There is not a better example of how the priorities of the United States are misaligned than what can be found in the chart below.
This chart details the higher education degrees that are receiving the highest and lowest subsidies based on the Income Driven Repayment Plan (IDR) for student loan forgiveness.
That program lowers monthly payments, waives excess interest, and allows for student loan forgiveness after 10 to 25 years in repayment, depending on the type of loans and the original balance. |
| Source: https://x.com/cremieuxrecueil/status/1856512745287409933 |
Under the IDR program, required student loan repayments are capped at no more than 5% of income over 225% of the poverty level.
This effectively means that borrowers with low average earnings are required to pay very little each year on their student loan balances.
At the same time, interest is accruing each year. In that such small amounts are required to be paid on the loans as the interest compounds, it is almost inevitable that the total amount owed on the loan after a decade or more can be more than the original loan balance.
After 10, 20 or 25 years, depending on different requirements, any remaining balance on the loan is forgiven if it has not been repaid under the IDR rules.
The chart above shows the effects of that policy on different higher education majors.
This program effectively provides students who major in low value, low paying courses of study the ability to not have to pay their student loans back.
You can see from the chart that this policy provides almost no subsidy for degrees that are the most necessary and in demand in this day and age---engineering, computer science and nursing.
On the other hand, it heavily subsidizes degrees such as music, fine and studio arts and cosmetology to the extent that the federal government is effectively paying the entire cost of any student loans taken out for these degrees.
Misplaced priorities and government waste combined in one chart.
For example, what is the logic of the federal government effectively paying for over 100,000 Cosmetology degrees annually?
How is that a worthwhile use of taxpayer dollars for America's future?
While we are paying for over 100,000 Cosmetology degrees, we are barely assisting those who choose Registered Nursing for a career which are degrees we desperately need with the nation's aging population.
Over 100,000 Cosmetologists a year but less than 10,000 Computer Scientists or Electrical Engineers?
What do we need more when we look to the future with AI, Robotics and the industries of the future?
The chart above shows just how misaligned our national policies are as well as the fundamental flaws and foolishness in the entire student loan debt forgiveness program.
I wrote a blog post on the enormous problems with the student loan program in 2019 titled "Student Loan Distress".
In that blog post I cited the enormous amount of federal government money flowing to hair and beauty schools.
The chart below shows the government money flowing to this sector in fiscal year 2017 as compiled by Openthe Books.com in an oversight report of the Department of Education.
The amounts of government aid must be much, much higher today.
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| Credit: https://www.openthebooks.com/assets/1/6/department-of-education-report.pdf |
This is what I wrote in that blog post over five years ago.
The largest school, Empire Beauty School, received $534 million in federal education subsidies between 2014 and 2017.
Empire charges students $14,000 in tuition per year to learn how to cut and style hair, apply makeup and give massages over a one to two year period required for graduation. Most students pay with federal student loans.
What is the average pay of their graduates? The New York Times did a study regarding the economic outcomes of students from these types of schools. At age 34 the median income of Empire Beauty School graduates was $18,800 per year.
Does that sound like a good investment? Take on $14,000 in student debt to get a job that pays $19,000 per year?
None of this could occur but for the massive amount of federal government money made available to facilitate it.
That money is the root cause of why a college education (and beauty and barber schools) have become unaffordable.
The answer is not to throw even more money at it as liberal politicians so often want to do.
It is time to put more accountability on the educational institutions who reap the benefits by making them put more skin in the game.
That should be the first step to putting an end to the student debt crisis that is causing so much distress to so many.
The chart below shows how the amount of student debt has grown to where it is now almost $1.8 trillion.
Total student debt is $1 trillion more than it was 15 years ago.
Student loan debt only leveled off the last few years because interest did not accrue on loans for more than three years during Covid, and Biden/Harris were doing anything and everything to forgive student loan debt, including ignoring a Supreme Court ruling on the issue,
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| Source: https://fred.stlouisfed.org/series/SLOAS |
How much is $1.8 trillion in student loan debt?
It is larger than the entire GDP of Australia, South Korea or Mexico.
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| GDP per country Source: https://x.com/cremieuxrecueil/status/1856512745287409933 |
It is also interesting to look at the geographic areas where the highest average student loan balances are.
D.C. and Maryland.
This just so happens to be where thousands of recent college graduates work in Congressional staff offices and the federal government bureaucracy.
How much do you think they care about who is really paying the bill for all of this?
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| Source: https://www.lendingtree.com/student/student-loan-debt-statistics |
Of course, the real beneficiary of the federal student loan program subsidies are the college, universities and beauty schools that would never be able to maintain the enrollments and tuitions they charge without the massive amount of federal money supporting them.
When you consider the endowments that schools like Harvard ($50+ billion) and Yale ($40+ billion) have why should the federal government be providing any loans at all to its students?
Why does the university not loan the money from its endowment to fund any student loans necessary?
Why should these colleges and universities not be making that type of investment in their students if they have the funds to do so?
Empire Beauty and almost all of the cosmetology schools are "for profit" enterprises. Why should they not use some of their "profits" to fund loans for their students and bear the risk if the students do not make a decent return on their education investment?
When Elon Musk and Vivek Ramaswamy begin their work with the Department of Government Efficiency they might want to first take a look at the entire federal student loan program.
There seems to be a lot of low hanging fruit on the student loan tree to improve government efficiency.
