Category Archives: College

Reauthorizing the Higher Education Act: Ensuring College Affordability

Good morning Chairman Alexander, Ranking Member Murray, and distinguished Members of the Committee. Thank you for giving me the opportunity to be here today to share my thoughts on this very important issue.

My name is Beth Akers.  I am a fellow at the Brookings Institution where I carry out research on the topic of higher education, with a particular focus on student loans.  I’ve been engaged in research related to higher education policy since 2008 when, in my role as Staff Economist at the Council of Economic Advisers, I assisted the Department of Education as they quickly implemented the Ensuring Continued Access to Student Loans Act.  My testimony is informed by the time that I’ve spent engaged as a researcher in this field, first as a graduate student in the Economics Department at Columbia University and then as a Fellow at the Brookings Institution.

Background

Over the past two decades there’s been a dramatic increase in the share of young U.S. households with education debt.  The incidence has more than doubled, from 14 percent in 1989 to 38 percent in 2013 (Table 1). Not only are more individuals taking out education loans, but they are also taking out larger loans. Among households with debt, the mean per-person debt more than tripled, from $5,810 to $19,341 during the same period (2010 dollars). Median debt grew somewhat less rapidly, from $3,517 to $10,390 (Figure 1, Table 1). Among all households, including those with no debt, mean debt increased eightfold, from $806 to $7,382 (Table 1).

Figure 1. Trends in Education Debt over Time, 1989-2013

Notes: Based on households age 20-40 with education debt.
Source: Akers and Chingos 2014b

Only a trivial number of households had more than $20,000 in debt (per person) in 1989/1992, whereas in 2013, almost one third of those with debt had balances exceeding $20,000 (the change in the distribution is illustrated in Figure 2). The incidence of very large debt balances is greater now than it was two decades ago, but it is still quite rare.  In 2013, seven percent of households with debt had balances in excess of $50,000 and two percent had balances over $100,000 (Akers and Chingos 2014b).

Figure 2. Distribution of Debt, 1989/1992 and 2013

Notes: Based on households age 20-40 with education debt. All amounts are in 2010 dollars.
Source: Akers and Chingos 2014b

The large increases in education debt levels over the last two decades are often attributed to the increases in tuition charged by colleges and universities. There is also evidence that college students are relying more on debt to finance college costs and paying less out-of-pocket (Greenstone and Looney 2013b), suggesting that student behavior is changing in ways that favor loans over other ways of paying for college. Furthermore, there have been shifts in the level of educational attainment and demographic characteristics of the U.S. college-age population that could impact observed student borrowing.  Estimates suggest that roughly one-quarter of the increase in student debt since 1989 can be directly attributed to Americans obtaining more education (both through increased enrollment and increased levels of attainment) while increases in tuition can explain 51 percent of the increase in debt observed during this period (Akers and Chingos 2014a).

Recognizing that the increases in borrowing are driven by multiple factors, some of which are less concerning than others, highlights an important point.  The growth in student loan debt is often discussed as a problem in and of itself. However, to the extent that borrowers are using debt as a tool to finance investments in human capital that pay off through higher wages in the future, increases in debt may simply be a benign symptom of increasing expenditure on higher education.  On the contrary, if these expenditures were spent in ways that don’t pay dividends in the future, then the observed growth in debt may indicate problems for the financial future of borrowers.

Evidence on Affordability

Positive Return on Investment

The most direct way to examine whether borrowers are using debt to finance investments that will pay off is to measure the financial return that their investment will yield in terms of lifetime earnings (relative to what they would have earned if they had not enrolled in a program of higher education) and compare it to the upfront cost of enrollment.  Despite the recent recession, the significant economic return to college education continues to grow, implying that many of these loans are financing sound investments. In 2011, college graduates between the ages of 23 and 25 earned $12,000 more per year, on average, than high school graduates in the same age group, and had employment rates 20 percentage points higher. Over the last 30 years, the increase in lifetime earnings associated with earning a bachelor’s degree has grown by 75 percent, while costs have grown by 50 percent (Greenstone and Looney 2010). There is also an earnings premium associated with attending college and earning an associate’s degree or no degree at all, although it is not as large (Greenstone and Looney 2013a). These economic benefits accrue to individuals, but also to society, in the form of increased tax revenue, improved health, and higher levels of civic participation (Baum, Ma, and Payea 2013).

