“The GOP Has It Backwards”: Republicans Want To Tax Students And Not Polluters
A basic economic principle is government ought to tax what we want to discourage, and not tax what we want to encourage.
For example, if we want less carbon dioxide in the atmosphere, we should tax carbon polluters. On the other hand, if we want more students from lower-income families to be able to afford college, we shouldn’t put a tax on student loans.
Sounds pretty simple, doesn’t it? Unfortunately, congressional Republicans are intent on doing exactly the opposite.
Earlier this year the Republican-led House passed a bill pegging student-loan interest rates to the yield on the 10-year Treasury note, plus 2.5 percentage points. “I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that,” Rep. Virginia Foxx (R-NC), the co-sponsor of the GOP bill, said.
Republicans estimate this will bring in around $3.7 billion of extra revenue, which will help pay down the federal debt.
In other words, it’s a tax — and one that hits lower-income students and their families. Which is why several leading Democrats, including Senate Majority Whip Dick Durbin, oppose it. “Let’s make sure we don’t charge so much in interest that the students are actually paying a tax to reduce the deficit,” he argues.
(Republicans claim the President’s plan is almost the same as their own. Not true. Obama’s plan would lead to lower rates, limit repayments to 10 percent of a borrower’s discretionary income, and fix the rate for the life of the loan.)
Meanwhile, a growing number of Republicans have signed a pledge – sponsored by the multi-billionaire Koch brothers — to oppose any climate-change legislation that might raise government revenues by taxing polluters.
Officially known as the “No Climate Tax Pledge,” its signers promise to “oppose any legislation relating to climate change that includes a net increase in government revenue.”
By now 411 current office holders nationwide have signed on, including the entire GOP House leadership, a third of the members of the House as a whole, and a quarter of U.S. senators.
The New Yorker’s Jane Mayer reports that two successive efforts to control greenhouse-gas emissions by implementing cap-and-trade energy bills have died in the Senate, the latter specifically targeted by A.F.P.’s pledge
Why are Republicans willing to impose a tax on students and not on polluters? Don’t look for high principle.
Big private banks stand to make a bundle on student loans if rates on government loans are raised. They have thrown their money at both parties but been particularly generous to the GOP. A 2012 report by the nonpartisan Public Campaign shows that since 2000, the student loan industry has spent more than $50 million on lobbying.
Meanwhile, the Koch brothers – whose companies are among America’s 20 worst air-polluters –have long been intent on blocking a carbon tax or a cap-and-trade system. And they, too, have been donating generously to Republicans to do their bidding.
We should be taxing polluters and not taxing students. The GOP has it backwards because its patrons want it that way.
By: Robert Reich, Robert Reich Blog, July 6, 2013
“This Isn’t Complicated”: Congress Must Fix The Bankrupt Student Loan Proposals
Interest rates on student loans will double on July 1 unless Congress acts. Since the phrase “congressional action” has become an oxymoron, this will quickly degenerate into an unnecessary crisis, requiring parents and students to threaten their legislators to get any relief.
Why is action even a question? There is a universal consensus — left, right and center — that it is vital to our nation to educate the next generation. If we want to compete as a high-wage, high-skill country, our children will need the best in college or advanced technical training. And all agree that gaining that higher education is a necessary, if not sufficient, requirement for entering the middle class.
So just as we pay for public education for kindergarten through 12th grade, we should ensure that advanced training or a public college education is available for all who earn it. None of this is even vaguely controversial.
Yet, despite this consensus, we are pricing college out of the reach of more and more families. State support for public universities has lagged. Increasingly, the costs have been privatized, with the bill sent to students and families.
With incomes stagnant for all but the wealthy few, the result, not surprisingly, has been an explosion of student debt. U.S. students and parents now owe an estimated $1.1 trillion in student loan debt, a sum greater than credit card or automobile debt. In 2005, average student loan debt was just over $17,000. By 2012, it was above $27,250, increasing more than 50 percent in just seven years.
With the debt burden rising and good jobs scarce, the result is calamity. Thirty-five percent of millennials — debtors under 30 — are seriously delinquent on their payments. In total, delinquent student debtors on the verge of default owe $113 billion, more than the total sums state governments spent on higher education in 2012.
