Does the government make a profit on student loans? It’s complicated

The question of whether the federal government profits from student loans has come up recently in discussions about the various proposals to prevent the scheduled Stafford subsidized loan rates from doubling to 6.8% on July 1.  This question puzzled me when I wrote about it last November.  At that time I found conflicting accounts, which frankly made my brain hurt.  Since I was left with a lingering curiosity about these illusive profits, the recent discussions on the topic caught my attention.

On May 16  the Huffington Post reported of projected federal profits exceeding those of Exxon, Apple, and other corporate giants.

Figures made public Tuesday by the Congressional Budget Office show that the nonpartisan agency increased its 2013 fiscal year profit forecast for the Department of Education by 43 percent to $50.6 billion from its February estimate of $35.5 billion.…

The Education Department has generated nearly $120 billion in profit off student borrowers over the last five fiscal years, budget documents show, thanks to record relative interest rates on loans as well as the agency’s aggressive efforts to collect defaulted debt.

But that rate is set to double to 6.8 percent, the rate for unsubsidized loans (for richer students, or poor students with debt above the subsidized loan program’s limits), on July 1.

The Washington Post, in reporting on the political disagreements in Congress, referenced the DOE’s $51 billion projected profit.

Democrats … objected to increasing the rates within a program that generates vast income for the federal government. The Congressional Budget Office this week revised its figures this week, reporting that federal loans will generate almost $51 billion this year. Over the last five years, that sum is almost $120 billion.

“That $51 billion is more than Exxon,” Miller said.

“It’s time we stop using federal student loans as a profit center,” added Rep. John Tierney, D-Mass.

Writing for Yahoo Finance, Jason Delisle disputes this notion of student loan profits, pointing out that the high risk of default must be considered.

What about Senator Warren’s claim that the government makes money off loans to low-income students? Senator Warren is not telling the whole story here either. She points to figures that the non-partisan Congressional Budget Office says “do not provide a comprehensive measure of what federal credit programs actually cost the government and, by extension, taxpayers.” In fact, when the budget office “accounts more fully… for the cost of the risk the government takes on when issuing loans,” it reports that Subsidized Stafford loans – those made to low-income students – cost taxpayers $12 for every $100 lent out, or $3.5 billion per year….

The claim that the government makes money on these loans is even more dubious given that the Department of Education estimates that 23 percent of the Subsidized Stafford loans it makes this year will default. That puts it among the riskiest loan programs that the federal government runs. By comparison, about 7 percent of the loans under the Federal Housing Administration mortgage program are expected to default. That program provides loans to high-risk borrowers who do not qualify for a traditional mortgage because they lack the savings, income or credit history.

Finally, in the May 20 Washington Post WonkBlog Dylan Matthews concludes that the “federal government does not profit off student loans”, at least not “in some years”.

Matthews reiterates that the interest rates do not reflect market risk.

… they set the interest rate on student loans below the market rate. And because they’re below the market rate, that costs the federal government money. Contrary to popular belief, and many a breathless article, the government does not, in fact, book a profit on student loans. As New America’s Jason Delisle has explained, that’s because the Congressional Budget Office is required by law to use a bizarre and faulty method for determining the cost of government loans.

Matthews goes on to explain what is essentially an unresolved dispute on the profitability of government student loans.  Additional details complicate the picture.  For example, even according to the CBO’s “bizarre and faulty” calculations, some years with higher subsidies actually show a loss.

I suspect there’s no profit.

After reading all these explanations, the most definitive statement I will accept is that it appears the government does not make a profit on student loans, but it might depend on the level of subsidies for any given year.  As the headline says, it’s complicated.

Quick Links – Middle school mess; hypergamy and single-parent families; bipartisan cuts to higher ed; and more

◊◊◊  The middle school debate

Various views on the middle school model were presented in the New York Times last year.

You don’t have to have to read all the studies to know that the ages between 10 and 13 are socially awkward ones. But they are also important ones academically, crucial in determining college and career outcomes. Would these preteens be better off staying in an elementary school that covers kindergarten through eighth grade? Or is there a reason why this age group needs to be sectioned off into a separate middle school?

Another observation on the Middle School Mess:

American middle schools have become the places “where academic achievement goes to die.”  – Cheri Pierson Yecke

◊◊◊  Fewer college-educated men are reason for rise in single parent families?

