Education and economic ignorance

Tim Nerenz:

LendEDU lists the 50 states ranked by the number of years is takes to pay off the average student loan in that state. …

Utah’s top rank is an average repayment period of 8.14 years of average monthly payments of $202 to pay off the average loan of $19,742

New Hampshire ranks last with an average repayment period of 14.4 years of $213 monthly payments and an average loan of $36,754.

The median of state averages is 11.68 years with monthly payments of $208.47. This is for a degree that the Department of Education says will increase lifetime earnings by more than $1 million.

WIsconsin ranks 33rd with an average of $30,600 per student borrower and 72 percent of 2019 college graduates graduating with education debt.

Any credit counselor or financial advisor will tell you that doubling up the monthly payment will reduce a 30- year mortgage to an 11-year repayment, and the same is true of car payments and student loans. Doubling the average $200 payment reduces the average payoff period to less than six years.

According to NerdWallet the average new car loan is paid over six years with $684 in monthly payments. The average used car payment is $488 for five years.

That difference alone could provide the money to double up the average student loan payments and cut the repayment time by half or more. It is one of the many ways that responsible degree holders have paid down their debt.

And here is another. The 2017 Tax Reforms reduced taxes on households making $15-50k by 16-20%; for those making $51-100k, taxes were lowered by 15-17%; for those making $100-500k, taxes were reduced by 11-13%; for those making $500k to $1 million, taxes dropped 9%; for those making over $1 million, taxes were reduced by 6%.

The standard deduction was increased by $6k for single filers and $12k for married couples and heads of households. How many student loan payers used that extra money to accelerate their loan payments and retire their debt sooner? Most of the accounting majors, I would guess.

Three rounds of covid stimmy checks provided $3000 per adult with adders for dependents in the household – that is 15 months of average student loan payments for the degree-holding laptop class that largely evaded the income loss imposed by covid lockdowns. Did they use the windfall to bring their accounts current?

This is an election year and Democrats should make student loan forgiveness THE issue of the campaign. All 435 Members of Congress should hold a special town hall in their districts on this one question.

They can explain to their constituents who chose affordable colleges and worth-it degrees or trades, earned scholarships and Pell grants ($2 billion unused each year), worked their way through school, used employer benefits, chose military service, saved for their children’s tuition, and honored their loan contracts are now morally obligated to pay off the debts of those who did not. Use plain English and look your folks in the eye.

If you are curious, the percentage of adults with federal student loans in arrears is 4%. This latest marginalized community is one tenth of the adults with college degrees, which has grown to 37% of the adult population.

The proportion among naturalized citizens is higher (42%) and the percentage of loans in arrears is far lower than native-born Americans. If you come here from somewhere else, your appreciation for our marvelous country is much greater – same as it ever was.

Our tax dollars fund colleges and universities; our tax dollars fund Pell Grants, the GI bill, and education reimbursement benefits for government workers; our tax dollars front the money for students who could otherwise not afford it – those loan proceeds go directly to college administrators each term to spend as they wish.

The argument that we do not do enough to support higher education is absurd; the people who make it are not serious.

The costs of college have increased because government money going to higher education has increased. Financial aid that follows the student provides the obvious incentive for colleges and universities to let in more students. Most colleges and universities are tuition-dependent, meaning their endowments are nowhere near as large as the Harvards and Yales of the world, and that provides another incentive to let in students, and since the feds are paying most of the cost of the student, there is no incentive for a college or university, even one with tight finances, to limit what it charges students.

A comment on Nerenz’s Facebook post passes on this from MoneyWise:

Experts often say a college degree vastly increases lifetime earnings and job prospects. But not necessarily for all majors.

Using earnings and employment information from the U.S. Census Bureau’s American Community Survey, Bankrate recently ranked 162 majors for career success after graduation. These are the majors on the bottom — counting down to the most worthless.

The list:
10. Library Science.
9. Interdisciplinary studies (“smaller, specialty majors spanning everything from ancient language studies to archaeology to neuroscience”).
8. Drama and theater arts.
7. Educational psychology.
6. Human services and community organization. (As community organizer Baravk Obama could attest, the money is much better in politics.)
5. Visual arts.
4. Cosmetology services and culinary arts.
3. Psychology.
2. Composition and speech. (“This major lends itself to a wide variety of different career tracks. Grads may find work in fields such as journalism, writing, political campaigning, public relations or marketing. Nearly every industry needs writers; the trick to being employed is gaining experience in a specific field.” Average income $44,211; average unemployment 4.9 percent.)
1. Fine arts. (Average income $40,855; average unemployment 9.1 percent.)

The poster then asks:

Why should we have to foot the bill for all of Americas philosophers, journalists, creative artists, general studies, and other nearly useless college degrees as ranked by MoneyWise? Go to tech school, learn a trade, pick up a tool belt and make yourself useful – that is the advice most of these college bums needed to hear.

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