How Wiping Out $1.5 Trillion In Student Debt Would Boost The Economy

posted by S. Abbas Raza in 3 Quarks Daily

Jillian Berman in Market Watch:



Student-debt cancellation, once viewed as a niche political issue, has now, with loans topping a staggering $1.5 trillion, made it onto the platforms of major presidential candidates.

Since at least the Great Recession a decade ago, borrowers, activists and others have been building a case that erasing debt acquired during students college years is a matter of economic justice. More recently, researchers have found that canceling some or all of the nation’s outstanding student debt has the potential to boost gross domestic product, narrow the widening racial wealth gap and liberate millions of Americans from a financial albatross that previous generations never had to contend with.

Sens. Elizabeth Warren and Bernie Sanders, both vying for the Democratic nomination for president, are proposing to wipe away some or all of the country’s burdensome debt as a key part of their campaigns. They plan to pay for it — and accompanying proposals to make public college tuition-free — by raising taxes on the wealthy. Warren estimates her plan would cost $1.25 trillion over 10 years, and Sanders says his would cost $2.2 trillion.

Critics question whether those proposals would fix the underlying problems in the way Americans pay for college, and also whether student-debt cancellation would entail a giveaway to well-off families.


More here.


Hazel's comment:
Yes, this is about the USA but the debts of many UK students are astronomical (not, of course, in Scotland), My granddaughter graduated this year and walked into a job the following week, she was lucky in that regard but she has no hope of paying off her student loan and the interest mounts up when you don't/can't pay.

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Student budgets and widening participation: Comparative experiences of finance in low and higher income undergraduates at a northern red brick university

an article by Rita Hordósy and Tom Clark (University of Sheffield, UK) published in Social Policy & Administration Volume 53 Issue 5 (September 2019)

Abstract

Drawing on a thematic analysis of longitudinal qualitative data (n_total = 118), this article takes a “whole student lifecycle” approach to examine how lower and higher income students at an English northern red brick university variously attempted to manage their individual budgets. It explores how students reconcile their income — in the form of loans, grants, and bursaries — with the cost of living.

Four arenas of interest are described:

• planning, budgeting, and managing “the student loan”;
• disruptions to financial planning;
• the role of familial support; and
• strategies of augmenting the budget.

In detailing the micro‐level constraints on the individual budgets of lower and higher income undergraduates, the article highlights the importance of non‐repayable grants and bursaries in helping to sustain meaningful participation in higher tariff, more selective, higher education institutions.

It also supports an emerging body of literature that suggests that the continuing amendments to the system of funding higher education in England are unlikely to address inequality of access, participation, and outcome.

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Hitting the books: student loans and the public finances

a post by Matthew Whittaker for the Resolution Foundation blog

With everything that’s going on in British politics right now, it’s easy to forget that the government was celebrating some seriously good news just seven weeks ago. You might remember that the Chancellor got handed a £74 billion fiscal windfall at the Budget that allowed him to deliver the long-promised extra spending on the NHS without having to make any significant changes to his borrowing plans or push through any controversial tax rises. Indeed, he was even able to throw in an income tax cut and restore some previously-removed funds to the Universal Credit budget. Things have, of course, turned a little sour for the government since then. And they may just have got a little bit more difficult again as of today.

Usually it’s the Office for Budget Responsibility’s (OBR) sofa down the back of which extra money is found and lost; this time however it’s the moving of furniture at the Office for National Statistics (ONS) that matters. Specifically, it’s today’s conclusion of the ONS’ review of the accounting treatment of student loans that will be concerning Philip Hammond. It’s a technical exercise, and ultimately it won’t change the true cost to government of providing student loans. But, by changing the presentation of that cost, it could well have big implications for the Chancellor’s fiscal rules.

Continue reading

There are links to some explanatory stuff as well as the clearly set out information in the blog post itself.
Even I understood it.

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Fees ARE putting the most disadvantaged young people off university, says new report

Contrary to previous reports, UCU report finds that increased fees are putting the most disadvantaged young people off university

Cost, poor advice and a perceived lack of jobs are putting young people from the most disadvantaged backgrounds off higher education, warns a report from the University and College Union (UCU) out today [8 December].