The effects of a low sex ratio

As this column has repeatedly noted, women are hypergamous, which means that their instinct is to be attracted to men of higher status than themselves. When the societywide status of women increases relative to men, the effect is to diminish the pool of suitable men for any given woman. If most women reject most men as not good enough for them, the effect is no different from that of a low sex ratio. High-status men, being in short supply, set the terms of relationships, resulting in libertine sexual mores and higher illegitimacy.

I rarely see the term “illegitimacy” used these days.

◊◊◊  ‘Bipartisan Support for Cutting Higher-Ed‘

The national trend is marked: between 2009 and 2012, 47 states cut higher education spending per FTE. The median (mean) reduction was just over 23 percent (22 percent). Just three states saw increases: Illinois (unified Democratic government), North Dakota (unified Republican government), and Rhode Island (divided government with Republican governor).

When they have had unified government, both Democrats and Republicans have cut higher education funding. If we look at the seven states with unified Democratic control over this period, six reduced funding. Those six (excluding Illinois’s 2.8 percent increase) reduced funding by between 19 and 31 percent (West Virginia and Washington respectively) for an average reduction of 22.9 percent.

Of the nine states under unified Republican control, eight reduced funding by an average of 25.2 percent, ranging from a 0.2 percent decline in South Dakota to 42.8 percent reduction in Idaho. Texas, one of Leonard’s great villains, reduced funding by 9.2 percent (less than any of the Democratically-controlled states). Florida cut funding by 27 percent, which outranked all but one unified Democratic state. So while Republican-controlled states did cut higher education spending, they were not alone; unified Democratic governments more than held their own. (Of the 17 states with divided government, 16 reduced higher ed spending by an average of 25 percent during the period)….

These data suggest a bipartisan national trend, not a conservative conspiracy. The vast majority of states–whether controlled by Republicans or Democrats–have cut higher education funding in response to budget deficits.

◊◊◊  Grandparents’ contribution make up about 9.5 percent of the total 529 assets

By all accounts, Grandma and Grandpa are more active than ever in funding their grandkids’ educations, including sinking money into 529 college savings plans….

By the end of 2012, American families had a record $190.7 billion socked away in 529 college savings plans, according to a March 13 report from the College Savings Plans Network. …

Parents still contribute the lion’s share of funds invested in 529 accounts. But contributions from grandparents now make up about 9.5 percent of the total, according to the most recent data from the Financial Research Corp, which tracks 529 investments. It was a substantial enough increase that FRC started keeping track of which types of relatives were funding 529s for the first time last year.

Sequester will cut thousands of college work study jobs

Pell Grants won’t be affected, but other types of federal student aid and research funding will be cut as the result of the sequestration that took effect on March 1.

The impending federal budget cuts known as the sequester, which will go into effect on Friday without action by Congress, are poised to have a significantly negative effect on both public and private universities nationwide. Some forms of federal student aid and funding for a variety of research programs are likely to find themselves on the chopping block, according to the White House and university administrators.

Several critical revenue streams for universities are at risk: The National Science Foundation, National Institutes of Health and the National Endowment for the Humanities are all subject to cuts that fall within both the 7.6 percent cut to mandatory spending and the 8.2 percent cut to discretionary spending.

Students’ tuition rates won’t go up, and Pell Grants are protected; but the federal work-study program and other scholarship sources, like the Supplemental Educational Opportunity Grant, would be subject to the 8.2 percent cut.

Some examples of how that breaks down, according to the White House: 4,720 low-income students in Texas would lose federal financial aid; an estimated 2,370 college students in Iowa will lose federal college aid; 4,520 low-income college students in New York would lose money; 6,250 Florida low-income students and 9,600 in California would get hit.

‘On campuses, uncertainty reigns.‘

The ambiguity of how the sequester will affect student aid, jobs, and research is adding to a gloomy atmosphere for colleges and universities.  Estimates on the dollar amounts and number of students affected differ significantly depending on the source.

Some estimated numbers

• 1,000 fewer NSF research grants
• Several thousand researchers could lose their jobs
• Over 50,000 work study students could lose their jobs  (another source puts the number closer to 9,000)
• About 50,000 to 100,000 college students could lose SEOG federal aid, depending on source of estimates
• Over 100,000 middle/high school students could lose TRIO and Gear Up federal aid (college prep programs)
• “Student loan origination fees will increase from 1% to 1.076%”, and some processing delays may occur

It’s hard to pin down accurate numbers.

