Tag Archives: Student Loans

Neil Cavuto explains basic economics to college student who wants free tuition

She has $280,000 in student loan debt for "Chinese medicine"
She has $280,000 in student loan debt for “Chinese medicine”

The video, which goes about 10 minutes. This is a must watch.

The description of the video explains the contents:

Keely Mullen, an organizer for the Million Student March movement, joined Fox Business Network anchor Neil Cavuto on the air Thursday to discuss the movement’s demands for free public college, student debt cancelation and a $15-an-hour minimum wage for student workers. In the awkward 9-minute interview, Cavuto repeatedly cited facts and figures that seemed to fluster the student.

When asked who would pick up the tab for the demands she listed, Mullen said, “The 1 percent of people who are hoarding the wealth and causing a catastrophe students are facing.”

“If the 1 percent just had their taxes raised a few years ago back to almost 40 percent then to pay for the healthcare law, they had them raised another few percentage points, then they had their deductions limited to raise another couple points — depending on the state or locality — they’re pushing over about 50 percent in taxes,” Cavuto told Mullen. “How much more do you think they should pay?”

Cavuto’s question, asked within the first two minutes of the interview, became the centerpiece of the entire discussion, as Mullen was unable to provide a clear answer.Mullen did say the rate should be raised to “enough until we have a system where not one in two families are threatened with poverty.” And when asked if she and her friends and family would pay more in taxes for her demands, she said “we already are.” However, according to Forbes, 45 percent of households pay no federal income taxes.

Cavuto asked Mullen where the money would come from should “these 1 percent hoarders” leave the country, and Mullen insisted there would always be wealthy people in the U.S. However, later in the interview, Cavuto told his guest that countries around the world, using Greece as an example, have run out of money because the top earners are fleeing.

When Cavuto asked her if she think the 1 percent could actually fund all her demands, Mullen said, “Absolutely.” However, Cavuot claimed taxing the 1 percent at 100 percent wouldn’t even fund Medicare for three years — let alone all of her demands for free services.

“They’ve done studies on this, Keeley, I don’t want to get boring here, but even if you were to take the 1 percent and take all of their money — tax it 100 percent — do you know that couldn’t keep Medicare, just Medicare, in this country going for three years?” Cavuto asked. “Did you know that?”

“Yeah, I don’t believe that,” Mullen said in response. “Yeah, I’m sorry, that just sounds completely ludicrous to me.”

Toward the end of the interview, Cavuto told Mullen taxing the 1 percent on 100 percent of their income would only yield “about one trillion” toward any entitlement program.

I took a look and found out that her father owns a million-dollar home. Also, she is studying two non-STEM subjects – political science and sociology. Both of these have some value, but they are also not the STEM areas that are in demand by employers.

By the way, Cavuto is not joking about how much money you can get by taking everything the 1% make.

The radically leftist New York Times explains how much you can get from “the rich” with a reasonably high tax rate:

To get the most accurate picture possible, throw in all the scraps of income, from the most obvious (like wages, interest and dividends) to the least (like employer contributions to health plans, overseas earnings and growth in retirement accounts). According to that measure — used by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution — the top 1 percent includes about 1.13 million households earning an average income of $2.1 million.

Raising their total tax burden to, say, 40 percent would generate about $157 billion in revenue the first year. Increasing it to 45 percent brings in a whopping $276 billion.

The Wall Street Journal has computed the costs of Bernie Sanders’ spending plan, and it came out to $18 trillion. Getting rid of all the current outstanding student loan balances would cost $1.2 trillion alone. I’ve already talked about the consequences of raising the minimum wage for young, minority workers – they won’t be able to find the entry level jobs they need to get their careers started, so they can move up.

The real question that needs to be asked is the one that Cavuto asked – do you expect the wealthy to continue producing at the same level when you take half or all of what they make. On the student’s view, the rich would work just as hard even if you took all their money and gave it to students taking underwater basket weaving, medieval pottery and puppetry. This is the question that people on the left never ask – what are the consequences of these policies for ALL of the parties who will be affected. That’s a simple question, but apparently not something that leftist professors teach their students to ask. College is generally little narcissists learning from big narcissists, at least in non-STEM programs. It certainly is not the place to learn basic economics and basic civics.

