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To: Barrack Obama, President of the United StatesFrom: Dianna Davydkina, MPA CandidateRE: A Tuition Free Bachelors DegreeDate: October 6, 2016Policy Options BriefProblem: Student loans are preventing Americans from obtaining the American Dream.Our nation is facing a vast economical problem of growing student loan debt and increasing student loan default rates. Every year, more and more students are burdened by student loans with limited career opportunities and unfulfilled dreams. Many individuals do not pursue a college education in an attempt to avoid getting into student loan debt without a guaranteed career opportunity. The government currently attempts to help cover the cost of education but these attempts fall short in creating a true tuition free bachelors degree. Although federal grants help pay for the cost of education for individuals with a low income and the upper class is able to afford a college education, the middle class falls into a situation where they do not qualify for these federal grants, nor can they pay for a college education without taking out student debt. The problem has gotten out of control and a serious burden on millions of American citizens. According to stats, “More than 41 million Americans collectively owe more than $1.2 trillion in student loan debt,” (CFPB). The problem with student loan debt in this country is always a major topic of discussion. In fall of 2016, more than 20.5 million students are expected to be enrolled in American institutions. This shows an increase of almost 5.2 million in enrollment since the year 2000 (Nation Center of Educational Statistics). This increase in enrolment has come with an increase in student loan debt. It comes to a point where an individual takes out student loans to get an education to get a good job and then counts on the job to repay their student loans. The problem being is that a obtaining a career is not guaranteed.The Current State: In America the goal of “college-for-all” has been pursued but many things have an influence on accomplishing this goal. We live in a society where tuition keeps rising and grants and subsidies are extremely difficult to obtain yet alone qualify for. Since many cannot obtain grants due to various reasons such as a high family income, this leads students to acquire private and Federal student loans.?America experienced a shift from grant to loan processing which is seen amongst today’s students (Choi 2014). With extensions to the Pell Grant system, as well as the reforms of the student loan program in 2010 ( HYPERLINK "" \l "ref-18" \t "_blank" Credit Card Act 2009), future generations of college students may see less of a pressure toward high educational debt. This lessening of pressures is not guaranteed and the problem of rising college tuition remains unresolved (Dwyer, McCloud & Randy 2012). Student loan debt is the second largest class of consumer debt right behind mortgages (CFPB). Debt affects not only the students who are taking out these loans but citizens in this country as a whole. According to the 2015 report from the Consumer Financial Protection Bureau, on student loan servicing, the average debt burden shouldered by an individual borrower grew by nearly 60 percent, rising more than $18,000 in 2007 to nearly $30,000 in the third quarter of 2015 (CFPB). Since debt is a liability it can potentially limit students future options and outcomes, on almost everything, as it is a burden on financial resources of the individual. These resources can instead be used for other purposes such as raising their own families, and affording what was once the American dream. There are many publications that surface this area of concern in regards to debts. A consideration of debt becomes increasingly important for understanding stratification in America as more people look to debt as a strategy for attaining education, housing and other life goals ( HYPERLINK "" \l "ref-25" \t "_blank" Dwyer 2009). An effect on mental health:An individual’s attitude towards debt and in particularity student debt can be can pave the way of not wanting to receive an education. In a study done back in 2004 that analyzed the relationship between attitudes toward debt and mental health in university undergraduates. There is evidence that attitudes to debt are the reason behind why some chose to not attend college. It is student loans that discourage people from attending colleges. This study talked about how these attitudes have an impact on the mental health of those students who are enrolled (Cooke, Barkham, Audin and Davy 2004). It was found that attitudes towards debt were in fact related to mental health levels. This study does not even reference that student unemployment can also add on stress factors causing even more of a decline in mental health. Since students have these loans for many not being employed is not an option. It was also found that students who work join fewer university societies. Not being involved in the university environment will then have a negative impact on the students’ experience of that university (Cooke et al., 2004).The problem – A clear burden on our Nation:Implementing this policy issue will help alleviate what has been a strong financial impact on the economic system of the United States. It affects both private institutions such as banks and the government due to state of loans that are originated. Most student loans come with an interest rate and all debts have to be repaid. When individuals cannot afford to repay their loans and fall behind on their bills, this leads to a bigger financial burden. According to the Federal Reserve Bank of New York, the student loan delinquency rate is now at 11.6% (NY Federal Reserve Bank Press Briefing). This means that 11.6% of all individuals who have student loan debt fall behind on their payments. In comparison to other forms of debt, mortgages only have a 