It seems that the way in which successive governments have promoted higher education as an instrumental tool to better jobs, salaries and outcomes is now coming home to roost.

Continue reading

Student loan reform, interest subsidies and costly technicalities: lessons from the UK experience

Alison Johnston (Oregon State University, Corvallis, USA) and Nicholas Barr (London School of Economics and Political Science, UK) published in Journal of Higher Education Policy and Management Volume 35 Issue 2 (April 2013)

Abstract

In this paper, we consider lessons for other countries about the design of student loans with income-contingent repayments (i.e. repayments calculated as x per cent of each borrower’s subsequent income).

Using a dataset of 20,000 simulated lifetime graduate earnings paths, we estimate the cost and distributional effects of reforms in England in 2012. Introducing a real interest rate produces significant savings, mostly from graduates in the middle and upper earnings deciles. But those gains are offset by an increase in the income threshold at which loan repayments start.

We conclude with discussion of policy changes to offset the increased cost of student loans (roughly £4,400 per graduate) within the current austerity climate, namely significant reductions in the higher education block teaching grant and a cap on the number of students.

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Statistics Behind Paying Off Student Loan

via Career Geek by careergeek
Paying off your student loan is a daunting prospect, especially when you have just graduated.
So how long will it actually take?

The infographic below from moneysupermarket.com tells us just how long and how much a typical professional would pay back.
For example I, as an Engineer, would take around 30 years to pay back.


Full size plus links to other useful information
The post Statistics Behind Paying Off Student Loan [INFOGRAPHIC] appeared first on Career Geek.

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The Higher Education White Paper: The Good, the Bad, the Unspeakable – and the Next White Paper

an article by Nicholas Barr (London School of Economics and Political Science) published in Social Policy & Administration Volume 46 Issue 5 (October 2012)

Abstract

This article argues that reforms of higher education finance for undergraduates in England introduced by the Blair government in 2006 provided a progressive strategy for achieving the central objectives of higher education of quality (better), access (wider) and size (larger).

Reforms in 2012 are a not a strategy but a collection of ad hoc arrangements. They include the good (a higher fees cap, a higher interest rate on student loans, better information and improved support for part-time study), the bad (abolishing most taxpayer support for teaching in the arts and humanities and the social sciences, and raising excessively the threshold at which loan repayments start) and the unspeakable (abolishing Education Maintenance Allowances and AimHigher).

The reforms are fiscally costly and hence perpetuate the central problem of capped student numbers, and will not stand the test of time.

The concluding section outlines the next White Paper.

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Consultation on potential early repayment mechanisms for student loans

This consultation opened on 28 June 2011 and will close on 20 September 2011

BIS (Department for Business, Innovation and Skills) is consulting on potential early repayment mechanisms for student loans – similar to those paid by people who pre-pay their mortgages.

BIS is committed to the progressive nature of the repayment mechanism. It is therefore important that those on the highest incomes after graduation are not able unfairly to buy themselves out of this progressive mechanism by paying off their loans early. That is why BIS is consulting on potential early repayment mechanisms – similar to those paid by people who pre-pay their mortgages.

Further information can be found on the Higher Education Reform website.

Input is sought on the following three questions:

1. Should BIS introduce a more progressive mechanism for early repayment of student loans?
2. If BIS should introduce a more progressive mechanism, which model best delivers BIS’ stated aims of ensuring the progressiveness and sustainability of the student finance system?
3. How would a more progressive early repayment mechanism affect you or your organisation’s perception of, and relationship with, the student finance system?

Download the consultation (PDF 10pp)

See also the Higher Education White Paper (URN 11/944) and related publications URNs 11/1046, 11/1048, 11/1049 and 11/1050

Hazel’s comment:
Please be grateful that I found the links to the related publications!! It was not the easiest task in the world and I gave up after 10 minutes on the “higher education reform website”.
Answers to the problem in the comments, please.

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