The young people who do everything we ask of them — study, graduate, go on to higher education — end up deep in a hole. Burdened by debt, they have a hard time affording cars or apartments. Starting a family becomes difficult, a down payment on a home an impossible dream. This not only crushes the dreams of our best young people; it puts a real damper on the economy.
This isn’t complicated. Washington should be moving boldly to make advanced education affordable for all. The federal government should be increasing grants to states for public colleges, on the condition that the states increase their own contributions and act to curb college costs. The government should crack down on private colleges that ripoff students. And of course, college expenses should be subsidized so that successful young people don’t graduate into debtor’s prison.
But common sense is an endangered species inside Washington’s beltway. Interest rates on federally subsidized Stafford loans are about to double to 6.8 percent. Republicans have passed a “solution” that pegs loan rates to the rate of a 10-year Treasury note plus an arbitrary 2.5 percent. (Or plus 4.5 percent for parental PLUS loans). Loans fluctuate each year with interest rates, with a cap of 8.5 percent for student loans and a stunning 10.5 percent for parental loans. Kids will end up paying more, while the government will make billions on the deal for deficit reduction. But we should be subsidizing the next generation to get the education they need, not making money off of them.
President Obama’s plan isn’t much better. He sets the rate at the 10-year Treasury note rate plus .93 percent for subsidized Stafford loans (3.93 percent for parental loans) with no cap. He does call for limiting what students have to pay to 10 percent of their income, insuring that students aren’t condemned to bankruptcy. His plan is “budget neutral.”
Sen. Elizabeth Warren (D-Mass.) has offered a plan that makes a lot of sense. She suggests we offer students the same rate that the Federal Reserve charges to big banks (about .75 percent) for the next year, while Congress gets serious about a permanent fix. Senators Tom Harkin (D-Iowa) and Jack Reed (D-R.I.) suggest that the Congress do the easy thing, simply extend the current rates for two years, paying for it with the closing of various loopholes.
Sen. Kirsten Gillibrand (D-N.Y.), like Warren, also makes sense. She would allow students and graduates to refinance into fixed 4 percent loans.
Is it any wonder that Americans grow cynical? Multinational corporations and wealthy investors stash literally trillions abroad to avoid taxes. The big banks rake in trillions in subsidies and discounted loan rates to rescue them from their own excesses. But Congress finds it impossible to make it affordable for the next generation to get advanced education and training.
As always, common sense won’t come to Washington unless citizens mobilize to force it on Congress. With graduations marked by student demonstrations across the country and pickets outside of Sallie Mae, the giant student loan bank, that movement may have begun. Student loans may be to this generation what the draft was to the boomers – the government folly that afflicts them personally and rouses them to act.
By: Katrina vanden Heuvel, Opinion Writer, The Washington Post, June 5, 2013
“In The GOP, Every Day Is A Bank Holiday”: The Republican College Loan Plan Would Help Banks, Hurt Families
Big banks are doing better than ever. Sunday, New York Times financial columnist Gretchen Morgenson wrote that 2013 has been a very good year for the financial industry. The KWB Bank Index which tracks the stock prices of 24 leading banks has risen 30 percent this year and it’s at its highest level since 2008.
With the banks doing so well, why are House Republicans pushing so hard to make banks even more money on the backs of kids from working families who want to attend college? The answer is that every day in the Republican Party is a bank holiday.
House Republicans took a step last week to boost the fortunes of their banker backers even higher. The GOP House majority proposed changes for the college student loan program which is scheduled to expire July 1. The Republicans would allow the interest on student loans to double. This will mean even higher profits for the GOP’s banker backers. But it will end the hopes and dreams that thousands of young Americans and their families have for their future in the cut throat world economic competition.
President Obama made his case to stop the interest rate increases in a speech last Friday. The president supports a Senate Democratic plan that would freeze interest rates for 79 million students at 3.4 percent for 2 years. Congressional Republicans want to tie the interest rate to the cost of a 10 year Treasury note. The nonpartisan Congressional Budget Office estimates the House Republican plan would push interest rates to 5.0 percent next year and to 7.7 percent by 2018.
If Republicans get their way, increased interest rates for 79 million college students will mean a big payday for the financial industry next year and a another step down for middle income families. Millions of college grads are already up to their armpits in debt. The Republican plan would make it even harder for young college graduates to get up from under the crushing debt that they already face.
Chinese president Xi Jinping will be in the U.S. this week. His visit should focus the United States on what it needs to do to compete economically with the emerging industrial tiger.
