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.”
California ‘success plan’ sparks opposition
The California Community Colleges Student Success Task Force (SSTF) has reached agreement on 22 recommendations to increase graduation and transfer rates. But implementing the report will be a “huge challenge,” task force member Nancy Shulock tells Thoughts on Public Education. Shulock is director of the Institute for Higher Education Leadership and Policy at Sacramento State University.
The most controversial proposal would give enrollment priority to new students and those who stay on track to earn a degree or certificate or transfer to a four-year college. Students who’ve earned 110 credits or more without completing a credential would lose their enrollment priority and fee waivers.
Nearly 140,000 first-time students couldn’t get into a single course in 2009-10, while others were repeating classes with no apparent plans to graduate, says Chancellor Jack Scott. Students who exceed 100 credits rarely earn a degree, according to a University of Michigan report.
Community colleges are trying to deal with $400 million in cuts this year. Some have cut noncredit enrichment courses for older adults.
West Sacramento Mayor Christopher Cabaldon likened the situation to a hospital emergency room, where doctors have to prioritize patients. It’s not that some classes are worthless, said Cabaldon, but they’re not priorities. “There are students who cannot get into college, for whom our experience would transform their lives, but we’ve got 10,000 who are taking Ukulele for Adults and Tai Chi,” he said.
Students should commit to an academic program by the start of the second year to increase the odds of completion, the report recommended.
San Francisco City College’s student newspaper strongly opposes the plan, as do other community college newspapers across the state. In an editorial, The Guardsman wrote:
The report recommends eliminating non-credit courses, creating one-size-fits-all placement tests for California’s diverse student population, stripping local college boards of their power, gouging students returning for their second degrees, and requiring any student not transferring to a university within a strict two-year deadline to pay outrageously expensive out-of-state fees. The Task Force recommendations will benefit higher-income students more, while students who attend part-time and work while attending school will be hit hardest. These recommendations would close off higher education to California’s 99 percent and slam the door shut in their faces.
The task force was funded by foundations, which the editorial calls “private interests.” The editorial charges that “10 out of 14 of Lumina’s board members have ties to the student loan industry — a sure sign that they should not be trusted.”
Lumina’s board has 12 members with backgrounds in “business, higher education, investment and finance,” the foundation responds. “Of these 12 directors, none is currently associated with the student loan industry, though five of them are either former employees or former board members of USA Group or Sallie Mae.”
Federal aid fuels exploding college costs
Education Secretary Arne Duncan’s approach to controlling college costs is dead wrong, writes Neal McCluskey, associate director of the Cato Institute’s Center for Educational Freedom. More federal aid will fuel exploding college costs, argues McCluskey, author of How Much Ivory Does This Tower Need? What We Spend on, and Get from, Higher Education.
To a system blackout-drunk on taxpayer money, the Obama administration would deliver even more booze while only whispering about tough love.
Speaking at a Nov. 29 Las Vegas gathering of financial-aid administrators, Duncan addressed exploding college costs, a problem highlighted by Occupy Wall Street protesters angry over rising student debt. He lauded loan forgiveness and repayment reduction, and exhorted colleges to do, well, something to become more efficient.
The education secretary inflated the benefits of a college degree — it’s not really $1 million over a working life — and ignored the reason colleges keep raising tuition, McCluskey writes.
Between 1985 and 2010, inflation-adjusted federal student aid rose from about $30 billion to about $140 billion, a 367 percent leap. Pell Grants alone ballooned from $8.1 billion in 1985 to $41.7 billion in 2011.
Add various tax credits and deductions to that, and it’s no wonder college prices have inflated even faster than health care: Government has ensured that ever-higher bills can be paid.
Declining state support for higher education isn’t the reason tuition keeps going up, argues McCluskey. Private colleges are charging more and more too.
President Obama wants to lead the world in college graduates by 2020. That means raising graduation rates for the many students who start college and never finish, often because they’re not prepared for college-level work.
Duncan says the administration will “challenge” schools to improve their graduation rates. Great.
Colleges’ most likely response will be to run warm bodies through to graduation, while giving them few if any college-level skills. Indeed, we’ve been seeing this for years, with literacy for degree-holders dropping and earnings for people with only a bachelor’s degree falling, too.