Arne Duncan:

“That ($86 million cut) would mean for the fall as many as 70,000 students would lose access to grants and to work-study opportunities,” Duncan said during the briefing….

Chronicle of Higher Education:

… programs like the Supplemental Educational Opportunity Grant and Federal Work-Study would be cut by millions of dollars, eliminating more than 100,000 students from participation.

Meanwhile, here in New York we learned how the cuts will affect K-12 education.

The School Boards Association has detailed district-by-district predictions of how the $102 million in federal cuts would be spread out.

Federal grants make up roughly 8 percent of statewide education expenditures. Most school money comes from the state budget and local revenues, including property taxes.

My local school district is slated to lose $50,141 in federal aid.

Quick Links – Obama on education; stereotyping boys; chimps have better working memories than those of humans

◊◊◊  Obama on education in State of Union address (Washington Post)

Universal ‘high-quality’ preschool

Tonight, I propose working with states to make high-quality preschool available to every child in America.  Every dollar we invest in high-quality early education can save more than seven dollars later on – by boosting graduation rates, reducing teen pregnancy, even reducing violent crime.  In states that make it a priority to educate our youngest children, like Georgia or Oklahoma, studies show students grow up more likely to read and do math at grade level, graduate high school, hold a job, and form more stable families of their own.  So let’s do what works, and make sure none of our children start the race of life already behind.  Let’s give our kids that chance.

High-tech curriculum for high schools

…  Tonight, I’m announcing a new challenge to redesign America’s high schools so they better equip graduates for the demands of a high-tech economy.  We’ll reward schools that develop new partnerships with colleges and employers, and create classes that focus on science, technology, engineering, and math – the skills today’s employers are looking for to fill jobs right now and in the future.

Link higher education federal aid with ‘affordability and value’

Tonight, I ask Congress to change the Higher Education Act, so that affordability and value are included in determining which colleges receive certain types of federal aid….

College Scorecard

…  And tomorrow, my Administration will release a new “College Scorecard” that parents and students can use to compare schools based on a simple criteria: where you can get the most bang for your educational buck.

…
◊◊◊  “..the study found that stereotypes seemed to be holding boys back.” (Dr. Helen at PJ Media)

Boys may be suffering from stereotype threat.

The belief that girls are brainier and better behaved is holding boys back at school, research suggests.

A study of British pupils found that, from a young age, children think girls are academically superior.

And, what’s more, they believe that adults think so too….

And by the age of seven, boys shared the belief that they were naughtier and did less well at school. Follow-up questions showed the children thought that adults had similar expectations.

The second part of the study found that stereotypes seemed to be holding boys back…

Study co-author Dr Robbie Sutton said: ‘Our study suggests that by counteracting the stereotypes in the classroom – wherever they might have come from originally – we can help boys do better.’

Noncognitive skills come into play in boys’ poor school performance.

This reminds me of the study I found on girls taking over at college. In it the researchers state:

One source of the persistent female advantage in K–12 school performance and the new female lead in college attainment is the higher incidence of behavioral problems (or lower level of noncognitive skills) among boys. Boys have a much higher incidence than do girls of school disciplinary and behavior problems, and spend far fewer hours doing homework (Jacob, 2002).

Are boys’ poor behavior and low academic performance partly due to low expectations?  Dr. Helen wonders if teachers tend to use grades to punish boys since other discipline options are more limited.  A related aspect is that much of early academic success may hinge on noncognitive and literacy skills, which boys tend to develop later than girls.

…
◊◊◊  Working memory of chimpanzees is ‘far better’ than that of humans

Chimpanzees can far outperform humans in some mental tasks, including rapidly memorising and recalling numbers, Japanese scientists have shown.

A good working memory is needed to survive in the wild.

Prof Matsuzawa, who combines the study of wild chimpanzees in west Africa with research using the captive colony in Kyoto, said such a good working memory – the ability to take in an accurate, detailed image of a complex scene or pattern – was an important survival tool in the wild.

For example, the apes can quickly assess and remember the distribution of edible fruit in a forest canopy. Or, when two rival bands of chimpanzees encounter one another, they can assess the strength of the rival group and decide whether to fight or flee.

Memory of chimps ‘far better than human’ (Financial Times)

How did the last-minute fiscal cliff legislation affect college financial aid?

