Bryce Covert

Editor

Recent Posts by Bryce Covert

  • Why is the Government Saving Money by Driving Students Into Debt?

    Dec 21, 2011Bryce Covert

    The latest budget deal cuts Pell Grants, one more blow to the old system that helped students pay for college directly.

    It's no secret that college graduates are struggling under huge debt loads. The overall debt owed is set to hit $1 trillion this year.

    The latest budget deal cuts Pell Grants, one more blow to the old system that helped students pay for college directly.

    It's no secret that college graduates are struggling under huge debt loads. The overall debt owed is set to hit $1 trillion this year.

    Rising debt loads are fueled by two simultaneous trends: soaring tuition and falling assistance. As James Surowiecki writes, "Since the late nineteen-seventies, annual costs at four-year colleges have risen three times as fast as inflation." And the days when a college education could be financed through government assistance like the GI Bill or Pell Grants are quickly disappearing. Grants used to cover two-thirds of financing an education. Now two-thirds of college financing comes from loans.

    In the face of these pressures facing graduates, the government might be expected to offer more assistance. And Obama announced an executive order in October that tries to ease burdens. It allows grads to cap repayments on their federal loans at 10 percent of their discretionary income come January (which is two years before it was already set to happen). After 20 years, all the remaining debt on those loans would be forgiven -- five years earlier than it would have been without his order. On top of this, some borrowers with more than one federal loan can consolidate them, which could reduce their interest rates (slightly). But even that most immediate impact, consolidating loans, is only likely to save the average borrower between $4.50 and $7.75 a month, a barely noticeable sum.

    Now news came out this week that the last-minute budget deal to fund the government and avert a shut down included cuts to Pell Grants. The maximum grant will be preserved at $5,550, but changes to the eligibility criteria will make as many as 100,000 recipients ineligible. The maximum amount a family can earn without contributing anything toward tuition will drop from $30,000 to $23,000. It also retroactively limits the number of semesters that a student can use grants, from 18 to 12. In sum, these changes will mean less money for fewer people to pay for a college education.

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    Even as the government has shifted further and further away from directly subsidizing higher education -- i.e. giving out money that doesn't have to be paid back -- it is still subsidizing education costs. It just does so through multiple tax breaks for student loans, which are far less visible to the average American. And the cost of these tax code subsidies isn't cheap. As my colleague Mike Konczal notes, the government shells out about "$22.75 billion... through the tax code to make college tuition and student debt more manageable." This means that in order to finance an education, the government is basically assuming students and their families will take on huge debt burdens.

    Compare that number to the total cost of the Pell Grant program. It cost the government $36.5 billion in 2010. While that's a larger sum, the government is still shelling out both amounts -- but only looking to cut money from the aid that doesn't entail students miring themselves in debt.

    Those tax subsidies should also be compared to what it would cost the government to simply provide free public higher education: by Mike's estimate, $15-$30 billion. If the government is looking to save money, it could do worse than shifting funds lost to tax breaks that subsidize indenture to giving out aid directly through either grants or simply free public ed. In fact, if it no longer had to lose money through tax breaks or pay out money for Pell Grants, the savings of free public colleges could be pretty nice.

    Because this debt does have a real life impact on the students who carry it. As I've written before, research shows that higher debt loads narrow the career choices students make upon graduation. By cutting down on direct aid and therefore pushing more students toward debt, the government is complicit in Wall Street's brain drain. And this debt can hang over them for an entire lifetime. Almost 10 percent of people ages 55-64 still have student loan debt. The bankruptcy code doesn't allow this type of debt to be discharged.

    As unemployment rates and income levels make clear, a college education is an important asset. The government has choices it can make in how it helps people finance those educations. One path leads to debt loads that skew students' life courses. Why would we choose that one?

    Bryce Covert is Editor of New Deal 2.0.

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  • The Paternalism of the Holiday Car Ad

    Dec 19, 2011Bryce Covert

    Husband buys wife a car with their combined income, without her permission. Happy holidays!

    Husband buys wife a car with their combined income, without her permission. Happy holidays!

    Ah, the holiday car commercial. You know the one. What did dad get mom? Just a little box… with a key in it to a new car! The family rushes to the yard, where a shiny new car waits with a big red bow on it. Apparently the tradition was started by Lexus in 1998, when it began its yearly “December to Remember” campaign that promotes a new car as the perfect gift. And it’s been successful: December Lexus sales are traditionally better than any other month. Other car companies have followed suit.

