Federal aid is subsidizing colleges with low graduation, loan repayment and employment rates, writes Judah Bellon on Minding the Campus. Instead of singling out for-profit higher education, regulators should scrutinize the outcomes of all colleges and universities that rely on federal loans and grants.
For-profit colleges enroll more black, Hispanic, low-income and older students than public and nonprofit institutions. Their no-frills programs attract working students who need a flexible schedule, writes Bellon. Technical training is the strong suit of for-profit colleges, which adjust quickly to employer demand. For-profit students are more likely to complete certificates and associate degrees than community college students.
However, for-profit students are much less likely to complete four-year degrees and much more likely to default on student loans. That inspired the U.S. Department of Education’s attempt to enforce “gainful employment” rules limiting aid to programs whose graduates don’t earn enough to pay back their loans.
Regulate the bad applies, writes Bellon. But don’t single out for-profit higher education. If students are failing to graduate for jobs or unable to pay back their loans, it doesn’t matter if they attended a for-profit, private nonprofit or public institution.
Whether college pays — in dollars — depends on where you go and what you study. College Risk Report, a web site created by 29-year-old Jared Moore, asks the collegebound to enter their prospective college or university and their major. It estimates how long it would take to pay off a bachelor’s degree and compares that to the payoff for an associate degree at an “average” community college or a high school diploma.
Forbes asked the site to analyze the time needed to pay off loans for an art degree from a small liberal arts college, Marymount Manhattan.
Earning a four-year degree in art would pay less over a lifetime than getting a two-year degree or “simply being an artist right out of high school,” notes Forbes. An engineering degree from a state university has a faster payoff and is worth much more than two-year degree.
In tough times, frugal students are starting at community colleges in Southern New Hampshire and Massachusetts’ Merrimack Valley, reports the Eagle-Tribune in North Andover, MA.
Kaila Nicholson of Kingston wants to join a SWAT team. Dayanna Martes of Lawrence is studying business. Aja Metcalf of Salem is majoring in exercise science.
The Northern Essex Community College students are looking forward to the day when they can start their new careers — without being burdened with thousands of dollars in student loan debt.
Students expect to save at least $20,000 in tuition, room and board by starting their path to a bachelor’s degree at a local community college.
Martes was offered an $18,000 scholarship to Newbury College, but calculated living at home and attending NECC was more affordable.
Nicholson, who is studying criminal justice, said she’s now paying $5,000 a year, compared to $30,000 a year at Southern New Hampshire University, where she attended for one semester. NECC is smaller and provides more individual attention, she said. “I think it’s a good school and the teachers here are really good,” Nicholson said. “And it’s cheaper.”
Ever since the recession began several years ago, community college officials in New Hampshire and Massachusetts say they are seeing significant increases in enrollment as students and their families struggle to foot the rising costs of higher education.
News coverage of rising college costs has scared students and parents, said NECC spokesman Ernie Greenslade.
New Hampshire graduates owed an average of $32,450, the largest debt load in the nation, according to The Institute for College Access & Success. Massachusetts ranked 14th at $27,181.
College borrowers with $75,000-plus in debt say they didn’t understand what they were doing, according to a new report, Lost Without a Map: A Survey about Students’ Experiences Navigating the Financial Aid Process.
“High-debt borrowers often do not have a clear idea about the consequences of the loans they take out, with many experiencing misunderstanding or surprise regarding repayment terms and interest rates,” says the report, by the firm NERA Economic Consulting and the youth advocacy group Young Invincibles.
Only 55 percent said they’d received financial counseling before taking out federal loans, even though colleges are require to provide counseling.
When financial aid falls short, colleges encourage parents to take out federal Parent Plus loans, reports ProPublica in The Parent Loan Trap.
As the cost of college has spiraled ever upward and median family income has fallen, the loan program, called Parent Plus, has become indispensable for increasing numbers of parents desperate to make their children’s college plans work. Last year the government disbursed $10.6 billion in Parent Plus loans to just under a million families. Even adjusted for inflation, that’s $6.3 billion more than it disbursed back in 2000, and to nearly twice as many borrowers.
