Mark Kantrowitz is the founder of the Web sites finaid.org, and fastweb.com. He regularly answers reader questions on The Choice. Readers can post comments of their own at the end of this essay.
In his State of the Union address, President Obama announced several proposals to make college more affordable. These included doubling the number of federal work-study program jobs over five years, a one-year extension of low interest rates on certain federal student loans and a permanent extension of the American Opportunity Tax Credit. President Obama also “put colleges on notice,” telling the colleges that if they can’t stop tuition from going up, the financing they get from taxpayers each year will go down. The president also announced initiatives to help families make informed decisions concerning college costs and quality.
More money for college is better than none. As a nation, we must put a priority on increasing federal and state investment in higher education. Maintaining the status quo or making slight tweaks to student aid financing is not enough.
Yet a key concern is that increases in some student aid programs may come at the expense of cuts in other more effective student aid programs.
It is unclear how President Obama plans on paying for increases in student aid financing while Congress concentrates on cost-cutting. Congress cut $8 billion a year out of the Pell grant program last year by ending the year-round Pell grant program, which allowed students in accelerated degree programs to get two Pell grants in a single year. Congress reduced the income threshold at which a student qualifies for a full Pell grant from $32,000 to $23,000. This cuts the Pell grants by $1,100 to $1,700 for nearly 14 percent of Pell grant recipients. Additional cuts are looming on the horizon.
The tight federal budgets yield a zero-sum game, where increases in one form of federal student aid force cuts in other forms of student aid. Adding 700,000 more federal work-study jobs over five years will cost more than $1 billion a year.
But how will the Obama administration pay for a one-year extension of the 3.4 percent interest rate on subsidized Stafford loans for undergraduate students? Approximately 7.4 million students will borrow about $3,500 in subsidized Stafford loans on average, costing the federal government more than $7 billion. The permanent extension of the American Opportunity Tax Credit will add several billion dollars more a year in tax expenditures. If the Obama administration doesn’t find savings elsewhere in the budget, these spending increases will force cuts in the Pell grant program, causing declines in Bachelor’s degree attainment by low-income students. That would be a bad bargain.
The risk is that the proposals for increasing student aid financing may be little more than a shell game, where the federal government gives with one hand and takes back with the other. For example, President Obama’s proposal for a one-year delay in the doubling of interest on the subsidized Stafford loan program will be coupled with increases in interest rates on the Perkins loan program. The re-engineering of the Perkins loan program will increase the interest rate on the Perkins loan from 5 percent to 6.8 percent and transform the subsidized Perkins loan into an unsubsidized Stafford loan. (This will save students some money, by shifting borrowing from higher-cost private student loans to lower-cost federal education loans. But it still involves increasing some interest rates to reduce others). Shuffling the deck doesn’t yield a net gain if there is no improvement in college graduation rates or other public policy objectives.
If the federal government can pay for cutting the interest rates on subsidized Stafford loans in half, then why was it necessary to cut the average Pell grant? Changing the interest rates and subsidized interest benefits on student loans has no impact on college access and completion rates. In contrast, the Pell grant program enables low-income students to enroll in college and to graduate. Cutting Pell grant financing forces low-income students to borrow more, shift enrollment to lower-cost colleges or drop out of college. Increasing the interest rate is a better alternative than cutting the Pell grant.
President Obama’s proposal to provide colleges with an incentive to keep tuition affordable will have a modest impact on tuition inflation. The proposal will base a college’s allocation of federal campus-based aid on whether the college keeps net tuition affordable, limits tuition increases and helps low-income students to enroll and graduate. But the $10 billion in campus-based financing represents only about 6 percent of all federal student aid financing and the allocation formula is complicated. The prospect of losing this financing may force some colleges to increase tuition even faster to compensate for the loss of campus-based aid financing.
There are limits to the ability of colleges to control costs. The consumer inflation rate has little to do with increases in college costs. College costs are largely driven by increases in the number of faculty and staff, increases in salaries, increases in facility costs, energy costs, equipment costs and health care costs, increases in institutional financial aid financing and decreases in federal and state financing. For example, if a college has a discount rate of 37 percent, the college must increase tuition by $1.59 to net $1 in additional revenue. This contributes to college tuition increasing faster than inflation by adding a multiplier effect.
President Obama’s proposal to create a mandatory “Financial Aid Shopping Sheet” and “College Scorecard”, on the other hand, will do more to constrain increases in college costs. This standardization of college cost and financial aid disclosures will provide families with clear, correct and comparable information about the real bottom-line cost of college.