How to go to college without going into debt for the rest of your life

Choosing the right major
Choosing the right major: study one of these, or learn a trade that pays well

First, watch this this 5-minute video that explains why college is so expensive:

This video clearly makes two points:

  1. College costs more because of government subsidies
  2. Only STEM degrees are worth taking out loans for, because there is a demand for STEM-degree holders

Now, in a previous post, I explained more about what’s in the video, and linked to appropriate sources (the New York Times) for support.

But this time, I want to get some advice from a friend of mine, the famous Lindsay. She has a BS and MS in biology, was admitted to a PhD program in biology, but then decided to become a stay-at-home wife, and the best homeschooling mom in the whole world.

She writes:

It is possible to go to college and get a degree that will prepare you for a job and to do it without drowning yourself in debt. I did it. I graduated with a Master’s degree in Biology, with a 4.0 GPA throughout, with no debt, and got a job right out of college. But I’m the exception. You can’t just do what everyone else is doing and expect things to work out well for you. You have to be smart and informed or you’re likely to end up an unhappy statistic, paying down enormous debt on a degree you never use.

She has 5 pieces of advice for you young people.

Here’s my favorite:

5) Remember that the proper amount of student loans is zero and any non-zero amount must be justified by careful study and number-crunching to make sure it is worth it. Your future is at stake. In my experience, the only time student loans are an acceptable investment is when you’re going into a high paying field (think doctor, lawyer, or engineer), have very high graduation and employment potential (good grades and some work experience), and your realistic (not idealistic) future income will be sufficient to pay for your total student loans in less than 10 years while also allowing you to cover all your living expenses. You have to crunch the numbers and make sure the investment, including the interest you will pay, is worth it in better job prospects and pay than you could achieve without the degree. You can’t rely on the system to check this for you. They are all too happy to mortgage your future for a degree you can’t afford and that won’t get you a job.

Straight talk from the Lindsay.

I guess I should say something about me. It’s hard for me to remember the numbers exactly, but I think I finished my Bachelor of Computer Science with $9,000 in the black, and then graduated with a Masters of Computer Science with $16,000 in the black. As Lindsay advises in her point #4, I worked in the summers and took two semesters off (in my BS) to work full time. I went to a very ordinary school in my home town for both degrees, and chose all programming courses as much as I could. I stayed away from anything theoretical, and even niche courses. (At least until graduate school – then I went crazy and audited 5 theoretical courses in addition to my programming courses and thesis). I do recommend working in some work related to your degree, at least in the summer, even if you don’t get paid. However, if you can’t find paid work in the summer related to your degree, that’s a pretty good sign that you’re not in a program that is going to pay for itself.

I mentor a lot of young Christian men and women about their educations and careers. Of all the other young Christians I mentor, everyone is in a STEM program, except for these two girls in California who just started working on. One got a job on Monday night, and the other one (who is shy) is investigating getting a promotion at her current job, as well as adjusting the courses she is taking now. Parents really need to be on top of the education and career situation of their children. And older Christians like me, well we need to be taking an interest in young Christians… making sure they study apologetics, apply themselves in school, study for jobs that pay – either in vocational training or in a STEM college program. Something where they  can find a job that pays. This is especially important for men, because they are tasked with the role of primary provider.

By the way, college is not for everyone. Previously, I blogged about the specialty welder who has struck it rich. There are many advantages to being in a field like that where you get to work as much or as little as you want, instead of working 40 hours a week regardless of money requirements. If you don’t like welding, here’s a list of blue-collar jobs that pay well.

New study: Average student loan balance at graduation hits record high under Obama

President Obama's student loan bubble
President Obama’s student loan bubble

The new study is discussed in The Federalist.


Graduates from the class of 2014 can thank President Obama that they’re exiting college with the highest student loan burden ever. They graduated with an average of $28,950 in student loans, according to a new study by the Institute for College Access and Success (TICAS).

