The Potential Effects of Universal Basic Income on Student Debt
Universal Basic Income as Universal Room and Board
Yes, it's true. I actually made this Futurama-inspired image three years ago at age thirty-seven. It even climbed its way to the front page of Reddit. The fact it was upvoted by almost 4,000 people I think says something. And what is that something?
There are a lot of people out there with student loans who think they will never pay them off.
At the same time, the costs of college tuition continue to rise.
All of this got me thinking, "How exactly might universal basic income affect college students and graduates?"
Increased Discretionary Income
The first thing I thought when I finally paid off my student loans was not so much the elation of having achieved something, but that I just got a raise.
I had at least $100 every month subtracted from my earnings for two decades, and with this burden finally gone, I now have over $100 more to spend every month. This should be obvious, but I don't know how obvious it really is.
Right now when a student graduates from college, they are losing about $242 per month ( on average) out of their earnings to this debt. Meanwhile, 16.5% are paying about $450 and 8.5% are paying about $750 or more. This is money not being spent on restaurant meals, or movie theaters, or concerts, or new clothing, or vacations, or gifts, or services, or art, or furniture, or cars, or home appliances, or home improvements, or even homes. This is money not being spent into the economy.
In other words, and most importantly, this is money not being spent to create each other's incomes.
Student debt, which now totals $1.3 trillion, is a massive drag on our consumer economy. Without discretionary income above and beyond the basics and school loans, this economy will continue to underperform because customers are unable to actually consume what they otherwise could. And the effect of consumers being unable to consume in a consumer economy is a shrinking economy. It means lost jobs and lower wages. It means the wastefulness of producing nonpurchasable goods and creation of services few can ever buy or use.
A basic income will reduce the burden for those who have already taken out these loans, and the effect will be increased discretionary income for everyone paying student loans, and through this, greater consumption and economic growth.
But how will basic income affect those who haven't yet taken out any loans?
Decreased Student Loan Sizes
It's not true for everyone, but it's true for many, that the loans taken out for college involve room and board expenses. Sure tuition might be $20,000 which is bad enough, but if we're not living with our families, we have to take out more than this to cover living expenses. Because we need room and board too, this balloons loans to be greater than they need to be to only cover tuition. How much are we spending on room and board?
The College Board reports that the average cost of room and board in 2016–2017 ranged from $10,440 at four-year public schools to $11,890 at private schools.
That's just under a basic income of $12,000 so...
Universal Basic Income is effectively Universal Room and Board.
Not only that, but because the average cost of books and supplies is around $1,250, this means that for college students, a basic income would even cover those expenses as well.
With all of these non-tuition expenses covered, students with basic incomes looking to start college will be able to get smaller loan amounts that reflect tuition only. This not only means less debt for future students, it also means greater discretionary income after graduation because of this reduced debt, again helping to drive our consumer economy.
Let's also not forget how some people are taking out student loans because they feel it's the only thing they can do. Unable to find a job, going back to school can be seen as the only way to get by. Effectively, people are currently treating college and graduate school as a means of avoiding homelessness. By reducing this pressure with basic income, an added effect could be reduced tuition rates, or at least slowed increases.
Going to college should be about going to college, not about taking out loans to eat and sleep indoors.
And this leads to the next effect...
Changed Student Demand
A basic income will mean that college becomes less of an absolute necessity. Some students now are only going to college because they believe they have no other choice to avoid living in poverty. The result is that college graduates unable to get jobs that use their degrees are actively pushing high school graduates out of the labor market. The degrees many people are getting aren't actually being used, because the jobs for them don't actually exist, but everyone still needs to have a college degree if they want a real shot at the middle class.
This is part of the reason tuition has exploded and wages are stagnant.
(Source: Economic Policy Institute)
There is a greater supply of college and graduate degrees than jobs that seek these degrees. And this includes Science/Technology/Engineering/Math (STEM) degrees. You would think that the opposite is true, from what people are constantly claiming, but it's not. The tech worker shortage doesn't really exist.
Salzman concluded in a paper by the liberal Economic Policy Institute, real IT wages are about the same as they were in 1999. Further, he and his co-authors found, only half of STEM (science, technology, engineering, and mathematics) college graduates each year get hired into STEM jobs. “We don’t dispute the fact at all that Facebook (FB) and Microsoft (MSFT) would like to have more, cheaper workers,” says Salzman’s co-author Daniel Kuehn, now a research associate at the Urban Institute. “But that doesn’t constitute a shortage.”
So the reason we hear people crying out for a need for more STEM degrees, is because for the most part, they get paid more. As a business owner, if you want to pay workers less, you're going to want to increase the supply of available workers. It's simply supply and demand. That's what the claims of STEM shortages and the "skills gap" are about, wanting to pay workers less.
What this all means for basic income is that because it increases choice and decreases the belief of college being mandatory, college students can voluntarily attend college and pursue the degrees they wish to pursue. Those who find jobs will also be more likely to be paid what they are worth because of a reduced pool of available labor, instead of being paid less than they are worth thanks to an oversupply of available labor.