This will help them make informed decisions concerning the tradeoffs between college affordability and other factors in college choice. More families will choose high quality but lower-cost colleges, forcing colleges to cut costs while maintaining or improving quality.
Now it’s your turn, Choice readers. Tell us your opinion on the president’s proposal, or at least Mr. Kantrowitz’s analysis of it, by using the box below.
http://tourism9.com/ http://vkins.com/
2012年1月31日星期二
Will President Obama's Blueprint Cut College Costs?
Mark Kantrowitz is the founder of the Web sites finaid.org, and fastweb.com. He regularly answers reader questions on The Choice. Readers can post comments of their own at the end of this essay.
In his State of the Union address, President Obama announced several proposals to make college more affordable. These included doubling the number of federal work-study program jobs over five years, a one-year extension of low interest rates on certain federal student loans and a permanent extension of the American Opportunity Tax Credit. President Obama also “put colleges on notice,” telling the colleges that if they can’t stop tuition from going up, the financing they get from taxpayers each year will go down. The president also announced initiatives to help families make informed decisions concerning college costs and quality.
More money for college is better than none. As a nation, we must put a priority on increasing federal and state investment in higher education. Maintaining the status quo or making slight tweaks to student aid financing is not enough.
Yet a key concern is that increases in some student aid programs may come at the expense of cuts in other more effective student aid programs.
It is unclear how President Obama plans on paying for increases in student aid financing while Congress concentrates on cost-cutting. Congress cut $8 billion a year out of the Pell grant program last year by ending the year-round Pell grant program, which allowed students in accelerated degree programs to get two Pell grants in a single year. Congress reduced the income threshold at which a student qualifies for a full Pell grant from $32,000 to $23,000. This cuts the Pell grants by $1,100 to $1,700 for nearly 14 percent of Pell grant recipients. Additional cuts are looming on the horizon.
The tight federal budgets yield a zero-sum game, where increases in one form of federal student aid force cuts in other forms of student aid. Adding 700,000 more federal work-study jobs over five years will cost more than $1 billion a year.
But how will the Obama administration pay for a one-year extension of the 3.4 percent interest rate on subsidized Stafford loans for undergraduate students? Approximately 7.4 million students will borrow about $3,500 in subsidized Stafford loans on average, costing the federal government more than $7 billion. The permanent extension of the American Opportunity Tax Credit will add several billion dollars more a year in tax expenditures. If the Obama administration doesn’t find savings elsewhere in the budget, these spending increases will force cuts in the Pell grant program, causing declines in Bachelor’s degree attainment by low-income students. That would be a bad bargain.
The risk is that the proposals for increasing student aid financing may be little more than a shell game, where the federal government gives with one hand and takes back with the other. For example, President Obama’s proposal for a one-year delay in the doubling of interest on the subsidized Stafford loan program will be coupled with increases in interest rates on the Perkins loan program. The re-engineering of the Perkins loan program will increase the interest rate on the Perkins loan from 5 percent to 6.8 percent and transform the subsidized Perkins loan into an unsubsidized Stafford loan. (This will save students some money, by shifting borrowing from higher-cost private student loans to lower-cost federal education loans. But it still involves increasing some interest rates to reduce others). Shuffling the deck doesn’t yield a net gain if there is no improvement in college graduation rates or other public policy objectives.
If the federal government can pay for cutting the interest rates on subsidized Stafford loans in half, then why was it necessary to cut the average Pell grant? Changing the interest rates and subsidized interest benefits on student loans has no impact on college access and completion rates. In contrast, the Pell grant program enables low-income students to enroll in college and to graduate. Cutting Pell grant financing forces low-income students to borrow more, shift enrollment to lower-cost colleges or drop out of college. Increasing the interest rate is a better alternative than cutting the Pell grant.
President Obama’s proposal to provide colleges with an incentive to keep tuition affordable will have a modest impact on tuition inflation. The proposal will base a college’s allocation of federal campus-based aid on whether the college keeps net tuition affordable, limits tuition increases and helps low-income students to enroll and graduate. But the $10 billion in campus-based financing represents only about 6 percent of all federal student aid financing and the allocation formula is complicated. The prospect of losing this financing may force some colleges to increase tuition even faster to compensate for the loss of campus-based aid financing.
There are limits to the ability of colleges to control costs. The consumer inflation rate has little to do with increases in college costs. College costs are largely driven by increases in the number of faculty and staff, increases in salaries, increases in facility costs, energy costs, equipment costs and health care costs, increases in institutional financial aid financing and decreases in federal and state financing. For example, if a college has a discount rate of 37 percent, the college must increase tuition by $1.59 to net $1 in additional revenue. This contributes to college tuition increasing faster than inflation by adding a multiplier effect.
