"Every Penny Counts...when you have Ten Million"

News flash...buying a home requires saving money! And you, too, can one day own a New York City apartment all by yourself, if you make "a combined salary of just over $100,000," "less than $100,000," or even just "$85,000"!
Talk about middle class success stories.

"Student Loans Have Become Big Business"

The Times Education Life section does a good job of explaining the problem with student loans these days.
"How did this critically important social program become so unmoored from its original intent, which was to help poor and middle-class students pay for college? To put it another way, why did student loans become more about shareholders than about students?"

Here's where I diverge from Joe Nocera's analysis: "No reform legislation is going to change the essential nature of any business, and student loans are no exception."

Disagree. This particular business was created by federal fiat and it can be destroyed the same way. If you only have direct loans, you have no student loan business.

What's the Economy For, Anyway?

I'll be speaking here on October 6.
For immediate release: July 24, 2007
Contact: John de Graaf: jodg@comcast.net (206) 443-6747
or Laura Pacheco: laurapacheco@comcast.net (617) 694-7998
See the full schedule and register early at: www.timeday.org/economyconference

WHEN: October 5-7, 2007
WHERE: Washington DC Convention Center (part of the annual Green Festival)
COST: $35 (entire conference, advance registration) or $50 (entire conference, no advance registration or $25 (per day). Conference fee includes free admission to Green Festival.

What’s the economy for, anyway? Is it just about having the biggest GDP or the highest Dow Jones Average? Or is it about providing for a healthy, happy, fair and sustainable society? If you think quality of life matters, and wonder how the United States compares to other countries when it comes to providing for its people, then the WHAT’S THE ECONOMY FOR, ANYWAY? Conference is for you! Dozens of prominent experts and activists will offers parts of the answer to the big question and offer out-of-the-box ideas about what we can do to make our economy serve us instead of vice-versa. Three tracks include FINDING HAPPINESS, SEEKING JUSTICE and SECURING SUSTAINABILITY.

[Out of the 100 speakers, some I really admire are Nancy Folbre, Bill McKibben, Juliet Schor, Gar Alperovitz, Jared Bernstein, and Celinda Lake. The organizer of the event, John de Graaf, is best known for his book Affluenza and for "National Take Back Your Time Day."]

All Work and No Debt

At the College of the Ozarks in Missouri, aka "Hard Work U," says the New York Times, 95% of students graduate debt free because they all must work 15 hours a week to pay for their tuition. There are 7 such "work colleges" in the country, all rural and most Christian; the others are Alice Lloyd (KY), Berea (KY), Blackburn (IL), Ecclesia (AR), Sterling (VT), and Warren Wilson (NC).

According to the College of the Ozarks website,
"Our distinctive work program, one of only a very few such programs in the entire country, makes college affordable for many students who might not otherwise be able to meet the cost of their education. For others, the work program means freedom from having to pay back large school loans after graduation. Best of all, the on-the-job experience you gain as a College of the Ozarks student will add extra dimension to your learning. Unlike many of your friends attending other colleges, you’ll be starting your career debt free; well educated; and work experienced! "
From the article, it seems a lot simpler than that: "Lauren Smollen, 21, who comes from a single-parent household in Jefferson City. “My family doesn’t have a lot of money,” Ms. Smollen said. “Here you’re pretty much guaranteed to have college paid for. You don’t have debt, which is a pretty big deal when you don’t have a lot of money.”"

Fighting Your Way Out of Debt (Literally); Debt Blogging

There are a lot of great blogs out there by and for members of Generation Debt sharing information on saving, money management, and investing. The blogs are where I advise people to go if they want to learn more about what people are doing to help themselves. One that I've discovered recently and that is right up our alley is Generation Y Financial Freedom.
He has recently posted on deciphering financial mumbo jumbo, where to learn about investing, and conquering your fear of risk.

Another that I found out about thanks to Nina at Queercents is Journey to Financial Freedom, by Nick Sloan. Not only does he have a lot of thoughtful posts about debt, saving, and financial integrity, his bio is pretty compelling:
"I am an Air Force officer currently deployed to Baghdad, Iraq. I volunteered to come to Iraq because of the extra money I earn while here. I'm using that money to get out of debt and get a new start on my financial future."