The only way to make college much cheaper or more effective is “taking the jet fuel — federal student aid — out of college pricing, and being frank about the real value of higher education,” McCluskey writes.
He provides links here to research on the effect of aid on college prices.
Virginia Postrel has more in a Bloomberg View column, including a warning:
A good chunk of the educated public has decided that college educators are decadent and lazy. Many are positively lusting to see higher education get its Detroit-style comeuppance.
This attitude is unfortunate and often unfair, but it’s the direct result of decades of federal policies. Any strategy to reduce college costs needs to look beyond traditional subsidies to remove some of the insulation that stifles innovation and feeds public resentment.
I keep expecting the non-elite private colleges to collapse as students and parents realize that it’s just not worth the money compared to a state university or a community college. If we do see cost controls, they’ll come in the private sector.
Federal policy pushes up college prices
College tuition is soaring in response to federal policies on student aid and university research funding, argues Arthur M. Hauptman, a higher education financing analyst, in an essay in Inside Higher Ed. Jawboning won’t help, he writes. Neither will top-down regulation.
Pell Grants aren’t a major push factor for college prices, Hauptman believes. But rising spending for Pell may be the reason colleges are shifting their own aid away from the poor and toward middle-class students.
The rise in student loans correlates strongly with the rise in tuition.
Currently, colleges can just maintain or raise their prices and shift the cost-sharing to loans for a broad range of their students. This needs to change. One way to accomplish this would be to require that needy students not receive all their aid in the form of loans. In effect, this would mean that institutions must offer discounts to their needy students who borrow, thereby reducing their debts.
In addition, students shouldn’t be allowed to borrow excessively for living expenses.
Now, community college students who face $2,000 or $3,000 in tuition and fees are eligible to borrow $10,000 or more to cover their total expenses. This applies at all institutions for students who live at home or off campus. This provision should be changed so that reasonable limits are placed on how much these students can borrow. Ditto for students living in dorms or on meal plans – they should not be allowed to borrow excessively large sums for this form of consumption. Such a change would likely have the beneficial effect of reducing how much institutions charge for these non-education services.
Students can’t use federal grants to pay for remedial courses, pushing them to borrow, Hauptman writes. He suggests students be able to take tuition-free remedial courses offered by providers who’d be paid by the government based on their success at raising student competencies. Colleges would have to compete with private companies for the remedial ed business.
Federal student loan subsidies should be eliminated or limited to Pell Grant recipients, he recommends. “This may seem harsh medicine, but the benefit is very expensive, not well-targeted to those most in need, and serves as an incentive for students to borrow more than they otherwise would.”
Linking loan repayments to post-college income makes sense, Hauptman writes, but it will serve “as a further encouragement to institutions to keep their prices high and let the loan system deal with the consequences.”
Should students borrow more?
Some community college students “should borrow more and work less” to increase their completion odds, says Sandy Baum, co-author of a College Board report, in a University Business article by me.
Working one’s way through college is the norm for community college students: 85 percent work part- or full-time.
. . . “People who work 10 to 15 hours do OK,” Baum says, but as work hours increase, grades slide.
“The worst thing students can do is go part-time or work full-time. Both drastically reduce their chance of completion,” says Debbie Cochrane, a program director for The Institute for College Access and Success (TICAS).
Community college drop-outs were half as likely as graduates to report receiving financial aid or scholarships in a 2009 Public Agenda study. Six in 10 community college students surveyed were working more than 20 hours a week; a quarter worked more than 35 hours a week.
Only 3.3 percent of part-time community college students complete a bachelor’s degree, according to a federal study.
Here’s the sidebar on helping students access financial aid.
Of course, working less and borrowing more can be a risky business, especially for students who don’t complete a marketable degree. “It’s probably true that if community college people borrowed more, they’d probably see a modest increase in graduation rates,” says Richard Vedder, an Ohio State economist who runs the Center for College Affordability and Productivity. But “community college students are in much more precarious financial positions” than four-year students, Vedder warns. “The consequences of failure are substantial.”