[…]A recent study from the Federal Reserve Bank of New York examining how student loans rose between 2001-2012 concluded that the more government subsidizes education, the more colleges raise their prices.

The study explains:

Yearly student loan originations grew from $53 billion to $120 billion between 2001 and 2012, with about 90% of originations in recent years occurring through federal student aid programs. Against this backdrop of increased borrowing, average sticker tuition rose 46% in constant 2012 dollars between 2001 and 2012, from $6,950 to $10,200.

In the years examined, tuition increased about 55 to 65 cents for every dollar the federal government gave out in student loans or Pell Grants.

Surprise! A government program designed to lower the cost of education actually did the opposite. Once colleges saw they could rake in money from helpless taxpayers, they figured: “Why stop now?” Consequently, tuition has skyrocketed due to government involvement.

Under Obama’s leadership, the U.S. Department of Education has increased the maximum Pell Grant award from $1,000 in 2008 to $5,730 for 2014-15. Additionally, it has doubled the number of students slated to receive these funds. If history is any indication, this expansion won’t lower the cost of higher education. In fact, it will probably do the opposite.

What’s more, increasing numbers of these loans aren’t getting repaid. Currently, about 40 million people owe about $1.2 trillion in student debt. Last year, 11.8 percent of student loans subsidized by the government fell into default, which is bad news for taxpayers, who are left holding the bag.

Well, if the rate of defaults is increasing, then how come bankers are still giving out these loans. Glad you asked. It’s not bankers who is giving out these loans with bank money. It’s Obama giving out these loans with taxpayer money. You see, Obama nationalized the student loan system in 2010, so that anyone can now get a loan no matter what they study, and no one has any requirement that they study something that allows them to pay the money back.

Investors Business Daily explains:

In 2010, Obama eliminated the federal guaranteed loan program, which let private lenders offer student loans at low interest rates. Now, the Department of Education is the only place to go for such loans.

Obama sold this government takeover as a way to save money — why bear the costs of guaranteeing private loans, he said, when the government could cut out the middleman and lend the money itself?

The cost savings didn’t happen. In fact, the Congressional Budget Office just increased its 10-year forecast for the loan program’s costs by $27 billion, or 30%.

What did happen was an explosive growth in the amount of federal student loan debt… The result of Obama’s action is striking. In each of the past six years, federal direct student loan debt has climbed by more than $100 billion.

And since Obama keeps making it easier and easier to avoid repaying those loans, it’s a problem that taxpayers will eventually have to shoulder.

The radically leftist New York Times, of all places, supports this view that big government is behind the rise in the cost of higher education (student loan bubble), just like big government was behind the housing bubble.

This is by Paul F. Campos, law professor at the radically leftist UC Boulder.

He writes:

[P]ublic investment in higher education in America is vastly larger today, in inflation-adjusted dollars, than it was during the supposed golden age of public funding in the 1960s. Such spending has increased at a much faster rate than government spending in general. For example, the military’s budget is about 1.8 times higher today than it was in 1960, while legislative appropriations to higher education are more than 10 times higher.

[…][F]ar from being caused by funding cuts, the astonishing rise in college tuition correlates closely with a huge increase in public subsidies for higher education. 

[…]As the baby boomers reached college age, state appropriations to higher education skyrocketed, increasing more than fourfold in today’s dollars, from $11.1 billion in 1960 to $48.2 billion in 1975. By 1980, state funding for higher education had increased a mind-boggling 390 percent in real terms over the previous 20 years. This tsunami of public money did not reduce tuition: quite the contrary.

[…]State appropriations reached a record inflation-adjusted high of $86.6 billion in 2009. They declined as a consequence of the Great Recession, but have since risen to $81 billion. And these totals do not include the enormous expansion of the federal Pell Grant program, which has grown, in today’s dollars, to $34.3 billion per year from $10.3 billion in 2000.

