OK! So if part 1 wasn’t gloomy enough for you – here’s part 2! Though I think it’s possible to be optimistic about the ways in which everything will play out if we go over the fiscal cliff, it’s a stretch.
So let’s look at the Domino effect of the fiscal cliff on student loans:
Change #1: End subsidized interest rates.
Effects? 1.) Federal loans will double from 3.4% to 6.8% interest rates. Fiscally aware students will avoid higher education, despite its potential to increase their life-long salary. They will either wait until they can better afford school, or they will never seek a post-secondary degree. They will work wherever they can with a High School degree or a GED (as I mentioned in my last post – those jobs are few and far between, but that is NOT because students are lacking – it’s because we’re still educating kids as if they’re entering the 1950’s job market, instead of educating them for the technology based jobs of 21st century). 2.) Fiscally aloof or less responsible students (i.e. – most 17 and 18 year olds) will accept the higher interest rates and unknowingly dig themselves into debt that will very likely exceed their income upon graduation. 3.) One effect that is arguably a good result – the fiscal cliff will probably prevent enough students from going to college that the “college degree” will become a rarity again and the college-graduate job guarantee will return. Nevermind that the students who will be cut out from this benefit will be almost exclusively low-income students (which is largely minority students).
Change #2: Make graduate and professional students ineligible for Federal loans. Effects? 1.) There will be radically fewer graduate and professional students. Since they will have to seek private loans, students with less than perfect credit will be rejected wholesale. Students who do qualify for private loans will have to wrangle with a prohibitively expensive 12+% interest rate. Possible benefit? You can definitely see this as a correction to the “over-education” of society – where people spend so long getting the necessary degrees, they aren’t actually able to function outside of academia. But as with all levels of opportunity, we shouldn’t settle for a world in which achievement is based your ability to pay steep prices – that’s an aristocracy. We’re supposed to be a meritocracy, where wealth doesn’t determine success or ability. 2.) At public universities, there will be fewer Teaching Assistants, which will result in diminishing the quality of undergraduate studies as professors become overburdened. Graduate and professional students take on a significant amount of the teaching burden at many universities, so that professors can focus on their research and production duties. 3.) Professors will no longer have the near infinite resource of graduate students to help them with advising, teaching and grading. Since almost all Universities prioritize teaching duties over research duties (at least officially), the research conducted in universities will plummet. Possible benefit? One can argue that the quality of learning at the university will go up, if the professors instead of students are required to actively teach on a more regular basis. We’ve all heard some kind of story about the T.A. being lazy, incompetent, or difficult to understand – so you could consider this a boost. But I think the following negative effects counter-act many of these benefits. 4.) With fewer fruits blooming in the Universities’ research sectors, the organizations and alumni who had previously donated to fund that research will more than likely withdraw their funding, and projects that are important for the local and academic community will be abandoned. 5.) Universities will suffer funding cuts as their research dwindles which will force the university to re-allocate its resources, which will, in turn, diminish the university programs for its students as well as its contributions to the community. 6.) Non-academic employees of the university may lose their jobs, as a result of the need to cut non-academic programs. Possible Benefits? Given that Administrative jobs have quadrupled in the last 10 years (weirdly congruent to the rising tuition costs) I think it’s fair to say that many of these jobs are in excess, and that they should be done away with. However, it’s not like those employees have a booming job market to enter, if they’re laid off in January, so maybe now is not the right time to cut off the dead weight. 7.) The general loss of vitality that comes from cutting integral programs and reallocating resources – extra-curricular activities, sports programs, community outreach – these are things that will be lost due to any kind of funding cuts, because they are the most “superfluous” parts of the post-secondary education budget.
Change #2A: By making graduate and professional students ineligible for Federal aid, eliminate graduate and professional student access to Federal Loan Forgiveness Programs. Effects? 1.) Fewer and fewer qualified candidates will enter the public and non-profit sectors. 2.) Graduate and professional students will seek out well-paid jobs (read: private sector jobs), that will allow them to pay back their student loans, at 12%, in just 10 years. 3.) This newly graduated, ambitious, and well-qualified sector of society will not work in the areas that need their talents the most. These students will be genuinely unable to pay back their student debt, if they enter the public sector. Therefore, the most highly qualified applicants will avoid these jobs, and these jobs will instead go unfilled or else will be filled by under-qualified applicants.
Sorry to be so gloom-and-doom – I honestly believe that none of this will happen, but it’s good to know what’s at stake, at least. I don’t hear very much about how the cliff will affect things other than “it could send us back into a recession”.
I’ll leave you with this sort-of-upbeat thought: The whole world is talking about the “fiscal cliff” with the same fervor, fear, and bias that they had leading up to the presidential election. It’s all over the news – if we go over the fiscal cliff, the world as we know it will end. Of course, that’s hyperbolic, but can we all just acknowledge the coincidental timing of the fiscal cliff and the Mayan apocalypse?? You know, since 12/23/2012 is the last day in December that Congress & the White House will be doing any work on this deal, as a result of holidays…?