The costs of an undergraduate education in the U.S.

Posted on April 2, 2012 by thefactfile

In last Wednesday’s post, we discussed the recent introduction in the House of Representatives of the Student Loan Forgiveness Act of 2012 by Hansen Clarke (D-MI); a bill that, if enacted, would provide student loan forgiveness, caps on interest rates on Federal student loans, and refinancing opportunities for private borrowers. To provide some background on where this bill came from and why student loan forgiveness should be considered despite the current fiscal environment, we wanted to use today’s post to look at the historical data showing the growing cost of an undergraduate education in the United States.

According to the U.S. Department of Education’s Digest of Education Statistics, the annual cost in 2008-2009 (including tuition, room and board) was $12,804 at public institutions and $32,184 at private institutions. In comparison, in 1980-81, a full-time undergraduate student paid on average (and adjusted to current dollars) $2,372 at public institutions and $5,470 at private institutions. And as the following chart makes clear, the cost of an undergraduate education has increased in every year in between, with no sign of letting up:

This significant rise in the costs of education wouldn’t be such a big problem if median incomes were also rising. But as we showed in a previous post, income levels have been remarkably stable since 1967, with the exception of the richest quintile of the population (see the charts below). For many college grads (e.g., the majority who do not end up in this richest quintile), this means that they exit college facing significant student loan debt and, for those lucky enough to find a job (let alone one in their field or requiring an advanced degree), a low median starting salary that makes it challenging to pay this debt back. (According to a 2011 study by the John J. Heldrich Center for Workforce Development at Rutgers University, median starting salaries for students graduating from four year universities fell from $30,000 in the period 2006-2008 to $27,000 in 2009-2010).

In short, it is this interplay between growing annual costs for college education and stagnant income growth that has led to the numerous proposals in Congress for some form of student loan forgiveness. And for the growing number of recent grads who are behind in debt and unable to do much about it as a result of on low starting salaries, it is certainly an idea that should be given serious consideration.

The Student Loan Forgiveness Act of 2012

Posted on March 28, 2012 by thefactfile

The Student Loan Forgiveness of 2012

The Student Loan Forgiveness Act of 2012 was introduced in the House of Representatives by Representative Hansen Clarke (D-MI) on March 8, 2012 and referred to the Committees on Education and the Workforce , Foreign Affairs and Armed Services. Each of these committees will be holding public hearings and their contact information is available at the end of this post for those interested in obtaining more information directly from them.

The stated purpose of The Student Loan Forgiveness Act of 2012 is “to increase purchasing power, strengthen economic recovery, and restore fairness in financing higher education in the United States through student loan forgiveness, caps on interest rates on Federal student loans, and refinancing opportunities for private borrowers, and for other purposes.” There are several provisions of this act and below, we give an overview of those provisions along with examples of how they would work.

The 10/10 Loan Repayment Plan

This provision, which would be open to all eligible borrowers, creates a new income-sensitive repayment plan that sets annual payment limits at 10% of the amount by which a person’s income exceeds 150 percent of the poverty level. For example, using the federal poverty guidelines for the 48 contiguous states and the District of Columbia, the annual payment limit for a single person with adjusted gross income (AGI) of $35,000 would be calculated as follows:

$35,000 (AGI) – ($11,170 (the poverty level) x 150% (poverty level multiplier)) = $18,245 (the amount by which AGI exceeds 150% of the poverty level). That amount, $18,245, is then multiplied by 10% and divided by 12 to get to the monthly payment, which in this case would be $152.04.

To be eligible for this program, a borrower would have to be willing to allow the holder of the loan to review their income annually and agree to have payments automatically debited from a bank account.

Loan Forgiveness under the 10/10 and Other Repayment Plans

A second provision of The Student Loan Forgiveness Act of 2012 provides for three different forgiveness options, which we describe in more detail below by class of borrower.

Existing Borrowers

Existing borrowers who have already made 120 payments that meet the minimum requirements of the 10/10 Repayment Plan during the ten years prior to the enactment of The Student Loan Forgiveness Act of 2012 would have their entire remaining balance cancelled (this is similar to existing rules for federal employees—although that program lacks the retroactive portion).

Existing borrowers who have less than 120 payments credited to their account meeting the minimum requirements of the 10/10 Repayment Plan would have their outstanding loan balance forgiven once those 120 payments are made.

