November 16, 2015 – HIGHER ED

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Turning away from the problems in the administration’s foreign policy, we return to their disaster doubling the amount of student loans. First off is the NY Times which has come to think student debt is worse than bien pensants have thought. But you knew that because you’ve been reading Pickings. 

After a series of blockbuster hearings held 25 years ago on abuses in the higher education industry, Congress created a system to protect undergraduates from risky student loans.

But two weeks ago, the Education Department released a trove of new data suggesting that the system is failing and that, at some colleges, the saddling of students with loans they cannot afford to pay down is far more dire than anyone knew.

The loan crisis hits hardest at colleges enrolling large numbers of students from low-income backgrounds. These undergraduates have to borrow for college, then often have difficulty finding well-paying jobs after graduation — if they graduate at all. …

… In September, the department made a different calculation. Instead of default rates, the department calculated nonrepayment rates, which include both defaulters and borrowers who have never paid a single dollar of principal on their loans.

The nonrepayment category includes people who are only paying interest, have delayed making payments by enrolling in graduate school or are getting loan extensions. The nonrepayment rates were calculated over a longer time period: at one, three, five and seven years after students leave college.

Some of the numbers are startling. American National University — a for-profit chain offering degrees in business, health care and information technology, both online and at 30 campuses in six Midwestern states — has an official default rate of 8.5 percent, well below the national average of 11.8 percent. But its five-year nonrepayment rate is 71 percent. Even after seven years, most of the university’s students, the large majority of whom borrow, have failed to pay back a penny of their loans. …

… Among both public and private nonprofit institutions, the debt problem is most acute when students with very little money attend colleges with very little money. All 25 of the public universities with the highest five-year nonrepayment rates are historically black institutions. Of the 25 private colleges with the worst nonrepayment rates, 22 are historically black. One example, Lane College in Jackson, Tenn., has a 12.9 percent default rate but a 78.2 percent nonrepayment rate.

Historically black colleges are neither unusually expensive nor profligate institutions. Most have served their communities for decades or longer, enduring racism and inadequate funding while enrolling young people who are often low-income, first-generation college students. As a result, despite the fact that tuition at historically black colleges is often much lower than at well-heeled private colleges, a vast majority of their students borrow.

That so many graduates of black colleges struggle to repay their loans may exacerbate racial wealth disparities. These nonrepayment rates, moreover, do not include the private loans that many students take out once their federal aid is exhausted, or the debt that parents are increasingly carrying to pay for their children’s college educations.

The new data may prompt Congress to revisit its system for ensuring that students who take on debt have a fighting chance to pay it back.

 

 

Megan McArdle of Bloomberg News wonders what we’re buying with $1,000,000,000,000 (That’s a trillion) in student loans.

College is expensive, and getting more so every year. Since most families don’t have tens of thousands of dollars lying around, the government has responded with ever-more-generous student loan programs.

First there were the loans themselves, with interest subsidized while you’re in school. Then, when that proved inadequate, we instituted income-based repayment, allowing students to cap their payments at a percentage of their discretionary income (stretching out the loan, and getting forgiveness on any balance remaining after 25 years). Then, since that wasn’t quite enough, we made the terms more generous. Now the Obama administration has announced that it’s making 5 million more people eligible for the program.

You know what they say about doing the same thing over and over again and expecting a different result. This is certifiable. College is too expensive, so have the government make it easier to finance — then keep shifting more and more of the cost burden to the government, without doing anything about the underlying cost inflation that is making it necessary for government to get into the finance business.

Obviously, this can’t go on indefinitely. …

 

 

Richard Vedder of PopeCenter lists seven ways the Fed Ed Department has made higher Ed worse.

… The 30 years between 1950 and 1980 were the Golden Age of American higher education. The proportion of adult Americans with college degrees nearly tripled, going from 6 to 17 percent. Enrollments quintupled, going from 2.3 to 12.1 million. 

By the end of the period, the number of doctorates awarded in engineering had quintupled and over 40 percent of Nobel Prizes were going to individuals associated with American universities. 

This was the era in which higher education went from serving the elite and mostly well-to-do to serving many individuals from modest economic circumstance. State government support for higher education rose dramatically—spending per student rose roughly 70 percent after inflation. 

