FARAI CHIDEYA, host:

From NPR News, this is NEWS & NOTES. I'm Farai Chideya.

What's $20,000? It could buy you a car, or pay your housing bills for a stretch. But what if that 20-grand weren't in your pocket, but on your back? Welcome to the life of a college graduate. This made the average senior cross the stage just shy of $20,000 in debt and that's the good news. The bad news is that many high school graduates, even with loans, still can't afford to go to college. But last week, the Senate passed a bill increasing Federal Pell Grants for low-income college students.

For more, we turn to Julianne Malveaux, author, economist and president of Bennett College. Julianne, great to have you on again.

Dr. JULIANNE MALVEAUX (Author; Economist; President, Bennett College): Always good to be with you, Farai.

CHIDEYA: So how much more can low-income students expect from the Pell Grants system? And is it enough to make a difference?

Dr. MALVEAUX: It makes a very small difference, Farai. It's a $300 a year increase in the maximum Pell. So it goes up to $4,700 beginning the fall of 2008. So it will not have any effect on a student who's getting ready to go to school this fall. Mr. Bush, when he ran for office in 2000, indicated at that time the Pell was 40 - well, 4,050 - $4,050. And he indicated that his goal was to take it up to $5,100 within a four-year period. So we see how far we're lagging behind.

The challenge, Farai, is that tuition, room and board has gone up. At my institution, tuition, room and board is $21,000. And that's a lot lower than some place like a Harvard, or Yale or Princeton, where you're looking at 40, 45. And so, $4,700 is a drop in the bucket for a student who's trying to put together an entire package. We - our country has really done some serious divesting in young people.

And that divestment shows up in the fact that it's so much more difficult for young people to get access to money. The other thing that's happened, Farai, in the past five years, or maybe even 10, is that there's been a switch away from need-based lending and need-based scholarships to merit-based scholarships. In other words, if you've got a 4.0 or 3.8, you're probably going to get pretty competitive financial aid. But once you…

CHIDEYA: But, Julianne, let me just jump in and direct what you're saying. Why is it a bad thing to reward students who were doing well?

Dr. MALVEAUX: I don't think it's a bad thing to reward students who were doing well. But I also think that we need to be willing to reward students who are doing good, not great, but good, who also have some income challenges. So I would not argue against merit-based giving, but I - if you look at the proportion of it, Farai, it shifted away from every million dollars that now comes in, in terms of a gift, a scholarship as opposed to a loan.

It shifted to maybe more than half going for merit, when at one point, more than half was going for need-based.

CHIDEYA: Well, let's talk a little bit about the House and Senate, which are still trying to reconcile the different aspects of this bill. One part of a House version that got cut out of the Senate version would reduce the interest rates of student loans. Why did they choose to cut that out and what effect could that have on folks, if you're a student in college right now?

Dr. MALVEAUX: Well, I think it's really negative that they did cut that out. Nancy Pelosi, in her 100-day plan, talked about cutting the interest rate on student loans. And just a year ago, we increased the interest rate on student loans. So she was trying to recapture some of that.

Failing to cut the interests makes borrowing more expensive. It makes the proposition - you talked about, the $20,000 on your back - well, the $20,000 on your back today is going to go up if you're not able to pay it off fairly quickly.

And so the higher the interest rate, the more of a burden that the student has when he or she walks across that stage. One of the good things about the bill, Farai, that I do want to mention, though, Congressman Cooper from Tennessee increased the spending for HPCUs, funding the HPCUs by about $125 million. And so that was something that some of us who need HPCUs and some of our students have been quite excited about them.

CHIDEYA: Now, let's put this in another framework. We are really talking about the intersection of money and politics when it comes to education. Young Americans are the least likely demographic to vote. Does that hurt them when it comes to the time to divvy out the government money?

Dr. MALVEAUX: It absolutely does. You know, the U.S. Student Association has a lobby. It's been an effective lobby. But the fact is that younger people are not voting. However, this is not just about young people. And I would encourage people of other generations to look at an international statistic that's frightening. In every other country in the world, Farai, 25- to 34-year-olds are better educated than 35- to 54-year-olds.

But in the United States of America, our younger citizens are less well educated than baby boomers. That's a frightening statistic to suggest our country is going backwards as opposed to moving forward.

CHIDEYA: Well, let's turn to another topic. It can be very much related. It's black teen unemployment. When you talk about going from being a teen in high school to being potentially a college student. African-American unemployment this summer for teens jumped over 30 percent, according to Labor Department statistics. Why do you think this is and should we be worried?

Dr. MALVEAUX: First of all, we should be absolutely worried, especially for our young people who are not going to college. Here is why. You see the increase in young people's unemployment. Part of it is where some of the jobs are, if they are in suburbs and these young people are in inner cities, there's just a geographic disconnect. Secondly, we should be concerned because I think that you look - you're looking at alternate populations taking low-wage jobs.

In other words, you see middle-aged women, regardless of race, taking some of the fast food and other jobs that young people generally used to take. And so that really is an indicator of economic weakness. But why, you might ask, young African-Americans as opposed to young whites? One of the answers is, of course, just plain old garden-variety racism. You know, Tammy(ph) gets the job before Tamika(ph) does.

