Tag Archives: finance


Staff Editorial: New Price For College Tuition: $0

Tennessee Gov. understands education is a right. Why don’t we?

The stress of college begins for many students and their families long before the first semester. College prices (room, board, and tuition)  have risen 42% for public, and 31% for private universities from 2000-2011, according to the National Center for Education Statistics. With the unbelievably high price of college tuition, students are expected to delve deep  into their own (or their parent’s) bank accounts for a good education.  For most, this means loans taken out and massive debts accrued, or the alternative — foregoing higher education completely. We at the Foghorn do not believe these are good options; thankfully, Tennessee Gov. Bill Haslam recently proposed a simple solution: make college free.

Education is a human right that should not be limited by a student’s financial situation. In order to make for a more progressive society, we must ensure free and easy access to a higher degree. As stated in the Universal Declaration of Human Rights’ (UDHR) Article 26: “Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit.” Haslam’s Tennessee Promise serves to fulfill this basic human right outlined by the UDHR, a right that has largely been ignored in this country.

The “Tennessee Promise” was proposed by Gov. Bill Haslam during his State of the State address on Monday, Feb. 3 2014. The promise was a big one — two free years of either community college or or technical school for high school graduates in the state of Tennessee.  If Gov. Haslam’s promise is fulfilled, Tennessee would be the only state in the country with free college. The initiative is important for Tennessee especially, one of the least-educated states in the country where less than one third of residents have a two-year degree, according to NPR.

At first Haslam’s plan seems a grandiose dream, one that raises more questions than it answers. The biggest question of all — if the students are not paying for college then who is? The answer, according to Haslam, is the state’s lottery where an excess amount of cash is generated to the tune of $300 million. “Net cost to the state, zero. Net impact on our future? Priceless,” Haslam said at the address.  Haslam’s plan is a breath of clean air in a polluted education environment — an environment that caters to the wealthy while indebting, or excluding, the less fortunate. Haslam has a feasible plan to offer free education in this country.

However  it is shocking that we are so behind other countries in terms of free education. Countries like Germany, Sweden, and Ireland (just to name a few) all have free education for their people. Does our Government place lesser value on higher education? During his first joint address to Congress in 2009, Obama stated that the United States “should once again have the highest proportion of college graduates in the world.” How will this goal be achieved if many in this country can not afford it?

Attending college might not be right for every person, but having access to it should be a right for every person. The Foghorn hopes Gov. Haslam’s enthusiasm for free education proves contagious, and it spreads across the rest of our country.

Dons Dollars and Cents

For the better part of last year, talk on Wall Street and in Washington on the topic of education centered around frozen credit markets and worry that student loans would be in short supply. Lenders were dropped out of federally backed student loan programs, and banks were hoarding cash amid widely held concern over financial turbulence related to free-falling housing prices. This left some parents and students scrambling at the last minute to secure loans to pay for college. Yet, after initial concern it became apparent that there would be enough money to go around, although some lending would be under less attractive terms or with higher interest rates.

However, as one crisis passes, another looms on the horizon for college students. Deflation, when prices go down instead of up as they tend to do, would cause a serious problem for all borrowers, including those holding student loans. As prices decline, the value of a dollar increases because it buys more goods; however this means problems for borrowers because declining prices also mean the real value of debt increases. For every percentage point of deflation, the real value of debt students owe would increase by one percent. Deflation would significantly increase the cost of debt to college students, just as the job market for new graduates looks bleakest.

While the U.S. economy is not currently experiencing deflation it is getting awfully close; prices rose by just 0.01 percent last year, the smallest increase since 1954. At a meeting last Thursday, St. Louis Federal Reserve Bank President James Bullard expressed his concern over deflation and predicted that prices could “end up in negative territory” this year, as was reported by Reuters.

While deflation is bad for student borrowers, more inflation is actually a good thing, at least for students with fixed interest rate loans like the ones issued by most federal loan programs. If, for example, a student owes $25,000 in debt, and inflation is 3 percent per year, which is the long term average in the U.S. economy, then each year the real value of that debt goes down by three percent. Historically, increases in wages outpace increases in prices, so once a student hits the 9-5 circuit, he or she should expect their wage to increase by at least the rate of inflation. Increases in wages due to inflation coupled with fixed rate loans means that a worker will be making the same loan payment every month but earning a higher and higher salary, above and beyond any promotions or pay increases related to increased experience or responsibility. In the end, inflation can reduce the real amount of money a student borrower pays back in the long run.

Student borrowers have everything to lose from deflation and those with fixed interest rate loans have everything to gain from inflation. For these reasons students should champion inflationary policies like the economic stimulus bill and other government spending as well as increases in the money supplied to banks via the Federal Reserve.