Studies that seek to identify the causal relationship between education and earnings draw similar conclusions.  A recent study, published by researchers at the Federal Reserve Bank of New York in 2014, suggested that the financial return on a college degree, when expressed as a rate of return, was 15 percent and had held steady at that level (a historic high) for the previous decade.  A valuable insight from this work is that the return on college has not fallen, despite the growing cost of attendance and stagnant earnings growth across the economy.  This counterintuitive result is driven by the decline of earnings among workers without college degrees (Abel and Deitz, 2014).  These statistics indicating large financial returns on investments in higher education suggest that, for the average student, college will pay for itself in the long run.

Month-to-month Affordability of Student Debt

The long run financial return is an important indicator of affordability, but it could potentially obscure more transient challenges faced by households. For example, an increase in debt may be affordable in the long run but impose monthly payments that squeeze borrowers in the short run, especially early in their careers when earnings are low. However, month-to-month affordability of student debt does not seem to have declined in recent history.  The ratio of monthly payments to monthly income has been flat over the last two decades (Figure 3, Table 2). Median monthly payments ranged between three and four percent of monthly earnings in every year from 1992 through 2013.  Mean monthly payments, which are larger than median payments in each year due to the distribution being right-skewed, declined from 15 percent in 1992 to 7 percent in 2013 (Akers and Chingos 2014b).

Figure 3. Monthly Payment-to-Income Ratios, 1992-2013

Notes: Based on households age 20-40 with education debt, wage income of at least $1,000, and that were making positive monthly payments.
Source: Akers and Chingos 2014

The ratio of monthly payments to monthly income stayed roughly the same over time, on average, at each percentile and for each education category. By this measure, the transitory burden of loan repayment is no greater for today’s young workers than it was for young workers two decades ago. If anything, the monthly repayment burden has lessened.

This surprising finding can be explained in part by a lengthening of average repayment terms during the same period. In 1992, the mean term of repayment was 7.5 years, which increased to 12.5 years in 2013. This increase was likely due primarily to loan consolidation, which increased dramatically in the early 2000s (Department of Education 2014, S-16). Loans consolidated with the federal government are eligible for extended repayment terms based on the outstanding balance, with larger debts eligible for longer repayment terms.  Average interest rates also declined during this period, which would also lower monthly payments (Table 3).

In order to appreciate how much of a burden monthly payments place on households, it’s useful to compare student debt payments to other household expenses.  In Figure 4 average monthly student loan payment (based on data from 2010) is plotted together with the average monthly expenditure in each major consumption category (this data comes from the 2012 Consumer Expenditure Survey, which is administered by the Bureau of Labor Statistics).  The largest categories of monthly consumption expenditure are housing ($1,407), transportation ($750) and food ($588).  Monthly student loan payments are relatively small compared to these expenses, and at $242, are closer in scale to monthly spending on entertainment ($217), apparel ($145) and health care ($296).  There is relatively little variation in monthly loan payments (due to consolidation with longer repayment terms for larger debts) (Akers 2014a).

Figure 4. Average Monthly Expenditures and Student Loan Payments

Data: 2010 Survey of Consumer Finances and 2012 Consumer Expenditure Survey
Source: Akers 2014a

Student Debt is a Poor Indicator of Economic Hardship  

It might seem reasonable to be most concerned about the plight individuals with large outstanding student loan balances, but evidence suggests that these individuals may not be faring any worse than households with smaller balances or no student debt at all.  The highest rates of financial distress, as indicated by late payments on household financial obligations, are seen among households with the lowest levels of student loan debt.  Households with large debts tend to have higher levels of educational attainment and earnings, on average, and miss bill payments less often.  Among households with outstanding education debt in the lowest quartile of the debt distribution ($0 – $3,386), 34 percent report having made a late payment on a financial obligation in the past year compared with 26 percent of households with education debt in the highest quartile (≥$18,930).  Households with student loan debt do not show indications of financial distress more often than households without student loan debt (Akers 2014b).

