Tag Archives: Student Loan Debt

For-Profit College Scrutiny

22 Jun

Congressional Democrats are finally turning up the heat on for-profit colleges and demanding some accountability for the 25% of federal student-aid they receive.  On Monday, Senators Tom Harkin and Richard Durbin, Representatives George Miller, Ruben Hinojosa and Timothy Bishop, sent a letter to the Government Accountability Office demanding a review of the quality of these institutions.

In numerous recent news stories and documentaries, for-profit colleges are accused of being more loyal to profits over the education of their students.  Senator Harkin summed up the balancing act: “While for-profit colleges have a responsibility to their shareholders, they also have a responsibility to provide educational value to their students, and an obligation to ensure that the federal dollars they receive are well spent.”

Review of for-profit colleges is much overdue.  With the costs of college rising, many are turning to these colleges as alternatives that will allow balancing school with work.  However, for-profits leave many students with high amounts of student loan debt and a lack of marketable skills.  Further, for-profits lead by example in the push to corporatize even non-profit institutions of higher education, degrading the quality of the educational experience across the board.

In particular, the letter asked the GAO to look at:

• The growth and change in the postsecondary education sector over the last several years, including changes in the structure and governance of institutions, recruitment practices, and the type and delivery of educational programs provided;
• What is known about the quality of educational programs offered by proprietary institutions and the outcomes for students attending such institutions, such as program completion rates, professional licensure rates, job placement rates, and student loan indebtedness;
• Whether existing program integrity safeguards are sufficient to protect against waste, fraud and abuse in the Federal student aid programs; and
• The extent to which proprietary institutions’ revenue is comprised of Federal student aid offered under Title IV of the Higher Education Act as well as other Federal funding sources.

In a statement, Senator Durbin said, “Millions of dollars are being sent to for-profit schools every year through federal student aid programs… It is essential that these institutions are held a high academic standard in order to ensure that students are given access to a high quality education.”

Last week, the Department of Education delayed issuing a regulation that would have prevented for-profits from receiving federal aid if their graduates are not properly prepared for the labor market.  This Thursday, the Senate Health, Education, Labor and Pensions Committee is holding a hearing on the for-profit industry as well.

Who Is to Blame for Student Debt?

3 Jun

Readers of Young Workers Movement likely already know the answer to that question: the rising cost of higher education, combined with a labor market that values that high-priced education possibly regardless of quality.

However, Ron Lieber in a New York Times’ column last week placed the blame with students for failing to properly consider the cost of college when enrolling and their colleges for failing to counsel them.  His argument is that smart students and their parents should better assess what taking out substantial student loans will mean to their future financial situation.  Fair enough.  $100,000 in student loan debt – which is nearly impossible to default on in bankruptcy court – should set-off some alarm bells.  But that’s your #1, top-pick choice of school, that is both academically stimulating and socially engaging, money seems not to matter.  Besides, society tells you to go to the best college you can get into, and, as a general trend, the higher ranked schools cost more.

Lieber also argues college admissions counselors should talk with students about their ability to afford the school, which might bring them back to reality.  There is a reason college admissions counselors do not look at financial statements – having nothing to do with the awkward inappropriateness of that conversation, which Lieber dismisses.  Admissions departments do not have financial information because it could then potentially be used in determining enrollment.  How could schools then be prevented from only choose the rich kids so as to avoid enrolling anyone that would need financial aid?  There are already too many challenges facing low-income students, having to convince admissions counselors that spending a few financial aid dollars on them is a good investment, shouldn’t be a part of the equation.

So what do we need to do?  We need to change the system.  The federal government’s transformation of the student financial loan system is a great first step, as it will increase the value of federal aid and stop paying big banks what the government could do itself.  The financial reform bill in conference right now is also a great step, as it will put some oversight over the big banks dolling out private loans.

The answer is taking the cost out of college.  Imagine a system of higher education where money does not determine if or where you enroll, does not drive the quality of the education nor does it harm your ability to be a self-sustainable, financially-sound young worker when you graduate.  Rather than continue to subsidize the cost of college through grants and loans, the federal government should look to subsidize the cost of college by giving those grants to the colleges directly.  Invest directly in the schools, not the students.  The status quo allows for the cost spiral to continue escalating upwards without breakers.  The closest thing we have in the US to this system is the public college system of state and community facilities of higher education, but it is under attack by budget cuts.  Change of this magnitude will be difficult to come because of the degree of corporatization of higher education, but in the meantime blaming the students won’t help.  Blame the system they are caught up in.

Cost of College

27 May

Too many students are scared off from attending their favored colleges because of costs, and then frequently underestimate their debt level upon graduation. According to a recent survey by the College Board
and Art & Science Group, LLC, students and parents have large concerns about the costs of college – but they are not adequately prepared with quality information to make decisions.  (This study was originally highlighted in an article featured in the 5/25 links, but some of its results are so important that they deserve their own post.)

Students and parents are making choices about where to attend college, and even where to apply, based upon sticker price.  39% of students ruled out colleges based upon cost – 17% don’t even apply to the pricey schools.  26% of students report that their parents insist they attend the most affordable school.    And 40% of parents actively ensure that students are applying to affordable schools.