But won't a basic income also mean more people will want to attend college who otherwise couldn't?
I think it's likely we'll see both effects to some degree. Those who would otherwise feel forced to go to college won't, and those who wouldn't otherwise have the time or resources to go to college might. They may also choose free or affordable online courses instead. Or they might also attend state colleges, community colleges, and technical schools at increased rates, while decreasing attendance of expensive private and out-of-state schools.
If the net effect is that fewer people overall go to college, then because those who do will take out much smaller loans, the result will be both decreased tuition rates due to decreased demand and also graduates with much smaller debt burdens. If the net effect is that more people overall go to college, tuition might increase for some schools, but debt burdens will still be lower because of students no longer requiring money for room and board, or books and supplies. In either case, a basic income will greatly help students. We just can't say to what degree yet. It may be a lot. Or it may be a whole lot.
Whether and how the net enrollment rate ends up increasing or decreasing in a world of basic income, the extra income a UBI provides will function as universal room and board, and universal books and supplies. It will also mean decreased student loan burdens for those already graduated. Therefore, it'll mean reduced loan amounts for all students, and universal raises for all graduates.
And that's exactly what our consumer economy needs.
Nice post! Paid off my student loans 2 years ago it was nice having it off my back. Upvoted!
Congrats! Yeah it's quite a relief and crazy to think how many years we walk with such a burden on our backs.
Good points. I certainly can't imagine that students wouldn't be among those benefiting most from UBI.
Interesting post. In Scandinavia we have free tuition, but you still have to pay room and board yourself mostly, although we have student benefits as well, they aren't high enough. In spite of this, student debt is an issue. I can't begin to imagine how bad it must be in the U.S. Your country's politics are so backward and dysfunctional.
Upvoted and resteemed.
So much of what we do here in the US is all backwards. Hopefully we can bring some sense to the whole education system in the years ahead, both in regards to funding, and also in regards to the entire point of all of it and the kinds of minds we want as a result of it.
Great article... Upvoted... How do you envision UBI will be paid for?
By raising $3.8 trillion dollars in new taxes in an environment where the government is currently spending about that much for all its activities combined. He wants to double the size of the footprint of government on our society and our economy and he fantasizes it will somehow free up resources.
If you actually read my plan, you'd know I'm not talking about $3.8 trillion in new taxes. In fact my plan would reduce tax burdens on 8 out of 10 households.
Replacing tax credits with basic income is not a new tax. Saying so is just as dishonest as saying that I've raised your taxes by $5,000 if I eliminated your $5,000 tax credit for home ownership and replaced it instead with $5,000 in cash.
It's also not raising your taxes if we replace welfare programs with basic income instead, which is also part of my plan.
It's also not raising your taxes if a portion of Social Security is replaced with basic income instead, which is also part of my plan.
I'd appreciate it if you stop commenting on my posts with disinformation based on either your inability to understand what I've already tried to explain to you in the comment sections of my previous posts, or your desire to lie to others in order to manipulate their opinions using false information.
Oh believe me, I read your plan. And no, I won't stop commenting on your articles, because your plan will destroy America's economy and society.
So, quoting you directly from your plan:
"this particular basic income design requires finding about $3.4 trillion in total (not net) revenue."
"I also recommend lifting the cap on Social Security so that everyone pays in no matter how much they earn, which would raise an additional $380 billion."
Now I don't know if you think making people who are not currently paying a certain amount of money into SS start paying into SS more than the current system requires is a new tax, but I do.
"Remaining need: $2.25 trillion
At this point I’d like to introduce some new taxes, none of which involve raising any tax rates on ordinary salaries and wages, and all of which are highly progressive when combined with basic income."
Oh wait, look at that, new taxes to fund the plan you told me elsewhere would cost no more than $500 billion, but your plan seeks $3.7 trillion for some reason.
It is dishonest to claim I want to raise $3.7 trillion in new taxes. That is false and this is what I responded to.
Do I not wish us to raise any new taxes? No. I do. But not $3.7 trillion. I suggest a 10% VAT tax (not a direct income tax but an indirect tax on consumption) and and a 5% LVT (again not a direct tax but an indirect tax).
However both of those despite raising an estimate of $750 billion each, are the gross tax increases, not the net. If your taxes get raised $6,000, and in return you get $12,000, your taxes just went down $6k, not up $6k. That's the net tax. For 80% of all households, UBI will be a negative tax.
So when I say $500 billion cost in new taxes, that is net new taxes as in the result of subtracting what people get in UBI from the new gross taxes they pay to make UBI possible.
Now you are proposing a VAT tax, too? OMG you really are trying to kill the US economy. Your plan is dangerous and oppressive. You want to put our corrupt government in charge of another $3 trillion dollars from the economy and make them the payroll department for all adult Americans. This idea is terrible.