    Some of these ads now feature girlfriends buying boyfriends cars for the holidays, but the most traditional form seems to be a husband buying one for his wife. There’s something wrong with this picture. As Annie Lowrey tweets in parody of these ads, “Husband buys wife a car! Wife expresses horror that he made a major financial decision unilaterally, on impulse!” It is strange to think that a man would up and buy his wife a car without consulting her, particularly as most married couples combine their earnings. But it hearkens back to a time when women didn’t have their own earnings, couldn’t buy their own cars, and actually did have to rely on husbands to buy them a new set of wheels.

    Take a look at this vintage holiday car ad:

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    Look familiar? Or take this non-holiday ad:

    Why do these women have to beg their men for cars? Because many can't afford to buy cars outright, but before the 1970s, women, minorities, and low-income families were excluded from credit products. Women in particular were denied loans based on social biases such as the idea that their salaries weren’t dependable because they would become pregnant and stop working. Not to mention that many women didn’t even have their own incomes; in 1950, only 34 percent of women were in the workforce.

    These days, women make up almost half of the workforce. Thanks to the Equal Credit Opportunity Act, they can take out as many car loans as any man. And while only four percent of husbands made less than their wives in 1970, by 2007 that percentage had risen to 22. A quarter of households are headed by women. Yet even with women having made such strides in income and the ability to make purchases equally with their husbands, this ad celebrates a man who buys his wife a car without permission as if she is helpless to do so.

    Nothing says "happy holidays" like some old timey sexism that assumes women can't buy themselves a car when they want one.

    Bryce Covert is Editor of New Deal 2.0.

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  • Cutting Back on Childcare Assistance Puts Single Mothers in the Hole

    Dec 15, 2011Bryce Covert

    As states pull back on support for childcare services, single mothers will have an even harder time building wealth and staying out of debt.

    As states pull back on support for childcare services, single mothers will have an even harder time building wealth and staying out of debt.

    Single mothers aren't faring very well in the recovery. Their unemployment rate was 12.4 percent in November, up from 11.7 percent in June 2009. An unemployed single mother will clearly need help with at least one thing to go out and get another job: childcare. And those who have jobs are still trying to make ends meet, potentially working longer hours and in need of someone to care for their children. But just as the need for childcare assistance is surely rising, states are cutting back. A new report from the National Women's Law Center shows that those in need of assistance were worse off this year compared to last year in 37 states when it came to income eligibility limits to qualify, waiting lists, copayments, reimbursement rates, and eligibility for assistance to parents looking for a job.

    Denying women support for childcare will directly impact their ability to save and their need to take on debt. As a report from NYU Wagner, "At Rope's End," says, "The hefty costs associated with single parenthood, which include childcare, housing, food, health insurance, among others, decrease the likelihood that, even with a stable income, these mothers will be able to accrue wealth." And paying for childcare is no small cost. The average price of full-time care can range from $3,600 to $18,200 annually, according to the NWLC report, and At Rope's End estimates that this cost accounts for over three-quarters of single mothers' monthly expenditures.

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    The effects can be seen in single women's wealth building and debt loads. Wealth is measured by subtracting total debt from total assets; single mothers have a median wealth of only $100. Meanwhile, over three-fourths of single mothers have some kind of debt, and the most common form is credit card debt. Almost half of single mothers -- 47 percent -- have that type of debt, and the median amount is $1,200. When childcare takes up three-quarters of your budget, the other expenses likely have to be put on plastic to make ends meet.

    And of course credit card debt can quickly become an expense in and of itself. While about a quarter of single mothers have debt related to education and about 30 percent have debt to own homes, the interest rates are quite different. The 30-year fixed mortgage rate is at a record low of 3.94 percent. The interest rate on federal Stafford student loans is 6.8 percent and is 7.9 percent for PLUS loans. Compare that to the average credit card interest rate, 16.75 percent. Any revolving balance left on a credit card will quickly increase the amount of money owed. Not to mention that while student and home debt is certainly a heavy burden on many right now, they at least go toward paying for a potential asset. Credit card debt gets you nothing.

    Childcare assistance is not just about the need to support young children's development, or about helping unemployed single mothers get back to work, or making sure employers have female employees who are able to show up at work. Those are all issues. But it's also about keeping single mothers out of debt and helping them build the wealth they need to provide for their families.

    Bryce Covert is Editor of New Deal 2.0.