How did the American Taxpayer Relief Act of 2012, AKA as the last-minute fiscal cliff legislation, affect college financial aid?  Mark Kantrowitz gives an update.

• The American Opportunity Tax Credit, which helps defray undergraduate college education expenses by allowing borrowers to deduct up to $2,500 in student loan interest, has been extended for five years, through the end of 2017.
• The Tuition and Fees Deduction, which allows taxpayers to claim up to $4,000 in tuition expenses, has also been extended. The deduction, which was set to expire at the end of 2011, will continue through the end of 2013.
• Some changes to the Coverdell Education Savings Accounts have been made permanent. This means that the contribution limit has been increased to $2,000 from $500 and that the account may be used for elementary and secondary school expenses. Higher income phaseouts have also been made permanent.
• The deal permanently repeals a five-year limit for deducting up to $2,500 via the Student Loan Interest Deduction. This means that students and families can claim on their tax forms student loan interest beyond 60 months.

What happens if no further action is taken to prevent across-the-board cuts of 8.2% in student aid that would be part of a delayed sequestration?

Unless Congress acts before March 1, Mr. Kantrowitz said, fewer students will be able to get work-study jobs and Federal Supplemental Educational Opportunity Grants, as these programs would experience cuts. Fees for federal education loans would go up, he added, and the maximum Pell Grant would be cut by as much as $400.

Related:

• Fiscal cliff would hurt education tax benefits (and employment prospects) (Cost of College)
• Tax season reminders about education tax benefits (Cost of College)n

Quick Links – online AP courses; no guilt about younger generation’s national debt burden; smartphones probably don’t improve academic achievement

»»»  Low-income high schools in New York will get access to ‘online and blended” AP courses

BUFFALO — High school students in Yonkers and 16 other poor districts will have better access to advanced placement coursesunder a program featuring virtual classrooms.

The state Education Department this week said $17.3 million in federal Race to the Top Funds will be distributed to 17 districts or consortia of districts under the state’s Virtual Advanced Placement Program.

Education Commissioner John King says low-income students don’t always get the chance to take AP courses, which give students a leg up in their college applications. The 18-month grants will fund the development of online and blended courses that combine online and traditional classroom instruction.

Other districts receiving funding include New York City, Buffalo, Rochester, Niagara Falls, Huntington and South Huntington.

Yonkers schools get virtual learning grants (lohud.com)

»»»  A baby boomer is feeling less guilty about leaving the younger generation with so much debt because, hey, it’s what the kids voted for.

From a  ”50-something, white, conservative” Republican’s letter to the editor of Barron’s:

As reported by the national exit poll conducted by Edison Research, Americans aged 18 to 29 voted 60% to 36% for Barack Obama. Prior to Obama’s re-election, I believed that it was morally wrong for my generation to pass a crushing national debt on to the next one.

The debt will top $20 trillion before Obama moves out of the White House, and it will include spiraling retirement-related costs that the administration has shown zero interest in bringing under control, largely driven by baby boomers piling into the Social Security and Medicare systems.

With the president’s electoral crushing of Mitt Romney, my overriding sense of morality and guilt have vanished. Thank you, kids!

»»»  Hispanic and African-American students lag behind white students in academic achievement, but surpass them in using smartphones for homework.

That’s my takeaway from an article informing us that 1 in 3 middle-schoolers uses smart phones for homework.  Nowhere in the article was there any mention that using these digital devices actually improves academic achievement.

The national survey of 1,000 students in Grades 6 through 8 found that:

• 39 percent use smartphones for homework.
• 26 percent use smartphones at least weekly for homework.
• 31 percent use tablets for homework.
• 29 percent of those with household incomes under $25,000 use smartphones for homework.
• Hispanics and African-Americans are more likely than whites to use smartphones for homework, at 49 percent, 42 percent, and 36 percent, respectively.

Fiscal cliff would hurt education tax benefits (and employment prospects)

If no agreement is reached on budget issues by December 31, many educational tax benefits will tumble over the “fiscal cliff”.

According to the New America Foundation’s Ed Money Watch, among the deductions that will expire or revert to lower levels are six that totaled $23 billion in 2012: the American Opportunity Tax Credit (AOTC); the exclusion from taxable income of employer-provided educational assistance; the exemption allowing parents to claim students aged 19-23 as dependents; the student loan interest rate deduction; several health care-related scholarships; and the Coverdell account provision allowing families to invest up to $2,000 annually in to an investment account for a child’s educational expenses with no taxes on earnings or withdrawals.