By the way, just because you wish to redistribute money from some people and give it to others doesn't reduce, or eliminate the tax increases. You say that most Americans will see a tax reduction because they will be getting other people's money, but those reductions are exactly countered by tax increases for the people who's money is being taken to give to the rest. The taxes are increased whether you think the people paying them deserve to have their wealth stolen or not. This assault on the wealthy is a death blow to our economy, because the only way the poor can hope to aspire to wealth is to allow the wealthy to be wealthy. When being wealthy becomes a crime, becomes a scarlet letter that results in your being robbed then wealth creation will slow down, and perhaps stop altogether. Its human nature. You are killing the goose that lays the golden eggs.
As for the VAT tax, its just a tax on people, on consumers. Every dollar the VAT tax generates for your program was first taken from a person buying a product or service. Its a ponzi scheme to convince people they are sticking to the man, making those evil companies pay their share. Its bullshit, all the money comes from the consumers, the buyers, its not sticking it to anyone but the people who allowed themselves to be fooled by your bad math and envious rhetoric.
I urge anyone who is reading your articles to seek out other sources of information.
every government throughout history has taxed its citizens into oblivion... UBI will just be the prolongation of the vicious circle.
But then, I am done with monetarism/barter/trade/reward/etc
Thanks! Here's how I'd go about it in the US:
https://medium.com/economicsecproj/how-to-reform-welfare-and-taxes-to-provide-every-american-citizen-with-a-basic-income-bc67d3f4c2b8
wow, that is a pretty good plan, i'll have to save that, quite progressive. yes I think a land-value tax would be a way to address unearned income, I've become advocate to reform taxation to address that through the work of Michael Hudson. Seigniorage reform sounds great too, dealing with the messed up Fed system. And let's not forget a reduction in military spending too! If only we could snap our fingers (-:
there will never be any reduction in military spending... the US poured 12-15 billion in AI weaponry last november. Last year pentagon admitted that it could not track 6.5 trillion in war budget.
UBI sounds all nice on paper but the theory does not deal with the Reality of the Matrix
Nations and their leaders are the result of the quality of the consciousness of their citizens. The most immediate improvement will be to downsize the amount of fear that is being blanketed over the population that is being provided or manufactured by the deep state in the US. That will also include erasing never from the vocabulary. It can be done because it is necessary. It requires more people turning on their light which effects everyone else. One person can illumine all of those around her, the effect of one person is greater than numbers would indicate.
exactly what I say in my 2 latest blogs by the way but it is social engineered, and as we speak many want to be in a state of servitude by design, so we have a monster issue to detangle.... but being chipped to get UBI will be mandatory. More than ever, the clock is ticking and the choice is upon humanity.
my blog (a sample)
The Merging Of Science And Spirituality Series: Let's Talk Of Our Millennia Old and Generational PTSD
The Merging Of Science And Spirituality Series: Corporations Are Holographic Projections
Here is an idea. Instead of going into a hundred thousands dollars in debt to get a degree that will not improve your employment chances, how about going to work? In 4 years you will have an idea of how the real world works and will have acquired a few skills that employers look for. You will have some skills and knowledge and no debt.
This result looks far better than someone with a enormous debt load and no real life skills demanding free money.
Your answer is "Get a job?" That's the problem. There aren't enough jobs for everyone to work 40 hours per week, especially when we take into account geographical mobility requirements and limitations, and the jobs that are available largely require degrees. Those without college degrees are finding it harder and harder to earn a living, as those with degrees fill jobs they are overqualified for.
Additionally, many jobs require experience that can only be earned through unpaid internships as their starting point. Not everyone has the luxury of working for free, so those from higher income families tend to be the ones far more able to do that, and thus get their first foot on the job ladder.
Your recommendation is a 20th century recommendation. It doesn't work that way anymore. You can't just walk to Main Street USA, find a sign that says "Help Wanted", walk on in, say you want the job, and be told to show up the next day for work.
So get 2 part time jobs, or three.
Very nice
@scottsantens got you a $0.96 @minnowbooster upgoat, nice! (Image: pixabay.com)
Want a boost? Click here to read more!
This post has received a 21.82 % upvote from @bellyrub thanks to: @scottsantens.
The answer to the student debt problem is two-fold, and simple. First: get government out of education, and education finance; and second: don't spend tens of thousands of dollars for an education that cannot pay off that debt? Go to trade school and learn to weld, or become an electrician. Use the money you earn from doing those jobs to study 16th century southeast Asian poetry if you want, but use money you already earned to do it, because nobody is going to pay you a salary for being credential in that field.
knowledge vs ignorance will forever exist as long as monetarism exists
upvoted
Very interesting great greetings venezuela here I will leave a link for those who can help me thanks! https://steemit.com/bitcoin/@wayforhappiness/segwit-locked-in-but-questions-remain-about-bitcoin-s-level-of-decentralization
