Tag Archives: college debt

Promises Promises…

Trump promised to revive coal mining. Bernie is once again promising to eliminate student debt. Bernie’s goal is a lot more attractive, but his strategy is equally delusional.

Trump, of course, is too dumb–and unconcerned–to know how energy markets work; he just throws red meat to his equally-uniformed base. Is that what Bernie is doing, too? Playing to his core voters without realizing how unrealistic/unworkable his promises are? I doubt that. Unlike Trump, he’s pretty smart–and he actually knows how government works.

And that’s worse, because it means he has to know his plan is an absolute non-starter.

Student debt is admittedly an enormous problem, both for the students who spend years burdened by it and for the economy, where it constitutes an enormous drag on consumer spending and economic growth. Policymakers definitely should do something to alleviate the burden, but the pertinent question is: what sorts of proposals make sense?

What would a workable solution look like?

Economists point out that simply canceling all student debt ends up helping high-income families most, which seems like a less-than-prudent use of tax dollars. Estimates are that the top 40 percent of earners would receive about two-thirds of the benefits.

Sanders has made a similar proposal before, and David Honig, a friend (who is an exceptional lawyer), took a “deep dive” into that previous plan. I am appending his analysis. It’s long, and it’s legalistic/technical, but it also demonstrates why political promises sound so much better when they aren’t closely examined.

I’ve bolded language that I think is particularly important…Here’s David’s summary.

________________________–
Time for a breakdown. Here we go:

TITLE I—FEDERAL-STATE PARTNERSHIP TO ELIMINATE TUITION

SEC. 101. GRANT PROGRAM TO ELIMINATE TUITION AND REQUIRED FEES AT PUBLIC INSTITUTIONS OF HIGHER EDUCATION.

That’s our first title, and what it tells you is that this isn’t a Federal program alone, it’s a State and Federal program. In turn, that means that States have to sign on. The King v. Burwell precedent from the ACA litigation is going to still control, and that means we’re not talking about free tuition everywhere, just in blue States.
 
(a) Program Authorized.—
(1) GRANTS AUTHORIZED.—From amounts appropriated under subsection (f), the Secretary of Education (referred to in this section as the “Secretary”) shall award grants, from allotments under subsection (b), to States having applications approved under subsection (d), to enable the States to eliminate tuition and required fees at public institutions of higher education.
(2) MATCHING FUNDS REQUIREMENT.—Each State that receives a grant under this section shall provide matching funds for a fiscal year in an amount that is equal to one half the amount received under this section for the fiscal year toward the cost of reducing the cost of attendance at public institutions of higher education in the State.

That’s your formula — 2/3 Fed, 1/3 State. So if Sanders’ own estimate is right, that the cost to the Feds is $750B over 10 years, that means the States are going to have to come up with $375B, and they can’t tax Wall Street.

So how much do they get? Well, that’s interesting, and the legislation quite clearly institutionalizes the vast differences in education spending from State to State:

(b) Determination Of Allotment.—

This is how the dollars are determined.

(1) INITIAL ALLOTMENT.—For fiscal year 2016, the Secretary shall allot to each eligible State that submits an application under this section an amount that is equal to 67 percent of the total revenue received by the State’s public system of higher education in the form of tuition and related fees for fiscal year 2016. For each of fiscal years 2017 through 2019, the Secretary shall allot to each eligible State that submits an application under this section—
(A) an amount equal to the allotment the State received for fiscal year 2016, plus
(B) if the State provides additional funds toward the cost of reducing the cost of attendance at public institutions of higher education in the State for any of such fiscal years that is more than the matching funds requirement under subsection (a)(2), an amount equal to such additional funding provided by the State, which amount provided by the Secretary may be used for the activities described in subsection (e)(2).

Ummm, wow. So the State gets 2/3 of the revenue it received in the form of tuition and related fees? That, by the plain language of the statute, would exclude money spent by the State from general funds, lottery funds, special education funds, etc., and include only tuition and related fees. So States that subsidized education the most would get the least? That’s how it reads. If so, this is a total non-starter, and the legislation is a complete sham —  a promise written in unrealistic numbers to make it seem possible. If that is really what is intended, kill it now. Just forget it, and stop even pretending it was realistic.

But, in the interest of fairness, let’s assume it doesn’t really mean what it says, and that what it is really intended to do is replace all State spending on higher education. Okay? Is that fair, at least for the sake of discussion?

Even under that reasoning, there are problems. California’s budget is $10.5B, while Vermont’s is $84M. More important, New Hampshire is $104/capita, while Wyoming is $606/capita. So we start with that spending (assuming it’s not really tuition, which would make the whole thing a farce), and see right away that the new Federal program would instantly endorse unequal spending decisions made State-by-State, and pay for those decisions with Federal money. How long do you think that would last without challenge, either in Congress or in the courts? Yeah, not very long. If the money is coming from DC, paid via New York, what justification is there to spend so much less in one State than another?

And for years after 2016, while the States can increase their spending, they only get a one-to-one match in Federal funds, rather than the initial two-to-one match, making future State spending far more expensive than past State spending.

(2) SUBSEQUENT ALLOTMENTS.—Beginning in fiscal year 2020, the Secretary shall determine the median allotment per full-time equivalent student made to all eligible States under this section for fiscal year 2019 and incrementally reduce allotments made to States under this section such that by fiscal year 2025, no State receives an allotment under this section per full-time equivalent student that exceeds the median allotment per full-time equivalent student made under this section for fiscal year 2019.

Oh look, starting in 2020 there is an “evening out” of the money. Except, it comes down, instead of going up. So a State that was spending a lot of money on education gets a whole lot less, dropping the median, while a State that was spending less doesn’t get more. The median just keeps dropping to the lowest common denominator.