Conclusions

This body of evidence contradicts the notion that a crisis of college affordability exists on a macro level.  However, it is undeniable that many individuals and households are facing serious economic hardship that can be explained completely or in part by their spending on higher education.  Like any other investment, the returns to higher education are not guaranteed.  While the average student will see a large financial return on the dollars they spend on higher education, some students will find that their investment won’t pay off.  We can reduce the frequency of this occurrence by ensuring that students have the information and resources they need in order to make good decisions about college enrollment.  For instance, a national level data base that reports earnings by institution would succeed in helping student to avoid enrolling at institutions that do not have a track record of success.  This would succeed in creating more institutional accountability without additional government intervention.

An additional way to improve outcomes for students is to simplify the federal lending program both on the front end, with the menu of services, and also on the backend with a more streamlined system of repayment.  Recent work on this issue has revealed that students have relatively little understanding of their financial circumstances while they are enrolled in college.  About half of all first-year students in the U.S. seriously underestimate how much debt they’ve taken on.  Even more concerning is the fact that among all first-year students with federal student loans, 28 percent report having no federal debt and 14 percent report that they have no debt at all (Akers and Chingos 2014c).  Removing the complexity of the federal aid system could potentially succeed in making it easier for students to comprehend their circumstances and to make better informed decisions.

However, some of the uncertainty about the payoff of college is unavoidable.  For example, some students will invest in developing skills that will ultimately become obsolete due to unanticipated technological or policy innovation.  It’s important that the government provide insurance against these types of occurrences both for the sake of ensuring individual welfare and also to discourage debt aversion among potential students.  Income driven payment programs, like the ones currently in place for the federal student lending program, are the appropriate tool for providing a safety net to borrowers.

In sum, college is affordable in the sense that on average it will pay for itself in the long run with heightened wages.  However, to ensure that college is universally affordable ex-post, it’s necessary to maintain a robust system of income driven repayment such that students are insured against their investment not paying off.  Lastly, we need to ensure that both the system of federal lending and the safety nets that exist to support it are simple enough that the benefits of these policy innovations can be fully realized.


References

Jaison R. Abel and Richard Deitz, “Do the Benefits of College Still Outweigh the Costs?” Federal Reserve Bank of New York Current Issues in Economics and Finance, vol. 20, no. 3 (2014), available at http://www.newyorkfed.org/research/current_issues/ci20-3.html.

Elizabeth Akers and Matthew M. Chingos. 2014a.“Is a Student Loan Crisis on the Horizon?” Brown Center on Education Policy, Brookings Institution, available athttp://www.brookings.edu/research/reports/2014/06/24-student-loan-crisis-akers-chingos.

Elizabeth Akers and Matthew M. Chingos. 2014b. “Student Loan Update: A First Look at the 2013 Survey of Consumer Finances.” Washington, DC: Brown Center on Education Policy, Brookings Institution, available at http://www.brookings.edu/research/papers/2014/09/08-student-loan-update-akers-chingos.

Elizabeth Akers and Matthew M. Chingos. 2014c. “Are College Students Borrowing Blindly?” Washington, DC: Brown Center on Education Policy, Brookings Institution, available athttp://www.brookings.edu/research/reports/2014/12/10-borrowing-blindly-akers-chingos.

Elizabeth Akers. 2014a. “They Typical Household with Student Loan Debt.” Washington, DC: Brown Center on Education Policy, Brookings Institution, available athttp://www.brookings.edu/research/papers/2014/06/19-typical-student-loan-debt-akers.

