• Tag Archives education

  • Struggling to Pay Back Your Student Loans? These States Will Revoke Your Job License

    Posted on by Azrael Comment

     

    Student loan debt is one of the biggest burdens to young Americans, recently ballooning to $1.5 trillion and topping car and credit card debt. Millions are struggling to repay money they borrowed for an education they were told would set them up for financial success, but many states across the country have barred individuals from working if they have not yet paid off their loans.

    Fourteen states across the country currently impose policies to suspend, deny, or revoke occupational licenses from borrowers, preventing them from working and, ultimately, fully paying off their loans. This practice applies to a wide range of professions, from massage therapists, barbers, and firefighters to psychologists, lawyers, and real estate brokers.

    With over 8.9 million recipients of federal student loans reportedly in default and as much as 40 percent of student loan borrowers at risk of defaulting on their payments by 2023, these restrictive policies only make it more difficult for them to work their way out of debt.

    In one recent example, last month 900 Florida health care workers received notices from the Florida Board of Health notifying them that if they didn’t repay their student loan debt, they would have their licenses suspended. Denise Thorman, a former certified nursing assistant in the state, lost her license last year because she fell behind on her payments.

    “Your license is gone, your livelihood’s gone, the care of your patients is gone. How fair is that?” she told local ABC affiliate WFTS last month.

    The degree of enforcement of these laws varies from state to state, but those with such rules nonetheless claim the right to revoke professional licenses. In 2017, The New York Times reported there were “at least 8,700 cases in which licenses were taken away or put at risk of suspension in recent years” due to student loan defaults, “although that tally almost certainly understates the true number.”

    Fourteen states currently assert their authority to rescind occupational licenses over unpaid loans: California, Hawaii, New Mexico, Texas, Louisiana, Mississippi, Georgia, Florida, Arkansas, Minnesota, Tennessee, Massachusetts, Iowa, and South Dakota, Iowa, and South Dakota. Iowa’s laws allow the revocation of all state-issued licenses, like driver’s licenses, while South Dakota can revoke driver’s, hunting, and fishing licenses, along with camping and park permits.

    For many Americans, the opportunity to work in a specialized field was the reason they opted to go into debt in the first place. A bipartisan effort in the US Senate now seeks to prevent states from denying borrowers the ability to work because of delinquent loans.

    Sens. Marco Rubio (R-FL) and Elizabeth Warren (D-MA) recently partnered to introduce the Protecting Job Opportunities for Borrowers (Protecting JOBs) Act (S.609). This is the second time they have proposed this type of legislation. The bill would “prevent states from suspending, revoking or denying state professional licenses solely because borrowers are behind on their federal student loan payments,” according to a press release issued last week by Rubio’s office. The legislation, which would give states two years after its passage to comply, offers protections for driver’s licenses, teacher’s licenses, professional licenses, and “a similar form of licensing to lawful employment in a certain field.”

    “It is wrong to threaten a borrower’s livelihood by rescinding a professional license from those who are struggling to repay student loans, and it deprives hardworking Americans of dignified work,” Rubio said when announcing the legislation.

    State policies revoking or suspending the licenses of delinquent student loan borrowers affect a surprising number of workers, largely because the number of occupations requiring a state-issued license has quadrupled since the 1950s.

    “At the national level, nearly 20 percent of workers are now licensed, up from just 5 percent in the early 1950s,” researchers at the Institute for Justice (IJ) said in a recent report.

    IJ authors analyzed data from 36 states to calculate the burden of these government-issued licenses, estimating they cost Americans two million jobs annually. Further, they reported that “[b]y a conservative measure of lost economic value, licensing may cost the national economy $6 billion. However, a broader and likely more accurate measure suggests the true cost may reach $184 billion or more.”

    To their credit, some states have already moved to do away with these restraints on economic freedom. Forbes reports that last year, “Alaska, Illinois, North Dakota, Virginia, and Washington all eliminated their default suspension laws for job licenses,” and eight more are considering similar legislation this year. The Kentucky legislature just passed a bill to prevent licensing agencies from suspending borrowers’ professional credentials.

    The federal government has played a central role in the student loan debt crisis and exploding costs of higher education. As FEE recently explained, the Higher Education Act of 1965, which put taxpayers on the hook for the loans made by private lending institutions, helped create the higher education bubble, which has seen a 1,600 percent increase in costs since its passage.

    Tuition data from National Center for Education Statistics and inflation data calculated using 1963–1964 tuition and tuition increase at rate of inflation from CPI Inflation Calculator. Graph by Noa Maltzman.