. . . The loans are both remarkably easy to get and nearly impossible to get out from under for families who’ve overreached. When a parent applies for a Plus loan, the government checks credit history, but it doesn’t assess whether the borrower has the ability to repay the loan. It doesn’t check income. It doesn’t check employment status. It doesn’t check how much other debt — like a mortgage, or other student-loan debt — the borrower is already on the hook for.
If the parent can’t pay the loan, the government can seize tax refunds and garnish wages or Social Security checks. With a few exceptions, Parent Plus loans aren’t eligible for deferment or income-based repayment plans open to student borrowers.
Sen. Tom Harkin’s Protecting Students from Worthless Degrees Act, introduced last week, would crack down on one of for-profit colleges’ worse abuses, writes Stephen Burd of New America Foundation on Higher Ed Watch. No federal financial aid, including veterans benefits, would go to programs that lack the accreditation needed for students to take licensing exams needed for jobs in their fields of study.
During a two-year investigation of for-profit higher education that led to a critical report, committee staff heard from students who’d discovered their certificates or degrees didn’t open the door to jobs. In some cases, students were told the college was accredited, but not told their program was not.
For example, the Senate committee heard testimony from Yasmine Issa, a single mother of twins who completed a training program in ultrasound technology at Career Education Corporation’s Sanford-Brown University in 2008 only to discover from potential employers that the program had not been accredited. . . . Issa, who paid $32,000 for the program ($15,000 of which came from federal student loans), wasn’t eligible to sit for the licensing exam or to find work as a sonographer.
Students at Bridgepoint Education’s Ashford University complained their online education degrees didn’t qualify them to teach in their home states. Students at Kaplan Higher Education’s online Corcord Law School learned that only one state, California, lets graduates of unaccredited law schools take the bar exam. (California lets anyone take the bar, including those who studied on their own. About 15 percent of unaccredited law school graduates pass, according to my attorney daughter.)
Some for-profit college companies disclose the lack of accreditation “deep in their Web sites or in the fine print within pages of enrollment agreements, while framing the disclosure in terms that prevent students from recognizing the gravity of this issue,” the report charged.
. . . prospective students who click on the description of the unaccredited veterinary technology program that Sanford-Brown’s Portland, OR campus offers are told that “graduates who have diligently attended class and their clinical, studied, and practiced their skills should have the skills to seek entry-level employment as veterinary technicians.” What’s left unsaid, according to the report, is that students who enroll in this program at the Portland campus are likely to be left stranded because Oregon, like many other states, only allows graduates of accredited programs to take the licensing exam to become certified veterinary technicians.
The law shouldn’t be needed, Burd writes. Last year, the Education Department adopted rules that threaten severe penalties to programs that deliberately mislead students on accreditation. ”But the Education Department doesn’t appear to be too eager to enforce these rules.”
A growing number of Social Security recipients with unpaid college loans are receiving smaller checks, reports Smart Money.
From January through August 6, the government reduced the size of roughly 115,000 retirees’ Social Security checks on those grounds. That’s nearly double the pace of the department’s enforcement in 2011; it’s up from around 60,000 cases in all of 2007 and just 6 cases in 2000.
Up to 15 percent of the monthly check — almost $190 on average — is withheld.
Many of these retirees borrowed to help children or grandchildren go to college. ”Other retirees took out federal loans when they returned to college in midlife, and a few are carrying debt from their own undergraduate or graduate-school years,” reports Smart Money.
Parts of the Education Department’s “gainful employment” rule are invalid, a federal judge ruled Saturday. The for-profit colleges’ trade association had challenged the rule, which could cut off student loan eligibility to vocational programs whose graduates don’t earn enough to pay off their loans. The department has authority to regulate career programs based on graduates’ earnings and debt levels, ruled Judge Rudolph Contreras of the U.S. District Court for the District of Columbia. However, the rule requiring at least 35 percent of graduates to be repaying their student loans was “arbitrary and capricious.”
