Submitted to Times Leader April 11, 2012
Young and old borrowers alike owe collectively a trillion dollars in debt from their public and private student loans. With the bad economy, as much as 30% of the borrowers are defaulting on their loans. They simply cannot make the minimum payments. It is so bad that more and more �older students� with loans are now turning 62 years of age and, surprise surprise, their social security checks are being garnished by the government to pay off these old loans. My research discovered an 82 year old gentleman who once guaranteed a friend�s loan and he is now paying 40% of his social security check to pay off the loan. He is left with $750 per month. Something is wrong in America.
Many are questioning the value of a university education today when the loan brokers have to wait until retirement years to collect the debt from government payments. Students in the bottom 60% of the class with little prospect for work in their field are wishing they could have that loan decision they made at 17 or 18 years old back again to do over. They know their huge loans; many over $100,000 may very well ruin their lives.
Where are the good jobs promised by the Universities for all the money borrowed? At the same time that most graduates cannot get jobs, the jobs they do get pay less. The average salary of college graduates has gone down 10% in the past few years while inflation is growing at an ever faster clip. Moreover, 85% of college graduates from 2011 have had to swallow their pride and move home with mom and dad because they could not afford life on their own. It doesn't take a rocket scientist to call out: �Houston, we have a problem!�
Meanwhile nobody is talking about the Universities� permitting more and more foreign students into their programs. When they graduate; guess whose jobs they take? A major source of H-1B visas (college graduates) is international students from U.S. university campuses. The reason corporations hire them before Americans is they are a ready source of cheap labor. Universities not only sell their foreign national graduates to corporations, they also hire more than their fair share of professors from the foreign national community�many who have just received graduate degrees from American Universities.
They will fire existing faculty and replace them with younger foreign national professors willing to work for less money. Smaller Universities will even outsource the legal part of the visa work to assure the foreign applicant a six-year H-1B visa. They will contract with immigration law firms and pay up to $10,000 or more per faculty member depending on the complexity of the case for the purpose of hiring a new faculty member who will work cheap. Do cheap faculty have any affect on the quality of education our children receive? It is really tough for Americans to get hired in US Universities since our Congress permits an unlimited number of foreign nationals to be hired as professors or staff at Universities.
With more and more former students not being able to survive without their parents, this also has an impact on the student borrower�s ability to ever consider purchasing a home. This is already having a major effect on the housing market and it will continue for years to come. Who will buy the new homes if not the young?
No solution is simple. With 20 to 30% or more former students ultimately defaulting on their loans, and many more trapped in a financial abyss from which they may never escape, Congress can certainly create a better way to help the borrower, the housing market, and the taxpayer, all at the same time. I would suggest that Congress assure that in times when saving earns just a percent or two interest, student lenders first have their interest rates capped at something that is well out of the usury category. Then, I would recommend putting together a progressive payback schedule (like the progressive income tax) based on adjusted gross income. Every borrower with income should have to pay something. I would start the maximum rate of payment at 5% for the lowest income borrowers and then take it up to 25% for those doing quite well. Of course in no instance would anybody have to pay more than the minimum monthly payment for the loan even if they could afford it.
I would also set up a means for any taxpayer to donate from $1.00 up to any amount of their tax refund and have it directed towards the paying down of all student loans. My final recommendation set is a bit more controversial.
All of this money that former students have paid and will pay over the years has already gone into the coffers of Universities across the nation, who seemingly have no skin in the game. And, since the products of the universities, the students, have not been able to achieve the American Dream as promised by the Admissions Counselors, and since such Universities encourage foreign students to take jobs in the US upon graduation and they hire foreign faculty when Americans are available, Universities are a part of the problem. In this regard, I would ask the Congress to enact legislation to make them part of the solution, providing the following:
1. Collect a fee of 5% of gross revenue to 25% (same rates as student payback) that is applied to paying down all student loans. The minimum payment would be a factor of the default rate for the institution and the percentage of gross revenue. The exact formula will need some work.
2. Limit the number of foreign students until the unemployment rate is 4% and cap the number permitted to obtain work visas after graduates to a small / reasonable number.
3. Limit the number of H-1B visas for faculty to a very small number-- 5%..
4. Assure the H-1B faculty member on worker visa returns to the home country after 6 years. Worker visas do not get in line for green card or citizenship.
5. Reduce all non University H-1B visas from 85,000 by 90% until the unemployment rate goes to 4%.