Tag Archives: subsidy

The Beltway For-Profit Witch Trials

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In mid September, the Congressional duo of George Miller and John
Tierney joined their Senate colleagues Tom Harkin and Dick Durbin and the
Department of Education in what might be described as the ongoing Beltway Witch
Trials, where the alleged witches are the colleges that are legally organized
on a profit-making basis. Messrs. Miller and Tierney proposed a new line of
assault to rein in these alleged evil doers that they have creatively named
the College
Student Rebate Act of 2012
. The objective of the proposed
legislation is to exert political control on how private sector colleges
allocate their financial resources, as the bill calls for a cap of 20 percent
for expenditures on “advertising and promotion activities, excessive
administrative expenses including executive compensation, recruiting, lobbying
expenses, or payments to shareholders.” Expenditures on these activities
exceeding the cap would need to be refunded to students and/or the government.

Rep. Miller told the Huffington
Post
that since “for-profit colleges tend to get a great deal of
revenue directly from the federal government…how schools spend this money must
be carefully examined.”Examination is one thing, but what the bill would really
do is enable politicians and unelected bureaucrats to limit the ability of
private firms to attract customers and strengthen their brands, compensate
their managers for successful performance, protect themselves from additional
onerous regulations, and reward owners for their investments. The bill would
seriously inhibit the incentive structure necessary to promote private investment,
innovation and growth in an industry greatly in need of improved efficiency. 

Continue reading The Beltway For-Profit Witch Trials

Three Pell Grant Scams

Many politicians, including senators such as Tom Harkin and Dick Durbin, have grown indignant over the allegedly vast amounts of higher education money captured by for-profit institutions via the Pell Grant program. In fact, they consider this something of a scam. The truth, of course, is that throughout its history, including now, the vast majority of Pell Grant funds—at least 75 percent– have gone to students attending not-for-profit colleges.

The implication of the criticism, of course, is that for-profit institutions (or at least many of them) are diploma mills, whereas the educational experience offered by institutions untainted by the corruptive influence of profits is of high quality, and provided by selfless individuals working for the public good. I think that is hogwash, but that is a subject for another day. Suffice it to say that there are documented instances where for-profit institutions pressured relatively unqualified students to enroll using Pell Grants, but there are numerous examples of not-for-profit schools doing similar things. The scam here is much broader than the good senatorial critics claim.

Continue reading Three Pell Grant Scams

Some Hope for Higher Ed Reform

The current conversation on higher ed reform coming is unusually platitudinous even for an election year. This was clearest earlier this year during the battle between Barack Obama and Mitt Romney on the proposed federal student loan interest rate, a subject fairly inconsequential in larger problem of sky-high college costs. In his Democratic nomination acceptance speech, President Obama claimed he would work to “cut college tuition in half” in the next ten years. How he would do this, or if he truly grasped what he was saying, is anyone’s guess.

But Senators Ron Wyden (D-Oregon) and Marco Rubio (R-Florida) have shown a great deal of care in crafting the “Know Before You Go Act.” The bill, currently under consideration in the Senate, will “support statewide individual-level integrated postsecondary education data systems.” More specifically, under the proposed bill the federal government will help states coordinate student educational and postgraduate employment data. The bill’s aim is to help consumers make better choices about the products they are considering. Per a press release from Wyden’s office, the bill focuses on making the following metrics more accessible to consumers:

  1. Post-graduation average annual earning;
  2. Rates of remedial enrollment, credit accumulation, and graduation;
  3. Average cost (both before and after financial aid) of the program and average debt accumulated;
  4. The effects of remedial education and financial aid on credential attainment and a greater understanding of what student success can mean.

We should praise the Know Before You Go Act for several reasons. First, instead of trying to instituting IPAB style price-control to help reform educational choices and costs, it respects the consumer’s volition to make his or her own determinations as to what is best for their particular circumstance. As Rubio said, “We want people to know what the new jobs, skills, careers in the 21st century are. The reason you need to know what your professional prospects are is that you have to weigh that against how much you will borrow.” He continued, “I graduated with $125,000 in student loans. That’s nobody’s fault – it was an investment for me. We want kids to have access to information before they make this investment.”