The more money that is attached to students, the more money universities charge – simple. Taxpayers are on the hook for all these defaulted loans, as well as state funding of higher education, as well as the increase in Pell grants. And what is Hillary Clinton’s response to all this? Why, to make taxpayers pay for college for everyone. Who do you think is going to pay for that?

Maybe we should be electing someone who actually knows how to make the costs of higher education go down so that students don’t have to be stuck with these huge student loan balances.

Obama’s irresponsible student loan policies leave taxpayers with trillion-dollar bubble

President Obama's student loan bubble
President Obama’s student loan bubble

This is from Investors Business Daily.

It says:

In 2010, Obama eliminated the federal guaranteed loan program, which let private lenders offer student loans at low interest rates. Now, the Department of Education is the only place to go for such loans.

Obama sold this government takeover as a way to save money — why bear the costs of guaranteeing private loans, he said, when the government could cut out the middleman and lend the money itself?

The cost savings didn’t happen. In fact, the Congressional Budget Office just increased its 10-year forecast for the loan program’s costs by $27 billion, or 30%.

What did happen was an explosive growth in the amount of federal student loan debt. President Clinton phased in direct federal lending in 1993 as an option, but over the next 15 years the amount of loans was fairly stable. The result of Obama’s action is striking. In each of the past six years, federal direct student loan debt has climbed by more than $100 billion. (See chart.)

And since Obama keeps making it easier and easier to avoid repaying those loans, it’s a problem that taxpayers will eventually have to shoulder.

Through words and actions, Obama has encouraged irresponsibility on the part of student borrowers. He constantly talks as if student debt were an unfair burden they unknowingly had foisted upon them.

At the same time, he’s made it easier and easier to avoid paying back student loans in full. Earlier this year, for example, Obama expanded eligibility for his “pay as you earn” program, which limits loan payments to 10% of income, with any debt left after 20 years forgiven.

Students got the message. The St. Louis Fed reports that 27.3% of student loans in repayment are at least a month behind in payments. That’s a far higher delinquency rate than any other kind of debt, and it’s significantly higher than the delinquency rate 10 years ago.

“This overall level of delinquency is very concerning,” concluded authors Juan Sanchez and Lijin Zhu.

A 2013 Consumer Financial Protection Board report found that less than half of this federal loan money was actually being paid. About 30% was held by borrowers still in school or in a grace period, another chunk in deferment or forbearance, and almost 14% was in default.

The problem here is that whenever the government nationalizes something that the private sector is doing, it always creates a problem. Let me explain. If student loans (or mortgage loans) are run solely by the private sector, then the motivation for lending money out at interest is to make money for the bank’s depositors and investors. In other words, because the bankers are in a free market and have to compete for depositors and investors, they have an interest in making sure that the loans they make get paid back.

But when the government takes over loans, they are not interested in being wise with the money they lend out – it’s not their money. They want to lend out as much as possible today in order to buy votes, and then kick the can down the road on the repayment. So instead of being careful about asking “will this get paid back?” they ask “how can I borrow from the future in order to buy as many votes as I can right now?” And that’s how we got the housing crisis of 2008, as well as this trillion-dollar student loan crisis.

When you take the profit motive out of the lending decision, then money gets lend to people who will never be able to pay it back. No private bank that has to answer to shareholders hands out money to students who want to study underwater basket-weaving. But the government does. They want to buy as many votes as possible. And besides, this is not their money. They are borrowing it from the future earnings of the very students they are giving it to! That’s what happens when you let big government decide everything.

Whenever big government politicians want to buy votes with taxpayer money, they always sell it to the people with sob stories about some poor, helpless group of people will suffer through no fault of their own. There are a lot of voters who will vote for politicians who cry crocodile tears for them, especially ones who don’t understand economics. There is no free lunch – somebody has to pay. Democrats are basically throwing a party for students, and then mailing them the (unexpected) bill for it, with interest.

New study: outstanding student loans reduce a woman’s odds of marrying

First, the study, which was published in Demographic Research.



With increasing levels of student loan debt, the path to economic stability may be less smooth than it was for earlier generations of college graduates. This paper explores this emerging trend by assessing whether or not student loan debt influences family formation.