New Borrowers

For new borrowers, which the Act defines as those who take a new Federal Direct Loan after the enactment of The Student Loan Forgiveness Act of 2012, the 10/10 Repayment Plan will be available; however, the amount of forgiveness cannot exceed $45,520. Although there is a cap on forgiveness for new borrowers, interest rates on these loans are also capped at 3.4%.

Other Provisions

The existing repayment time for public service employees (mentioned above) is reduced to 60 months from the current 120 months, and public service employees are granted the same retroactive rights as other borrowers under The Student Loan Forgiveness Act of 2012. That means that existing public service employees who have made 60 payments that comply with the 10/10 repayment plan will have their outstanding loan balances forgiven.

Additionally, borrowers with private education loans would be able to refinance many of those loans as new Federal Direct Loans and thus be eligible to participate in the provisions of The Student Loan Forgiveness Act of 2012 as “new borrowers.”

In a previous post, we discussed the two sides of this debate and, while we do not usually come down on one side or the other, we do think that Representative Clarke has constructed a bill that will accomplish the goals it sets out to meet while addressing critics of outright forgiveness like Justin Wolfers. The Student Loan Forgiveness Act of 2012 requires borrowers to make the same number of payments required since the inception of the Student Loan program: 120 payments over ten years. Thus, there is a level of responsibility for the borrower. Under this plan, some people, such as those with low debt, high income, or a combination of the two, will easily pay off their entire loan in those ten years. Others with higher debt or lower incomes will not. However, no matter what the case may be, either immediately for those who have already paid or within ten years of graduation for others, they will know that their student loans will be paid in full and the money previously dedicated to those payments can be used as the act states to “start businesses, invest, or buy homes.”

The Committee on Education and the Workforce

Phone: 202-225-4527 Fax: 202-225-9571

The Committee on Foreign Affairs

Phone: 202-225-5021 Fax: 202-226-7629

The Committee on Armed Services

Phone: 202-225-4151 Fax: 202-225-0858

The Affordable Care Act Celebrates its Second Birthday at The Supreme Court

Posted on March 26, 2012 by thefactfile

Last week, the Affordable Care Act (ACA) celebrated its second anniversary, and today, the Supreme Court will take up arguments brought by states questioning whether the Federal Government has the right to require individuals to purchase health insurance policies. The key issue is whether this mandate is justified by the Commerce Clause of the Constitution, as the Administration argues.

Ironically, the individual mandate itself is an idea that stems from a 1989 report from the conservative Heritage Foundation. In that report, Stuart Butler (Heritage’s health care expert at the time) argued that under the “Heritage Plan” a mandate was necessary because “[s]ociety does feel a moral obligation to insure that its citizens do not suffer from the unavailability of health care. But on the other hand, each household has the obligation, to the extent it is able, to avoid placing demands on society by protecting itself… A mandate on households certainly would force those with adequate means to obtain insurance protection.” This was, of course, a central element of Mitt Romney’s Massachusetts plan as well as his 2008 defense of this plan; in the 2008 ABC News debate, Governor Romney stated, “Here’s my view: If somebody – if somebody can afford insurance and decides not to buy it, and then they get sick, they ought to pay their own way, as opposed to expect the government to pay their way….And that’s an American principle. That’s a principle of personal responsibility.”

To assist with the complexity of this issue, we have posted a series of videos below from the Alliance for Health Care Reform. The Alliance for Health Care Reform, is a nonpartisan, nonprofit group, that according to its mission statement, “does not lobby or take positions on legislation.” In their statement accompanying the release of the videos to coincide with the second anniversary of the Affordable Care Act, the Alliance for Health Care Reform wrote something near and dear to TheFactFile.com (emphasis added), “Although the Affordable Care Act is two years old today, it’s obvious that millions of Americans don’t understand it. This is a bipartisan problem. So, believing that people should argue about policy but not facts, [The Alliance for Health Care Reform created] videos to help…explain…how the law affects” young adults, small employers, people on Medicare or Medicaid, uninsured with pre-existing conditions and primary care providers. TheFactFile.com found these videos extremely informative and we hope our readers will as well.