Elizabeth Akers, 2014b. “How Much is Too Much? Evidence on Financial Well-Being and Student Loan Debt.” Washington, DC: Center on Higher Education Reform, American Enterprise Institute, available at http://www.aei.org/publication/how-much-is-too-much-evidence-on-financial-well-being-and-student-loan-debt/.

Sandy Baum, Jennifer Ma and Kathleen Payea. 2013. “Education Pays, 2013.” Washington, DC: The College Board, available athttps://trends.collegeboard.org/sites/default/files/education-pays-2013-full-report.pdf.

Department of Education. 2014. “Student Loans Overview: Fiscal Year 2015 Budget Proposal.” Washington, DC: U.S. Department of Education. http://www2.ed.gov/about/overview/budget/budget15/justifications/s-loansoverview.pdf (accessed June 13, 2014).

Michael Greenstone and Adam Looney. 2010. “Regardless of the Cost, College Still Matters.” Brookings on Job Numbers blog, October 5.http://www.brookings.edu/blogs/jobs/posts/2012/10/05-jobs-greenstone-looney.

Michael Greenstone, and Adam Looney. 2013a. “Is Starting College and Not Finishing Really that Bad?” Washington, DC: Brookings Institution, Hamilton Project, available athttp://www.hamiltonproject.org/files/downloads_and_links/May_Jobs_Blog_20130607_FINAL_2.pdf

Michael Greenstone, and Adam Looney. 2013b. “Rising Student Debt Burdens: Factors behind the Phenomenon.” Brookings on Job Numbers blog, July 5, available athttp://www.brookings.edu/blogs/jobs/posts/2013/07/05-student-loans-debtburdens-jobs-greenstone-looney.


Tables





AUTHOR

Beth Akers headshot
Beth Akers
Fellow, Governance Studies,Brown Center on Education Policy

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6 Things High School Grads Need to Do Before Leaving for College

Your last high school prom is over and you’re counting down the days till graduation. Some of you may have even already graduated. Yes, freedom and plans for a fun-filled summer are just around the corner.  Before you know it, you’ll be loading up your belongings in the family minivan and heading off to college. You’re so ready, right? Well, maybe not. Here are some tips for things to do this summer before you head off to college.

1. Downsize, Get Organized & Learn How to Do Your Own Laundry

You’re not going to be able to take your whole closet and every cherished belonging with you to the dorm.  Start downsizing now and make a list of all the things you’ll need to take with you. A clean and tidy space will make things a lot more manageable. Most likely you’ll go home a time or two on break and you can swap out things that you don’t need for things that you do. But, in between those trips home, you’ll need to learn how to do laundry. Those whites can turn into some interesting colors and transform into a smaller size if you don’t know your way around a washer and dryer.

2. Understand Your Financial Situation

Each family’s situation is different – make sure you understand what your family may or may not be able to contribute. You should’ve already applied for financial aid.  If not, you need to complete the 2015-16 Free Application For Federal Student Aid (FAFSA) ASAP! Make sure you list on the application the school code of the college you plan to attend so your information is sent to that school. If you still haven’t decided it’s best to list any school you think you may attend. The financial aid office will then notify you of any financial aid you might be eligible for.  Know what each of those types of aid is and in what order you should accept them.  Visit StudentAid.gov for information on planning and paying for college. Do you have enough money to pay for school? Will you need to work part-time? Make a budget and know what you can spend on certain things.

3. Get a Good Calendar and Prepare for a Whole New World of Time Management

One of the biggest challenges for a lot of you will be time management. When you head off to college, you won’t have somebody there to wake you up, make you breakfast and send you out the door in clean clothes with completed homework in hand. Set yourself up early with a class schedule (make a course syllabus your new best friend) and a system that works for you.  You need to know deadlines for registration, papers, financial aid, coursework and everything in between.  Your chance of succeeding academically will rapidly evaporate if you don’t manage your time well. You’re worth the investment – manage it well.