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  • Flournoy Leaves the Pentagon: Another Sign That Our Workplace Policies Fail Women

    Dec 13, 2011Bryce Covert

    If women continue to be penalized for flexible work needs and depended upon for household and childcare duties, they will continue to face impossible choices.

    If women continue to be penalized for flexible work needs and depended upon for household and childcare duties, they will continue to face impossible choices.

    Women have made huge strides in the workforce, now accounting for half of it. But our policies haven't kept up with them. That fact was made strikingly clear by a story today about Michèle A. Flournoy, the chief policy adviser to Defense Secretary Leon E. Panetta and one of the highest-ranking women in the history of the Pentagon, stepping down from her job to "rebalance" her life and spend more time with her children. The article cites the fact that she "is often at the Pentagon from 7 a.m. to 8 p.m. daily, plus many weekends, a typical work schedule for a top Defense Department official."

    As women have made strides in the workforce, they are heavily congregated in the public sector, working for governments at every level. They make up 61 percent of the workers at the local level, 52 percent at the state level, and 43 percent at the federal level. Why have women flocked to the public sector? Because just as for minorities, historically it was a place that welcomed them, more so than the private sector. But even as the percentages make clear, women's involvement slows down the further up you go, from local to federal.

    Why this drop off? There was a big to-do in September over whether the Obama administration is a woman-friendly work environment. But what may be more to the point is that few work environments are friendly to women's family obligations, including the federal government. Its policies haven't caught up to the needs of its female employees.

    The U.S. is still among a very small handful of countries that don't mandate paid maternity leave, keeping company with no industrialized countries -- just Papua New Guinea, Lesotho, and Swaziland. In 2010, 44 million workers lacked access to paid sick days, which means that even if a child is too sick to go to school, a mother can lose her job to stay home and care for her. And flexible workplace policies, which it sounds like Flournoy desperately needed, are almost unheard of. A study by the Department of Labor found that under 30 percent of full-time workers can vary the times they begin and end their work day -- and only one-third of those, or 10 percent of the entire workforce, actually have official flextime policies at their place of work. So it's little wonder that even a government division like the Department of Defense would be one more workplace that wasn't able to accommodate a mother.

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    The other side of the coin is Flournoy's husband. The article on her job transition briefly mentions him: "Ms. Flournoy is married to W. Scott Gould, a career naval officer who is No. 2 at the Department of Veterans Affairs." There's no mention of his hours or whether he considered leaving his position to be with their school-age children. That's pretty typical of most families: women in the U.S. still do the majority of housework and care work, even when they're employed. Employed women do twice the amount of housework as men. Women spend over an hour providing care to their children on an average day; men spend 26 minutes. If women are already expected to be the primary workers for this kind of labor while employed, why wouldn't it make sense for them to get rid of their jobs to focus on it full-time, rather than ask their husbands to do it?

    Flournoy is certainly entitled to decide what's best for her family and to leave her job, but she harms both her own career and the paths she blazes for other women by doing so. Had she stayed in her current role, the story reports, she was widely seen as a "likely candidate to be the first female defense secretary years from now, when she would have more experience." By dropping out, she loses that experience and thus is not likely to advance. This is a big part of the leaky pipeline for many professions and why women have yet to make up our 50 percent share at the highest ranks.

    And by not continuing on, she opens fewer doors for women to follow in her footsteps. She herself said in 2009, "The thing I feel the most is wanting to do well by the younger women who are counting on me to kind of open doors and blaze a trail for them." Her leaving is not a personal failing. It's a failing of our society to protect and support women workers and their needs.

    Bryce Covert is Editor of New Deal 2.0.

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  • Better Policy for Today, Progressive Leaders for Tomorrow

    Dec 9, 2011Bryce Covert

    The Roosevelt Institute | Campus Network may be on over 100 college campuses, working with over 10,000 students, but it started just seven years ago. To celebrate that meteoric success, it put together this video:

    The Roosevelt Institute | Campus Network may be on over 100 college campuses, working with over 10,000 students, but it started just seven years ago. To celebrate that meteoric success, it put together this video:

    As Hilary Doe, National Director, says of the motive behind starting the Campus Network, "Young people were asked for their blood and their sweat and their tears, but not their ideas." The Campus Network changed all of that. What does it do instead? As the video puts it, "We build progressive leaders for tomorrow and we build better policy for today."

    It's been an exciting seven years, which saw the creation of the Blueprint for the Millennial America, the Budget for Millennial America, the Roosevelt Institute | Pipeline, and so much more. The next seven years stand to be even better.

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