October 04, 2004, 8:38 a.m.
Middle-Class Is in Session
College is cheaper under Bush.

Last week in Wisconsin, John Kerry repeated a central part of his middle-class-squeeze theme: that college tuitions under the Bush administration are squeezing middle-class families out of affordable education. We’ve been down a similar path before. In “The Squeeze Theory is Bankrupt,” we showed how Kerry will abuse statistics in the service of his middle-class-squeeze agenda. In that case, the junior senator from Massachusetts had repeated a statement that had once been true a year after it had been rendered untrue. In this case, however, Kerry has used some valid numbers — but he has radically twisted their implications.

Kerry claims that tuitions have risen 13 percent under George W. Bush. So far, so good. We could bicker with him about his choice of which colleges to include in his sample, though. For instance, FactCheck.org pointed out that the Kerry number refers only to state-school tuitions, and not tuitions for private schools. In fact, private-school tuitions rose a mere 5 percent during this same period of time.

But the Kerry campaign has committed a more serious error than simple selective surveying — they have ignored the fact that the majority of Americans do not directly pay college tuition. They borrow the money and the lenders pay the schools.

If you are a parent with kids in college and your last name is not Heinz or Kerry, there’s a pretty good chance you have taken out a student loan. If you have, your bank is sending the tuition to the college, and in the 10 years after graduation you will repay the loan to the bank. The reason this matters so much is that under George W. Bush, Stafford student loan rates have plunged to their lowest level ever. Since George W. Bush took office, student loan rates have plummeted from 8.19 percent to 3.37 percent, an amazing 59 percent drop.

This means that even with substantial increases in the “sticker price” of a college education, college is actually cheaper for the vast majority of families who use student loans. For example, let’s say your brother borrowed $46,000 for his kid’s college tuition at an interest rate of 8.19 percent in 2000. That means his payment to the lender is $562.74 every month for 10 years. Now it’s your turn to take out a loan. Not being a Kennedy, your kid — like your brother’s kid — is going to state school. Because of higher tuitions, you need to borrow $51,980. But in 2004 your interest rate is a far-lower 3.37 percent. Therefore you will end up paying $510.85 per month for 10 years. Why is the payment so much lower? Because, under Bush, you’ve gone from paying $21,528 in total interest to just $8,661. (Now everybody finally knows which brother is the smarter.)

Student loans are subsidized by the federal government, so our inner Hayek is not entirely pleased about all this. But on the other hand, BuzzCharts is raising three kids who are of college age with five more on the way. This time our inner Hayek is just going to have to deal with it.

— Jerry Bowyer is the author of The Bush Boom and an economic advisor to Blue Vase Capital Management. He can be reached through www.BowyerMedia.com.

*   *   *

YOU’RE NOT A SUBSCRIBER TO NATIONAL REVIEW? Sign up right now! It’s easy: Subscribe to National Review here, or to the digital version of the magazine here. You can even order a subscription as a gift: print or digital!