Secondly, the bill does not create a new federal database to obtain data by tracking students. Instead, its coordinates already extant data gathering mechanisms in the states. In describing this aspect of the bill, Wyden sounded like a Republican. “The new database is state-based and individually considered. The states can do this on their own but there’s a problem. There’s no uniform standards. If there’s no standards…then the system is failing families.”

Lastly, of concern to many conservatives, Wyden emphasized that the bill would produce a glut of computer science or accounting majors, to the neglect of the liberal arts. “This legislation is about empowering students to make their own choices. Are we going to miss out on opportunities for rich liberal arts education? I reject the either/or choice. A lot of universities are starting to pick up on labor trends – after 9/11 and Arabic for instance. Is it liberal arts or an education for a high paying job? That’s a false choice.”

Granted, it still seems Congress is far from addressing the main driver of college cost inflation – federal subsidies in the form of loans for anyone who wants them. Said Wyden, “Federal education policy is at a fork in the road. Historically it is about access. I want to keep that focus – support Pell grants, Stafford Loans, and all of the assistance that ensures access.” Nonetheless, a respected Democratic policy thinker is supporting a bill that is conservative in its temperament. By supplying greater amounts of data to consumers, the Wyden-Rubio bill is the right move in reforming an industry badly in need of more transparency and accountability.

Three Things Colleges Don’t Want Us to Know

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Universities are in the knowledge business, and the creation and
dissemination of it is at the very core of what colleges do. Yet some forms of
knowledge about higher education itself are either unknown, or hidden from the
public. Why? Release of the information would prove embarrassing and possibly
even costly to the school.

1. What Are the Teaching Loads?

This is prompted by an email I received from Bill Armstrong, President
of Colorado Christian College and former two-term U.S. Senator. He is looking
for data on faculty teaching loads and cannot find it. Going to the latest Digest of Education Statistics, I learn
that there were 7,500 faculty members teaching agricultural or home economics
courses in 2003 between the ages of 35 and 39, or that there were 1,959
full-time equivalent faculty teaching in Delaware in 2009. But in over 20
tables on staffing, there is not a word on teaching loads.

Why? I suspect the reason is simple: faculty don’t teach very much, and
far less than they used to. I have been around higher education for over 50
years, and my recollection is that at middling quality state schools in the
early 1960s, most faculty taught around 12 hours a week. At those same schools
today, the average load is almost certainly not more than 9 hours. At
top-flight universities, faculty taught about six hours a week in the 1960s,
and often 3 hours or 4.5 hours (one semester, one course, the second semester,
two courses) now.  On average, we have
seen at least a 25 percent reduction in loads.

Why? We are told it is because of the need to expand research output.
And surely the number of academic journals and other outlets has exploded.  But what percent of the research gets
seriously read or cited? Mark Bauerlein of Emory, a regular contributor to
Minding the Campus, has demonstrated that vast amounts of research are seldom
even cited, and that the number of articles written in the last 25 years or so
about, say, Shakespeare, reaches into the tens of thousands. Do not diminishing
returns set in regarding academic research like it does everything else in
life?

Continue reading Three Things Colleges Don’t Want Us to Know

Wesleyan Abandons Need-Blind Admissions

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The
vast majority of American colleges and universities make admission decisions
without considering the financial need of applicants. Only a handful of private
institutions admit their entire first-year class need-blind and then fully meet
the financial need of all of their admitted students through a combination of
grants, loans and employment opportunities. These institutions tend to be our
nation’s most selective, in terms of entrance test scores, and wealthiest, in
terms of their endowment per student levels and their flows of annual giving.
 