According to this chart from Ed Money Watch, many of these changes will affect low- and middle-income families.

Recession and higher unemployment
I suspect that many people are “blissfully ignorant” of these and other implications of the upcoming fiscal cliff.  For college students, the loss of these tax breaks is probably less likely to hurt them than would the lower GDP and rising unemployment brought on by higher taxes.

Related:

• Political outlook for the Pell Grant and other federal college aid (Cost of College)
• The fiscal cliff – higher taxes may not be so bad if you’re seeking college financial aid (Cost of College)

Political outlook for the Pell Grant and other federal college aid

Next year the Pell Grant program will face a $5.7 billion shortfall and interest rates on federally subsidized students loans are scheduled to double to 6.8%.  Given the pressure to curtail overall government spending, it’s prudent to expect changes in federal college aid programs.

Sequestration  - The Pell Grant is protected from first-year cuts, but all federal student loan programs would be cut by 8.2% if no agreement is reached to avert the fiscal cliff.

Student loans  –  Several options have been discussed, including doing away with the subsidy but lowering interest rates by tying them to U.S. Treasuries.  For the purpose of targeting lower-income students, it has been argued that the recently enhanced income-based repayment program does a more effective job than loan subsidies.

Pell Grant  –  A push to overhaul Pell grants has come from various directions, with a common perspective that they need to become more efficient and effective.  Some ideas are to use the grants as an incentive for higher college completion rates and increased state aid for low-income students.

A fuller discussion of the issues can be found at What’s Next for the Pell Grant? (Inside Higher Ed).

———————————————————–

Does the government make a profit from student loans?

From What’s Next for the Pell Grant? (Inside Higher Ed), this caught my attention:

Even subsidized loans are a moneymaker for the federal government under the current accounting system, notes Sarah Flanagan, vice president for government relations and policy at the National Association of Independent Colleges and Universities.

But this is contested by a spokesperson for the Democrat-controlled Senate Committee on Health, Education, Pensions and Labor in a PolitiFact piece:

Subsidized loans do not make money for the government, Sessions said. They actually cost the federal government money.

An explanation of how student loans are a money-maker from This Can’t Be Happening:

Inflation, according to the government’s own statistics, is running at 2.7%. In other words, the government, which is the lender in the case of Stafford Loans, is already making 0.7% on its “subsidized” loans to undergraduates. And the inflation rate has been considerably lower in prior years, so the government has actually been making out like a bandit longer term. If it were to start earning 6.8% on these loans, like it’s already making on older loans, unsubsudized Stafford loans and Perkins Loans, the Treasury would be raking in huge profits on a loan program which is supposed to be helping make college affordable for lower income and middle-income students.

And this from the Minneapolis Star Tribune:

Now, the possibility that the federal government actually makes money on student loans may sound wildly improbable. Over the last several months we’ve heard repeatedly that keeping interest rates at the current level of 3.4 percent will “cost” the federal government $6 billion. Republicans want to pay for the reduced interest rates by trimming spending from health programs. Democrats want to go after tax breaks for businesses.

But the truth is that taxpayers do quite well by the student loan business. If you think about it just a little, it’s not hard to figure out why: The U.S. government pays almost nothing to borrow money that it lends out to college students at much higher interest rates. The current interest rate on a subsidized Stafford loan is 3.4 percent; on an unsubsidized Stafford loan the interest rate is 6.8 percent.

The fiscal cliff – higher taxes may not be so bad if you’re seeking college financial aid

Politicians may be close to a deal that will avoid the dreaded fiscal cliff, thereby averting a $450 billion tax increase that would affect most American households.  However, if we find ourselves tumbling over the edge of that cliff on January 1, there is at least one possible silver lining for parents of college students.

Higher Taxes Can Increase Your Child’s College Aid Eligibility

Paying higher taxes can actually increase your child’s eligibility for need-based college financial aid. The reason is that in the formulas used to determine a student’s need for financial aid, federal, state and FICA taxes that parents and students pay get subtracted from their respective incomes. The more taxes you pay, the less income the formulas determine you’ll have available after taxes to contribute toward the cost of college. Depending on the cost of the colleges your child is considering, the child’s aid eligibility may go up because the child’s expected contribution will go down as the result of you paying more in taxes.

