Jan 21, 2009

A better bailout

While we're dishing out cash to big companies, and thinking about insignificant sums to be returned to taxpayers, maybe we should think of one more thing. In Fareed Zachariah's new book, "The Post-American World," (which I plan to write more about) he offers an idea from one economist -- that our definition of savings is flawed. Cash, stock and property are dollars reserved instead of spent, it ignores another big class of deferred (monetary) gratification -- education.

Plenty of people sinking under loads of debt are those with big student loans. They followed conventional wisdom and invested in knowledge that will not only benefit them in the future, but will benefit all of us in their increased competence and ability to serve our needs (except for those studying to be stockbrokers, of course). Then they graduated into this economy and are waiting tables, if they're lucky.

So why don't we look at a student loan forgiveness program? We'd need some criteria for whose loans would qualify, maybe just those who are unemployed or making less than $20,000, or something. (It would probably be cheaper to just forgive student loans across the board rather than pay for a whole phalanx of examiners of applications.)

At the same time, let's find a way to beef up scholarship funds. As Toyota demonstrates, slack times are opportunities for training and improvement. As a society, couldn't we invest in that as well?

3 comments:

Lester said...

Karen,
I agree that education needs to be treated as a resource for society, but why just forgive loans? I am spending over $1,000 per hour for my PhD classes at WSU. Should I have borrowed money for that so I can be forgiven? Maybe an ability to pay is a moderator that needs to be thought about.....

How is the book coming?

Andrew said...

Karen,

I agree that education can be one of the most important investments which any nation can make.

To see evidence of this, I need only to look at the country in which I currently reside, South Korea, which has few natural resources but has performed brilliantly over the past thirty years, part of which can no doubt be attributed to the massive investment which the country has made in terms of education.

Nevertheless, I must agree with Lester's point that the forgiveness of student loans would unfairly penalize those who pay for the costs of their education up front.

If you were going to go down that path, then to make it fair, you would have to make education free per se, and I need not remind you of how much of a strain that would put on the national budget.

It is certainly fair to legislate that people don't have to make student loan repayments until they reach a certain level of income. I don't know how it works in your country, but in my home country of Australia, graduates are only required to make loan repayments if their income exceeds a certain threshold, which is about $25,000 Australian dollars (Perhaps $20,000USD).

This is reasonably fair, since it means that those who genuinely cannot afford the repayments do not have to make them, but also that those who are able to make repayments are required to provide financial support for the education system from which they benefited.

Karen Wilhelm said...

Good points both of you. Some other qualifications might be:

Associates degree achieved at a community college.

Bachelors degree achieved at a state university

Ability to pay

Unemployed or underemployed

Type of degree

California had free tuition at state universities many years ago. It fell victim to budget cuts. Did it underwrite some waste? Yes. Did it produce return on investment? That would be interesting to know.

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