Why
do these selective private institutions pursue such policies?  In part it is because as nonprofits they are
major beneficiaries of federal and state tax policies that reduce the federal
and state income tax liabilities of donors who make contributions to them, thereby
increasing the contributions they receive. These policies also exempt them from
having to pay federal and state income taxes on their endowment earnings,
exempt their property that is used for educational purposes from local property
taxes, and allow them to borrow funds for educational facilities at lower
tax-exempt interest rates.  Because of
all of these tax benefits, the public at large is subsidizing these
institutions to the tune of literally billions of dollars of lost tax revenue a
year and the willingness to do so is based upon the belief that the selective
private academic institutions are yielding benefits to society as a whole.  Because many of the leaders of society are
graduates of these institutions and a well-functioning democratic society
requires that leaders come from all socioeconomic backgrounds, these
institutions have long understood that they have a special obligation to admit
and enroll students from all socioeconomic backgrounds.

Continue reading Wesleyan Abandons Need-Blind Admissions

Another College Cost: Lower Birth Rate

Originally posted at Open
Market

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The Washington Times takes
note
of the burgeoning higher
education bubble
in a recent editorial:

The
cost of a college education has soared far in excess of the cost of health
care. This is in spite of — or, more accurately, because of — massive
government involvement in subsidizing and running schools. . . Doing more of
the same isn’t a realistic answer. America is in the midst of what University
of Tennessee Prof. Glenn Reynolds calls the “higher education bubble.” As with
the housing bubble, cheap credit is the primary culprit in inflating the price
of schooling. Federal student loans subsidized by taxpayers have made learning
more expensive, not more affordable.

The
Cato Institute’s Neal McCluskey estimates federal student aid increased by 372
percent between 1985 and 2010, from just under $30 billion to almost $140
billion. To put it another way, as Mr. McCluskey explains, “Taxpayer-funded
outlays per degree rose from $58,755 in 1985 to $78,347 in 2010.” This flow of
cheap money corresponded with rapid growth in tuition at rates well above
average inflation. Mr. Reynolds reports that college tuition grew at almost 7.5
percent annually between 1980 and 2010, when average inflation was 3.8 percent.
At less than 6 percent annually, even health care costs grew at a slower rate
than the university tab.

Young
people aren’t getting much in exchange for this huge outlay. While enrollment
has increased, completion rates remain dismal. Barely a third of students
complete their degrees in four years, and less than 60 percent earn their
degree in six years, according to Mr. McCluskey. That means at least two out of
five enrollees don’t finish and fail to reap the benefits of a post-high-school
education. Even those who complete their programs of study and are fortunate
enough to find employment find that in one out of three cases, their degree
isn’t required for their work.

Continue reading Another College Cost: Lower Birth Rate

Investing in Higher Education Will Not Bring Democratic Equality

old-fashioned-school-room.jpgBy Robert Weissberg


America’s
huge investment in higher education has always had a democratic justification: everyone
should be able to attend college because this opportunity would flatten the
social pyramid. Yes, a North Dakota State and Harvard degree differ in
prestige, but at least the North Dakota State graduate can join the game. Put
ideologically, investing in higher education–more schools for more kids–is
egalitarian.

Reality,
it seems, has refused to cooperate. The billions poured into higher education
have not flattened the social pyramid. If
anything, income gaps have widened as graduates from the top schools often earn
“obscene” salaries while those from lesser schools struggle to find decent jobs
to pay down student loan debt. Charles Murray’s Coming Apart depicts an America where the rich and poor increasingly live in diverging worlds. Clearly,
something is wrong with the traditional narrative that insists that a well-
funded, open access higher education for all can ameliorate the evils of
hierarchy.    