4.55% delinquency rate (FRSL) and credit cards debt only has a delinquency rate of 2.2% (FRSL) It is clear that student loans become a much larger financial burden than mortgages and credit cards. In fact the default rate on student loans is almost double than that of the default rate on mortgages. The impact that this has is an ongoing increase of debt among individuals within the nation. Having a policy change in this country and allowing all American citizens the right to a free four-year bachelors degree in both public college and universities will remedy the second largest class of consumer debt burden. There are other countries such as Germany, France and China that use tax money to fund free University for their citizens. One solution that is open for debate is imposing a tax to help pay for a four year degree. This is something that Bernie Sanders referenced as he campaigned to be the next president of this country. Outlined below are several solutions to both reduce the student loan debt on United States citizens and work for creating a tuition free world for future generations to come. Solution 1: Increase taxes to subsidize all education up to a bachelor’s degreeIf we are able to increase taxes on all individuals in our nation, we would be able to pay for a college education for everyone. A few dollars from everyone’s paycheck would mean that individuals can receive a college education without being burdened by student loan debt. Tax credits can be created to individuals who successfully complete a college degree program. This is a very fast and simple solution to create a tuition free college degree. Many European countries such as Germany already have free college education by passion the cost onto the taxpayer. This creates a system when individuals all collectively fund a system that improves everyone’s life. An educated individual is worth more in terms of the wealth he or she can create for a country. According to the Organization for economic co-operation and development, the approximate current tax wedge in the United States is 31.5%. In Germany the tax is approximately 49.3% (OECD). The increased taxes allows Germany to provide many more social services and a tuition free higher education is one of themPros: There are several positive things that come out of paying more taxes in exchange for an additional social service such as a free public education. First of all, this would mean less debt and held by the citizens of this nation. It would also mean a smarter more educated nation that can accomplish more. Since citizens would have less debt and hold a higher education in the case of the individuals who can’t afford to obtain a college degree, more Americans would be closer to achieving the American dream. Cons:Admittedly, there are several cons that go along with this. For starters, those who already have a college degree and still owe debt would continue to pay it. These individuals would now be burdened by smaller pay checks due to an increases in taxes. This impact would only last for several generations as younger generations would not have to take out student loans to pay back student loans. A higher tax rate could also cause citizens and business to defect to other countries which would have a lower tax rate and could result in a potential loss in GDP. Many individuals could be against such a tax rate increase to justify this program. Solution 2: Create laws mandating states to set up programs to fund their public institutionsThe economy runs at both a federal and a State level. Having Federal laws that mandate every state to set up revenue generating programs to fund their own public universities is a strong solution. Leaving the responsibility on the states end alleviates most federal involvement in maintaining a federal budget. Every state would be urged to properly manage its budget to pay for its citizen’s education. The revenue generating programs could come from city tax increases, municipal charges and other revenue streams. This would allow each state to manage its highest earning revenue streams and allocate funds properly without government involvement. The state would benefit by having more individuals ready to take on more jobs and thus this would contribute to the nation as a whole. There already exists a system like this. CUNY is a public university funded by the city of New York and already provided reduced cost tuition to its citizens with a budget of $3 billion annually (CUNY office of budget and finance). Not every state has a city or state funded public university system. Further investment could help offset more costs for its citizens. Pros:There are several pros to state funded public institutions. First of all the system would revolve around a budget that can be adjusted on a yearly basis by using accurate predictions of future enrolled members. This would allow the cities to accurate estimate their operating budgets. Having a smaller federal impact would help reduce overheard pressure to provide these programs.Cons:There are also several cons. Not every state would have an identical system. Poor budget management could result in a bad financial situation that could require a bailout if the state takes on debt. Other negatives include the differences in quality of education among different states depending on how much money is available in the budget. Solution 3: Allow all to qualify for grants when attending a public university. By removing income limitation on federal grants such as the Pell grant, every unities states citizen could receive money to help cover the majority of the costs of education. Currently the Pell program is a grant and individuals who receive this grant are recipients based on financial need. The change that I propose is to make this an actual program where everyone can qualify. Currently if the individual’s parents make less than $49,000 combines then the pupil automatically qualifies for aid. If the income is