Fri, Jul 21, 2023 page8

• Money smarts also open doors

  • By Huang Yu-zhe 黃于哲
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  On June 29, the Executive Yuan passed an act that would provide a NT$35,000 subsidy per year to each student attending a private college or university in Taiwan.

  It has been criticized by the opposition parties to be the “big money-throwing scheme” with which the Democratic Progressive Party (DPP) is trying to win the hearts and minds of voters at the expense of taxpayers’ money.

  Clearly, it is one thing to argue about the timing, while good intentions are another. Up to now, what the opposition has argued could be simply reductive if not unconvincing.

  One must look at the “student loan forgiveness” at a scale of US$400 billion — proposed by US President Joe Biden’s administration — aimed at easing US college students’ financial pressure in the post-COVID-19 pandemic environment with high inflation.

  Yet, it was struck down by a US Supreme Court ruling on June 30 that, given the “major questions doctrine” — clear grants of congressional authority in cases with significant political or economic consequences — the US Department of Education was not authorized by federal law to cancel such outstanding student-loan debt.

  On top of a backlash from Democrats, it is noteworthy that the term “Bennett hypothesis” is being discussed again.

  In 1984, the New York Times published the article “Our Greedy Colleges,” written by then-US secretary of education William Bennett, in which he conducted an empirical study to argue that expansions of student financial aid were the primary culprits of increasing the cost of attending college. Since then, the “Bennett hypothesis” has been hotly contentious among higher education policy analysts and academics.

  However, multiple studies have proved otherwise. For instance, some suggested that the hypothesis only applied to prestigious private universities, while others found that it was not plausible to conclude that college fees would not have increased in the absence of increases in financial aid.

  Either way, Bennett made an intriguing point about whether government subsidies are counterproductive.

  In Taiwan, it would take time to test whether subsidies can actually significantly ease students’ financial pressures, instead of driving up the cost of tuition.

  In fact, for many years, the government has provided zero-interest-rate loans for students whose families make less than NT$1.14 million (US$36,683) annually. After graduation, if students meet certain requirements, they can even apply for a grace period and extension. The policy has been in place since former president Ma Ying-jeou (馬英九) was in office.

  Upon President Tsai Ing-wen (蔡英文) taking office in 2016, the policy has continued to expand the subsidies in response to changing circumstances.

  All in all, the subsidy should be deemed an investment in a student’s future.

  However, given the traditional thinking in Chinese society that a loan is a bad thing and should be paid back at the earliest opportunity, many local students, particularly in private universities, are eager to pay the loans in full during college by taking multiple part-time jobs, so that they would not shoulder any debt after graduation.

  Doing so is possibly unwise and literally a waste of the government’s well-intended subsidy. On the contrary, students in private universities should take advantage of the precious four-year period to cultivate professionalism, prepare to compete for a high-paid job in the market with those who graduate from top-ranking national universities.

  Assuming that they can earn a decent job with a better “head start,” which means a promising career, then paying the interest or principal of a loan step by step would become a simple matter afterward.

  Those stuck in old thinking remind me of the longest-running bestseller worldwide, Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!

  The author, Robert T. Kiyosaki, emphasizes the importance of “financial literacy,” part of which explains the discrepancy between working for money and having your money work for you. The former justifies how ill-considered it is to think that liability should be returned soon; while the latter indicates that only by growing your assets, such as stocks, bonds or property investment, can you take easier ways to pay back the lower interest rate loans, and ultimately become financially independent.

  Undoubtedly, investing in college education is the right path for the long haul. It is equally important that our society does not need a “rich government” or a main street and Wall Street full of “rich dads.” On the contrary, in addition to government subsidies, what is also needed is education providing more financial literacy, which is the key to helping underprivileged students change their future.

  Huang Yu-zhe is a student at National Chengchi University’s Graduate Institute of Law and Interdisciplinary Studies.
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