YOUNG ADULTS (3:01) featuring Sara Collins, vice president for the Affordable Health Insurance Program at The Commonwealth Fund

SMALL EMPLOYERS (3:40)  featuring Terry Gardiner, vice president for policy and strategy at Small Business Majority

PEOPLE ON MEDICARE (3:04)  featuring John Rother, president of the National Coalition on Health Care

PEOPLE ON MEDICAID (2:44)   featuring Diane Rowland, executive vice president of the Kaiser Family Foundation

UNINSURED PEOPLE WITH PRE-EXISTING CONDITIONS (2:44)   featuring Deborah Chollet, senior fellow at Mathematica Policy Research

PRIMARY CARE PROVIDERS (3:02) featuring Kevin Grumbach, MD, professor and chair of the Dept. of Family and Community Medicine at the Univ. of California, San Francisco

The 2012 Election: Propublica Explains Super PACs in Song

Posted on March 23, 2012 by thefactfile

Since the 2010 Supreme Court ruling on Citizens United v. Federal Election Commission, Super PACs have gone from nonexistent entities to important players in the 2012 presidential election. According to the most recent numbers gathered by the Washington Post, revenues/expenditures from Super PACs on behalf of their desired candidate make up a substantial proportion of the candidates’ total revenues/expenditures. For example, Super PACs have brought in more than one third ($43.2 million out of a total of 118.6 million) of Romney’s total campaign funds, while accounting for just under one third ($32.7 million out of a total of $100.8 million) of the total funds spent on his campaign so far.

While the news media (including most vocally Stephen Colbert with the Colbert Super PAC) have spent an extraordinary amount of time to explain what a Super PAC is, there is still widespread misunderstanding of both the origins of Super PACs and how they have changed the dynamics of our democratic electoral process. As a remedy to this knowledge gap, Propublica and Explainer Music recently put together an easy to understand music video that we wanted to alert our readers to. Have a look:

Campaign Spending in Election 2012: Cost Per Delegate, March 22 Update

Posted on March 22, 2012 by thefactfile

The results of the Illinois Republican primary are in and, once again, Mitt Romney has reclaimed his on-again off-again place as the “overwhelming, indisputable and probably uncatchable favorite.” While we won’t dip our toes into the question of Romney’s inevitability—based on the ups and downs of the race so far, we wouldn’t be surprised if Romney’s momentum waned once again—we have been interested in the question of how money has been influencing the race. Specifically: how much has each active candidate spent per delegate earned?

Since we started following the data on the amount of money spent per delegate by each of the candidates, the trend has been pretty steady: Ron Paul gets the least bang for his buck (as of March 14, he spent $683,333 per delegate) while Rick Santorum gets by far the most from his relatively meager resources ($30,279 per delegate). But how do things stack up following Romney’s win in Illinois?

The following charts compare the four GOP candidates on the total amount of money raised/spent (accessed 3/22/12). These figures include revenues/expenditures by the campaigns and the Super PACs that support them. The delegate count comes from here (accessed 3/22/12).

Candidate	Money Raised	Money Spent	Delegates	Overall Cost per Delegate
Newt Gingrich	$39,900,000	$35,900,000	135	$265,926
Ron Paul	$38,300,000	$36,500,000	50	$730,000
Mitt Romney	$118,600,000	$100,800,000	563	$179,041
Rick Santorum	$21,600,000	$18,600,000	263	$70,722

As with our past updates, Ron Paul once again dominates all of the candidates for spending the most while getting the least, with each of his 50 delegates costing around $730,000. At the other extreme, Santorum is still getting the most out of his money, spending only $70,722 for each of his 263 delegates. However, it should be noted that this is more than double where Santorum was at one week ago, when he was at $30,279 per candidate.

We’ll continue monitoring this race for #1, and, as always, we’re interested in what you have to say: Join the discussion below or let us know via Facebook or Twitter.

Fact Checking the Fact Checkers Redux: The Case of A singular Woman vs. The Road We’ve Traveled

Posted on March 21, 2012 by thefactfile

The recent release of the Tom Hanks-narrated documentary about President Obama, “The Road We’ve Traveled,” has led to a reopening of the controversy that began with the publication of “A Singular Woman”—Janny Scott’s biography of President Obama’s mother, Stanley Anne Dunham. At issue is whether President Obama’s recollection of the last year of his mother’s life or Ms. Scott’s account is correct.

In President Obama’s recollection, his mother “died of cancer while fighting with her insurance company at the end of her life.” In contrast, Ms. Scott writes that the dispute was not with a health insurer, but rather with Cigna over disability insurance. The Washington Post’s Fact Checker accepted Ms. Scott’s account without question and gave President Obama and the documentary “Three Pinocchios.” This is not something we would have done at TheFactFile.com, especially given some of what we have read about Ms. Scott’s other reporting and given that even in Ms. Scott’s account, Ms. Dunham was indeed “fighting with her insurance company at the end of her life.”