. . . Judge Contreras says the department failed to provide a factual basis for why a repayment rate of 35-percent would be a “meaningful performance standard.” Instead, he wrote, it has said it chose that figure “because approximately one quarter of gainful employment programs would fail a test set at that level.” But the department could have chosen a percentage under which only one-tenth of the programs would have failed and justified it by the same rationale, he said.
The rule’s other provisions, which compare graduates’ debt to earnings, “were based upon expert studies and industry practice—objective criteria,” the judge ruled.
But because the debt-to-income measures were intertwined with the debt-repayment measure, he said, he had to vacate them too.
By the same reasoning, he also vacated two other provisions that rely in part on the debt-repayment measure: one that requires institutions seeking to offer a new vocational program to get prior approval from the Education Department, and one that requires institutions to provide data to the department for calculating the debt measures.
The Education Department also ordered institutions to disclose a vocational program’s costs, on-time graduation rate, job placement rate and median loan debt to potential students. That part of the rule will stand.
A 35 percent repayment rate is embarassingly low, writes Ed Sector’s Kevin Carey. Can the industry really make an argument for a lower rate?
The for-profit industry’s trade group is standing up in front of the world and saying it can’t live with a rule that excludes programs from federal financial aid only if two-thirds of students are failing to pay loans back and–emphasis, and–the program also fails both debt-to-income measures, for three out of four years.
The Education Department is likely to appeal the ruling. The judge wants more justification for the repayment rate. That ought to be doable.
If college is an investment, students should have some idea what they’ll earn with a degree in nursing or marketing or whatever from College X vs. College Y, writes Daniel de Vise in College, Inc. Soon more information will be available about post-college employment.
Especially as college continues to get more expensive, students rightfully want to make sure that that their investment has value. They’re asking: What are the chances I’m going to get a job earning a decent wage? And if I’m choosing between two or three schools as a prospective student, which will give me the biggest bang for my (and my family’s) buck?
The Labor Department is working with the states to share data on earnings and employment. In addition, the Education Department will be releasing “gainful employment” reports on how for-profit and community colleges’ vocational certificate earners are doing in the workforce.
“If these reports show wide disparities among graduates from different colleges, can it be long before the same data are demanded for all bachelors’ degree programs?” asks de Vise.
The drive to raise graduation rates doesn’t address degree quality, he points out. For most students — and especially those from low-income and working-class families — it’s important to earn a credential that puts them “on a path to earning a decent living.”
If students understood college costs and potential earnings, they’d be wary of enrolling in a high-cost for-profit college, especially for a bachelor’s degree program. They’d also avoid high-cost private colleges that don’t offer a lot of financial aid and an elite degree.
In Student Loans Weighing Down a Generation With Heavy Debt, the New York Times introduces a debt-doomed borrower: Kelsey Griffith, 23, borrowed $120,000 to earn a marketing degree from Ohio Northern University. She’s working two restaurant jobs and will move in with her parents while looking for a marketing job.
Her father, a paramedic, and mother, a preschool teacher, have modest incomes, and she has four sisters. But when she visited Ohio Northern, she was won over by faculty and admissions staff members who urge students to pursue their dreams rather than obsess on the sticker price.
“As an 18-year-old, it sounded like a good fit to me, and the school really sold it,” said Ms. Griffith, a marketing major. “I knew a private school would cost a lot of money. But when I graduate, I’m going to owe like $900 a month. No one told me that.”
Ninety-four percent of students who earn a bachelor’s degree borrow to pay for higher education — up from 45 percent in 1993, according to a Times analysis of Department of Education data. This includes federal and private loans.
“Pursue your dreams” — but don’t do the math — is a cruel hoax being played on 18-year-olds and their financially naive parents.