Education costs rising out of range

Updated: Friday, May 30, 2014
Education costs rising out of range story image
KALAMAZOO, Mich. (NEWSCHANNEL 3) - It's the time of year for pomp and circumstance and graduation parties, as young American men and women make the transition from high school to the rest of their lives.

Never before has the cultivation of young minds been more important for the future of our country.

Tonight, in Tom's Corner, Tom Van Howe says if we expect to compete well in the growing arena of global competition, we should be making it easier for young people to continue their education, not harder.

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We've all heard the numbers. And they're sobering.

In math, our kids rank 36th. In science, 28th. And in reading, 24th.

And its not so much that our scores are getting worse--theirs are getting better.

We're stagnating.

A generation ago the United States had the highest number of college graduates in the world.

Today we rank ninth--behind such countries as South Korea, Japan, China, Canada, and India.

This, at a time when how we compete in a global economy is going to be dictating our future. Whether we wish to burden our young people with this or not, the fact is, they are our warriors in an increasingly competitive battle for survival.  It's a war that will never end.

No longer is it whether the son or daughter is being groomed to take over the family grocery store. The day of the mom and pop enterprise is largely over. The game is now being played on a world stage.

And how are we helping?

We urge them to borrow large sums of money from the government--with interest rates of roughly 4 to 7 percent--to be paid back after they graduate from college.

With a smile, a signature, a handshake and a few words of encouragement, we award them a diploma and place them in a ten to twenty year financial bind.

Instead of saddling these young men and women with interest-laden debt, why not make it as appealing as buying a new car: "no money down and zero-percent financing." If auto companies can afford to do it to increase sales, we ought to be able to do it to increase our competitive edge.

Not to suggest free education. Just to suggest we drop the burden of interest. Why in the world should a student graduate with a debt of $50,000 and have to pay $80 or $90-thousand over the next 20 years to get out from under it? How about "pay back what you borrow."

To be sure, the government likes things the way they are. Our federal government takes in as much as $65 billion a year on interest from loans made to college students. Isn't that special?

Here's a snapshot of where we stand: more and more young adults want to further their educations. Applications are up at colleges and universities all across the state.

The trouble is, tuition rates over the past thirty years have risen three times faster than median family incomes.

A new ACT study says the average family income for high school seniors has actually declined 12 percent over the past eight years.

People have less and less to pay more and more.

Massachusetts Senator Elizabeth Warren says graduates are so strangled by student debt that for many it's nearly impossible to buy houses or cars or take part in our economy in any substantial way.

And the exact opposite is what we need.

Just as in the world of healthcare, we have to find a way to get control of the cost. There is no sane reason that healthcare and education should continuously outpace inflation.

And there is no sane reason we shouldn't be affordably equipping our young people with everything they need to compete head-to-head in an increasingly competitive world.

It's a cost we'd benefit from greatly.

And our future depends on it.

In this corner...I'm Tom Van Howe.

Business News

Last Update on September 18, 2014 17:14 GMT

NET WORTH

WASHINGTON (AP) -- Strong stock market gains and higher home prices boosted Americans' net worth in the April-June period to a record high, a trend that could encourage more spending.

U.S. households also took on the most new debt in five years, driven mostly by student and auto loans. More borrowing can be a sign of confidence, although greater student debt can pose a burden for younger households.

The Federal Reserve says household wealth rose 1.7 percent in the second quarter to $81.5 trillion. Americans' stock and mutual fund portfolios gained $1 trillion. The value of their homes increased $230 billion.

The Fed's figures aren't adjusted for population growth or inflation. Household wealth, or net worth, reflects the value of homes, stocks, and other assets minus mortgages, credit cards and other debts.

UNEMPLOYMENT BENEFITS

WASHINGTON (AP) -- The number of people applying for U.S. unemployment benefits dropped by a sharp 36,000 last week to a seasonally adjusted 280,000, a sign that the job market is strengthening.

The Labor Department says the four-week average of applications, a less volatile measure, fell 4,750 to 299,500. The total number of people collecting benefits during the first week of September was 2.43 million, the fewest since May 2007.

Applications for unemployment benefits remain at pre-recession levels. The number of people seeking benefits has been trending downward for the past four months.

Applications are a proxy for layoffs. When fewer people seek benefits, it suggests that employers are keeping their workers, likely because they are more confident about economic growth and poised to hire.

