Community college students use Pell, not loans

Few community college students benefit from subsidized loans, I write in U.S. News and World Report. “Community college students, who tend to come from low- and moderate-income families, rely on need-based Pell grants, which, unlike loans, don’t need to be repaid.”

While President Obama — and Mitt Romney — call for spending $6 billion to subsidize Stafford loans for another year, Pell is expected to run $7 billion short next year. This year, the maximum grant amount was saved only by cutting aid for year-round students and limiting eligibility.

“Targeting a precious $6 billion right now to borrowers who have jobs and incomes high enough to cover the higher rate seems out of touch, especially when the Pell Grant program needs approximately that much next year to stave off a massive cut to the aid it provides,” writes Jason Delisle, director of the Federal Education Budget Project at the New America Foundation in Washington, D.C. Stafford borrowers already can postpone payments if they fail to find work or earn too little, he notes.

Lots of middle-class and affluent families benefit from federal loan subsidies and tax credits — and they vote.

Skipping the BA was ‘smartest choice’

An excellent student from a blue-collar family in Canada, Kathy Shaidle didn’t go to university and doesn’t regret it, she writes on PJ Media. With a two-year media degree from a community college, she launched a successful career.

In an era of double-digit unemployment and interest rates, I got my first “real” job at a Toronto communications firm pretty easily, and paid off my relatively puny student loans in short order (unlike some of my friends, who got BAs — then declared bankruptcy).

Shaidle was the first in her family to finish high school. “Filling out applications, applying for grants, moving into a dorm — you might as well have been talking about a voyage to the moon.”  But, though her reasons for not going to university “sound pretty stupid,” she considers it “one of the smartest decisions of my life.”

Shaidle recommends Worthless: The Young Person’s Indispensable Guide to Choosing the Right Major by Aaron Clarey, aka Captain Capitalism.

Like me, Clarey’s been saying for years that BAs are today what high school diplomas used to be: that is, so commonplace that not having one makes no difference if you’re a genius, an energetic entrepreneur, or both.

Like me, he believes too many people are being pushed into getting a degree (i.e., brainwashed in junk science and political correctness at their own expense) when they should be learning a trade or just plain left alone.

And like me, Clarey thinks lots of would-be students should use the money they’re wasting on tuition as start-up capital instead.

For those who insist on seeking a bachelor’s degree, Clarey offers common-sense advice on which majors lead to a paying job and which will lead back to Mom and Dad’s house.

Two sisters, different college decisions

Raised by working-class parents — Dad’s a construction worker and Mom a practical nurse with a GED — the Hopper sisters excelled in school. Briallen earned a PhD from Princeton and lectures in English at Yale, barely earning enough to pay her student loans. Johanna, 20, gave up on college after a year. Debt-free, she works at a bakery for slightly more than minimum wage. They write about their very different college choices in the Chronicle of Higher Education.

Briallen worked in child care and food service for a while after high school, went to community college, and was accepted to a selective four-year college but was not offered enough financial aid to go. She finally graduated from a local college with the help of Pell Grants and a lot of debt. She can’t imagine her life without higher education, but as a non-tenure-track academic in a tough job market, she has limited job security, and she owes more than $800 a month in student-loan payments. Her student debt makes it impossible for her to save money or start a family anytime soon, and she is entering her mid-30s.

An honor student, Johanna was admitted by selective public and private universities and a nationally ranked liberal arts college. But  the scholarship offers didn’t pay the full costs. She worried about getting a job that would enable her to pay her student loans.

Johanna was wary of graduating with substantial debt and no family safety net, so she took a year off to work and save money and try applying to college again. Her financial-aid offers the next year were no better. She ended up taking classes at the local satellite campus of a state university while living at home and working long hours at a salon to pay her own way.

But after a couple of quarters she discovered that, because of the poor academic advising she had received, none of the introductory courses she had taken were actually required for her degree. Her AP credits from high school should have qualified her to start as a sophomore, but she was mistakenly placed in freshman-level courses.

Her savings depleted, Johanna left school. She works  full time for $13,000 a year.  She reads, writes and pursues “free or cheap cultural and educational opportunities.”

Johanna hasn’t ruled out college someday, but even community college would require money, time, and faith in the system that she doesn’t yet have. Too many of her college-educated friends are living off of family and food stamps. She’s determined to seek success and self-worth outside of the enormously expensive educational institutions that too often disregard the significant personal sacrifices students make to attend them.

Briallen is trying to talk her sister into going back to college. “She believes higher education is valuable beyond the price, and she hopes it will even prove a good investment someday, if the economy improves.”

Johanna believes her choice to educate herself without debt should be respected.

Cut tax breaks to save Pell

Congress Should Cut Tuition Tax Breaks Before Cutting Pell Grants Again, argues Stephen Burd on Education Sector.