    By the 1980s, student loan defaults were already becoming a problem. In 1990, the Department of Education followed the lead of a handful of states, like Texas and Illinois, which had already started imposing laws to restrict borrowers’ licenses if they fell behind on payments. “Deny professional licenses to defaulters until they take steps to repayment,” the department said in its lengthy guidance entitled “Reducing Student Loans Defaults: A Plan for Action.”

    Nearly 30 years later, student loans continue to weigh down individuals and the economy as a whole. That the federal government issues loans to people, assisting their plunge into debt, and then advocates barring them from working to pay them off only adds insult to injury.

    Carey Wedler

    This article was originally published on FEE.org. Read the original article.

     

     


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  • How Government-Guaranteed Student Loans Killed the American Dream for Millions

    Posted on by Azrael Comment

    In Basic Economics, Thomas Sowell wrote that prices are what tie together the vast network of economic activity among people who are too vastly scattered to know each other. Prices are the regulators of the free market. An object’s value in the free market is not how much it costs to produce, but rather how much a consumer is willing to pay for it.

    Loans are a crucial component of the free market because they allow consumers to borrow large sums of money they normally would not have access to, which are later paid back in installments with interest. If the borrower fails to pay back the loan, the lender can repossess the physical item the loan purchased, such as a house or car.

    Student loans are different. Education is abstract; if they’re not paid back, then there is little recourse for the lender. There is no physical object that can be seized. Student loans did not exist in their present form until the federal government passed the Higher Education Act of 1965, which had taxpayers guaranteeing loans made by private lenders to students. While the program might have had good intentions, it has had unforeseen harmful consequences.

    Millennials are the most educated generation in American history, but many college graduates have tens of thousands of dollars in debt to go along with their degrees. Young Americans had it drilled into their heads during high school (if not earlier) that their best shot—perhaps their only shot—at achieving success in life was to have a college diploma.

    This fueled demand for the higher education business, where existing universities and colleges expanded their academic programs in the arts and humanities to suit students not interested in math and sciences, and it also led to many private universities popping up to meet the demands of students who either could not afford the tuition or could not meet the admission criteria of the existing colleges. In 1980, there were 3,231 higher education institutions in the United States. By 2016, that number increased by more than one-third to 4,360.

    Secured financing of student loans resulted in a surge of students applying for college. This increase in demand was, in turn, met with an increase in price because university administrators would charge more if people were willing to pay it, just as any other business would (though to be fair, student loans do require more administration staff for processing).  According to Forbes, the average price of tuition has increased eight times faster than wages since the 1980s. In 2018, the Federal Reserve estimated that there is currently $1.5 trillion in unpaid student debt. The Institute for College Access and Success estimates that in 2017, 65 percent of recent bachelor’s degree graduates have student loans, and the average is $28,650 per borrower.

    The government’s backing of student loans has caused the price of higher education to artificially rise; the demand would not be so high if college were not a financially viable option for some. Young people have been led to believe that a diploma is the ticket to the American dream, but that’s not the case for many Americans.

    Financially, it makes no sense to take out a $165,000 loan for a master’s degree that leads to a job where the average annual salary is $38,000—yet thousands of young people are making this choice. Only when they graduate do they understand the reality of their situation as they live paycheck-to-paycheck and find it next-to-impossible to save for a home, retirement, or even a rainy-day fund.

    Nor can student loans be discharged by filing for bankruptcy. Prior to 1976, student loans were treated like any other kind of debt with regard to bankruptcy laws, but as defaults increased, the federal government changed the laws.  So student debt will hang above the borrower’s head until the debt is repaid.

    There are two key steps to addressing the student loan crisis. First, there needs to be a major cultural shift away from the belief that college is a one-size-fits-all requirement for success. We are beginning to see this as many young Americans start to realize they can attend a trade school for a fraction of what it would cost for a four-year college and that they can get in-demand jobs with high salaries.

    Second, parents and school systems should stress economic literacy so that young people better understand the concepts of resources, scarcity, and prices. We also need to teach our youth about personal finances, interest, and budgeting so they understand that borrowing a large amount of money that only generates a small level of income is not a sound investment.

    Finally, the current system of student loan financing needs to be reformed. Schools should not be given a blank check, and the government-guaranteed loans should only cover a partial amount of tuition. Schools should also be responsible for directly lending a portion of student loans so that it’s in their financial interest to make sure graduates enter the job market with the skills and requirements needed to get a well-paying job. If a student fails to pay back their loan, then the college or university should also share in the taxpayer’s loss. Only when the demand for higher education decreases will we witness a decrease in its cost.


    Daniel Kowalski

    Daniel Kowalski is an American businessman with interests in the USA and developing markets of Africa.