Nevertheless, the context in the documentary itself seems to indicate that Ms. Dunham was battling with a health insurer. In an effort to shed some light on the issue, we decided to do the research and digging that The Washington Post did not do in their fact checking. We reviewed the statements on both sides of the issue made last summer when the book was first published. (For a sample check here and here.) We also reviewed the book itself. The most troubling aspect we noted was a lack of the source for the letters Ms. Scott quotes. In a variety of interviews both recorded and in print, Ms. Scott has had various responses about the source of the letters she relied upon. We found these conflicting accounts confusing and tried, unsuccessfully we might add, finding the source, or a more accurate statement on the source of the letters. We also tried to contact Ms. Scott, and like others, were unsuccessful. Ms. Scott’s employer, The New York Times, stated that she had not returned to work. Finally, we contacted her publisher, Penguin, which failed to respond, although we waited more than 72 hours before going to press with this post.

Overall, we at TheFactFile.com take the approach that when dealing with facts, some due diligence is required. We cannot see where there are clear facts to support the conclusion that either President Obama and “The Road We’ve Traveled” or Ms. Scott and A Singular Woman deserve any Pinnochios. All we know is that the person who lived through the last year of Ms. Dunham’s life with her, President Obama, has a different recollection than the person who wrote a story about it.

Student Loan Forgiveness UPDATE

Posted on March 20, 2012 by thefactfile

UPDATE (Our original post on this topic appears below):

On March 8, 2012, Representative Clarke introduced H.R. 4170, The Student Loan Forgiveness Act of 2012. You can follow the bill’s progress through Congress here.

Original Post

Recent news reports indicate that student loan delinquencies have reached more than $85 billion, with about 14 percent of all student loan holders being delinquent on their debt. The remaining 86 percent are either “paying as agreed,” in deferment, forbearance, or still in school.

Student loan debt is a persistent issue and was one of the clarion calls for the Occupy Wall Street movement. Thie increasing debt load of college students also spawned a national petition sponsored by Robert Applebaum that elicited a response from the Obama Administration last fall and more recently an official student loan complaint site from the Consumer Financial Protection Bureau.

The advocates in favor of student loan forgiveness argue that the stimulative effect on the economy of forgiving student loans would far outweigh any immediate loss from wiping out the debt. Supporters of this idea include Representative Hansen Clarke (D) of Michigan who has a bill pending in the 112th Congress to forgive student loans as a means of stimulus. Others, like Justin Wolfers, call forgiving student loans “the worst idea ever.” Mr. Wolfers’ argument is that, not only is it a bad idea to forgive student loans, it sets a bad precedent. Wolfers writes: “This is a bunch of kids who don’t want to pay their loans back. And worse: Do this once, and what will happen in the next recession? More lobbying for free money, rather than doing something socially constructive. Moreover, if these guys succeed, others will try, too. And we’ll just get more spending in the least socially productive part of our economy—the lobbying industry.”

The argument in favor of forgiving the debt rests primarily on the notion that freeing students from debt will allow them to become bigger consumers and in an economy that has more than 75% of its activity driven by consumer spending, more and bigger spending is important. There is another argument for proponents of forgiving the debt that would seem to have some support in at least one recent study. That argument is that forgiveness of student loans is akin to a tax rebate for people who actually do something “socially constructive” by putting in the time to get a college education.

That support comes from a recent Organisation for Economic Co-Operation and Development (OECD) country note on the United States that shows that college graduates in the United States “generate more public revenue” than college grads in any other OECD country. The OECD calculates that an average male college graduate in the United States contributes about $190,000 more public revenue than non-college educated men. (For women the figure is $90,000, and both are far above the OECD average of about $55,000 in spite of generally higher tax rates in other OECD countries). Thus, one could argue that forgiveness of up to $190,000 in student loan debt would be akin to a tax rebate for people who put in the time to go to college.

We would like to know what you think? Is forgiving student loans a good stimulus plan or is it just a giveaway to a bunch of would be freeloaders?

The Ideal 2012 Presidential Candidate

Posted on March 19, 2012 by thefactfile

With all of the hyper-partisanship of the primaries weighing us down, we decided to daydream a little today and look at where the ideal 2012 presidential candidate would stand on economic and social issues. To figure that out, we relied on recent Gallup survey data (July 2011 to the present) and our understanding of the median voter theorem.