Continue reading Investing in Higher Education Will Not Bring Democratic Equality

A Response to Peter Sacks

I’d like to respond to Peter Sacks’ critique of my new study. Something that I think is lacking from Sacks’ critique is any sort of acknowledgement of what the paper is about. So, for those that haven’t read it yet, here is the basic story of my report…

Continue reading A Response to Peter Sacks

How Federal Aid Drives Up College Tuition

At Bloomberg News, Virginia Postrel writes about how federal
subsidies intended to make college more affordable have instead encouraged
rapidly rising tuitions, in a column entitled, “U.S.
Universities Feast on Federal Student Aid
.” Education analyst Neal
McCluskey links to four studies showing that increased government spending on
student aid results
in large tuition increases
. As Postrel notes, talk of a “higher education bubble” is now common: “As veteran education-policy consultant
Arthur M. Hauptman notes in a recent essay: ‘There is a strong correlation over time
between student and parent loan availability and rapidly rising tuitions.
Common sense suggests that growing availability of student loans at
reasonable rates has made it easier for many institutions to raise their
prices, just as the mortgage interest deduction contributes to higher housing
prices.'”

Continue reading How Federal Aid Drives Up College Tuition

Average Taxpayers Are Heavily Supporting Elite Colleges

An elephant in the room that universities avoid is how their system is rigged to serve the rich over the poor.

An October study by the American Enterprise Institute (AEI) entitled “Cheap for Whom?” showed one way that  the university system is rigged in favor of the rich. It said:  “Average taxpayers provide more in subsidies to elite public and private schools than to the less competitive schools where their own children are likely being educated…. Among not-for-profit institutions, the amount of taxpayer subsidies hovers between $1,000 and $2,000 per student per year until we turn to the most selective institutions . . . Among these already well-endowed institutions, the taxpayer subsidy jumps substantially to more than $13,000 per student per year.”

Continue reading Average Taxpayers Are Heavily Supporting Elite Colleges

Too-Large Subsidies for Too-Selective Colleges

A new report on higher education from the American Enterprise Institute, out today, contains an eye-catching finding likely to generate a lot of headlines: the more selective a school is, and the fewer low-income students it serves, the larger its taxpayer subsidy.  Calling this system of funding “perverse,” the report says: “Average taxpayers provide more in subsidies to elite public and private schools than to less competitive schools where their own children are likely to be educated.”

Basing college selectivity on Barron’s Profiles of American Colleges, the authors of the report, Mark Schneider and Jorge Klor de Alva, write that for public institutions, there is a consistent increase in subsidies across the first four levels of selectivity, with substantially more in the most competitive schools. Among not-for-profits, subsidies per student are between $1000 and $2000, but for the most selective (and already well-endowed) schools, taxpayer subsidies jump to more than $13,00 per student.

Continue reading Too-Large Subsidies for Too-Selective Colleges

Shame on the Sociologists

Who knew the American Sociological Association was this bad? The Association put out a pompous and wrongheaded statement in defense of radical sociologist Frances Fox Piven, who has been under attack from Glenn Beck. In the 60’s, Piven made a name for herself by urging people to flood onto the welfare rolls to overload and break the system so government would be forced to grant everyone a guaranteed annual wage. She resurfaced recently with an article in The Nation magazine calling for riots, which drew the criticism from Beck and some hate mail and death threats. The article, “Mobilizing the Jobless,” said, “an effective movement of the unemployed will have to look something like the strikes and riots that have spread across Greece in response to the austerity measures forced on the Greek government by the European Union, or like the student protests that recently spread with lightning speed across England in response to the prospect of greatly increased school fees…”
Did the American Sociological Association step in to say that an invitation to violence on the scale of what happened in Greece is somewhat problematic among social scientists? No. It followed the framing of the story by the New York Times, where the real news wasn’t Piven’s call for riots, but instead the reaction it drew–hate mail and death threats. Well, yes, hate mail is bad and death threats dangerous. But focusing on reaction is a classic way of avoiding the original provocation. The Association said of Piven that “scholars of her caliber…should stimulate equally levels of serious challenge and creative dialogue.”
Blogger Ann Althouse wrote in derision: “So vigorous debate about Piven’s ideas is really important, but it better be the right kind of debate by the right kind of people and certainly not that terrible, terrible man Glenn Beck. She’s very lofty and serious, so, while she should be challenged, she must be challenged only by lofty and serious individuals, and of course, Glenn Beck is not one.”
Glenn Reynolds at Instapundit added a reminder that the Greek riots, which Piven yearns to see replicated here, caused four deaths, three serious injuries and heavy street damage as well. He wrote, “Just so we remember who’s actually advocating violence here. Shame on the American Sociological Association for trying, however ineptly, to obscure that point.”