The Fiscal Cliff and Need-Based Aid Eligibility

Colleges determine your child’s eligibility for need-based aid by subtracting the amount you are expected to contribute toward the cost of attendance (cost of attendance – expected family contribution = need). The more taxes you pay, the lower your child’s expected family contribution (EFC). At colleges where the overall cost of attendance is higher than your child’s EFC, the child will qualify for need-based aid. If you end up paying more in taxes if we go over the so-called “Fiscal Cliff” when the Bush-era tax cuts expire this December 31st, then your child’s EFC will go down and aid eligibility at the colleges where your child qualifies for need-based aid will go up.

A simple rule of thumb is that your child’s EFC will drop by about 47% of every dollar you pay in additional taxes on the same amount of income.

Higher taxes may not be so bad if you’re seeking college financial aid, but they can be tough on  long-run economic growth.

Related:  How Would the Fiscal Cliff Affect Typical Families in Each State? (Tax Foundation)

Quick links – Parents burdened by ‘crushing’ student loans; young voters turned out in record numbers; longing for pensions

——  ’Child’s Education, but Parents’ Crushing Loans’  (New York Times)

There are record numbers of student borrowers in financial distress, according to federal data. But millions of parents who have taken out loans to pay for their children’s college education make up a less visible generation in debt. For the most part, these parents did well enough through midlife to take on sizable loans, but some have since fallen on tough times because of the recession, health problems, job loss or lives that took a sudden hard turn.

And unlike the angry students who have recently taken to the streets to protest their indebtedness, most of these parents are too ashamed to draw attention to themselves.

Related:  Paying student loans in your 20s, 30s, and beyond interferes with saving for retirement (Cost of College)
…

——  College students voted in record numbers with most supporting Obama.

According to Fair Elections, 19 percent of all voters this year were between the ages of 18 and 29, which is a percentage point higher than the turnout of young voters in the 2008 presidential election.

Spaulding said while total number of young voters remained “on-par” with the numbers from 2008, in some states, such as California, the percentage of voters under 30 years old increased by over 5 percent.

He attributes the spike in young voter turnout to the increasing ease of voter registration. Many first time voters are uninformed as to how and where to register which eventually causes them to miss out on voting entirely, he said. Spaulding said the rise of online registration is one of the biggest factors in increasing participation.

Obama support slipped, but remained higher than for Republican candidate.

In some battleground states, tallies show, their ballots were decisive factors in the president’s victory….

… Sixty percent of young people voted for him, compared with 66 percent four years ago….

… As in 2008, the edge young voters gave to Mr. Obama proved decisive in some states. According to Circle, in the battleground states of Florida, Ohio, Pennsylvania, and Virginia, if young people had not voted or if only half of them had supported the president, Mr. Romney would have won.

…
——  Employees lust after pensions, but the memory may be better than the reality.

… In several head-to-head questions, researchers asked whether workers would prefer it if their employers offered them a guaranteed retirement benefit (essentially a pension) or other perks. A large plurality – 49% — chose the pension over the opportunity to earn a bigger bonus….

… A generation ago, pension plans were offered to more than four out of five private-sector workers; today it’s fewer than one in three. Pensions have largely been replaced by defined contribution retirement plans like 401(k)s, which were hammered along with stock and bond prices during the financial crisis….

There’s also some evidence workers may be looking at the past with rose colored glasses. Another recent study from the Investment Company Institute, the mutual fund industry’s trade group, argues exactly that. Its findings: In 1980, payments from private pension plans accounted for only about 8% of retirees’ overall income, compared to 53% for social security. (The rest came from other sources, ranging from other forms of government help to dividends on stocks.)

Since most 401(k)s are stocked with mutual funds, of course, the institute has a lot to gain from promoting the current 401(k) system. But the study is still worth note. The explanation: While many workers had access to pension plans thirty years ago, many failed to collect full benefits because of various factors. Switching jobs, for example, tended to reduce employees’ standing under formulas plans used to calculate payouts. The government moved to fix these problems with new laws in the 1970s and ‘80s, but by then the move to 401(k)-type plans was already underway.

“There’s a persistent misconception that there once existed a time when private sector workers typically retired with full pension benefits,” says ICI senior economist Peter Brady. “Many actually received little or nothing.”

Were pensions as great as you remember? (WSJ MarketWatch)