvement, he intends to maintain existing regulations that restrict improper loan practices.

While these solutions would stabilize higher education in the long run, there is also concern about the immediate student debt crisis.

In February, the Daily Bruin reported that aggregate debt from student loans has surpassed credit card debt. Some financial analysts worry that, if unchecked, building student debt could lead to a financial collapse.

This is where Romney has work left to do ““ his plan addresses systemic problems in higher education, but has few short-term solutions.

In order to provide a platform that students and parents affected by the current debt crisis can rally around, Romney needs to provide a contingency plan to address the astronomical rise of student debt.

Email Ferdman at [email protected]. Email Padgett at [email protected]. Send general comments to [email protected] or tweet us @DBOpinion.