Dealing with the For-Profits

For-profit colleges are having a tough time these days, thanks to the Obama Education Department’s looming new “gainful employment” rules that threaten federal aid cutoffs to an industry that derives 87 percent of its revenue from government loans and grants to its students—along with steep declines in new enrollments (due partly to new federal caps on commissions to recruiters, and partly to the colleges’ own efforts to select students more carefully in order to secure lower default rates) and just plain bad publicity, which seems to have trickled down to potential applicants.
Just this past week four of the largest publicly traded players in the for-profit arena—Apollo Group Inc. (parent company of the 400,000-student University of Phoenix), Education Management Corp., the second-largest for-profit chain, DeVry Inc., and Strayer Education Inc.—reported continuing steep declines in their share prices—as much so that Standard & Poors’ Education Services Index, which reached a high last year of $105.37 in April (according to a Reuters report), closed on Jan. 11 at $81.04. The 20 percent drop just about matched the 20 percent average fall-off in new enrollments that for-profit colleges at the beginning of the year.
For-profit colleges may be in trouble, and their current and former students may be in even bigger trouble (Education Department statistics indicate that 46 percent of outstanding loans to students enrolled at for-profits will ultimately go into default, in contrast to 16 percent of student loans overall), but there is one entity that does not appear to be in trouble at all: the U.S. government, which not only guarantees the troubled loans but, thanks to an Obama-pushed change in the law last year, now originates all of them. A fascinating analysis of White House budget figures recently published the the Wall Street Journal indicates that the Education Department expects to recover “85% of defaulted federal loan dollars based on current value,” as Journal reporter Melissa Korn wrote. That recovery percentage is outstanding, compared with the percentage for other kinds of consumer credit. Banks, for example, as Korn reported, get back less than ten cents on the dollar on overdue credit cards. Indeed , according to White House figures for fiscal 2011, “the federal government expects gross recovery of between $1.10 and $1.22” for every dollar of loan principal extended, Korn wrote. (About $49.9 billion of federally guaranteed loans and loans directly from the government were in default as of Sept. 30, 2010, out of a total outstanding federal loan balance of $713.4 billion).

Continue reading Dealing with the For-Profits

25 Ways to Reduce the Cost of College

The Center for College Affordability and Productivity today completed the release of its 240-page report, 25 Ways to Reduce the Cost of College. It offers a dizzying overview of the possibilities for increased efficiency in college operations, both on an individual and collective scale, and serves as a sure retort to the notion that current higher ed costs are inevitable or unalterable. The ideas vary in depth and quality, but among these ideas there’s unquestionably a package of reforms that could result in savings even at the most parsimonious college. The full report Is here, and in groups of five, the 25 Ways are here, here, here, here and here.

Reducing the Cost of College

How many different ways are there for colleges to cut costs? A lot. At the Center for College Affordability and Productivity, we have identified 25 such ways in a book-length study. In Part 1, focusing on Using Lower Cost Alternatives, released Wednesday, we offered the following 5 suggestions for college and university administrators and public policy leaders:

