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Student Loan Reform, at last!

3/27/2010

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On Thursday the NYT reported a successful overhaul of the current Federal Student Loan Program. Though the reform has garnered little media attention with Obama's health care reform still drawing criticism, praise and close analysis from media outlets, it is an encouraging piece of hard-won education reform.  Republican lawmakers again tried to smear democratic progress as a "Washington takeover" of the student loan industry, though the existing program is already administered by the government and wrapped up in bureaucracy. The legislation was attached to the health care reform bill and sets out the following gains for US taxpayers:
  • $61 billion in tax-payer savings over 10 years, with $40 b. reinvested in in higher education
  • Automatic increases in Pell Grants, tied to inflation (a $36 b. investment over 10 years)
  • Reduce the minimum share of income required in student loan remission to 10% from 15%
  • Extend loan forgiveness after 20 years of repayment, down from 25
These gains are realized by expanding the direct lending program in lieu of the Federal Family Education Loan program.  Under the FFEL program, the government lent money to commercial banks to initiate and service loans.  It then subsidized a student's financial burden by paying the difference between the interest rate extended to the student (say 3%), and the maximum interest rate set by congress loan (say 7%).  Further, the government guaranteed the loans (the private banks were not extending their own capital, after all) in the event a student defaulted, creating a risk-free way for banks to pad their bottom lines.  Tight bankruptcy regulations strictly prevent student loans from being dismissed in bankruptcy proceedings, unless you can prove that repaying the debt will pose an undue financial hardship on you. 

In the new plan private banks will continue to make money by servicing loans, though they will not be making loans with government money.  
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Priceless, I

3/23/2010

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In preparation for graduate school I plan to read a few new books and review influential texts I discovered as an undergraduate.  Currently, I am reading a jarring critique of cost-benefit analysis, a mainstay of public policy decision making and as readily influenced by political ideology as qualitative research. 
Priceless: On Knowing the Price of Everything and the Value of Nothing
, demonstrates that current approaches to quantify the cost of some public policies, such as environmental protection, are easier to describe in finite dollar terms than its benefits.  When costs can be carefully estimated, but benefits such as human health and happiness-- two important advantages of a robust environmental policy-- cannot be similarly quantified, the argument against environmental protections is strengthened. Often cost/benefit studies never attempt to impute the value of these benefits, and in effect, weaken the business case for regulation.  How do we calculate the value of a healthy environment so that it is both relevant to policy makers and reflective of its true worth?  I am going to continue reading in hopes that Ackerman and Heinzerling have good suggestions.
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Historic Healthcare Reform is Passed

3/22/2010

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Today is a historic day for the USA-- it marks the end of a year-long march toward achieving greater equity in healthcare; today is a historic day for me-- it makes the beginning of my website and comments contained here, in my blog. 
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