In short, the median voter theorem—probably best explained in the political sense in Anthony Downs’ An Economic Theory of Democracy
–states that in a two party system like the United States, the competition is for the voter whose opinions are at the median. The candidate who gets the closest to that point without alienating his or her base will win the election.

Below, we took several pertinent economic and social issues that Gallup has polled on since July 2011 (the issue text links to the Gallup survey) to create our ideal median voter candidate. We used a 51% rule to construct our ideal; that is, the ideal median voter candidate will support (or oppose) an issue when at least 51% of those surveyed also support (or oppose) that issue.

So what does the median voter look like? Let’s take a look:

Issue	The Median Voter Candidate
Abortion	Favors laws requiring information about abortion risks, parental consent for women under 18, a 24 hour waiting period, a ban on partial birth abortions and strongly opposes a law prohibiting abortion clinics from receiving federal funds.
Death Penalty	Favors increased usage of the death penalty for murder.
Cutting the Federal Deficit	Favors cutting the deficit mostly with spending cuts but is open to some tax increases (see below).
Taxes	Favors increasing taxes on corporations and on individuals with incomes above $200,000 and families with incomes above $200,000.

In an upcoming article we’ll look at how our current crop of candidates compare with this theoretical Median Voter Candidate. But until then: what do you think? Join the discussion below or let us know via Facebook or Twitter.

Blast(s) from the Past: The Fact File and the Primary Concerns of American Investors

Posted on March 16, 2012 by thefactfile

In a post published on Gallup.com earlier this week, Dennis Jacobe (Chief Economist at Gallup) discussed the most recent findings from the Wells Fargo/Gallup Investor and Retirement Optimism Index survey; a survey conducted quarterly among investors to get a gauge of the political and economic “situations” of most concern to investors. The survey asks investors about a series of possible situations in the U.S. and whether they are helping or hurting the investment climate in the United States, using a scale that ranges from “hurting a lot” to “helping a lot.” (The survey points were September 2011 and February 2012 and the full report can be viewed here).

Given that we have looked at many of these same issues in the past few months, we thought it would benefit our newer readers to link to these analyses (as they have the tendency of getting lost in the mix). Below are some of the key results from the Gallop survey, along with these links to our reporting on each issue. Generally, you will notice that issues we have identified as serious have remained of high concern with investors, while those issues we have generally viewed as creations of media hype have diminished.

Percent of respondents in the Wells Fargo/Gallup Investor and Retirement Optimism Index survey who said that the issue was hurting he investment climate a lot, with links to our reporting
	September 2011	February 2012
A politically divided federal government	74%	73%
The unemployment rate	83%	62%
Price of energy, including gas and oil	62%	53%
European debt crisis	48%	48%

Are there issues that we’ve missed that you want us to look at? If so, let us know in below in the comments or by sending us a message directly.

Campaign Spending in Election 2012: Cost Per Delegate, March 14 Update

Posted on March 14, 2012 by thefactfile

As we do after each big primary day (if you can call the Alabama and Mississippi primaries ‘big’), we wanted to return once again to the question of how much each active candidate has spent per delegate earned. As of our last update following the Super Tuesday primaries, Ron Paul was still in the lead in getting the least bang for his buck (spending close to $700,000 for each of his delegates) while Santorum was getting the most (spending around $43,000 for each of his delegates). But how do things look one week later?

The following charts compare the four GOP candidates on the total amount of money raised/spent as of February 31, 2012. (Unfortunately, these numbers are updated only once a month, so there will likely be significant changes come March 31). These figures include revenues/expenditures by the campaigns and the Super PACs that support them. The delegate count comes from here (accessed 3/14/12).

Candidate	Money Raised	Money Spent	Delegates	Overall Cost per Delegate
Newt Gingrich	$31,500,000	$27,300,000	131	$208,397
Ron Paul	$34,700,000	$32,800,000	48	$683,333
Mitt Romney	$100,400,000	$63,900,000	494	$129,352
Rick Santorum	$9,700,000	$7,600,000	251	$30,279

Perhaps unsurprisingly given that we’re using the same data on campaign revenues/expenditures, the picture looks similar to a few weeks ago. Ron Paul still dominates all of the candidates for spending the most while getting the least. And Santorum is still getting the most out of his money, spending only $30,279 for each of his 251 delegates—less than quarter of the amount Romney is spending.

We’ll continue monitoring this race for #1, and, as always, we’re interested in what you have to say: Join the discussion below or let us know via Facebook or Twitter.