    This article was originally published on FEE.org. Read the original article.



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  • Canada’s Universal Child Care Program Suggests Elizabeth Warren’s Plan Would Be Disastrous for Children

    Posted on by Azrael Comment

    The state does such a stellar job of nurturing and educating children from preschool through high school, we should expand its role from birth onward. That’s the new proposition unveiled this week by US Senator Elizabeth Warren of Massachusetts. On Tuesday, the Democratic presidential candidate outlined a vast federal program of free and subsidized child care for children from birth until school-entry, including creating a network of government child care centers modeled after the federal Head Start early childhood program. Warren states: “Child care is one of those things we’ve got to do for working parents and we’ve got to do for our children.”

    The popular idea that the state should do things for parents, rather than allowing parents to do things for themselves and their own children, illustrates the pervasiveness of the welfare state mentality. What is framed as helping families instead strips them of their individual power and autonomy, making them more reliant on, and influenced by, government programs.

    Warren’s program is to be financed through a “wealth tax” on the most asset-rich American households and reportedly assures that all child care workers will earn wages that are on par with those of local public school teachers. Like other attempts at government price-setting, however, the economic impact of such a program would inevitably be to drive up prices, reduce variety and competition, and lead to more widespread shortages.

    The intentions of universal, government-funded child care may be good. Supporting children and families is a worthy ambition. But as Nobel Prize-winning economist Milton Friedman warned: “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” We should reject Warren’s proposal both on principle and on consequence.

    The results of similar universal, government child care programs are dismal. In 2005, economists with the National Bureau of Economic Research, including Michael Baker of the University of Toronto, Jonathan Gruber of MIT, and Kevin Milligan of the University of British Columbia, analyzed the effects of Canada’s government-subsidized, universal child care program. Similar to Warren’s proposed child care plan, the Canadian program is available to all families—not just those who are disadvantaged. The researchers discovered that demand for child care increased significantly under the government plan, as more parents abandoned informal child care arrangements with family and friends in favor of regulated child care programs.

    While demand increased, the researchers found that children’s emotional and physical health outcomes declined dramatically with the introduction of government-subsidized, universal child care. Children in the Quebec program experienced increased rates of anxiety and decreased social and motor skills compared to children elsewhere in Canada where this program was not offered. The researchers write:

    We uncover striking evidence that children are worse off in a variety of behavioral and health dimensions, ranging from aggression to motor-social skills to illness. Our analysis also suggests that the new childcare program led to more hostile, less consistent parenting, worse parental health, and lower-quality parental relationships.

    Last fall, these economists published updated findings on their analysis of Canada’s universal child care program. Their recent research revealed similarly alarming results of government-funded child care, including a long-term negative impact of the program. They assert: “We find that the negative effects on non cognitive outcomes persisted to school ages, and also that cohorts with increased child care access had worse health, lower life satisfaction, and higher crime rates later in life.” This early institutionalization of children may have enduring, undesirable consequences.

    While it’s not clear exactly what is causing the negative outcomes of Canada’s universal, government child care program, the research hints at some possibilities. A primary explanation is that the program funneled more children into government-regulated, center-based child care facilities and away from more informal child care arrangements. There was also a drop in parental care, as the opportunity cost of stay-at-home parenthood rose.

    Proponents of universal, government child care programs often tout the expansion of allegedly “high-quality” child care options, suggesting that parental care or other unregulated child care arrangements are subpar. But who determines quality? If Canada’s program is any indication, the government’s definition of “high-quality” child care may, in fact, be harming children.

    In his recent article on the economic causes of current child care shortages and correspondingly high prices, Jeffrey Tucker explains that the key to affordable, accessible daycare for all is to reduce government regulation of child care programs and providers and allow parents to choose the child care setting that best suits them and their child. Let parent preferences drive the market for child care options, not government interventions that squeeze supply, devalue informal caretaking arrangements, and unnecessarily raise the cost of stay-at-home parenthood.

    We should all heed Tucker’s conclusion: “Daycare for all is a great idea. A new government program is the worst possible way to get there.”

    Kerry McDonald


    Kerry McDonald

    Kerry McDonald (@kerry_edu) has a B.A. in Economics from Bowdoin and an M.Ed. in education policy from Harvard. She lives in Cambridge, Mass. with her husband and four never-been-schooled children. Kerry is the author of the forthcoming book, Unschooled: Raising Curious, Well-Educated Children Outside the Conventional Classroom (Chicago Review Press). Follow her writing at Whole Family Learning.

    This article was originally published on FEE.org. Read the original article.



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