TEXT OF COMMENTARY
KAI RYSSDAL: Wall Street's credit crunch has come to the world of student loans.
Back in April, a group of investors agreed to pay $25 billion for the federally chartered student loan company Sallie Mae. Since then, of course, much of the financing for those big leveraged buyouts has dried up.
Today, we learned the potential buyers want to renegotiate their purchase price. Another thing that's weighing on their minds is a bill the president signed today -- it'll pump another $20 billion into federally-backed student aid programs, in part by cutting subsidies to lenders like Sallie Mae.
Commentator Kim Clark says more money for college students is all well and good. But we ought to check the math on how we factor those costs in the first place.
KIM CLARK: You know how kids crack open algebra textbooks and whine "Why do I have to learn formulas? Nobody uses this in the real world!"
Well, listen up: There's a real-world formula gone so bad that it could cost you big bucks. That's the formula the government uses to determine how much your family should pay for college.
It's got a lot of variables, but generally, for this year and next, a family of four living on more than $2,250 a month after taxes is expected to cough up money for college.
How much money? At least 22 cents of every dollar above that budget.
You coastal city dwellers can lift your jaws off the floor. I didn't make a mistake. The government did.
Get this: Back in 1967, the government calculated the budget of a family with a "lower standard of living." And for the last 40 years, they haven't adjusted it for the dramatic increases in expenses like health insurance, child care or retirement savings, or for regional cost-of-living differences.
Consider the Brooklyn family lucky enough to find a decent two-bedroom for $1,200 a month: The federal government's own research shows that even stingy families would need at least another $2,000 for luxuries like food, transportation, utilities, health care and clothes.
And that doesn't allow even a penny for child care, retirement savings -- or God forbid, a movie. Yet the government and colleges will limit grants to that student so that the family pays at least $100 a month for college.
Congress just tried to solve some of this problem by increasing the budget for students who are paying to put themselves through college. Nice try -- but no help for parents. Wouldn't the textbook answer be to fix the formula by basing it on real families' real cost of modern living?
RYSSDAL: Kim Clark covers money for U.S. News and World Report.