Do people really think this is a good idea?

(c) State Eligibility Requirements.—In order to be eligible to receive an allotment under this section for a fiscal year, a State shall—

Okay, so what does a State have to do to stay in the system?

ensure that public institutions of higher education in the State maintain per-pupil expenditures on instruction at levels that meet or exceed the expenditures for the previous fiscal year;

You have got to be kidding me! So one-half of the States, the ones actually trying to fund their higher education, get less starting in 2020, but the State has to keep paying just as much? So now the funding will go down from 2-1 to perhaps 1-1, or even less? This is insane. In the meantime, they have to do just as much with even less than they had before? So the University of California system is going to have funding from the feds that matches funding to Missouri, but has to put just as much California money into it, while trying to maintain their standards? Interesting.

ensure that tuition and required fees for in-State undergraduate students in the State’s public higher education system are eliminated;

Hey guys, we get less money, but we can’t charge tuition. Terrific!

(3) maintain State operating expenditures for public institutions of higher education, excluding the amount of funds provided for a fiscal year under this section, at a level that meets or exceeds the level of such support for fiscal year 2015;

Okay, this one’s not a big deal. Except, it hints that when it said “tuition” up above, it really meant “tuition.” And that’s nuts.

(4) maintain State expenditures on need-based financial aid programs for enrollment in public institutions of higher education in the State at a level that meets or exceeds the level of such support for fiscal year 2015;
(5) ensure public institutions of higher education in the State maintain funding for institutional need-based student financial aid in an amount that is equal to or exceeds the level of such funding for the previous fiscal year;

Huh? Why do they have to spend just as much on need-based student financial aid if students don’t have to pay tuition? Somebody please explain this one.
 
(6) provide an assurance that not later than 5 years after the date of enactment of this Act, not less than 75 percent of instruction at public institutions of higher education in the State is provided by tenured or tenure-track faculty;

A lovely goal, but the money just dropped through the floor for the highest-paying half of the States in the country.

(7) require that public institutions of higher education in the State provide, for each student enrolled at the institution who receives for the maximum Federal Pell Grant award under subpart 1 of part A of title IV of the Higher Education Act of 1965 (20 U.S.C. 1070a et seq.), institutional student financial aid in an amount equal to 100 percent of the difference between—
(A) the cost of attendance at such institution (as determined in accordance with section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll)), and
(B) the sum of—
(i) the amount of the maximum Federal Pell Grant award; and
(ii) the student’s expected family contribution

So in addition to the funding discussion above, now they have to make up the difference between costs and Pell grant money? This is starting to sound like a whole lot of new unfunded mandates, the kind the Supreme Court doesn’t like.
 
and
(8) ensure that public institutions of higher education in the State not adopt policies to reduce enrollment.

Same enrollment, less money.

(d) Submission And Contents Of Application.—For each fiscal year for which a State desires a grant under this section, the State agency with jurisdiction over higher education, or another agency designated by the Governor or chief executive of the State to administer the program under this section, shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may require.

Only States that want to participate will need to submit applications. Guess which States will want to participate? The Democratic States that spend low amounts of money on higher education. The higher-paying States, even if they’re blue as blue can be, won’t want any part of it, for the reasons noted above. 
 
(e) Use Of Funds.—

How do they get to use the money?

(1) IN GENERAL.—A State that receives a grant under this section shall use the grant funds and the matching funds required under this section to eliminate tuition and required fees for students at public institutions of higher education in the State.

First, reduce tuition. Okay, got it.

(2) ADDITIONAL FUNDING.—Once tuition and required fees have been eliminated pursuant to paragraph (1), a State that receives a grant under this section shall use any remaining grant funds and matching funds required under this section to increase the quality of instruction and student support services by carrying out the following:
(A) Expanding academic course offerings to students.
(B) Increasing the number and percentage of full-time instructional faculty.
(C) Providing all faculty with professional supports to help students succeed, such as professional development opportunities, office space, and shared governance in the institution.
(D) Compensating part-time faculty for work done outside of the classroom relating to instruction, such as holding office hours.
(E) Strengthening and ensuring all students have access to student support services such as academic advising, counseling, and tutoring.
(F) Any other additional activities that improve instructional quality and academic outcomes for students as approved by the Secretary through a peer review process.

Second, you have to put any additional money back into education. Savings may not be spent elsewhere. Not even State money. So the Feds are now controlling the State use of its budget, even if the State is meeting all its obligations. Interesting. How long do you think that will last in court?

(3) PROHIBITION.—A State that receives a grant under this section may not use grant funds or matching funds required under this section—
(A) for the construction of non-academic facilities, such as student centers or stadiums;
(B) for merit-based student financial aid; or
(C) to pay the salaries or benefits of school administrators.
 
Oh for ____’s sake! Do we really think school administrators, the people who enroll students, who handle disciplinary issues, who manage dormitories, and a thousand other things, aren’t part of running a successful university? Is there some imaginary university where the kindly professor meets the students under the ol’ oak tree to impart knowledge, while they nibble their brown-bag lunches?
 
(f) Authorization And Appropriation.—There are authorized to be appropriated to carry out this section $47,000,000,000 for fiscal year 2016, and such sums as may be necessary for each of the fiscal years 2017 through 2025.

And the cost? $47B the first year, and whatever is necessary for the years to follow.

Conclusion

There you go. That’s Sanders “free college” plan.

It doesn’t sound quite as great to me when you look at the details as when you put it on a bumper sticker.

That reminds me–how are all those new coal mines doing?