Student Loans and STEM

Blog 21 Oct 10 student debt

Random thoughts generated by observing all the PYTs (pretty young things) in the grocery store on a Sunday evening:

How many of the people just graduated from universities are hamstrung by their student loans? Anecdotally, most students graduating from college are saddled with about $20,000 worth of debt. If they’ve just graduated from law school, or earned an MBA, or gotten a Ph.d. in the sciences or liberal arts, it is likely double that. At a minimum, they have to figure out a way to come up with about $300 every month, for at least 5 years.

Easy enough if they are computer science majors, or hard science types whose diploma is in high demand. Not so much for your basic English Lit. major, or, even worse, those gender studies folks. For the latter, it’s likely a struggle to find any job, let alone a job that comes with a salary sufficient to meet the debt obligation.

So, for a lot of them, it’s a future that doesn’t include a shiny new car, or saving for a few years to accumulate a down payment for that first house. No, it’s back to the parents, or slumming with a few room-mates in that edgy part of town where the rents are low enough for a group effort to pay the landlord. Last year, the Washington Post reported that the total outstanding student loan debt was $865 Billion.

Every year, our institutions of higher learning churn out thousands of graduates whose educational achievement, for the most part, doesn’t promise a future of movement up the social ladder.

It is such a waste.

Here’s what I think. First, instead of wasting more money on crony capitalism, investing in solar panel plants, and lending money to Brazilians so they can sell oil to China, let’s write off existing student loans, subject to a few simple rules. Give each debtor a 2-1 tax credit for ever dollar invested in short term Treasuries. Suspend debt repayment while saving is occurring. Once the debtor has accumulated sufficient savings and tax credits, write off the debt. Allow the student to transfer the accumulated funds to savings program created for the establishment of a 10% down payment on a house or condo. I don’t think I have to spell out the benefits to our economy of such a program.


Second, going forward, student loans would only be offered to students enrolled in a STEM degree. Remember, STEM stands for science, technology, engineering, and mathematics. Those degrees just happen to have the highest starting salaries for new employees, represent the hardest degrees at most universities, and are those programs most needed for the US to continue as a dominant player in the world economy.

Want to major in gender studies, women’s contemporary literary issues, or African-American history? Feel free, but don’t expect a dime from the US taxpayer. Because you likely won’t be able to pay your debt, and you most likely won’t be able to find a job to support yourself. Which means the degree is essentially worthless. And that is a luxury this country cannot afford any longer.

Admitted…..To The Inner Spoke

You may recall a recent post or two about my latest hobby, riding my mountain bike with hybrid tires, wherein I have taken a tumble or two and waxed eloquent on the joys of exercise.

It is great exercise, and just the thing to clear the mind of various confusing academic concepts.

What you haven’t heard about is the 38 flat tires I’ve experienced over the last 3 months or so. My mentor, Pedicabman, took me under his wing after the first flat, and gave me the full monty on how to fix the boogers. Which was a relief, since I didn’t want to spend that $10 at the local bike shop every time I ran over a thorn. A spare tube, a neat little tire tool, a tire patch kit, and I was ready to strike out on my own. Total investment….under $10.

The bike shop guys were happy to sell me the gear, and seemed slightly warmer, as if thinking that maybe the old guy was really going to get into the bike thing.

Soon, I was dropping into the bike shop and asking other questions. How to fix a slipping chain, or how should I clean the gears, could you untwist the bead on this tire that I really screwed up, and, maybe, how much for a new set of tires? Soon I, or rather, the bike, was shod in new shoes that would give me more speed on the road while holding up to the stresses of the greenway (my favorite ride of all!). It was getting positively friendly in the ole bike shoppe.

But with the new tires came the aforementioned rash of flats. Bike lore, or shop talk, or superstition…whatever, informs that each tube in each tire can only be patched twice before it must be cast on the rubbish heap of history. After the 3rd or 4th visit (I’d lost track of the tube purchases by now), and subsequent series of flats, I took the unusual step of taking my entire rear wheel into the shop where I could show the boys my problem. What about these holes in the tires? The tubes must be getting shredded because of the holes. Do I need a new tire after just 3 months?

It was at this moment that I was admitted to the inner sanctum. My friend, the manager, took me aside and advised that what I really needed was a tire liner. You see, they make a thick liner that sits between the delicate tube and the exodermic tire…a penetration of the tire is caught by the liner, thus sparing the tube from the insult of penetration. A beautiful concept, for which I gladly forked over the $19.99.

In the warm afterglow of the exchange, I murmured to my friend that I appreciated his help. I admitted that it has been a long journey, learning to ride and care for my bike, but the pleasures of the experiences vastly outweigh the pains. Why, I wondered, didn’t more bike riders buy the liner? His laughing response was that most folks just want to drop off their bikes, with flats, and spend the $10 or so for his guys to do the work. I shared the laugh, and cast a knowing glance in his direction. I had been given a secret, something that I had to earn, but whose possession invited me into the inner spoke of bicycle knowledge.


The Art of Lawnmower Maintenance


My lawnmower died two weeks ago in the middle of the fortnightly trim. No amount of cranking on the starter cord, swearing, or futile gesturing would get her started again. With the grass looking very snake friendly, and the fleas moving into the area, Mrs. Agricoli put her foot down and demanded action today.

The counter man at the hardware store that does my mower maintenance laughed out loud when I rolled up. Six to seven weeks to get to your machine he said, with barely concealed glee. Sympathetic customers gave me the usual tips, i.e., change the filter and change the spark plug. Things I don’t do, given my complete lack of knowledge regarding things mechanical.