higher than that than more factors come in to play (Dept. of Ed). This will eliminate income as a requirement. Part of the proposal I suggest is that graduation and a 3.0 GPA is a requirement to not be held liable for the money awarded to the individual. This will create an incentive to finish the program and get the most out of it by studying. Pros:Evidently, there are several pros that come into effect. Everyone will have access to funding for school regardless of income. This means that the middle class which makes too much to qualify for the current program will be able to receive assistance. If the assistance does not cover the whole tuition amount, a smaller loan can be taken out. This will be less off putting and the majority of the tuition balance will be covered. Cons:The cons are also evident. More individuals including those that don’t need assistance will get assistance. The money will have to come from somewhere to pay for it and that could mean a burden on cities and states during the budgeting process. This program could mean a reduction of funds for other programs. Another con is that if the wealthy also qualify for this program, would that seem fair? The thought is that if the upper class can afford college then why should government subsidize it? Solution 4: Invest in states while mandating that states reinvest the money into their education systems while providing more subsidies to colleges who reduce or eliminate their tuition fees. A fourth solution calls for federal investments into state programs so that the state can reinvest their funds into programs like full subsidies for colleges. The fact of the matter is that our country already invests millions into other programs such as offshore oil and we need to start investing in education. It is proven that “education is the key to American competiveness,” (American Progress). This means that in order for us as a country to sustain growth, our citizens need to be educated. If we do not invest in our education then what are we really investing in? It is not our future. If we can invest in states to create their own fully funded college systems and these states can take that money and reinvest it in other colleges who are not part of this system, we can both eliminate and reduce student loan debt depending on the college that the individual goes to. America will then help again by recognizing and awarding colleges that reduce or eliminate student debt altogether. Pros:The positive notes of this plan is that American will be reinvesting in itself by funding educational programs where it will obtain benefit from a smarter working class population. This will allow America to stay as a global superpower and be competitive on multiple frontiers. By making the smart investments that factor in future growth, education alongside student debt reduction will help aid development. Cons:As with all other cons, money is a factor and where it comes from is the question. My suggestion is to take from budgets that are not feasible to sustain such as resources that are not renewable. These resources can be fossil fuels and invest in education. Through education, there is a chance that other creations or investments for alternative energy can occur. Another con is trusting states to properly reinvest the money handed to them. Every state has their own budgeting concerns and insuring proper allocation of funds would be a challenge. Is there a dream solution?The thought of a dream solution is difficult to grasp. It is hard to account for something where current student loan debt is repaid, future education is free and all at minimum expense to the public in terms of taxes. The solutions I have recommended offer a strong starting point to aid future generations to come. We will not get there overnight and so Mr. President, I urge you to side with one of these solutions in the fight for a long term solution of a free bachelor’s degree. Thank you, Dianna DavydkinaWorks CitedBaum, Sandy, and Judith Scott-Clayton. "Redesigning the Pell Grant Program for the Twenty-First Century." (2013): n. pag. Print."Budget & Finance."?The City University of New York Budget Finance Comments. N.p., n.d. Web. 07 Oct. 2016.By Diana Epstein | Tuesday, September 6, 2011. "Investing in Education Powers U.S. Competitiveness."?Name. N.p., n.d. Web. 07 Oct. 2016."Delinquency Rate on Credit Card Loans, All Commercial Banks."?- FRED. DRCCLACBS, 23 Aug. 16. Web. 05 Oct. 2016."Delinquency Rate on Single-Family Residential Mortgages, Booked in Domestic Offices, All Commercial Banks."?- FRED. DRSFRMACBS, 23 Aug. 16. Web. 04 Oct. 2016.Of Ed, Dept. "THE EFC FORMULA, 2015–2016."?THE EFC FORMULA, 2015–2016. Dept Of Educatin, n.d. Web.CHOI, Yeseul. "Debt and College Students’ Life Transitions: The Effect of Educational Debt on Career Choice in America." (n.d.): n. pag. Web. 7 Sept. 2016.Christie, Hazel, Moira Munro, and Heidi Rettig. "Making Ends Meet: Student Incomes and Debt."?Studies in Higher Education?26.3 (2001): 363-83. Web.Cooke, Richard, Michael Barkham, Kerry Audin, Margaret Bradley, and John Davy. "Student Debt and Its Relation to Student Mental Health."?Journal of Further and Higher Education?28.1 (2004): 53-66. Web."Digest on Educational Statistics." National Center for Educational Statistics, n.d. Web. Dwyer, R. E., L. Mccloud, and R. Hodson. "Debt and Graduation from American Universities."?Social Forces?90.4 (2012): 1133-155. Web."Federal Reserve Bank of New York: Outsourcing Financial Services Activities."?Bankrechtstag 2000 Funktionsauslagerung (Outsourcing) Bei Kreditinstituten?(n.d.): n. pag.?Student Loan Borrowing and Repayment Trends, 2015. Federal Reserve Bank Of NY, 16 Apr. 2015. Web. Protection Bureau, Consumer Financial. "Student Loan Servicing Analysis of Public Input and Recommendations for Reform."?. CFPB, Sept. 2015. Web. 7 Sept. 2016. 2015, September. (n.d.): n. pag. Web. ................
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