President Obama’s proposal to create a mandatory “Financial Aid Shopping Sheet” and “College Scorecard”, on the other hand, will do more to constrain increases in college costs. This standardization of college cost and financial aid disclosures will provide families with clear, correct and comparable information about the real bottom-line cost of college.
This will help them make informed decisions concerning the tradeoffs between college affordability and other factors in college choice. More families will choose high quality but lower-cost colleges, forcing colleges to cut costs while maintaining or improving quality.
Now it’s your turn, Choice readers. Tell us your opinion on the president’s proposal, or at least Mr. Kantrowitz’s analysis of it, by using the box below.
http://tourism9.com/ http://vkins.com/
In his State of the Union address, President Obama announced several proposals to make college more affordable. These included doubling the number of federal work-study program jobs over five years, a one-year extension of low interest rates on certain federal student loans and a permanent extension of the American Opportunity Tax Credit. President Obama also “put colleges on notice,” telling the colleges that if they can’t stop tuition from going up, the financing they get from taxpayers each year will go down. The president also announced initiatives to help families make informed decisions concerning college costs and quality.
More money for college is better than none. As a nation, we must put a priority on increasing federal and state investment in higher education. Maintaining the status quo or making slight tweaks to student aid financing is not enough.
Yet a key concern is that increases in some student aid programs may come at the expense of cuts in other more effective student aid programs.
It is unclear how President Obama plans on paying for increases in student aid financing while Congress concentrates on cost-cutting. Congress cut $8 billion a year out of the Pell grant program last year by ending the year-round Pell grant program, which allowed students in accelerated degree programs to get two Pell grants in a single year. Congress reduced the income threshold at which a student qualifies for a full Pell grant from $32,000 to $23,000. This cuts the Pell grants by $1,100 to $1,700 for nearly 14 percent of Pell grant recipients. Additional cuts are looming on the horizon.
The tight federal budgets yield a zero-sum game, where increases in one form of federal student aid force cuts in other forms of student aid. Adding 700,000 more federal work-study jobs over five years will cost more than $1 billion a year.
But how will the Obama administration pay for a one-year extension of the 3.4 percent interest rate on subsidized Stafford loans for undergraduate students? Approximately 7.4 million students will borrow about $3,500 in subsidized Stafford loans on average, costing the federal government more than $7 billion. The permanent extension of the American Opportunity Tax Credit will add several billion dollars more a year in tax expenditures. If the Obama administration doesn’t find savings elsewhere in the budget, these spending increases will force cuts in the Pell grant program, causing declines in Bachelor’s degree attainment by low-income students. That would be a bad bargain.
The risk is that the proposals for increasing student aid financing may be little more than a shell game, where the federal government gives with one hand and takes back with the other. For example, President Obama’s proposal for a one-year delay in the doubling of interest on the subsidized Stafford loan program will be coupled with increases in interest rates on the Perkins loan program. The re-engineering of the Perkins loan program will increase the interest rate on the Perkins loan from 5 percent to 6.8 percent and transform the subsidized Perkins loan into an unsubsidized Stafford loan. (This will save students some money, by shifting borrowing from higher-cost private student loans to lower-cost federal education loans. But it still involves increasing some interest rates to reduce others). Shuffling the deck doesn’t yield a net gain if there is no improvement in college graduation rates or other public policy objectives.
If the federal government can pay for cutting the interest rates on subsidized Stafford loans in half, then why was it necessary to cut the average Pell grant? Changing the interest rates and subsidized interest benefits on student loans has no impact on college access and completion rates. In contrast, the Pell grant program enables low-income students to enroll in college and to graduate. Cutting Pell grant financing forces low-income students to borrow more, shift enrollment to lower-cost colleges or drop out of college. Increasing the interest rate is a better alternative than cutting the Pell grant.
President Obama’s proposal to provide colleges with an incentive to keep tuition affordable will have a modest impact on tuition inflation. The proposal will base a college’s allocation of federal campus-based aid on whether the college keeps net tuition affordable, limits tuition increases and helps low-income students to enroll and graduate. But the $10 billion in campus-based financing represents only about 6 percent of all federal student aid financing and the allocation formula is complicated. The prospect of losing this financing may force some colleges to increase tuition even faster to compensate for the loss of campus-based aid financing.