4. Craft a Good Resume and Learn How to Network

No, don’t wait until you’re approaching college graduation to write a cover letter and resume, you need one now. Having a compelling and professional resume and cover letter is vital to applying for part-time jobs, internships, etc. You might want to also consider changing your email address. Employers probably won’t be impressed with an email address like justheretoparty@XXmail.com.  Work experience can be just as important as good grades when looking for jobs after college graduation. Internships not only provide you with knowledgeable experiences in your field, but they also provide great networking opportunities.  Don’t settle in and nest, put yourself out there and go to as many networking events as possible.

5. Embrace Coupons and Master the Art of a Good Deal

Another difficult thing to learn is skipping those unnecessary splurges. Yes, I know it’s all about YOLO but you need to embrace BOGO. Coupons aren’t just for stay at home moms anymore.  Scoring deals whether in newspapers, magazines or with online sites like Groupon and Living Social it’s easier than ever.  But don’t get so caught up in the deals that you buy vouchers for things you end up not using.  That can cost rather than save you money. Save those splurges for when you score a great “Buy One Get One” free or other greatly discounted offer. Ask about student discounts and if available, a student advantage card.  Start practicing this summer.  It’ll impress your friends and it’ll be a little more money in your pocket when you get to campus. Another great way to save money is buying used textbooks rather than new. Search sites like bigwords.com, Amazon, and TextbookRush to name a few.  If you buy new and then resell them back to the college bookstore check online sites first for what they’re worth.  College bookstore buy back rates are sometimes as low as 10% of what you paid for it new. Lots of students are also renting textbooks on sites like chegg.com.

6. Learn How to Keep You and Your Things Safe

Yes, you need to remember to lock your dorm room and place that lock on your laptop. Losing your laptop can wreak havoc on your studies and a theft due to an unlocked door can also ruin your relationship with your roommate. Start practicing being more aware of your surroundings and keeping yourself safe. Program your school’s campus security number into your phone.  You never know when you might need it. Safety also applies to protecting your social security number, usernames and passwords. Your social security number is one of the main identifiers when checking on things like financial aid, grades, and registering for classes.  Make sure all your passwords and important numbers are not on a post-it-note on your desk.  Store them in a secure place.  Not protecting your identity and important information can have lasting long-term effects on your ability to get a job and apply for credit.

Congratulations on a job well done and making the decision to advance your education!

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What Every 2015 College Graduate Should Know

I’m four months out of college, living halfway across the country from where I grew up. I graduated from the University of Northern Iowa with a degree in public relations. And sometime this summer, as I search for a full-time job to take the place of my internship, I’ll begin the daunting task of paying back my student loans.

Welcome to life as a young adult in America, a country with $1.12 trillion dollars in outstanding student loans.

In a few short weeks, a new wave of graduates will join my ranks, owing on average $33,000 each in student loans. Here’s what they should know.

  1. Most of your friends are indebted to the government. Out of the 21 million+ students enrolled in higher education in the United States, roughly 69 percent take out student loans. And of those, 93 percent are made directly by the federal government. College_Graphic-01-01
  2. It’s OK to move back home. The higher the national debt, the harder it is for the government to fund what matters (and the more it needs your paycheck to curtail rising interest). Plus, a high national debt equals fewer resources available in the economy when you want to take out a loan to start a business or buy your first home. On the plus side, more companies are looking to hire recent graduates, many of whom believe their pricey degree was worth it.College_Graphic-02
  3. Certain degrees have a little more polish than others. Graduation is about the time you may start rethinking that anthropology major. While there’s value in pursuing a passion, résumés that highlight business, engineering or computer science degrees and experience may get pulled more quickly to the top of the stack.College_Graphic-03
  4. What to do if you’re not an engineer. We can’t all be science and math gurus. If you find yourself with a fine arts major—and an inability to land a position at a gallery—focus on showing potential employers that you have some of the skills they find most desirable.College_Graphic-04
  5. There is opportunity. You can only hear about high debt and a poor economy for so long before getting depressed. But as the 9.6 percent recent graduate hiring uptick hints, there is opportunity. These are the top 10 cities for finding an entry-level opportunity.College_Graphic-05

By Leah Jessen
Leah Jessen is a member of the Young Leaders Program at The Heritage Foundation.

