Walker student loan "reforms" don't erase the higher ed mess he caused

Feeling the heat from Legislative Democrats and advocacy organizations like One Wisconsin Now, and in light of reports that Americans now owe more than $1.3 trillion in student loan debt, Gov Walker felt the need this week to try to look like he was do something on the issue of student loans and the costs of higher education. As a result, Walker introduced a list of proposals intended to show that he also wants to contain higher education costs, with tax incentives and slightly expanded funding for certain grants included.

Gov Walker’s press release supplied a list of bills that he says have been or will be introduced by GOP representatives in the Legislature (though there doesn’t seem to be any listing for these bills in the Text of Recently Introduced Proposals as of this time). Here’s a look at a few of these proposals on student loans and college affordability.

Deducting All Student Loan Interest – authored by Representative John Macco and Senator Howard Marklein, this legislation would eliminate any cap on the tax deduction for student loan interest, which would save student loan debt payers $5.2 million annually when it is fully phased in. This tax deduction would be the most generous of any state in the Midwest with an income tax and benefit roughly 32,000 Wisconsin taxpayers paying off student loans. This deduction also directly benefits middle class Wisconsinites with an average benefit of more than $200 annually for those making between $30,000 and $70,000;

· Increasing Wisconsin Grants for Technical Colleges – authored by Representative Dave Heaton and Senator Sheila Harsdorf, this legislation would increase needs-based Wisconsin Grants by $1 million for technical college students in the biennium or $500,000 annually. This would benefit over 1,000 students throughout the state;

· Creating Grants for Students in Emergency Financial Need – authored by Representative David Murphy and Senator Howard Marklein, this legislation would provide $130,000 to UW System colleges and $320,000 to technical colleges to provide emergency grants to students. This approach has been credited with increasing the likelihood a student finishes his or her degree in these unfortunate situations by increasing student retention;

For selfish reasons, I approve of the proposal on student loan interes, and wish the concept was taken to Congress, because the phase-out level of that tax deduction is at a point where a couple that each earn the median amount for people with a master’s degree isn’t able to use it. It seems a bit odd to not allow those who put in the work to get their extra education and income aren’t able to write off the interest on the loans that helped to make it possible, because they get paid too much with their improved job. The complication is that 32,000 taxpayers writing off $200 a year means a tax break of $6.4 million a year, and given our state’s budget problems, that may not be affordable. But I'll at least say it's a start.

On the expense side, these items sound OK at face value, but obviously funding must be found to pay for those items as well. And as Chris Walker at Political Heat notes, the $1 million for the “Wisconsin grants” won’t go very far, as the large amount of needs in the state requires a much larger commitment than that.

The bill that Walker touts to will help so-called “need-based” students will fund about 1,000 additional grants. However, last year, more than 37,000 technical college students who were eligible for the grants didn’t receive them. Doling out a small amount of grants will help a very small portion of students in dire need, and do little to help the debt crisis facing college graduates.

There are also provisions in Walker’s proposals to increase funding for staff that can help find students more internships (the WMC crowd loves their free labor!), and a bizarre unfunded mandate to require schools to send out financial literacy information to students, as well as mail current loan status and cost information to students (which seems to be a waste of time for the schools and a veiled attempt to scare some into not continuing their education once they see the costs and debts involved).

Governor Walker also tried to promote the fact that the last two budgets he has signed has frozen in-state tuition for all UW System institutions, saying that this moved has helped make the universities more affordable for today’s students.

According to the Legislative Fiscal Bureau, in the ten years prior to Wisconsin’s current historic four-year tuition freeze, tuition increased an average of 8.1 percent across all UW System. Over that same period, tuition had gone up 118.7 percent prior to the freeze that Governor Walker and the Legislature enacted. Compared to the average increases over the prior ten years, across the UW System, students have saved $6,311 because of the freeze. While savings vary by institution, the tuition freeze meant average savings of $2,926 at UW Colleges and savings up to $9,327 at UW-Madison.

Walker’s claim of a $9,327 savings over the 4 years at UW-Madison (for example) is sketchy enough- an 8.1% average increase would result in total in-state tuition reaching $12,736 in 2016-17 instead of the $9,327 it is at today (or just over $3,400), and even if the savings are taken in total, it reaches $8,192, not $9,327. That still doesn’t mean there isn’t relief there, but it’s not as much as Walker claims it to be (Pages 20 and 21 of the PDF on the Legislative Fiscal Bureau’s paper on UW tuition give a good history of the rates over the last 10 years).

However, it’s worth noting that a large amount of those tuition increases between 2001 and 2011 are attributed to cuts in taxpayer funding to the UW System, to allow the total amount of funding and quality for the UW System to stay somewhat consistent. That has not been the case in the Age of Fitzwalkerstan, as the UW’s documentation said the one-time benefit savings of Act 10 didn’t come close to making up the difference in tuition that was required as a result of Gov Walker’s first budget cut in 2011 (it’s on Page 21 of that LFB tuition paper). Now the cut of $250 million for 2015-17 has been installed along with the tuition freeze for those two years, meaning that despite general taxpayer funding being around $50 million less for the UW System vs 2013, tuition hasn’t been able to be raised to make up that difference, let alone pay for higher costs over the last 4 years.

Walker’s claim also assumes that the UW would have used the tuition to offset increased costs in wages and benefits for their faculty and staff, but those increases have been far smaller in the post-Act 10 world, so there wouldn’t be a need to raise tuition as much anyway. In fact, it seems quite likely that had Walker decided to adequately fund the UW System since 2011, tuition increases could also have been mitigated or outright avoided. These same goals of putting a lid on tuition would have been able to be done without sacrificing the UW System’s quality and potentially reducing access to programs, both of which hamstring the earning ability of students once they get out of college, and their chances of growing the state’s economy.

This doesn't even include the crippling of tenure, stacking of the UW Board of Regents with right-wing hacks, and regressive social legislation that has made retaining talent less likely for UW System schools. All of those developments have compromised the UW’s ability to produce a high-quality education that allows high-skilled talent to come to Wisconsin for college, and/or want to stay after college ends, and preventing that scenario from occurring would seem to be a much more worthwhile boost to Wisconsin’s economy than tuition freezes or being able to write off a few dollars of student loan interest on one’s taxes. So while Gov Walker’s proposals on student loan repayment and college costs might be a slight improvement from the status quo, it still doesn’t come close to making up for the damage his past policies have had on higher education and college graduates in the state.

And this package of proposals also doesn’t forgive Walker from avoiding the common-sense solution in the Wisconsin Democrats’ “Higher Education, Lower Debt” bill, which would allow college graduates to refinance their student loans into lower interest rates, just like they can with a car, a house, or most other types of debt. Sorry, Scotty, but your misdirection play isn’t going to fool any of us outside of the Bubble, and it doesn’t come near close enough to handle the real problem of student loan debt and the reduced economic activity that results from that debt.