There are limits to the ability of colleges to control costs. The consumer inflation rate has little to do with increases in college costs. College costs are largely driven by increases in the number of faculty and staff, increases in salaries, increases in facility costs, energy costs, equipment costs and health care costs, increases in institutional financial aid financing and decreases in federal and state financing. For example, if a college has a discount rate of 37 percent, the college must increase tuition by $1.59 to net $1 in additional revenue. This contributes to college tuition increasing faster than inflation by adding a multiplier effect.
President Obama’s proposal to create a mandatory “Financial Aid Shopping Sheet” and “College Scorecard”, on the other hand, will do more to constrain increases in college costs. This standardization of college cost and financial aid disclosures will provide families with clear, correct and comparable information about the real bottom-line cost of college.
This will help them make informed decisions concerning the tradeoffs between college affordability and other factors in college choice. More families will choose high quality but lower-cost colleges, forcing colleges to cut costs while maintaining or improving quality.
Now it’s your turn, Choice readers. Tell us your opinion on the president’s proposal, or at least Mr. Kantrowitz’s analysis of it, by using the box below.
http://tourism9.com/ http://vkins.com/
2012年1月17日星期二
Caixin Online: China fund official:Barriers to investments abroad
By Gao Xiqing
BEIJING (
Caixin Online
) — Chinese overseas investment has grown from zero before reform and opening-up in the late 1970s into a behemoth today. It is projected that the total will reach $500 billion during the 12th Five-Year Plan, which covers 2011 through 2015.
Chinese companies are an emerging force on the stage of international investments. Due to the immensity of the country’s foreign exchange reserve and its fervent expansion of overseas investments, Chinese investors have had the world’s attention since the financial crisis of 2008.
While the movement has gone quite well so far, we still faced many challenges, some external and some internal.
/conga/story/misc/caixin.html
61611Every nation has laws and organizations to supervise foreign investments. There were two levels of challenges in the supervision realm that Chinese overseas investments faced.
The first was that the laws and regulations of some countries are particularly complicated. In those countries, it is easy to wander down the path of illegality if one stops paying attention for even a moment. The second was that some countries put up obstacles to Chinese investments via the legal or supervisory systems because of ideological or political concerns. Another major challenge for China’s new overseas investment drive is a lack of experience.
First and foremost, we lack an understanding of investment products. Many investment products abroad are either completely nonexistent at home or have just emerged, whether they are swaps, hedging or stock index futures. These products or vehicles have grown complex in developed markets. One must be especially competent in handling the technical aspects, for even the slightest misunderstanding could easily result in losses.
We are probably most familiar with direct investments. However, in many countries and in many industries we have no precedent to follow. Our lack of experience exacts greater demands on us in risk management.
The next challenge is a lack of experience in project design, investment structures and negotiations. How can we identify good opportunities, develop projects or find suitable partners? How can we design an effective structure to manage investments, taxes and repatriation of investment income? How can we extract better terms and conditions from negotiations? These questions demand that we respond to the challenges carefully and study diligently. We must also make the utmost use of highly experienced talent — lawyers, accountants and other intermediaries.
Then comes a lack of understanding of foreign cultures and societies. Many investment activities cause cultural or societal friction in target countries. Some countries have developed complex feelings toward China as it has rapidly grown. Many people in those countries (not only supervisory organizations) look at China through culturally or ideologically colored glasses.
The world still hasn’t entirely adjusted to the reality of China’s rise, nor is our rise welcomed everywhere. We must be prepared to encounter some setbacks while we are investing abroad. In addition, the societies and governments of some investment target countries are especially complex. So we must research diligently and find top-notch consultants before investing. It is of the utmost importance that we maintain the stability and safety of investments, and that we avoid passively becoming entangled in local political, economic or social conflicts.
While Chinese investors are making great contributions to the growth and stability of the global economy, we must avoid certain immature attitudes. While it is true that Chinese corporations are becoming a force to be reckoned with in international investment markets, some of our investors put on arrogant attitudes — as though they believed that everybody ought to be seeking them. This attitude is not good for China’s image. It will also negatively affect the investors’ ability to attract opportunities, and in the long term it will harm development potential.
One big difference between Chinese overseas investment and that of developed Western nations is that we lack talent. The West has been involved in overseas investment for several hundred years, so their talent pool is vast. But Chinese efforts have only just begun. One could say that our first generation of investors has just emerged from the clay.
Our greatest challenge is to establish a mechanism to attract talents, retain them and allow talents to rise to their full potential. It’s not enough just to hire them; we must also be able to train them and build a reserve of talented individuals.
These are only a few of challenges facing China as a newbie in international investment. These are all just developmental problems, and we should have faith that we can resolve them. And despite these challenges, many new opportunities are appearing on the international market. For example, some high-quality assets have been devalued due to current market turmoil.