But here's one of the reasons why we should be especially worried. If you're not going to college, the longer you're out of the labor force, the harder it is to get into the labor force. So it's almost like a chicken-and-egg-type situation. For a young person who's going on to college, I don't worry too much about the high unemployment rate. But for those who are not, I do worry about it. And the other thing that we note is that people get experience, but also contacts on some of these jobs. One of the other reasons why you see fewer opportunities because lots of young people are working on unpaid internships.

And again, young folk who are moderate income can afford to go to work for free. Their parents and their schools are counting on them to bring a little bit of money to their financial aid package.

CHIDEYA: Do we have any idea if this is higher, the unemployment rate, that is, for low-income African-Americans versus middle income and wealthy African-Americans? And, you know, at some point, it must become important to really separate out different groups within the African-American population.

Dr. MALVEAUX: Well, the Bureau of Labor statistics would not make that kind of separation. But I think that intuitively, Farai, from the factors that I've given you, you can figure that for wealthier and middle-class African-Americans, it's less important. They don't need the money as badly. They're the ones who can afford to work in the unpaid internships. So it's much less important. The only reason why teenage unemployment is important is either because you need the income or because you need the experience.

In the case of wealthier African-Americans, it's not clear that either of those needs is really there. So we will never get the kind of class breaks in data collection unless it's not coming from a government source. But we can intuitively say that we know it does make a difference.

CHIDEYA: Let me just reference something. It's coming out of the Employment Policies Institute based at Cornell University. And in it they say, quote, "The majority of the working poor are not helped by a minimum wage hike and the vast majority of those who are helped do not live in poor families." They're talking about the recent minimum wage hike. How does this supply to black teens and do you agree with their thesis?

Dr. MALVEAUX: Well, I don't agree with their thesis. This organization that - I believe it's Economic Policies - or Employment Policies Institute…

CHIDEYA: Employment Policies Institute.

Dr. MALVEAUX: Right. It's no way - it's rather conservative approach. And the conservative approach is to be anti-minimum wage. The fact is that the minimum wage as a floor. We've increased the floor - you cannot go below floor. There may be some organizations at the margin who say, you know, we don't think it's worth it. But look, at the current minimum wage, you're not employing African-Americans. And so if you're not employing them at the current minimum wage, I think it's almost a mute kind of conversation. Where you see some competition is at those who are going to employ people at a sub-minimum wage and that's illegal, but we know that it does happen.

Some of our undocumented brothers and sisters are often vulnerable to that kind of happening. So I tend to basically, there - for every study that says that people are hurt, there's another study that says that people are helped. And I tend not to give a weight to that particular study.

CHIDEYA: Well, finally, we put out a call last week for our listeners on the blog for dollars and cents questions. We had one from Kevin Dantonio(ph). He said, quote, "I have about $2,000 worth of credit card. Should I pay that off first before putting money in a high-yield savings account with five percent interest or should I hedge my bets paying off some of the debt while putting some in savings. What do you think?

Dr. MALVEAUX: First question I'd want to know from Kevin is what interest rate he has on his credit card. If it's your basic credit card, it's a 13 to 18 to maybe even 24 percent. So let's do the math. If you're paying 18 percent on your credit card, you're only going to get five percent on the savings, you're still going 13 percent in the whole a month. So that would suggest that you would pay the debt off.

Here's the only caveat, Farai, if you pay the debt off and you still have that hot little card in your hand, are going to go back and charge it up again? And so if you are, maybe you want to put some of that money in savings. The second question I would ask Kevin is do you have a savings habit? Because even as you're paying off your bill, if you're not saving at all, just try saving a little bit so that when the bill is paid up, you can start in a better - in a regular savings program. It sounds to me like this listener doesn't have a savings program. And I would encourage him to start that. But look at the interest rate and make some basic financial resolutions about why you use that card? Will you use it again? If you're going to use it again, paying it off doesn't do you a whole lot of good. But if this is a time for you to retire your debt, then I'd think about it.

CHIDEYA: All right. Very quickly, we only have a minute left. What about lowering your credit card minimums? Is that a good idea or not? Because you can call them up and say, I want to lower, I mean, not their minimums their - your ceiling. I want to lower my ceiling.

Dr. MALVEAUX: You know, it depends on what your credit rating looks like and whether it looks like you're afraid that you can't handle the credit. If you've got in that kind of credit, it's not lower the ceiling so much because especially - let's say that you - this person has a $4,000 ceiling and they have $2,000 worth of debt. If they say now, take me down to a $2,000 ceiling what the credit reporting people will say is, he's used up all the credit he has. Whereas with $4,000 he'll now say, well, he's used up only half of his credit. Looks like he can handle it responsibly.

CHIDEYA: All right.

Ms. MALVEAUX: That's the kind of thing you've got to juggle when you talk about lowering your ceilings.

CHIDEYA: All right. Well, Julianne, thanks for answering the question.

Dr. MALVEAUX: Thank you.

CHIDEYA: Julianne Malveaux is an author, economist and president of Bennett College. Now if you have a question you'd like to ask our economist here at NEWS & NOTES, just send them to our blog, nprnewsandviews.org and as always, please be sure to tell us where you're writing from and how to pronounce your name.

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