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White House Abandons Plan to End College Savings Accounts

Your 529 Plan Is Safe. Here’s Why the White House Changed Course.

President Obama is abandoning his controversial plan to tax the interest on 529 savings accounts, the White House announced Tuesday.

The 529 plans are savings accounts in which parents and families can invest after-tax dollars. If the money is used for specified college costs, they don’t have to pay federal tax on the interest accumulated in these accounts.

The president’s proposal, which faced bipartisan opposition, would have “effectively end[ed]” the plans, according to the New York Times.

“Given it has become such a distraction, we’re not going to ask Congress to pass the 529 provision so that they can instead focus on delivering a larger package of education tax relief that has bipartisan support, as well as the president’s broader package of tax relief for child care and working families,” a White House official told the New York Times.

Earlier on Tuesday, House Speaker John Boehner, R-Ohio, said that 529 plans “help middle-class families save for college,” and said that taxing these accounts should not be included in the president’s budget proposal.

Lindsey Burke, the Will Skillman fellow in education policy at The Heritage Foundation, said that the president’s plan would have hurt middle-class families.

“Taxing college savings accounts would have created disincentives for those who save for college in favor of the federal government directing college spending, lending and handouts—through proposals like ‘free’ community college and student loan ‘forgiveness,’” Burke told The Daily Signal.

“It became clear pretty quickly that the proposal to tax college savings accounts in no way benefited middle-income families,” Burke added. “Families who have diligently worked to save for their children’s college education would have been penalized under this proposal. It seems, at least for the moment, that the administration is dropping its quest for this bad policy.”

>>> Obama Proposes Eliminating Tax Cut Designed to Help Families Save for College

Corie Whalen Stephens, a spokeswoman for Generation Opportunity, said taxing the interest on 529 plans hurts middle-class students and their families.

“It’s encouraging to see our president respond to the needs of our generation by dropping his ill-conceived idea to tax 529 college savings plans. His misguided proposal, intended to fund his unaffordable government policies, would have fallen squarely on the backs of middle-class students and their families,” said Stephens.

She added that funding a broken system doesn’t help students.

“Finding new ways for the government to finance a failing higher education system isn’t a solution. In fact, these endless subsidies with no reforms attached to them are the problem. To fix this, our leaders must look to policies that foster innovation and competition to lower overall costs—not repackage failed big government policies,” said Stephens.

By Kate Scanlon
Kate Scanlon is a news reporter for The Daily Signal and graduate of The Heritage Foundation’s Young Leaders Program.

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Making Sense of the Uproar Over Obama’s 529 Proposal

President Barack Obama’s proposal to scale back tax breaks for college-savings accounts, the 529 plans, provoked an immediate uproar. There’s no doubt the proposal would make future contributions to  529s much less attractive. (It doesn’t affect money already in 529s.) But the loud opposition misses the rationale for changing the way the government encourages saving for college and underscores the reasons tax reform is so hard.

Who benefits from the 529 tax break?

The White House says about 70% of the benefits of 529 plans go to households with incomes above $200,000. That’s fewer than 4% of all tax returns, according to the latest IRS data. There are no income limits on 529 plans; anyone can use them, no matter how affluent.

In general, tax breaks that involve deductions (mortgage interest) or excluding income from taxes (401k retirement accounts) benefit upper-income taxpayers more than others because they are in the highest tax brackets. (A $1,000 deduction reduces the tax bill by $250 for a family in the 25% bracket and $396 for a family in the 39.6% bracket.) Replacing tax deductions with tax credits can give everyone the same dollar amount, regardless of tax bracket.