1. Encourage more students to attend community college: Too many students whose high school grades and test scores indicate they would have difficulty with four-year schools enroll anyhow, accruing not only large personal debts but also imposing a burden on taxpayers in the form of federal financial assistance and unwarranted state subsidies. Four-year schools should be discouraged from accepting many of these students, and instead encourage them to enroll in two-year colleges; those who succeed academically can then move on to four-year schools. Given the cost differential between two- and four-year schools and high attrition rates among students, encouraging more students to begin their postsecondary education at a community college is a sensible policy goal.
2. Promote Dual Enrollment Programs: There are certainly numerous bright and ambitious high school students capable of doing college level work while in high school—sometimes in the junior or even sophomore year. Students who earn a good deal of college credit in high school (through AP classes, CLEP credit, dual enrollment, etc.) can sometimes reduce their college baccalaureate years to three—saving nearly 25 percent in direct costs and, just as importantly, giving an additional year of productive full-time labor. The key is to incentivize students, and schools must encourage alternative ways of obtaining college credit.

Continue reading Reducing the Cost of College

Government Meddling and For-Profit Colleges

The Education Department’s boom has finally fallen on for-profit colleges, much-criticized for their high rates of default on their students’ education loans, loans that U.S. taxpayayers have to repay when graduates of proprietary schools can’t find jobs either because the jobs don’t exist or because the training for which the students have paid doesn’t strike prospective employers as adequate.
If a set of proposed rules issued last week by Education Secretary Arne Duncan goes into binding effect; a majority of programs at for-profit colleges would be subject to restrictions on availability of federal loan funds, and about 5 percent of those schools programs would lose access to federal loan dollars altogether. Since for-profit colleges typically derive close to 90 percent of their income from government- guaranteed loans to their students, the Education Department’s rules threaten to curtail their operations and even put some investor-owned schools out of business altogether.
Administrators of for-profit schools and their allies are crying foul. They argue that the government should also crack down on loan funding for programs at non-profit colleges, many of which also depend heavily on student-loan proceeds for income and many of whose graduates–say, art-history or women’s-studies majors–find themselves unemployed and perhaps unemployable after graduation. The current proposed rules, for-profit advocates contend, discriminate against low-income students who choose career colleges instead of the liberal-arts schools that middle-class young people tend to select. The advocates may have a point–but isn’t there a larger point? Should the government be in the business of providing money to everyone who wants to go to college in the first place? And if so, to what extent? If a $100,000 bachelor’s degree in English literature from a liberal-arts college and a $14,000 career-college certificate as a medical assistant–training that many medical assistants obtain for free on the job–don’t do much to improve their recipients’ employment prospects, why are taxpayers underwriting the cost of supplying either? What public good is served?

Continue reading Government Meddling and For-Profit Colleges

Another Pitfall for Student Loans

In a recent article for Career College Central, I discuss the negative implications of the Department of Education’s (ED) proposal to alter the gainful employment rule to restrict the amount of money that a student could borrow by program of study and expected entry level occupational earnings. I identified three major flaws with the proposal. First, it would severely limit the ability of for-profit colleges to offer bachelor’s degree programs, and other non career-specific fields of study. Next, it fails to account for total compensation, regional variations in compensation, and the possibility that workers will receive a promotion or pay increase over time. Finally, the rule could result in a reduction of educational options and access for those most in need, and a shortage of qualified employees to meet the demands of the labor force.
I also analyzed the effect that the rule would have on 10 occupations that are expected to produce more than 2.6 million additional jobs by 2018, finding that for most of the occupations, students would have been able to borrow less (after adjusting for inflation) to pursue training in them in 2008 than in 2003. ED’s arbitrary gainful employment metric would hamper the ability of colleges to offer occupational training in fields that the market demands by exerting what amounts to government price controls. A better solution to protect the interests of both students and taxpayers would be to ensure that colleges provide prospective students with sufficient information (such as job and income data, and debt and default levels) to make wise education decisions, prior to their enrolling and paying a dime of tuition.