The United States has fallen to 10th in the world in the percentage of people with a college degree. That may be why it’s much easier for people to advance economically in Western Europe than it is in the U.S. The Republican plan will push us down even further on the education ladder and give our economic competitors in the world a leg up. If we want to compete effectively internationally, we should do everything we can to get more young people into college instead of making it more difficult for them to attend college. College is the ticket young Americans need to punch to get the training they need to compete with China and other engines of international economic growth.
The U.S. should build on its strengths. We still have the best higher education system in the world. Hundreds of thousands of international students are currently enrolled in American colleges and universities to get the best college education in the world. We would be a lot better off if American students could afford to attend them too.
The GOP plan to boost banks at the expense of kids in working families mirrors the trends in the American economy at large. The Dow Jones Index, which measures the fortunes of corporate America on Wall Street, has hit record highs several times this year. While profits for corporate America have mushroomed, real income for middle class families has been stagnant. The Republican student loan program will accelerate an unfortunate trend that has enriched Wall St. and improvised middle class families who are working overtime just to meet ends meet.
By: Brad Bannon, U. S. News and World Report, June 4, 2013
“Romney’s Higher Education Plan”: A Giveaway To Wall Street Banks And Predatory Schools That Fund His Campaign
2012 presumptive presidential nominee Mitt Romney released his higher education plan Wednesday, decrying the nation’s “education crisis.” During a speechbefore the U.S. Chamber of Commerce, Romney blamed President Obama for rising tuition prices and increasing student debt.
Of course, tuition increases and growing debt are a phenomenon several decades in the making. And Romney’s plan would make the problem decidedly worse in two important ways, giving federal money away to Wall Street banks and predatory for-profit colleges, two industries to which Romney has extensive ties.
First, as he’s promised before, Romney intends to divert money away from student aid — instead giving it away to banks — by repealing Obama’s student loan reforms:
Reverse President Obama’s nationalization of the student loan market and welcome private sector participation in providing information, financing, and the education itself.
President Obama did not nationalize the student loan market. (Plenty of banks still make private sector student loans.) Instead, Obama and the Democrats cut private banks out of the federal student loan program, ending billions in subsidies that were needlessly going to banks for acting as loan middlemen. The money saved went into the Pell Grant program. Romney’s plan would entail taking away Pell money in order to pay Wall Street to service federal loans.
Second, Romney would remove regulations meant to protect students from predatory for-profit colleges:
Ill-advised regulation imposed by the Obama administration, such as the so-called “Gainful Employment” rule, has made it even harder for some providers to operate, while distorting their incentives.
This rule simply states that colleges leaving too many students crippled with debt and without good jobs lose their access to federal dollars. Many for-profit schools make nearly all of their revenue from the federal government — in the form of the various streams of aid used by their students — yet have much higher rates of student loan default than public schools. Only 11 percent of higher education students in the country attend for-profit schools, but they account for 26 percent of federal student loans and 44 percent of student loan defaults.
Romney is already intimately tied to the for-profit college industry. Inside Higher Ed noted that two of his advisers “have lobbied on behalf of the Apollo Group, the parent company of the University of Phoenix.” On the campaign trail, Romney has effusively praised Full Sail University, a for-profit institution. And it seems that his policy platform would be a boon to this industry which is, in many instances, extremely predatory.
By: Pat Garofalo, Think Progress, May 24, 2012
The Virginia Foxx Bill: “Protecting The Freedom Of For-Profit Schools To Suck Off The Government Teat Without Any Accountability Whatsoever Act”
Earlier this year, the U.S. House of Representatives voted to pass a bill with the impressive, everybody-can-get-behind-this title “Protecting Academic Freedom in Higher Education Act.” Sponsored by the ultra-conservative North Carolina Republican Virginia Foxx, the bill ostensibly took aim at an issue close to small-government-loving hearts: intrusive federal regulation of for-profit colleges — fast growing, highly profitable outfits like DeVry University or the online-only University of Phoenix.
Like so many of the bills passed by the House since Republicans gained the majority in the 2010 midterm elections, the bill was designed to repeal specific actions taken by the Obama administration. In this case, the issue at hand was the Obama administration’s efforts to ensure greater “program integrity” in the for-profit educational sector. Specifically, a new federal definition of what constitutes a legitimate academic “credit hour” and a new requirement that all online providers of post-secondary education be accredited in each and every state in which they do business.