If we’re uneasy about widening income inequality and want to use the tax code to lean against that (which not everyone does), then swapping deductions for credits makes sense. That is the essence of the president’s proposal.  He’d curb the use of 529s, which disproportionately benefit upper-income families, to finance expansion of the American Opportunity Tax Credit, which is available only to families with pretax incomes up to $180,000.  Families that don’t make enough money to owe income taxes can get up to $1,000 in cash from the AOTC today; the president would increase that to $1,500, an obvious winner for lower-income families.  He’d also extend the benefit to part-time students and allow students to take it for up to five years (instead of the current four).

Now the tax credit isn’t a perfect substitute for the 529 tax break, but the president’s plan for 529s piece can’t be viewed in isolation. He means to move tax subsidies for college savings down the income ladder. “The plan overall would do MORE to help both middle-class and lower-income families afford college,” Bob Greenstein of the Center on Budget and Policy Priorities says in a recent defense of the president’s proposals.

If we’re going to use the tax code to encourage saving for college, then there’s a good case for targeting tax breaks at lower- and (truly) middle-class families. Government help will make more of difference for them – and certainly will reduce the amount of debt they take to go to college — instead of helping affluent families who are going to send their kids to college no matter what the government does.

Do we really prize simplicity in the tax code?

Everyone wants a simpler tax code. Almost everyone says there are too many deductions, credits, exemptions and loopholes. (What’s the difference between a deduction or credit and a loophole? If you get the benefit, it’s a deduction or credit. If someone else gets it, it’s a loophole. )

The president’s proposal is a small step towards simplicity. It would, the White House says, “consolidate education incentives into one vehicle.”  That means doing away with some tax breaks – the Coverdell college-savings accounts, the little-used deduction for interest on new student loans, the Lifetime Learning Credit – and sweetening others.  It turns out that a lot of people prefer complexity to simplicity if simplicity means doing away with a tax break they get.

Do tax breaks really encourage savings?

Much of the U.S. tax code is based on the logical economic argument that tax breaks get Americans to save. The argument: If you increase the after-tax return on savings (by giving people a tax break for putting some of their wages into a 401k or by making the capital gains, interest and dividends on a 529 tax free), people will save more than they otherwise would.

But do they? That’s long been debated by economists. Recent research from Harvard’s Raj Chetty and colleagues suggests tax breaks for retirement savings  reward people who would have saved the money anyhow and don’t increase the total amount of saving.

Better to skip the tax breaks, they say, and rely on “nudges,” such as automatically enrolling workers in retirement-savings programs. Most people are what the researchers call “passive savers.” They don’t respond much to tax incentives. Of course, that’s one risk the president is running here. One advantage of 529 plans is that they are widely marketed by states and mutual funds and that may help nudge people to save for college. Curtail the benefit and there’ll be less of that marketing.

By David Wessel
Director, The Hutchins Center on Fiscal and Monetary Policy
Senior Fellow, Economic Studies
The Brookings Institution

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Georgia State poised to become Georgia’s largest university

Georgia State University is poised to become the state of Georgia’s largest university.

At the Jan. 6 meeting of the state Board of Regents, Chancellor Hank Huckaby is expected to recommend that the board merge Georgia State and Georgia Perimeter College, a move that would create the largest university in the state and one of the largest in the nation.
Georgia State had a fall enrollment of 32,556 and Georgia Perimeter 21,371, for a combined 53,927. That would make the combined school far larger than The University of Georgia, which had a fall enrollment of 35,197.

“The consolidation would greatly improve opportunities for students and expand Georgia State’s reach and impact across the metro-Atlanta area and the state,” said Georgia State President Mark Becker in a message broadcast to the campus.
The consolidation would leave the University System with 29 institutions.

The merger would be the second recently, following the merger of Kennesaw State University and Southern Polytechnic State University, which is up for final approval by the Board of Regents at the Jan. 6 meeting.

“Our consolidation of institutions has been about serving our students better by expanding access, broadening programs and reinvesting resources for the benefit of our students,” Huckaby said on Dec. 9 when discussing the Kennesaw State/Southern Poly merger.