Driving away from the store, I told my wife about a post I had read just this morning.

From Seth’s Blog:

What to do with special requests

The bike shop is busy in June. If you bring your bike in for a tune up, it will cost $39 and take a week.

A week!

What if someone says, "I have a bike trip coming up in three days, can you do it by then?"

At most bike shops, the answer is a shrug, followed by, "I’m sorry, we’re swamped."

The problem with telling people to go away is that they go away. And the problem with treating all customers the same is that customers aren’t the same. They’re different and they demand to be treated (and are often willing to pay) differently.

So, why not smile and say, "Oh, wow, that’s a rush. We can do it, but it’s expensive. It’ll cost you $90. I know that’s a lot, but there you go."

Outcome: Maybe they’ll still leave. But maybe they’ll happily pay you for the privilege of doing business with you. Why should this be your choice, not theirs?

I would have, despite my scarce stash of discretionary dollars, gladly paid twice the going rate to make the queen of my castle happy.

Instead, we looked at each other and headed to Lowes, where I bought a spark plug wrench, a spark plug, an air filter, and 4 stroke motor oil. Twenty minutes later I was carving my way through the yard that had nearly become a savanna.

The lesson is that there are several lessons. Necessity is the mother of invention; it’s amazing what you can do when you put your mind to the task; and the repair business just lost a few years of revenue from a customer that was willing to pay a premium to get out of a tough spot.

Think they’ll miss me?

They’ll never know……

Congress is a Lynch Mob

From The Big Picture and worth repeating in its entirety:

A Lynch Mob!
March 21, 2009

“Let’s go hang ‘em.”

American history is replete with examples of lynch mobs taking control of a situation and inflicting injustice. In the end most lynch mobs have dealt harmful blows to society. Congressional action to punish AIG employees over the bonus issue is already seeding that outcome.

Members of the US House of Representatives who voted for this bill said they were reacting to the anger of their constituents. In failing to show leadership they have just undermined the entire structure designed to repair the financial system.

Specifically the House did the following:

1. They licensed the abrogation of contracts. Their message is simply that it makes no difference what rules we put into effect now; we can and will change them so you cannot depend on them. Global businesses take heed: Your previous judgment about the sanctity of US law has been rendered faulty by our political leadership.

2. They passed retroactive taxation. Their message is that, whatever you plan with regard to the federal tax code, do not assume consistency and do not build any reliability about your government into your decision making. We, in Congress, can reverse our laws and confiscate your results.

3. They made the tax punitive. A 90% tax on something is like taking all of it. The chairman (Rangel) of the House taxation committee actually admitted that by taxing the 90% he was leaving the remainder for the states. In other words, states are now encouraged to engage in the same form of behavior.

Sure citizens are outraged over the $165 million in bonus payments to AIG staff. But they should direct their outrage at the Congress and not threaten the employees or their families with personal injury. The Congress authorized these payments; Dodd, Geithner, and Obama Administration personnel admitted that. Remember, the law passed without giving anyone the chance to testify in public hearings and without allowing comment on the draft legislation. When the law originally went through the Congress, the House leadership suppressed amendments. This Barney Frank and Nancy Pelosi-led House is especially guilty of ignoring the rule of law. They are now guilty of encouraging the rule of lynch mob.

The result of this House action is already damaging. The federal regulator of Fannie Mae and Freddie Mac has shown the courage to ask that this law not be advanced in the Senate. We expect to hear more from those federal personalities who have the strength to speak up and oppose this House-approved proposal.

But depending on the Senate to soften the law or depending on the US Supreme Court to overturn it is a dangerous strategy. Some Congressmen admitted privately that they voted in favor because of constituent pressure, even though they were really opposed to the concept. They voted “yes” because they were relying on the Senate or the courts to say “no.”

Some damage is already done. Firms that were gearing up to participate in the federal program to be announced this coming week are considering withdrawal. They fear that any action which puts them into the federal assistance plan will subject them to the chance of retroactive punishment and taxation. The House has undermined the so-called public-private partnership designed to help restore financing of consumer items like automobiles and credit cards. We expect that the participation in the program to be announced this coming week will be tepid at best.

At Cumberland, we are advising institutional clients to take great care when engaging in any form of activity with the federal government. Simply put: a lynch mob can turn on you in a second and cannot be trusted. The risk is now very high.

Other firms that are already acting with TARP monies, or other federal monies for that matter, are seeking ways to deleverage and exit. In the entrepreneurial and risk-taking business and financial community the universal response to this act by Congress is outrage and distrust and disgust.

So far President Obama is silent on this lynch-mob approach. He has yet to declare himself against it.

Obama needs to be reminded of a parallel in history. A century ago a man named Leo Frank was lynched in Georgia for a murder he did not commit. Local politicians supported the lynch mob; those courageous politicians that opposed it were voted down. Frank was an innocent victim. His subsequent posthumous pardon did not undo the harm.

A century later a man named Barney Frank brags about the earmarks he obtained for his Congressional district (see his website). This modern Frank foments the modern-day version of a lynch mob. The House of Representatives and the Financial Services Committee under the leadership of Barney Frank have made the first day of spring, 2009 a sad day for America. They suppressed the rule of law; they chose the rule of the lynch mob; they are now going to have to live with that result.

When the citizens of America realize what the House has done, they may redirect the lynch mob against the Congress. That is coming next. As Yogi Berra said: “This ain’t over till it’s over.”