Foxx’s bill repealed both measures. (The Senate has yet to address the measure.) According to Foxx, the new federal regulations threatened “innovation” in the educational sector. As reported by InsideHigherEducation, Foxx is on record as declaring that for-profit colleges do a “a better job of being mindful about efficiency and effectiveness than their nonprofit peers.” By, for example, flexibly providing online education when and where low-income working Americans want it, the for-profit free market delivers the kind of quality higher education that Americans so desperately need. The government should just stay out of their business.
I stumbled upon this story while researching the student loan crisis and at first I was perplexed. I didn’t understand why Republicans were opposed to higher academic standards for the for-profit sector, and I didn’t get the connection to student loans. But it didn’t take much research to discover what was really going on: an example of blatant hypocrisy sufficient to outrage even the most jaded observer of American politics.
The for-profit educational sector is an industry almost entirely subsidized by the federal government. Around 70-80 percent of for-profit revenues are generated by federal student loans. At the same time, judging by sky-high dropout rates, the for-profit schools do a terrible job of educating students. The Obama administration’s efforts to define a credit hour and require state accreditation were motivated by a very understandable desire: to ensure that taxpayers are getting their money’s worth when federal cash pays for a student’s education. In contrast, Foxx’s legislation is designed to remove that taxpayer protection. So here’s a more accurate title for her bill: “The Protecting the Freedom of For-Profit Schools to Suck off the Government Teat Without Any Accountability Whatsoever Act.”
The for-profit educational sector has been growing extraordinarily rapidly for the past decade: 12 percent of all post-secondary students are now enrolled in for-profit schools, up from 3 percent 10 years ago. But the main beneficiaries of the growth appear to be the shareholders and executives of the largest publicly traded for-profit schools, not the students.
- In 2008, for-profit schools registered a a graduation rate of 22 percent. (Public and private non-profits registered 55 percent and 65 percent respectively.)
- 54 percent of the students who enrolled in 2008-2009 in 14 publicly traded for-profit schools had withdrawn without a degree by 2010.
- The biggest player in the for-profit sector, the University of Phoenix, graduated only 9 percent of its B.A. candidates within six years.
The pathetic performance of the for-profit sector in delivering actual degrees becomes all the more alarming when you realize that most of the students who are dropping out paid for their educations with student loans that have to be paid back: According to a report released in the summer of 2010 by Sen. Tom Harkin, D-Iowa, “Emerging Risk?: An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit Higher Education,” in 2009, the five largest for-profit schools reported that government grants and loans accounted for 77.4 percent of their revenue.
The Harkin reports comes to a stark conclusion:
The Federal government and taxpayers are making a large and rapidly growing investment in financial aid to for-profit schools, with few tools in place to gauge how well that money is being spent. Available data show that very few students enroll in for-profit schools without taking on debt, while a staggering number of students are leaving the schools, presumably many without completing a degree or certificate.
It is precisely this situation that the Obama administration’s efforts to ensure “program integrity” were designed to address. Student loans are tied to credit hours: By requiring a more rigorous definition of credit hour, the administration was attempting to make sure that government money was paying for actual education. Similarly, the requirement that all for-profit schools must be accredited by the individual states in which they do business was a measure designed to keep fly-by-night online schools operating out of states with weak accreditation requirements from enrolling out-of-state students and ripping them off. The issue is not “innovation.” The issue is basic consumer protection.
One would imagine that Republicans, who theoretically oppose government involvement in the private sector, and are always looking for ways to cut government spending, would approve of efforts to seek greater accountability for taxpayer funds. Virginia Foxx, after all, was notorious for being one of only 11 members of Congress to vote against a federal relief package for victims of Hurricane Katrina, citing the “high potential for the waste, fraud and abuse of federal tax dollars.”
But as it turns out, Foxx herself is benefiting from the waste and abuse of federal tax dollars. Among the top 20 financial contributors to Foxx in the 2011-2012 cycle are the Association of Private Sector Colleges/Universities, the Apollo Group (owner of the University of Phoenix), and Corinthian Colleges. Since federal student loans comprise the vast majority of the revenues of those for-profit schools, it follows that their campaign contributions to Foxx are also made possible by U.S. taxpayers.
By: Andrew Leonard, Salon, April 16, 2012
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