Race and Ethnicity in Student Borrowing

The College Board has issued another of its reports on student loan debt, focusing this time on the 17 percent of students who graduate from four-year colleges with “high debt levels”—that is, more than $30,500 worth of education loans. The average debt load for those high -borrowing students, one out every six graduates with bachelor’s degrees, was $45,500 in 2007-2008, the academic year covered by the study. That’s a staggering amount, considering that the average annual starting salary for a new college graduate is about $49,000 (for liberal arts majors, it’s only $36,000). Two-thirds of college students and their parents borrow for higher education, and a fourth of those borrowers are at the highest debt level. About a third of that debt is in non-federally guaranteed loans that typically bear higher interest rates and are more difficult to defer repaying. High levels of student debt typically correlate with high levels of loan default, as college graduates discover that the entry-level jobs for which they qualify right after graduation don’t pay enough to enable them to keep up with their loan repayment schedules.
What is most intriguing—and disconcerting—about the new College Board study, titled “Who Borrows Most?” is the role played by race and ethnicity in student borrowing. “[H]igh debt levels are more prevalent among black bachelor’s degree recipients than among those from other racial/ethnic groups, and these differences are not entirely explained by differences in family income levels.” the study reports. Some 27 percent of black recipients of bachelor’s degrees in 2007-2008 borrowed $30,500 or more to pay for college, compared with 16 percent of whites, 14 percent of Hispanics, and 9 percent of Asians. The racial/ethnic discrepancies in taking on debt existed at all income levels, from the poorest (families earning less than $30,000 a year) to the solidly middle-income. Only among families at the highest income levels–those earning $100,00 or more a year—were the borrowing levels among ethnic groups roughly comparable: Nine percent of well-off white students graduated with more than $30,500 in loans, compared with 11 percent of well-off blacks and 10 percent of well-off Hispanics. Even in this prosperous group that could presumably afford high debt levels, Asians stood out for their low levels of borrowing. Only five percent of Asians from families earning $100,000 or more a year graduated from four-year colleges with more than $30,500 in student debt.
What does this all suggest? To the report’s authors, Sandy Baum and Patricia Steele, it suggests that a sizable percentage of college undergraduates make rash and uninformed decisions about how much to borrow in order to pay for their educations and need an array of government interventions to protect them from the consequences of their poor planning. “[I] is difficult for students to estimate in advance [It] is vital that policies be designed to protect students from unmanageable debt to the extent possible,” they write. The new student-loan provisions tacked onto the healthcare overhaul that President Obama signed into law this year—increases in the size of federal Pell grants for low-income students and easier repayment and forgiveness terms for those who borrow directly from the government—seem to be the kind of “policies” that Baum and Steele have in mind. “Strong income-based repayment is important as a supplement to moderating price increases and increasing the generosity of need-based financial aid,” they write.

Continue reading Race and Ethnicity in Student Borrowing

A Clarification

Andrew Gillen of the Center for College Affordability and Productivity wrote this note to Charlotte Allen to clarify comments of his in Allen’s article today on student loans:

Charlotte, I saw your article on student loans is up at Minding The Campus. I liked it, but at the very end, you have a long quote from me that is problematic.
The quotation says: “I think that having a federally run program makes some sense, as long as the government is limited to determining eligibility and setting interest rates. Get rid of lender subsidies, let interest rates vary, and let the government subsidize students directly if it wants to. The problem with the private loans was that they happened because federal loan limits got mazed out. So drop the cumulative loan limit and let people borrow what you can pay back. Drop the non-dischargeability, but let lenders pursue borrowers to a limit of, say, $200,000 or $300,000.”
This is sort of a merging my views on both gov and private loans, but it’s not clear from the quote which program I was talking about when. You probably wrote it down correctly, since I tend to be all over the place when talking, but as it is, it could be misinterpreted very easily. Probably the easiest thing to do would be to replace it with this “I think that having a federally run program makes some sense, as long as the government is limited to determining need based eligibility and setting the loan limits. Get rid of lender subsidies, let interest rates vary, and let the government subsidize students interest payments directly if it wants to. For private loans, drop the non-dischargeability and let the market determine the terms of lending.”
Thanks,
Andrew