State-funded student loans wouldnt work
After President Barack Obama presented his plan to step up federal student loan reform last week, Republican presidential candidate and businessman Herman Cain suggested a plan of his own: shifting the burden of student lending from the federal level to the states.
“I believe that if a state wants to help with college education, that they should do that,” Cain said during a satellite speech to a forum sponsored by The College Board. “Secondly, you have people living within communities within states that are willing to help fund those kinds of programs. So I do not believe that it is the responsibility of the federal government to help fund a college education because, herein, our resources are limited and I believe that the best solution is the one closest to the problem. The people within the state, the people within the communities, ultimately, I believe, are the ones who have that responsibility.”
Rather than allow for healthy reform, Cain’s plan would likely spell the end of student lending altogether. While federal resources are limited, states are no better off. With state budgets constantly shrinking, many could not afford to start issuing student loans even if they wanted to or were forced to by federal mandate.
According to the State Higher Education Executive Officer’s report on funding to higher education, state and local support to universities fell $5.2 billion, from $88.9 billion to $83.7 billion, from 2008 to 2010. This decrease was offset only by $4.8 billion in added federal funding.
Many states simply don’t have the money, and increased education spending seems unlikely in this economy. It is also unclear whom Cain had in mind when he referred to local community members who would like to support student aid.
Florida’s state funding is especially poor. Even after tuition hikes, the USF System lost $25.3 million in its budget for this academic year.
“What we’re seeing is that, over time, we have seen state appropriations diminishing or eroding,” USF Provost Ralph Wilcox said in a May interview with The Oracle. “The Legislature and the taxpayer has reduced its investment in USF and all public universities in the state of Florida.”
Cain’s plan, in effect, would not be too far off from Republican candidate and U.S. Rep. Ron Paul’s plan to eliminate the federal student-loan program altogether.
If students no longer had the option of taking out federal student loans, more would turn to private lenders, which charge higher interest rates and offer no debt forgiveness. And student loan debt, which is nearly $1 trillion nationwide, would only get higher.