During this period, however, the federal role was quite modest. …

… Compare the Golden Age to the post-Department of Education era (1980 to 2015). While college attainment has continued to grow, in percentage terms the growth has slowed. But that is not all. Let me briefly enumerate seven other unfortunate trends.

First, of course, education costs have soared. Tuition fees rose more than three percent a year in inflation-adjusted terms, far faster than people’s incomes. As new research from the New York Federal Reserve Bank demonstrates, rising federal student financial aid programs are the primary factor in this phenomenon.

If tuition fees had risen as fast after 1978 as in the four decades before, they would be about one-half the level they are today, and the student debt crisis would not have occurred. Presidential candidates would not be talking about “free” tuition. …

… Sixth, the Department is guilty of regulatory excesses and bureaucratic blunders. For example, the Office for Civil Rights (OCR) imposes a “preponderance of evidence” standard on colleges in sexual assault cases that violates American ideals regarding due process and fair treatment of accused. Twenty-eight members of the law faculty at Harvard, among others, have bitterly complained about that, but the OCR continues its crusade. 

Also, the form required of applicants for federal student aid (FAFSA) is Byzantine in its complexity—the 2006 Spellings Commission criticized it severely—but nothing important has been done about it.

Seventh, the one arguably useful function of the Department is to provide information to consumers and taxpayers about college performance. Yet Department bureaucrats have done very little to give useful information on student learning, post-graduate success, consumer satisfaction, et cetera. …

 

 

And in the Washington Post a former editor of the Chronicle of Education writes on how baby boomers have presided over a disaster in higher Ed.

Fifty years ago this week, President Lyndon Johnson signed the Higher Education Act, ushering in an era of massive federal support for college students through a flurry of new programs: tuition grants, guaranteed student loans, and work-study funds. The law allowed a much greater swath of Americans to earn a college degree regardless of their family income. During the following decades, enrollment at campuses across the country grew threefold, to some 20 million students.

But today, Johnson’s vision of the Higher Education Act as a great equalizer in the American economy is at risk. Indeed, the divide between the haves and have-nots in higher education is almost as great today as it was in the mid-1960s. In the past decade alone, the percentage of students from families at the highest income levels who received a bachelor’s degree has grown to 82 percent, while for those at the bottom it has fallen to just 8 percent.

Who is to blame for this growing divide? In large part, the same generation that mostly benefited from the original ideal of the law: the Baby Boomers.

When that generation went to college in the 1960s and 1970s, many of them paid little in tuition at nearly-free public institutions or received generous federal and state grants that paid for most of their bachelor’s degree. But during the past two decades, as members of that same generation came to power — in Washington, in state legislatures, or as college presidents and trustees — they presided over the decay of the basic building blocks of the Higher Education Act as they drastically increased tuition and pulled back on financial aid.

In a column last week about how Baby Boomers are to blame for much of what’s wrong with the American economy, The Washington Post’s Jim Tankersley mentioned how college costs have more than doubled since the early 1980s. But Tankersley’s list of grievances with the Baby Boomers didn’t go far enough when it comes to higher education. A college degree has become much less affordable for families in recent years largely because public officials and college leaders have abandoned three basic elements of the original Higher Education Act: …

 

 

Another day without cartoons, but from a blog in Canada, Syrup Trap, we learn about a wayward coyote who wandered onto a campus in British Columbia. Certain predictable mishaps have befallen the canine.

VANCOUVER (The News Desk) — A coyote that has been seen wandering around the campus of the University of British Columbia has suddenly found himself with more than $21,000 in outstanding student loan debt.

“I don’t know, yesterday I lost my way in the forest and ended up wandering around the campus for a few hours. Next thing I know, I’m getting an email from the NSLSC saying that my loans are going into repayment,” said the coyote.

“I am not in a position to take on this much debt right now.”

The coyote told press that his predicament is proof of how much the costs of higher education have spiraled out of control in recent years.

“All I did was eat a squirrel near the Main Library and make eye contact with a professor. Many students spend five, sometimes six years bathing, breeding and foraging on this campus. I can’t imagine what their costs are like.”

Vice-president Students Louise Cowin said that students should not expect exemption from student fees just because they are wildlife.

“I don’t care if you’re an animal — a wolf or a bird or whatever. Many of our students manage to complete undergraduate degrees without displaying any higher-order cognitive functioning.”

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