Sunday, February 1, 2009
Jesse Jackson Writes "Try 1 percent solution for student loans" in Chicago Sun Times
Try 1 percent solution for student loans
BY JESSE JACKSON
The debate on the recovery has begun in earnest. The $825 billion plan introduced in the House is a good beginning. It makes a down payment on investments vital to our future -- in new energy, health-care efficiency, education. It provides assistance for those hit hardest by the crisis. It provides a tax break for the vast majority of Americans.
Republican leaders have reacted in partisan rather than patriotic form. Their objections are simply wrongheaded. House Minority Leader John Boehner says the plan is too large, spends too much and has too few tax breaks for business. In fact, the reverse is true. If anything, given the accelerating downturn, the plan is too small and contains too many business tax breaks that are notoriously ineffective at producing jobs.
To help get the economy moving, Congress would be well advised to pass -- either as part of the recovery plan or separately -- a bold initiative to help make college and advanced training affordable. I'd suggest a simple proposition: Let's make college loans available to students on the same terms that the banks receive.
Banks now borrow money at about 1 percent, even as the Treasury and Federal Reserve pour in literally trillions in equity, loan guarantees, credit swaps and the like to keep them from going belly up. Over the last few decades, students have gone from paying for college with two-thirds grants and one-third loans to the reverse, with most racking up tens of thousands of dollars in debt to stay in school. They are forced to borrow -- even on the subsidized loans -- at rates of 4 percent to 5 percent. When those limited funds are exhausted, they are forced into a private market, where interest rates are even higher, and sometimes end up relying on credit card debt, with rates more than 20 percent.
With the recession spreading, students are struggling to cobble together the funds to stay in school. Parents' contributions get slashed when they lose their jobs. Grant aid doesn't make up the difference. The Economic Recovery Plan would increase the maximum Pell grant by $500, but that doesn't make a dent.
There is real perversity here. General Motors is offering car loans at zero percent while students seeking to get an education must pay 5 percent to 6 percent. Students are essentially subsidizing the banks that drove us into this ditch, even as those banks continue to pay multimillion-dollar bonuses to the very leaders who are responsible.
Thus far, the Federal Reserve and the Treasury keep spraying the leaves and ignoring the roots. They keep bailing out the captain's quarters while ignoring the hole at the bottom of the boat.
We should go another way. Michelle Obama has noted the harsh burdens that students are faced with. "Salaries don't keep up with the cost of paying off the debt, so you're in your 40s, still paying off your debt at a time when you have to save for your kids." She and Barack were still paying off their loans in their 40s, until his best-selling books got them out of the hole. And they were successful graduates of Harvard Law School.
Now the situation is much worse. Talented students are forced to drop out. Schools without large endowments are making draconian cuts and raising tuitions.
Young people are the nation's most valuable asset; their education is essential to our future. Their potential should not be snuffed out, their dreams shattered because of an economic crisis they didn't cause and cannot avoid. We shouldn't ask them to subsidize the very banks that caused the mess. It's time for a 1 percent student loan program.