. . . at a time when the budget axe is falling on the Pell Grant program, providing billions of dollars in tax benefits to upper-middle-income families who don’t really need the help is a luxury that the government can ill afford.

For the sake of preserving access and equity in higher education, Congress should eliminate, or at least scale back, the tuition tax benefits and use the savings to put the Pell Grant program back on a sustainable path.

Despite changes that limited Pell eligibility, Congress “will need to find at least an additional $7 billion (and probably much more) to avoid slashing the maximum award in fiscal year 2014,” Burd writes. “Already there has been talk that Congress may consider eliminating the in-school interest subsidy on federal student loans entirely, or significantly reducing the amount of income students can earn before it counts against their Pell Grant eligibility—penalizing those who have to work while in college to support their families.”

A syllabus for the ‘Occupy’ movement

As universities rush to offer courses on the “Occupy” movement, Glenn Reynolds, a law professor and blogger, proposes a syllabus. One of his possible lessons:

1) The Higher Education Bubble and Debt Slavery Throughout History. Since ancient times, debt has been a tool used by rulers to enslave the ruled, which is why the Bible explains that the borrower is the slave to the lender. One complaint of many Occupy protesters involves their pursuit of expensive degrees that has left them burdened by student loans but unable to find suitable employment. This unit would compare the marketing of higher education and student debt to today’s students with the techniques used to lure sharecroppers and coal miners into irredeemable indebtedness. Music to be provided by Tennessee Ernie Ford.

For younger readers, Reynolds is referencing “Sixteen Tons” a song we used to belt out at my elementary school in an upper-middle-class suburb of Chicago.

You load sixteen tons an’ what do you get?
Another day older deeper and debt.
St Peter don’t you call me I cause can’t go:
I owe my soul to the company store.

There also was Drill, Ye Tarriers, Drill, in which we worked all day for the sugar in our tea (pronounced tay) down behind the railway.

Repayment study left out blacks

A U.S. Education Department analysis on the relationship between race and repayment of student loans left out black students, skewing results used to justify the gainful employment rule, reports Inside Higher Ed.

For-profit colleges, which enroll many minority, low-income and older students, argue the high-risk demographics explain their students’ higher default rates on student loans. Not so, said the department in June, concluding that only 1 percent of the variance in repayment rates could be explained by the racial composition of enrollment. Sorry, never mind.

But by failing to count black students, the study understated the impact of race: the actual variance at for-profits is 20 percent over all, and 31 percent for four-year institutions, the department said in the December filing.

Eduardo Ochoa, the department’s assistant secretary for postsecondary education, said “accurate figures would have had no impact on the final regulations.”

Interesting.

The Association of Private Sector Colleges and Universities, the for-profit trade group challenging the gainful employment rules, charges the new figures show that “schools that enroll a higher percentage of minority students are more likely to fail the department’s repayment test.”

President Obama talked about defunding colleges that raise tuition in his State of the Union speech, writes Andrew Kelly on the Enterprise Blog.  That means shifting “some Federal aid away from colleges that don’t keep net tuition down and provide good value,”  according to a White House blueprint (pdf). Deciding whether a college is providing value for the money will require collecting gainful employment data on all higher education sectors, writes Kelly.

Mid-life borrowers pile on student debt

Middle-aged students are piling up student debt faster than any other age group, according to a CreditKarma analysis, Reuters reports.

People of all ages are borrowing more for college but those between 35 and 49 — Reuters’ definition of “middle aged” — owe 47 percent more than in the past.

While those aged 26 to 29 owe the most — an average of $12,000 — borrowers aged 38 to 41 aren’t far behind at $12,000.

More people are seeking mid-career training, says Credit Karma CEO Kenneth Lin.

“More and more people are going back to school,” he says. “High unemployment, rising tuition costs, artificially low interest rates from the government, and increased for-profit school advertising… (adds up to) consumers taking on student loan debt at an alarming pace.”

Every story like this includes at least one example, but Reuters found someone a bit different. Atlantan Janice Derrick, laid off as an executive assistant at 47, did something that few people seem to do. The math.

Unable to find an office job of any kind, Derrick took an aptitude test, which concluded she was suited to be a social worker or school counselor.

But she did the math and realized the low salary expectations and the amount of additional schooling weren’t a great combination.

She borrowed $25,000 to train as a court reporter, got her license and says there are many openings. The median salary of a court reporter is $51,101, according to Salary.com.

It’s too easy to get student loans, says Mitchell Weiss, co-founder of the Center for Personal Financial Responsibility at the University of Hartford. “Everybody believes they will get out school, get a job and pay it back. Few really take the time to do the math and decide how much they could afford to borrow,” he says.

Some NC colleges opt out of federal loans

Four North Carolina community colleges will not let students apply for federal student loans, fearing they’ll run up debts they won’t be able to repay. Other colleges in the state are considering pulling out of the loan program.

