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Straight Story: Obama's budget plan
Economics editor Chris Farrell
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About the author
Christopher Farrell is economics editor of Marketplace Money, a nationally syndicated one-hour weekly personal finance show produced by American Public Media.
Pay attention to the private student loan comment in this article. Although some students may use private student loans for the remainder of undergraduate expenses, these are also used for living expenses in professional graduate programs, such as law and business. These loans may also be a major source of funds for private technical programs, such as culinary school. In the first category, the ROI for the person getting the loan is often very high; this is a risk that person takes as part of their career development. In the second category, private technical programs provide ample opportunity for fraud and, in some cases, are downright scams. These become financial wastelands because the students can be “sub-prime†– they have academic track records that indicate that they are unlikely to finish the program, and therefore reap the rewards. Alternately, graduates are going into lower-paying fields that would never yield the income required to pay the loans. The more financially prudent decisions for students considering private technical programs is for them to attend community colleges that provide cost-effective, accredited training.
This issue is right along the same lines as the housing crisis: don’t underwrite programs further enable people to take more academic and financial risk than their income, future earnings, and academic performance allow them to, or they will default.
The policy now being put into place will have little general effect on the whole macroeconomy because the only place to take money from is a place where it is already being used and that place will suffer just as much as the new place benefits. In Keynesian terms, the multiplier effect is exactly equalled and opposed by a negative multiplier on where the money came from.
The answer to the crisis is to provide more opportunity, by shifting the taxes onto land values, the sole non-production resource that is being speculated in so that less is presently available for use. By making it not worthwhile to hold onto and not use, this tax will stimulate the economy by the land becomming more cheaply available as a direct result. For story (paper) contact me.
Listening to the discussion about Pell grants and other ways of funding college, I am reminded, as part time faculty at our local community college, that not all individuals are cut out for, or prepared for college, even if they find the money to attend right out of high school.
Many students are woefully undereducated (reading, writing, attendance practices) when they enter and soon find themselves trying to keep their academic heads above water.
As part of the "Straight Story" please gently remind parents, and students that the optimal way to allocate scarce college resources may be to NOT attend when the student is not quite prepared.