Additionally, 41% of students are very concerned that they won’t be able to get enough student loans.  And two-thirds are very or somewhat concerned about their ability to repay student loans after graduation.

After applying, in calculated their expected financial aid and needed loan amounts, students often over-estimate the aid they will receive.  First of all, 93% of students apply for aid – a number that is no where near close to the number of students who receive aid (65.6%, according to the Department of Education).  Further, students are expecting grants and scholarships to cover more than 1/3 of their college costs and loans to cover 1/5.  But when asked how much they expect their monthly payments to be after 40% were unsure, and 44% expected their payments to be under $200 (the national average is $206).

This survey makes clear that (a) college costs are too high and (b) that the lack of financial aid literacy can create a trap for many prospective students.  Our colleges must do more to help students figure out what the real costs of college will be to ensure that young workers do not get enslaved in the student loan debt crisis.

Raise the Wages of Non-College Youth

18 May

Yesterday, Young Workers Movement posted on David Leonhardt’s analysis of the value of college – why students who probably shouldn’t go to college do.  But the answer lies between that and the original argument posed in the New York Times’ Week in Review “Plan B – Skip College“, which argued that college isn’t for everyone.  In fact, the fastest-growing professions require vocational training more than a four-year bachelors degree:

College degrees are simply not necessary for many jobs. Of the 30 jobs projected to grow at the fastest rate over the next decade in the United States, only seven typically require a bachelor’s degree, according to the Bureau of Labor Statistics.

Among the top 10 growing job categories, two require college degrees: accounting (a bachelor’s) and postsecondary teachers (a doctorate). But this growth is expected to be dwarfed by the need for registered nurses, home health aides, customer service representatives and store clerks. None of those jobs require a bachelor’s degree.

However, the article falters when it argues that those who drop out of college do so because they are not smart enough or devoted enough to get by.  Many are dropping out because they are feeling the pressure of student loans and feel the need to get into the labor market earlier to begin paying some of that money back.  The student debt burden can be devastating to those who do not make it through, but guidance counselors shouldn’t be telling low-performing students not to go to college because of that.

Instead, high school guidance counselors need to do a better job of advertising the fast-growing careers that require vocational schooling or certificate attainment – as some economists have argued.  To do this we first need to strengthen these programs that have been sucked up into the “for-profit” higher education model (think of all those high-tech vocational training programs advertising on tv.)

But, more fundamentally, we need to make sure that the jobs young people get after completing these programs are good paying jobs.  Returning to David Leonhardt’s argument, you cannot steer young people away from college unless you reduce the earnings gap between those with a college education and those without.  The best way to raise the floor, of course, is through a more robust union movement.

Young Workers and Financial Reform

6 May

(Photo by Chris Hondros/Getty Images)

Today the Senate rejected several an amendment by Senator Richard Shelby (R-AL) to gut the Consumer Financial Protection Bureau.  Why should young workers care?

a) Since young workers are the most susceptible to unscrupulous credit card, student loan, and auto lenders, having a consumer advocate to regulate these bottom-feeders would be useful.

b) Its time we reined in the greedy and reckless behavior of the big banks, and brought the financial sector more in line  with its purpose: to maintain the necessary capitol for strong businesses to keep growing, providing good jobs for working families.

Young workers have been caught up in a world of debt.  USA Today summarized current data and statistics in an article in April:

•About 37% of 18- to 29-year-olds have been underemployed or out of work during the recession, the highest share among the age group in more than three decades, according to a Pew Research Center study released in February.

•This generation is the least likely of any to be covered by health insurance. Just 61% say they were covered by some form of a health plan, the Pew study said.

•Only 58% pay monthly bills on time, a National Foundation for Credit Counseling (NFCC) 2010 survey said.

•60% of workers 20 to 29 years old cashed out their 401(k) retirement plans — typically a big financial no-no because such a move squanders retirement assets and forces the recipient to pay a tax penalty — when they changed or lost jobs, an October study by Hewitt Associates said.

•Nearly 70% of Gen Y members are not building up a cash cushion, and 43% are amassing too much credit card debt, says a November MetLife poll.

•On average, Gen Yers each have more than three credit cards, and 20% carry a balance of more than $10,000, according to Fidelity Investments.

•Millennials are graduating from college with an average of $23,200 in student debt, according to the most recent data from the Project on Student Debt. That is a 24% increase from 2004.

The personal debt crises that young workers are suffering through began before the recession and was caused by the same big firms that are fighting reform now.  As Up To Our Eyeballs: How Shady Lenders and Failed Economic Policies are Drowning Americans in Debt, published in 2008, the debt crisis hit young workers and working families generally the hardest.  Take the story of 26 year-old Rene whose student loan debt and underemployment has forced her to repeatedly ask her mother for help.  “I shouldn’t have to be doing this. I’m twenty-six years old. I live on my own, I have a full-time job. I shouldn’t have to ask my mom to feed me.”

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