North Carolina legislators passed a law requiring community colleges to participate in the loan program, then reversed the mandate. Gov. Beverly Perdue vetoed the reversal, but the veto was reversed in a special session late in the year.

Central Piedmont Community College started offering the federal student loan program in July. Some 3,168 students have run up $5 million in student loans.

“Our concern is if students take a large amount of debt, once they do finish school it will impact their ability to do things like buy a house or a car,” said Jeff Lowrance, assistant to the president at CPCC.

Leaders are also concerned about new federal laws. In a couple of years, the schools could lose all federal aid, including Pell grants, if a large percentage of their students default on the loans.

“There is no screening process. There is no way to tell if a student is in a good position to pay back those student loans,” Lowrance said.

North Carolina ranks last in the nation in community college students’ access to financial aid, says Debbie Cochrane of The Institute for College Access and Success. There’s little risk community colleges could be barred from Pell Grants because of loan defaults, Cochrane says.

CC cuts push students to costly for-profit schools

Cierra Nelson spent four years trying to complete prerequisites for a nursing program at a community college in southern California. Again and again, she was turned away from science classes she needed, such as anatomy and physiology. Finally, she gave up on the low-cost community college and borrowed more than $50,000 to attend a for-profit, Everest College, writes Chris Kirkham in the Huffington Post.

“When I first saw how high it was, it was kind of a shock,” said Nelson, who eventually came to the conclusion that taking out loans made more sense than waiting semester after semester to take the community college classes she needed to advance. “I know it’s a lot of money and I’ll be in debt, but I’ve got to do what I need to do.”

More than 90 percent of nursing graduates at nearby community colleges last year passed state licensing exams, compared to fewer than 70 percent of Everest students. But Everest students are able to graduate without spending years on wait lists.

For-profit colleges enroll more low-income, minority and adult minority students than other institutions. Graduation rates are higher for career programs that take two years or less, much lower for bachelor’s programs. Default rates on student loans are significantly higher.

While for-profit schools can raise money to expand quickly in high-demand fields, community colleges have cut classes to cope with funding cuts, Kirkham writes.

California has been hit especially hard. Some  200,000 community college students will be turned away from classes next school year, the chancellor’s office predicts.

That amounts to more than 7 percent of the entire state’s community college student body, and that does not count those who gave up on plans to enroll due to the difficulties of securing classes.

After accounting for inflation, California is now spending the same amount on community colleges that it did six years ago, despite adding more than 175,000 students in that period, a nearly 20 percent increase. On a per-student basis, the state is spending less this year than it was 15 years ago.

Riverside Community College in southern California has room for 200 students; some 1,500 applicants are on a wait list. And many more, like Nelson, aren’t able to get into the required classes that will qualify them for the wait list.

In just the past year, California’s community colleges have cut between 5 and 15 percent of their course offerings, according to the state community college chancellor’s office. Among the hardest hit were costly, yet crucial workforce training programs such as computer information systems, nursing and other health care-related majors, such as radiologic technology.

No wonder students are choose for-profit career colleges, despite the much higher costs.

Study: For-profits lag in student outcomes

For-profit college students don’t do as well as similar students at public and private nonprofit colleges, according to a draft research paper (pdf) by Harvard economists. From Inside Higher Ed:

“For-profits disproportionately attract minority, older, independent and disadvantaged students,” according to the study, which assessed student outcomes after factoring in observable differences in populations who have attended different types of colleges.

. . . The research found that for-profits have some competitive strengths, such as in first-year student retention rates compared to community colleges. But the adjusted data showed for-profits lagging behind other types of colleges in areas such as employment outcomes, student satisfaction with academic offerings, debt levels and loan default rates — gaps that probably cannot be fully explained, the researchers say, by the greater propensity of students at the colleges to have prior risk factors.

Researchers compared first-time undergraduates, but did not analyze older, returning students.

The vast majority of students at for-profit colleges expressed satisfaction with their courses of study and academic programs. But the study found that they report “significantly lower satisfaction than observably similar students” at other institutions.

Not surprisingly, for-profit students, who pay unsubsidized tuition, are less likely to say their education was worth the cost or that their student loans were a good investment.

Given the constraints of the data, the study is a “conversation starter” rather than the last word, said David Deming, one of the authors.

For-profits have strong business models that often allow for a quicker response to changing labor markets than their nonprofit competitors, according to the study’s authors. For example, the sector currently produces 51 percent of associate degrees in computer and information services. And for-profit offerings in health and medical fields, where demand is high, are growing faster than at nonprofits.

. . . “Regulating for-profit colleges is tricky business,” said the study. “The challenge is to rein in the agile predators while not stifling the innovation of these nimble critters.”