Also, some sellers’ urgent need for cash means we can negotiate stellar provisions and agreements that would be difficult to obtain under normal circumstances. As long as we analyze issues scientifically and approach them carefully, we can seize all opportunities and fulfill our fiduciary duty.
Read this commentary on Caixin Online.
The author is Vice Chairman and General Manager of China Investment Corp
http://tourism9.cm/ http://vkins.com/
BEIJING (
Caixin Online
) — Chinese overseas investment has grown from zero before reform and opening-up in the late 1970s into a behemoth today. It is projected that the total will reach $500 billion during the 12th Five-Year Plan, which covers 2011 through 2015.
Chinese companies are an emerging force on the stage of international investments. Due to the immensity of the country’s foreign exchange reserve and its fervent expansion of overseas investments, Chinese investors have had the world’s attention since the financial crisis of 2008.
While the movement has gone quite well so far, we still faced many challenges, some external and some internal.
About Caixin
Caixin is a Beijing-based media group dedicated to providing high-quality
and authoritative financial and business news and information through
periodicals, online and TV/video programs.
• Get the Caixin
e-newsletter
Caixin is a Beijing-based media group dedicated to providing high-quality
and authoritative financial and business news and information through
periodicals, online and TV/video programs.
• Get the Caixin
e-newsletter
61611
The first was that the laws and regulations of some countries are particularly complicated. In those countries, it is easy to wander down the path of illegality if one stops paying attention for even a moment. The second was that some countries put up obstacles to Chinese investments via the legal or supervisory systems because of ideological or political concerns. Another major challenge for China’s new overseas investment drive is a lack of experience.
First and foremost, we lack an understanding of investment products. Many investment products abroad are either completely nonexistent at home or have just emerged, whether they are swaps, hedging or stock index futures. These products or vehicles have grown complex in developed markets. One must be especially competent in handling the technical aspects, for even the slightest misunderstanding could easily result in losses.
China brings the Cultural Revolution to Hong Kong
Opinion Journal: The Communist Party is stepping up the attack on pro-democracy thought leaders in Hong Kong.The next challenge is a lack of experience in project design, investment structures and negotiations. How can we identify good opportunities, develop projects or find suitable partners? How can we design an effective structure to manage investments, taxes and repatriation of investment income? How can we extract better terms and conditions from negotiations? These questions demand that we respond to the challenges carefully and study diligently. We must also make the utmost use of highly experienced talent — lawyers, accountants and other intermediaries.
Then comes a lack of understanding of foreign cultures and societies. Many investment activities cause cultural or societal friction in target countries. Some countries have developed complex feelings toward China as it has rapidly grown. Many people in those countries (not only supervisory organizations) look at China through culturally or ideologically colored glasses.
The world still hasn’t entirely adjusted to the reality of China’s rise, nor is our rise welcomed everywhere. We must be prepared to encounter some setbacks while we are investing abroad. In addition, the societies and governments of some investment target countries are especially complex. So we must research diligently and find top-notch consultants before investing. It is of the utmost importance that we maintain the stability and safety of investments, and that we avoid passively becoming entangled in local political, economic or social conflicts.
While Chinese investors are making great contributions to the growth and stability of the global economy, we must avoid certain immature attitudes. While it is true that Chinese corporations are becoming a force to be reckoned with in international investment markets, some of our investors put on arrogant attitudes — as though they believed that everybody ought to be seeking them. This attitude is not good for China’s image. It will also negatively affect the investors’ ability to attract opportunities, and in the long term it will harm development potential.
One big difference between Chinese overseas investment and that of developed Western nations is that we lack talent. The West has been involved in overseas investment for several hundred years, so their talent pool is vast. But Chinese efforts have only just begun. One could say that our first generation of investors has just emerged from the clay.
Our greatest challenge is to establish a mechanism to attract talents, retain them and allow talents to rise to their full potential. It’s not enough just to hire them; we must also be able to train them and build a reserve of talented individuals.
These are only a few of challenges facing China as a newbie in international investment. These are all just developmental problems, and we should have faith that we can resolve them. And despite these challenges, many new opportunities are appearing on the international market. For example, some high-quality assets have been devalued due to current market turmoil.
Also, some sellers’ urgent need for cash means we can negotiate stellar provisions and agreements that would be difficult to obtain under normal circumstances. As long as we analyze issues scientifically and approach them carefully, we can seize all opportunities and fulfill our fiduciary duty.
Read this commentary on Caixin Online.
The author is Vice Chairman and General Manager of China Investment Corp
http://tourism9.cm/ http://vkins.com/
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