Nelson-Burr Defeated, Student Aid Passes Senate

The Senate passed increases to the Pell Grant and all that other good stuff for borrowers in the budget reconciliation bill." The legislation that passed Friday in a 78-18 vote [way to go crossing the aisle, 28 Republicans!] would cut roughly $18 billion in federal subsidies to banks that issue government-backed student loans."

Next week they take up even more reform issues in the Higher Education Act reauthorization, like simplifying the FAFSA and changing the rules of oversight.

No on Nelson-Burr

The Senate version of the House financial aid bill passed last week, currently up for a vote, contains an adulterating substance.

According to FutureMajority,

Ben Nelson (D-NE), whose home state is also home to Nelnet, one of the biggest corporate lenders, is trying to weaken the Senate version of the bill and return $3 billion of that to the lending industry so they can continue to line their pockets with corporate welfare.

What I’m hearing is that the cloture votes on Iraq and the DOD reauthorization are going to fail, and the Higher Education Access Act of 2007 will be brought to the floor instead, with voting to be scheduled for today or tomorrow. Right now, Republicans supposedly have 3-6 Democrats willing to side with lenders on the Amendment, so they are likely to see it pass [killing Fair Payment Assurance

Here’s what you can do:Call your Senator and urge them to vote YES on S. 1762, and NO on the Nelson-Burr Amendment. The Capitol Switchboard can be reached at (202) 224-3121, and the operators can tell you who your Senators are.

According to a factsheet put out by Campus Progress,

*The Nelson-Burr Amendment would give $3 billion in corporate subsidies back to banks, which could fund 588,000 maximum Pell Grants.

They say they're giving lenders back the cash to protect competition for lenders and borrower benefits, yet
*according to Finaid.com, lenders spend less than 0.1 percentage point of their subsidy on benefits for borrowers, and
*according to Sallie Mae herself, less than 10% of borrowers manage to take advantage of the advertised repayment benefits.
*The student loan market is already highly consolidated. The current subsidies don't stop Sallie mae from cornering the market. The DoE recently pointed out more than 900 colleges where 80 percent of the college’s federal student loan volume is held by a single lender.

update from the PIRGs:

Analysis of the Nelson-Burr Amendment to S. 1762

The Nelson-Burr Amendment cuts $4.2 billion from need-based aid to low-income students over the next five years and gives the bulk of it to for-profit student lenders.

The Nelson-Burr amendment reduces aid for the neediest students by $290 a year, or nearly $1200 over their 4-year college career.

The amendment lowers the subsidy reduction for-profit lenders from .5% to .35% and pay for it by cutting $4.2 billion from the Promise Grant program.

The Nelson-Burr amendment takes grants away from low-income students and give it back to banks including:
$800 million to Sallie Mae over the next 5 years.
$160 million to Nelnet over the next 5 years.[1]

The Senate bill reduces less from private student lenders than both the President’s Fiscal Year 2008 budget and the House reconciliation bill. The Nelson-Burr amendment would cut back on subsidies even further at the expense of the more than 5 million students who receive Pell Grants every year.

U.S. PIRG urges Senators to vote against the Nelson-Burr Amendment to S. 1762

---

[1] Based on current loan holdings.

Second Yahoo Finance Column: Question Answered

My second Yahoo Finance column gives all the details on the big student aid bill that just passed the House.

Many people have asked if the Income Based Repayment proposal (aka Fair Payment Assurance) will be available to those with existing student loans. After rereading the relevant portions of the act, I'm not positive, but I think it will. Currently borrowers are able to change their repayment plans or consolidate loans many years out of school, and I see nothing in the bill that says any different.

They Just Won't Grow Up!

Another boomerang kid story-- this one notes up high the impact of "economic necessity," student loans and credit card debt (with an old 2002 stat; the latest number is lower).
But personal finance experts can't agree: are you really helping your offspring in the long run? What about your own retirement?

This is my own personal biased opinion: I think living at home is OK if the younger person has a plan, because it is self-limiting; annoying for both sides. Paying rent so they can live in the city is not. It creates a false sense of independence, removing the incentive to save or budget (not to mention it ruins neighborhoods now full of trust fund kids). My first year out of college, my parents paid for, not my rent, but my health insurance. That was really looking out for me.

Populism, aka Giving a Fig

New York Times article this morning on how more Democrats are embracing "a view that current economic conditions are difficult and deteriorating for many people, analysts say, and it is now framing debates over tax policy, education, trade, energy and health care."