David Allison
Editor – Atlanta Business Chronicle

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Dual enrollment vs. AP classes: Are Georgia high school students learning about both options?

Rick Diguette is a local writer and college professor.  Today, he takes up a topic of personal interest to me as a parent of two high school sophomores, dual enrollment.

Should more high school students be able to take classes like this one at Georgia State? (GSU Photo)

My twins have to decide in the next few weeks whether to apply  for their high school’s new International Baccalaureate diploma program, which locks them into six two-year courses over 11th and 12th grades. Their other option is to select a mix of IB and AP courses, which could possibly allow space for dual enrollment at a local college.

But I found out from the high school it falls on parents to pursue and enable dual enrollment. Parents whose children dual enrolled at Georgia State, Georgia Perimeter or Tech confirmed to me they spent a lot of time and energy making it happen.

Diguette says it should be easier for Georgia high school students to take courses at local college.  But he says schools often promote AP classes to their students instead.

By Rick Diguette

It is no secret that the cost of a college education is greater today than ever before.  And the cost just keeps rising.  That is also why the debt college seniors incur by the time they graduate has continued to rise―by an estimated 6% every year since 2008. When they finally have that diploma in hand, better than 70% of America’s college graduates have racked up almost $30,000 in student loans.

Those are the cold, hard facts that most Georgia parents must reckon with sooner or later.  Even parents of a child who can take advantage of HOPE know that Georgia’s lottery-funded scholarship program isn’t nearly as lucrative as it once was, especially if their child doesn’t qualify for a Zell Miller Scholarship. 

Since there is no reason to believe that college costs will begin to fall any time soon, parents and students must be resourceful as they plan ahead.  However, one low-cost option that they sometimes overlook is Dual Enrollment.

High school juniors and seniors participating in Dual Enrollment can earn college credits while satisfying their remaining high school graduation requirements at the same time.  Although this 2-for-1 deal has been around a long time, the savings it can generate have never looked more attractive.

Dual Enrollment students taking two college courses each semester during their junior and senior years can graduate from high school with 24 college credits. That is almost the equivalent of freshman year. And most of the costs associated with earning those fully transferable college credits will be paid for by the Georgia Student Finance Commission.

Another Dual Enrollment option available exclusively to public high school juniors and seniors is Move On When Ready. Students participating in the program must take all of their courses at a local college, but they can still take part in team sports and other non-curricular activities at their high school.  The costs associated with courses taken as a Move On When Ready student are fully funded by the Georgia Department of Education.

If all of this sounds too good to be true, rest assured it isn’t.  But there is a hitch.   

According to the Georgia Department of Education, beginning in the 8th grade all Georgia students should receive information about Dual Enrollment by April 1 of each school year.  If your school’s principal supports Dual Enrollment, you and your child will hear about the program. 

But not all principals are sold on Dual Enrollment, and the same can be said for some teachers and guidance counselors.  What they promote instead is Advanced Placement.

The Educational Testing Service has done a great job marketing Advanced Placement as a means of adding rigor to the high school curriculum.  Teachers and guidance counselors advise parents and students that college admissions screeners look favorably on high school transcripts with a high percentage of Advanced Placement courses.

And yet in one of its very own reports, ETS acknowledges that “although most students attend a high school at which the AP program is available, few students actually take an AP exam even after taking an AP course, and only a fraction of those who do take a test score high enough to qualify for college credit or placement in the colleges and universities that offer such opportunities.” 

Participating in Dual Enrollment benefits high school students in many ways.  Perhaps most important, it prepares them for the college environment which is quite different from what they’ve grown accustomed to in high school.  And it also allows them to save their parents some money. 

Best of all, those 24 college credits earned by my hypothetical Dual Enrollment students are 24 college credits they won’t have to pay for with student loans.    

By Maureen Downey
AJC – Get Schooled 

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Filed under AP - Advanced Placement, College, College Tuition, Dual Enrollment