Higher Education

By Zachary Koldys

Historical policies related to higher education.

• Higher education wasn’t an issue that was discussed in great detail in the past. The emergence of higher education in the United States was a few schools limited to the most powerful and elite families in the U.S.

• There were very few policies to help pay for higher education. There was the hope credit that was developed as a tax credit to reimburse some of the cost.

Historical policies related to higher education.

• The National Center for Public Policy and Higher Education was established in 1998 as a project of the Higher Education Policy Institute to promote public policies that enhance Americans' opportunities to pursue and achieve high-quality education and training beyond high school. As an independent, nonprofit, nonpartisan organization, the National Center prepared action-oriented analyses of pressing policy issues facing the states and the nation regarding opportunity and achievement in higher education-including two- and four-year, public and private, for-profit and nonprofit institutions.

(Higher Education, 2015)

Current policies related to higher education.

• Health Care and Education Reconciliation Act of 2010– This main educational aspect of this act was the

increase the federal investment in Pell Grants. – The maximum grant is now at $5,730 and the

amount of grants given out has increased by 50% since 2008.

– This act also ended student loan subsidies for bank and moved the $60 billion back to the students.

– (White House Higher Education, 2015)

Current policies related to higher education.

• American Opportunity Credit– The American Opportunity Credit was a modification

of what was previously the Hope Credit available on your federal income tax return.

– The AOC offers, up to, a $2,500 credit on your income tax return. This is dependent on your income as well as the cost of your education.

– The AOC is only available during a students first four years of undergraduate education.

(IRS, 2015)

Current policies related to higher education.

• Pay as You Earn Plan– The Pay as You Earn Plan limits the amount that a

former student will have to pay, per month, on their student loans.

– The amount that you pay can be reduced to accommodate your earnings.

– This allows for a lower monthly payment and after 20 years the remaining balance is forgiven.

(White House Higher Education, 2015)

Current policies related to higher education.

• The Bipartisan Student Loan Deal– This was an act passed that limits the interest rates

allowed on student loans.– The rates on Stafford loans were capped at 3.4% for

the year.– This allows guarantees a future cap of 8.25% in the

future for undergraduate loans.– The cap is 9.5% for graduate loans and 10.5% for plus

loans.(White House Higher Education, 2015)

The impact higher education costs and its resulting policies have had in the U.S.

• The cost of higher education is rising at an unsustainable rate. This is causing the average student to be $26,000 dollars in debt upon graduation.

• These policies at most will pay for about $50,000 dollars over the entire life of a students loans. The average cost of one year of college is $20,234, so they will still have to pay $30,000 on their own.

(White House Higher Education, 2015)

The impact higher education costs and its resulting policies have had in the U.S.

• These policies are not driving at the root of the problem.

• The cost of education is rising at a rate far above inflation and policies that are just dealing with the effect of the root cause aren’t going to be successful in eliminating or even reducing the problem for long.

Who will these policies affect?

• These issues will effect the middle class down through the lower class.

• It will not however be effective more most of the families that fall into that range for a variety of reasons.

What are the possible effects?

• Beneficiaries – Middle class families

who are on the cusp of being able to afford college, but can’t quite do it on their own.

– Middle class families who can afford it, but are able to limit their out of pocket cost and future debt.

• No Benefit– Middle class families

who can afford it without it affecting their daily lifestyle.

– Lower class families that aren’t able to afford the $40,000 debt left over after receiving the maximum benefit from all of the federal plans

In what ways will those populations be effected?

• The populations that are helped by these policies are still coming out of college with an average debt of $26,000, which leading into an average paying job is handicapping the opportunities these students have.

• The populations that aren’t helped by these policies will continue to lack the ability for higher education and the current population that benefits will begin to become part of the population that can’t afford higher education because of the rate at which the cost is increasing.

The benefits and drawbacks of the policies related to the issue.

Supporters• Pell Grants can give a low

income student $5,730 per year.

• Interest rate caps can save $1,500 to $3,000 on the life of their loan.

• Pay as You Earn and when you get to 20 years the rest is forgiven.

• $2,500 dollar credit on your income tax return.

Non-Supporters• Pell Grants only support a

limited segment of the population.

• The $1,500 to $3,000 dollars isn’t much considering the average debt is $26,000. When factoring in their interest over 20 years at the capped rates it is actually a debt of $53,168.90.

continued

The benefits and drawbacks of the policies related to the issue.

Non-Supporters• Pay as You Earn plans are

effective in reducing monthly payments, but the forgiven amount is taxed as income when forgiven in 20 years.

• The principal on those monthly payments is reduced so you are left with a larger premium to be forgiven.

Non-Supporters• The American Opportunity

Credit only increases you benefit over other plans by small amount.

• There are phase out for the credit is $80,000 and $160,000 for someone filing single and jointly respectively.

(White House Higher Education, 2015)

Relationship of policy one to social work.

• Health Care and Education Reconciliation Act of 2010.– Social work is about helping those less fortunate

have the same opportunities as everyone else. This act is a way to get them started on that path.

– By giving out a record amount of Pell Grants at the highest dollar amount to each student on record, it is giving students that wouldn’t have a chance on to start on the path to higher education and a better future.

Relationship of policy two to social work.

• American Opportunity Credit– This is the second phase of that plan to help those

less fortunate afford a higher education.– Pell Grants can’t pay for an entire education, but

with the AOC you can help to reimburse the costs that the students had to pay out of pocket.

– This can total $2,500 a year through a federal income tax credit on only $4,000 of out of pocket costs.