"Democrats say they are responding to economic trends that the statistics in the headlines do not capture, including middle-class insecurity about jobs, the affordability of health insurance and the costs of education. The times have changed, these Democrats argue, and six years of Republican tax and economic policies have heightened the inequities."

I think increased voting among younger voters can only strengthen this trend. The young people I meet don't take the default position that government is bad. They want to work for it, the climate change movement (among other crucial issues) can't succeed without it, and they believe federal and state policies has a role in making life more fair.

House Passes College Cost Reduction

It passed by a pretty awesome margin. It will be interesting to see what kinds of compromises are made between this and the Senate bill. I would be surprised to see Bush make good on his threat to veto but he's already the most unpopular president in history so why not take this chance to stand up for his principles (like helping bankers)?

House Passes Single Largest Effort to Help Students Pay for College since GI Bill

Bill Would Boost Scholarships and Reduce Student Loan Costs at No New Taxpayer Expense

WASHINGTON, D.C. – By an overwhelming vote of 273 to 149,he House of Representatives approved legislation today that would do more to help students and families pay for college than any federal effort since the 1944 GI Bill. The legislation comes at no new cost to U.S. taxpayers.

The legislation, the College Cost Reduction Act of 2007 (H.R. 2669), would boost college financial aid by about $18 billion over the next five years. The legislation pays for itself by reducing excessive federal subsidies paid to lenders in the college loan industry by $19 billion. It also includes nearly $1 billion in federal budget deficit reduction. The Senate is expected to vote on similar legislation this month.

“This bill is a remarkable step forward in our efforts to help every qualified student go to college,” said Rep. George Miller (D-CA), chairman of the Education and Labor Committee and author of the legislation. “With this bill, we are saying that no one should be denied the opportunity to go to college simply because of the price.”

Bush Nixes Fair Payment Plan

WASHINGTON (MarketWatch) -- The White House said it would veto a college-cost-reduction bill that made its way to the House floor Wednesday, claiming that it fails to help the neediest college students and creates programs with long-term costs for taxpayers.
The College Cost Reduction Act of 2007 would boost college financial aid by about $18 billion over the next five years and cut federal subsidies to lenders in the college-loan industry. The proposed legislation would also invest in minority institutions, control repayment rates and create loan-forgiveness programs, among other actions.
Under the act, the maximum value of the Pell Grant scholarship would increase by $500 over the next five years. The act would also cut interest rates on need-based student loans to 3.4% from 6.8%.

More from Pedro de la Torre of Campus Progress:

This is wrong headed for a few reasons. While the increase in need-based grant aid is, in my opinion, the most important part of the bill, the increasing debt burden that graduates face needs to be addressed.

What "Jane"'s Demise Says About Generation Debt

Jane is a women's magazine that folded today. Founded by Jane Pratt, the same editor behind the beloved-by-many teen mag Sassy, Jane tried to be a down-to-earth, quirkier alternative to the mainstream women's publications, albeit within the boundaries set by being a Big Media Conde Nast publication, which is the tension that probably killed it. According to the reaction of these bloggers, Jane was aiming for a certain zeitgeist of young women which sounds a lot like Generation Debt [all irony and snarkiness (sic)]:

"a lot of the ladies at whom Jane was initially targeted are maybe not the biggest fans of life. Not that we're living on the streets of Bombay or anything, just that it's not exactly like it was for our um parents.... A lot of them are probably uninsured. Brandon Holley once told me (full disclosure: I wrote a story for Jane once) that readers always told her they liked the magazine's funny features on personal finance: the one about different desperate ways to make $1000 in a week; the one about lucrative side jobs i.e. stripping; this month's about acing your credit check. (Ughhhh.)"

Everyone has some junk food in their media diet. If you are 25 years old, underemployed and uninsured, it's probably better to read a magazine that tells you in a "funny" way how to ace your credit check than one about $1000 beach towels and plastic surgery.

Krugman on Health Care

and by tThis is not really a surprise that I would agree with Paul Krugman, but he makes the exact same point, with the same three examples, in the same order, about "Sicko" appealing to our moral outrage over the broken down health care system (Select):

"That’s what we learn from the overwhelming response to Michael Moore’s “Sicko.” Health care reformers should, by all means, address the anxieties of middle-class Americans, their growing and justified fear of finding themselves uninsured or having their insurers deny coverage when they need it most. But reformers shouldn’t focus only on self-interest. They should also appeal to Americans’ sense of decency and humanity.

