Debt a National Crisis

I have seen the best minds of my generation besieged by debt, their choices encumbered by financial woes, as throngs of college graduates return to their parental homes as derelicts as they make their downtrodden journey towards adjoining a “new class of indentured servants.” Senator Claiborne Pell posited a caveat in 1989 upon noticing a growing trend “that students who successfully completed college were overburdened by large debts. Senator Pell felt that college students were at risk of becoming a ‘new class of indentured servants’ whose career choices and personal lives were distorted by the significant loan debt they had acquired to get an education.” Almost twenty years later, it seems that Senator Pell’s admonition has gone unheeded as student debt grows at an exponential rate while college graduates try to grapple with their bleak reality of unemployment and incessant calls from creditors.
The forthcoming presidential administration touts a platform of ‘change’ and I feel it is an imperative for the new administration based on the foregoing platform to the address the vast amount of debt incurred by college graduates because the proposed solutions of educational tax credits and parental “responsibility [as basis] for their children’s success[es]” are not enough to address the issue at hand. The Obama for America official campaign site reported that, “the average graduate leaves college with over $19,000 in debt,” and for graduates who leave school facing an ailing economy inundated with unemployment (the U.S. Bureau of Labor Statistics reported the October, 2008 unemployment rate at 6.5 percent) repaying student loans with accruing interest rates is a true predicament. Aside from an ability to repay loans, many graduates due to their indebtedness are unable to afford to live on their own while others are unable to attain further loans in order to attend graduate or first professional schools. In my own life, I have watched my girlfriend uncontrollably sob as her appeals for financial aid and educational loans were turned down in mass, despite her law school acceptance, and I have witnessed my cousin unable to attain a job with his degree. The problem is that stories like theirs are not uncommon making student debt not a collective depressing statistic but a series of individual tragedies with numbers ranging in the hundreds of thousands.
The proposed solutions by the new administration in regards to Higher Education are the creation of the American Opportunity Tax Credit and the simplification of Financial Aid Applications. The “universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans,” however $4,000.00 barely covers the costs of books is not enough to cover the costs of tuition for the average student. The College Board reports that students who opt for a year a private four year will pay around $25,143.00 in tuition per year, while the “the average surcharge for full-time out-of-state students at public four-year institutions is [around] $10,867.00.” Other provisions of the proposed American Opportunity Tax Credit is that it “will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students,” which fails to include any terms for those students who opt for or are currently in private institutions. The American Opportunity Tax Credit fails to address how money will be obtained and how funds will be allocated in order to pay those tuitions costs covered by the Tax Credit in the wake of the poor economic state. As “Molly Corbett Broad, president of the American Council on Education, which represents 1,600 colleges and universities, says public schools face the greatest challenge in a slumping economy because they get as much as three-quarters of their revenue from state taxpayers.”
The other proposal made by the new administration in regards to higher education is the simplification of the financial aid system “by eliminating the current federal financial aid application and enabling families to apply simply by checking a box on their tax form, authorizing their tax information to be used, and eliminating the need for a separate application.” Though the aforementioned proposal will be helpful to those families hindered by the complex paperwork involved in the financial aid process, it does not provide that those families will be automatically approved for aid. Many people fall through the cracks of financial aid because on paper their families appear to be financially able to pay for the costs of college the process does not accurately reflect a family’s ability or willingness to assist their children in paying for college. In addition, due to the poor state of the economy, public and private universities alike are forced to cut the amount of aid given to students because of decreased state spending on higher education, decreased donations, inaccessibility of cheap credit and a lack of liquidity therefore streamlining the financial aid process will not solve the problem of increasing need.
What is absent from the proposals are provisions that address the current financial exigencies faced by graduates and current students in college. To remedy some of the financial constraints faced by college graduates loan forgiveness programs, which currently exist to bolster employment in a number of need-based occupations, should be better funded by federal and state government and be reoriented to include students who graduated with high grade point averages regardless of their major. Loan forgiveness programs should also be extended to those who seek to attend first professional schools where contingencies will be attached that upon successful graduation those who used the loan forgiveness programs will provide a certain amount of pro bono work. Aside from loan forgiveness programs, the government should reduce or eradicate interest rates on educational loans, because not only do graduates have to deal with the repayment of large principle amounts they also have to contend with ever increasing interest which makes repayment more difficult. Interest rates capitalize on education in a way that prevents graduates from being financially autonomous and being able to attain further education based on their socioeconomic status. Graduates who start out with immense debt get stuck in cycle of having to continual borrow in order to pay off their bills, without interest graduates will be able to more quickly pay off their debt without having to take out further loans to cover accrued interest. If student debt is dealt with by the new administration graduates will be more apt to contribute to economy by means repaying loans and by being able to afford to reengage in consumer spending, which is currently hindered by their educational debt. Overall, higher education represents a sizeable portion of the economy where “U.S. colleges and universities spend $334 billion annually, employ 3.4 million people and enroll 17.5 million students,” wherefore any issues concerning higher education should be a priority for not only for economic but also ethical reasons.

China gives aid, with a catch.

An article in the New York times struck some interest, “ China spreads aid in Africa, with a catch for recipients.” I felt it’s an interesting topic regarding business ethics. China has become a major super power in recent years with very wealthy companies, so the thought of providing foreign aid would be a pretty ethical move from an international standpoint, but their seems to be things hidden behind the curtain. China provided a low interest loan to Namibia in which they bought 55.3 million dollars worth of Chinese made scanners used to deter smugglers. China believed doing good in Namibia would benefit China as well. However now, “Namibia has charged the state controlled company selected by China to provide the scanners that they had facilitated the deal with millions of dollars in illegal kickbacks. And until China threw up barriers when Namibian investigators asked for help looking into the matter. Now the scanners seem to illustrate something else: the aura of boosterism, secrecy, and back room deals that has clouded China’s use of tens of billions of dollars in foreign aid to court the developing world”( Sharon Lafraniere and John Grobler). It seems all over Asia and the middle east China is using foreign currency savings to tie alliances, gain access to foreign natural resources, and gain even more wealth for its leading companies.
Technically, China and it’s companies are obeying the law, but it doesn’t seem ethical. Although they’re gaining high profits, it’s at other country’s expense, which of many desperately need financial aid. As noted in Chapter 2 of our text book “ ethical compliance is the extent to which the members of the organization follow basic ethical (and legal) standards of behavior” (Fundamental of Management, Ricky W. Griffin, p. 44). Does China really uphold this? And there really isn’t anyone to defend, or “whistle blow,” because of their superiority.
Authors Sharon Lafraniere and John Grobler illustrate clear points from both sides of the issue, however, and quite obviously they favor Namibia and the outlying countries. Lafraniere and Grobler seem to not solidly point the finger at president Hu Jintao, but rather the large companies and corporations that are providing all these “goods and services.”