Relationship of policy three to social work.

• Bipartisan Plan– This is the final step that helps those less

fortunate.– This plan caps all interest rates for student loans

so students can’t get stuck paying insurmountable interest rates.

– The interest rate at 8.25% allows students to pay of principal faster and save an average of $1,500 to $3,000 over the course of their loan.

What public policy issue the NASW is currently engaging in an what are they requesting of Congress?

• The National Association of Social Workers are currently involved in seeking potential benefits for education.– They were instrumental in helping get the Health

Care and Education Reconciliation Act of 2010 passed.

– They are seeking loan forgiveness for people in the social work field. It is the Perkins Loan Forgiveness Program.

(NASW, 2015)

Develop or discuss first policy choice with support or criticism.

• Bipartisan Student Loan Deal– It only caps the interest rates from 8.25% to 10.5%

depending on the loan type.– The interest over the life of a 20 year loan at, the

average debt of a college graduate, at least the amount of the debt. That is if it is compounded annually not continuously which is most often the case.

Develop or discuss second policy choice with support or criticism.

• American Opportunity Credit– This is the best current policy as it provides a real

and substantial benefit of up to $2,500.– It provides a $2,000 of the first 100% of your costs

and 25% of the remaining cost up to $500 per year, up to four years of undergraduate education.

– It is only an extension of the previous Hope Credit by increasing the cutoff to $80,000 and $160,000.

Develop or discuss third policy choice with support or criticism.

• Pay as You Earn– The Pay as You Earn plans are deceptively enticing for

graduates struggling with their debt.– It costs you more in interest over the life of your loan

thereby keeping the principal higher.– When the 20 years are up you may end up paying

more in the long run than if you had paid the initial monthly payment.

– As an accountant I have run simulations for the Pay as You Earn plans that show they aren’t beneficial.

Proposed Revision of Policies• Take the money from the Pell Grants and provide

community colleges with increased funding and aid. In personal experience a class at a community college is the same price as a single credit at an state college such as UVM.

• Promote commuter schools and community colleges where infrastructure isn’t the largest expense and stem the rising cost of schools.

• The cost of schools since 1985 has increase almost 500% whereas consumer products have only increase 114%.

(Inflation Data, 2015)

Proposed Revision of Policies

• Keep the American Opportunity Credit as it stands.

• Change the Pay as You Earn plans to allow refinancing at lower interest rates after 10 years. It is beneficial for the borrower and lender. It limits the cost of the borrower and the loss to the lender.

Are these ideas successful and how is that determined?

• The only way to determine if these ideas are successful will be over time.

• We can see based on the limited impact the current policies have so a change is needed to effect the root cause of the issue.

• Trying to subsidize an individuals cost won’t stop the cost of colleges from increasing another 500% in the next 30 years. They system has to change.

• They will be successful if the cost increases rise at a lower rate an plateau until they become affordable once more.

Before doing this assignment, what did you know about the policy issues you researched? Has this assignment helped you better understand the issues or confused the issues further?

Why or why not?• I knew a little bit about these issues before as I deal

with some of them during tax season.• I knew some of the benefits, but also a lot of the

shortcomings that these programs have for so many tax clients.

• It has given me a better understanding of the totality of the programs available and why this problem has to look at the root cause and not the effect of that cause, which is unsustainable college costs.

Evaluate the resources you used as you completed this assignment. What did you find most useful? Why? What was

least useful? Why? What would make this resource better?

• I used a wide variety of resources during this assignment. The whitehouse.gov, was as expected, extremely bias and only showed the positive issues.

• Different websites present facts in different ways and enough viewpoints show you the best representation of the facts. There is never a truth as it is a different thing to different people in issues like this.

• I found the statistical data most useful, as it tends to be less bias. Everything else whether for or against my arguments were extremely bias and difficult to sift through. We need more statistical data and less opinionated data.

Describe your process in this assignment (in literal, concrete terms). How did you get started? What steps did you take to complete this

assignment?

• I started this assignment as I would have a paper. I outlined the critical questions asked in the assignment and made those my talking points.

• By listing factual data in my outline I was able to form a distinct opinion on every issue and develop slides presenting those opinions in an efficient yet effective presentation.

Bibliography

• Dewan, S. (2014, April 15). More Renters Find Affordability Unattainable. Retrieved July 2015, from New Your Times: http://www.nytimes.com/2014/04/15/business/more-renters-find-30-affordability-ratio-unattainable.html?_r=0

• FastFacts. (2015). Retrieved July 2015, from NCES: http://nces.ed.gov/fastfacts/display.asp?id=372 • FastFacts. (2015). Retrieved July 2015, from NCES: https://nces.ed.gov/programs/digest/d99/d99t187.asp • Higher Education. (2015). Retrieved July 2015, from Higher Education: http://www.highereducation.org/ • Inflation Data. (2015). Retrieved July 2015, from Inflation Data:

http://www.inflationdata.com/inflation/inflation articles/Education Inflation.asp • IRS. (2015). Retrieved July 2015, from Internal Revenue Service: http://

www.irs.gov/uac/American-Opportunity-Tax-Credit • National Association of Social Workers. (2015). Retrieved July 2015, from Social Workers:

www.socialworkers.org • Student Aid. (2015). Retrieved July 2015, from Student Aid: https://

studentaid.ed.gov/sa/types/grants-scholarships/pell• White House Higher Education. (2015). Retrieved July 2015, from White House: https://

www.whitehouse.gov/issues/education/higher-education#college-affordability