What outrages people who see “Sicko” is the sheer cruelty and injustice of the American health care system — sick people who can’t pay their hospital bills literally dumped on the sidewalk, a child who dies because an emergency room that isn’t a participant in her mother’s health plan won’t treat her, hard-working Americans driven into humiliating poverty by medical bills.

...
This isn’t one of those cases where we face painful tradeoffs — here, doing the right thing is also cost-efficient. Universal health care would save thousands of American lives each year, while actually saving money.

So this is a test. The only things standing in the way of universal health care are the fear-mongering and influence-buying of interest groups. If we can’t overcome those forces here, there’s not much hope for America’s future."

BlogInterview Up

Here's an interview I did with Cody McKibben of the personal finance blog Iwillteachyoutoberich.com,
run by an interesting young finance writer/entrepreneur named Ramit Sethi.

"Sicko" and student loans

I saw Michael Moore's film on the American health care crisis tonight at a New York City multiplex. It's a strange experience to go out for an evening's entertainment only to view a piece of agitprop that indicts in the strongest moral terms where we're going as a society--hospitals dumping indigent, disoriented senior citizens on Skid Row, babies dying after they're turned away from a hospital their insurance doesn't cover, a hardworking middle aged couple that loses their house because of medical bills. You cry, you shake your head, but what does it all mean? A blockbuster for the Weinstein brothers. Democratic proposals for health care don't come close to the free universal coverage in the rest of the Western world that Moore touts as superior to our system (OECD statistics agree.) How are we going to get from there to here? Not (just) by watching a movie.

Moore also mentions student loans several times as part of a complex of debt and lack of security that makes average Americans into worried workers desperate to keep their jobs under any circumstances, loath to protest either the government or working conditions. He features an elderly, distinguished British Labor Party politician who speaks eloquently about how debt keeps people afraid and demoralized.

On the other hand, looking at the reforms currently on the table for student loans gives me hope. Political consensus can change lightning fast and I can and do hope for the system to be set on the right path and improved considerably in the next Presidential term. I think Sicko could be good just because it forces even the most chauvinist to admit that America doesn't do everything better than everyone else.

Education and External Rewards

The Times ran a story in the business section that is a gentler version of the same old rap: baby boomer educators/ managers think that Millennials have a crappy work ethic.

Reading it with my Gen-Debt eyes, I wondered if the increased financial pressures placed on college students today, and the conservative attitude toward education policy, are actually twisting young peoples' attitudes toward work and education.

"Even in college, students seem to value the external rewards of work over learning for its own sake. A 2006 survey of college freshman at the University of California, Los Angeles, found that about 74 percent of men and 70 percent of women say that the primary reason they attend college is to make more money. "

Well, they're just being little Reaganites, or little economists. If they get little or no grant aid to attend college and must take out loans just as though they were buying a car or a house, while being told all the time that college is a private investment that is their only way to make it into the middle class, why shouldn't they believe that that is the primary value of college?

"Students tend to take an industrial view of work. They commonly contest a grade by saying they deserve a higher one because they put so much time into studying or writing a paper."

Well, about half of full time college students and 85 percent of part time college students are working, a pursuit where they do get paid by the hour. This represents a large increase over the 1970s. It's only natural to compare the immediate rewards of even a low-paying job to the often vague long term rewards of a class, particularly when that class is a cattle-call lecture taught by a phoning-it-in professor, or a part-time adjunct.

I don't think this attitude is great news, and I don't think it's completely prevalent among young workers. In fact, I think there's an incredible resistant strain of idealism that leads tons of young people to seek intrinsically fulfilling work despite economic pressures. But if you load college with high costs and instrumental expectations it's only natural that students would absorb the attitude that it's all about the money.
And another thing. Today's college students are digital natives who live in an era where nearly all the world's information is free. The ivory tower has no monopoly on the distribution of knowledge. The basic thing college has to offer, then, besides the intangibles that we all love to rhapsodize about, is a sorting function and a valuable credential. If the credential can't be redeemed for at least what you paid for it, what's the point?

Introducing Generation Debt (Again)

So I've started a new biweekly column on Yahoo! Finance. You can read the introductory column here.

In the next few weeks I'll be writing about the GI Bill and student loan reforms in the news. I may have to scale back some blogging but I"ll do my best to stay on top of things.
Anya