Nothing As Certain As Debt and Taxes

by Ferd Wulkan

The Massachusetts class of 2010 (public and private 4-year colleges) graduated with an average debt of $25,541, 12th  highest among the 50 states. 63% of students graduated with some amount of debt, 16th  most among the 50 states. Among public 4-year colleges, Westfield State had the highest percentage with debt (75%) with UML and UMD right behind (74%). Pell grants, which in 1980 covered 69 percent of public college costs, now cover less than 35 percent.

In addition to destroying credit and affecting the ability to hold a professional license, if you have federal student loans, the government can seize tax refunds, and garnish wages and Social Security payments. So far this year, the government has garnished the Social Security checks of 115,000 retirees. Typical student loan borrowers with average consumer debt were not likely to qualify for the average mortgage.

And the Department of Education reported that 13.4 percent of borrowers whose loans entered repayment between Oct. 1, 2008 and Sept. 30, 2009 had defaulted within three years. While the default rates are highest at for-profit colleges, they are very high for public college graduates as well.

Student debt also affects middle-aged Americans. As of March 2012, the delinquency rate for borrowers ages 40 to 49 was 11.9 percent, the Wall Street Journal reported. In addition, as reported in The Nation, many students are forced to move back in with their parents after graduation, which further depresses the housing market. Public interest work is less affordable as people opt for higher-paying (but sometimes less rewarding) jobs in order to pay off loans.

The Nation reports on a few of the initiatives underway to address the problem: “Representative Hansen Clarke introduced a bill that would forgive up to $45,520 in student debt after a borrower makes ten years of payments at 10 percent of income. The Occupy Student Debt Campaign is calling for a write-off of existing debt as well as free public higher education. Students in California are pushing an initiative that would make four years of state university free for all the full-time, in-state students who maintain at least a 2.7 GPA or do seventy hours of community service a year. Lost tuition would be paid for with a modest surtax on those earning more than $250,000.”

PHENOM believes that a national policy making public college free is a viable idea. The GI Bills made college free for millions of vets after World War II as well as more recently. This helped the whole economy and provided the benefits that come with having a well-educated citizenry. The cost of providing free higher education to all who want it is estimated at $70 – $100 billion. This could easily be paid, for example, by a financial transactions tax which would have the added benefit of inhibiting unproductive Wall Street speculation.

At the state level, we look to our politicians to take some steps to address the problem. Benjamin Franklin famously said that in this world nothing can be said to be certain except death and taxes. Were he alive today, he might say it’s debt and taxes. And we believe we can’t effectively address the problem of debt without addressing taxes. Massachusetts must  raise sufficient revenue to adequately fund our campuses (and fund other important social services). With additional resources, campuses can freeze or lower fees. That’s why PHENOM is linking a campaign for progressive taxation with our campaign against student debt.

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