The objective of this study is to examine whether student loan debt delays marriage in young adulthood, whether or not the relationship between student loan debt and marriage differs for women and for men, and if this relationship attenuates during the years immediately after college graduation.

METHODS We estimate a series of discrete-time hazard regression models predicting the odds of first marriage as a function of time-varying student loan debt balance, using a nationally representative sample of bachelor’s degree recipients from the 1993 Baccalaureate and Beyond Longitudinal Study (N = 9,410).

RESULTS We find that the dynamics of loan repayment are related to marriage timing for women, but not for men. Specifically, an increase of $1,000 in student loan debt is associated with a reduction in the odds of first marriage by 2 percent a month among female bachelor degree recipients during the first four years after college graduation. This relationship attenuates over time.

CONCLUSION Our study lends support to the proposition that the financial weight of monthly loan repayments impedes family formation in the years immediately following college graduation – however, only for women. This finding questions traditional models of gender specialization in family formation that emphasize the economic resources of men.

I think that a woman who is serious about studying something that will allow her to get a job related to her field so she can quickly pay off her loans in the first few years is a very good sign of RESPECT for a man, and for his role as primary/sole provider. Men choose tough majors / trades for a reason, and they do tough jobs for a reason. When a woman chooses something hard to study and then chooses a hard job to do to pay off her loans, it’s showing to her man that she respects what he is doing to provide for the family. I think this is something that parents need to encourage young women to do, but so often parents focus too much on spiritual / emotional concerns instead of practical wisdom when leading their kids.

When a woman asks a man to work to pay for the marriage – with all the costs of home, furniture, diapers, tuition, etc. – she is asking him for a commitment to work until he is 65. That is a lot to ask, and it is very hard to accept this from a woman who doesn’t understand the difficulty of earning and saving money.

So what do I recommend to a woman? I recommend she do a STEM degree, pay off her debts, guard her chastity, marry young when she is fertile, have a few years of work to pay off student loans and get used to the workplace, demonstrate ability in apologetics and mentoring others, etc. A wife needs to have a lot more skills than just being pretty and young. There are things she has to do in the marriage – things that take preparation. The more accustomed she is to hard work and self-sacrifice, the easier she will take to her role in the marriage. Women who are used to having to do hard things that they don’t feel like doing make the best wives and mothers. It’s something that a woman can grow into, if she lets herself be challenged to grow.

My friend Amy is fond of telling me that people usually adapt to their friends. So if all your friends are very spiritual and impractical, and they don’t have jobs or savings, then chances are you’ll be like them, too. To get out of debt, don’t take financial advice from people who, in their own lives, show no evidence of knowing what to study, how to find a job, how to save money, and so on. Instead of pushing away the people who “rain on your parade” with wisdom, grab them and keep them close. Watch what they do. Talk to them about your finances. Rely on them to hold you accountable for choosing a good major, updating your resume, and continuously growing your salary, through annual raises or job changes. That’s how you get better.

I don’t say these things in order to make women feel bad, or limit their freedom unnecessarily. I tell women to make good decisions to prepare for marriage, to practice self-denial and self-sacrifice, to choose the right men, to not be scared away by strong providers and men with moral and religious convictions. Although on one level, women can be scared off by men who have firm and definite convictions, they need to understand that these men are the most reliable men to marry. Men who don’t make demands on women usually don’t respond well to demands that women make on them. A strict moral and theological framework can seem scary to a woman – she might feel scared that she could be rejected. But it’s exactly these convictions that ground a man’s ability to keep loving her, to stick with her, and to encourage and support her as she grows.

Instead of being frightened by men who ask her to do good things, she should view it as an asset, not a liability. And the more she listens to his leading and grows, the more independent and capable she will be. She will feel better about doing hard things and playing a role. Better than she would feel about always choosing the easy way and then finding herself without accomplishments. Demanding men can be bad, but not if the demands they make are to build the woman up. The demand that a woman be serious about paying her debts with a real plan might seem scary to some women, but the study shows that this is good advice for her to be more attractive – to any man who might want to marry her.