HOME CONSTRUCTION

WASHINGTON (AP) -- U.S. home construction plunged in August, led by steep decline in the pace of building apartments.

The Commerce Department says construction fell 14.4 percent in August to a seasonally adjusted annual rate of 956,000 homes. This reverses the sharp gains in July when the rate of new construction rose to 1.12 million homes, the highest annual rate since 2007.

Last month's decrease primarily came from builders starting fewer apartment complexes, which plummeted 31.5 percent compared to July. Apartments have propelled much of the growth in residential construction over the past year, but the pace has been volatile from month to month.

In August, the building of single-family houses fell 2.4 percent.

Applications for building permits, a good sign of future activity, dipped 5.6 percent to an annual rate of 998,000.

FED-YELLEN

WASHINGTON (AP) -- Federal Reserve Chair Janet Yellen says the Great Recession showed that a large number of American families are "extraordinarily vulnerable" to financial setbacks because they have few assets to fall back on.

She says a Fed survey finds that an unexpected expense of just $400 would force the majority of American families to borrow money, sell something or simply not pay.

She says the bottom fifth of households by income -- about 25 million households -- had net worth in 2013 of just $6,400 and many of these families had nothing saved or negative net worth.

In a speech delivered by video to a Washington conference, Yellen says there is a critical need to encourage people to take small steps to boost their savings.

MORTGAGE RATES

WASHINGTON (AP) -- Average long-term U.S. mortgage rates surged this week, marking their largest one-week gain this year.

Mortgage company Freddie Mac says the nationwide average for a 30-year loan jumped to 4.23 percent from 4.12 percent last week. The average for a 15-year mortgage, a popular choice for people who are refinancing, rose to 3.37 percent from 3.26 percent.

At 4.23 percent, the rate on a 30-year mortgage is at its highest level since the week ended May 1, though it is still at a historically low level.

Mortgage rates often follow the yield on the 10-year Treasury note. The 10-year note traded at 2.62 percent Wednesday, up sharply from 2.54 percent a week earlier. It was trading at 2.63 percent Thursday morning. Bond yields rise when bond prices fall.

PEPSICO-NFL

NEW YORK (AP) -- The leader of Gatorade maker PepsiCo is urging the National Football League to "seize the moment" and put domestic violence and child abuse policies in place immediately once it conducts its review.

PepsiCo Inc. Chairman and CEO Indra Nooyi said in a statement that the NFL has a chance to "effect positive change with the situation presented to them."

PepsiCo is one of several NFL sponsors watching closely as the league investigates how its executives handled evidence in the domestic violence case of former Baltimore Ravens player Ray Rice. The Minnesota Vikings Adrian Peterson is also facing a felony child abuse charge that has placed more attention on the NFL.

Nooyi also expressed confidence that NFL Commissioner Roger Goodell would "do the right thing for the league."

HOLIDAY HIRING

NEW YORK (AP) -- Wal-Mart Stores Inc. says it plans to hire 60,000 temporary holiday workers for the crucial holiday season, an increase of 10 percent from last year.

The world's largest retailer also says current workers who want more hours during the holidays will get priority for them. The retailer, based in Bentonville, Ark., has been criticized by labor groups for low pay and intentionally keeping employees' hours low.

The news follows similar announcements from UPS, FedEx and Kohl's, which are also making more temporary hires this year.

A retailer's hiring plans can indicate its expectations for the holiday shopping season, which accounts for 20 percent of the retail industry's annual sales, according to the National Retail Federation.

GAS DRILLING-CHEVRON

PITTSBURGH (AP) -- Chevron has become the first energy company to meet a new set of voluntary shale gas drilling standards that aim to go beyond existing state laws in Pennsylvania, Ohio and West Virginia.

The Pittsburgh-based Center for Sustainable Shale made the announcement Thursday morning. The center is a partnership between major energy companies, environmental groups and charitable foundations.

The certification process consisted of an independent review of 22 Chevron sites. The program is meant to work much like Underwriters Laboratories, which puts its familiar UL seal on electrical appliances.

The review was conducted by Bureau Veritas, an international testing company that also handles the LEED review process for the U.S. Green Building Council.

Some major environmental groups say the Sustainable Shale program is no substitute for tougher state and federal laws.

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