What the Department of Education does now is to give loans to every college student who demonstrates financial need without examining evidence of academic ability and other criteria of credit-worthiness.Our current situation reminds me of the problems associated with the federal loan home loan programs that contributed to the housing crisis, where credit standards were lowered so that loans could be given to people who otherwise could not afford home ownership.
In Minding the Campus, Jackson Toby asks us to consider this proposal.
Insert a risk-assessment component into all future student loans that includes past academic performance in order to maximize the likelihood of loan repayment and minimize defaults that add to the national debt.
How will the government figure out which students are "college-ready", since educators don't even seem to be able to figure it out?
ReplyDeleteIt could use SAT/ACT tests, or something similar, with other back-up info if needed. I know there's a whole "anti-test" faction that would protest, of course. Basically, it comes down to the "will" to do it, not to the method, I think.
ReplyDeleteWell, that is basically just using admissions criteria then. Why not simply go back to the old system of funding state universities that maintain strong admissions standards? A big factor (not the only factor though) behind the student loan crisis is the fact that states have essentially stopped funding their public universities, causing tuition to skyrocket. Universities in several states are considering becoming entirely private because the state share of funding is almost 0. I would like to go back to the older system in which academically qualified students could go to a top school like University of Michigan for a small tuition. This is how my parents went to college (they are UMich alums). They didn't have to take out loans. The old way was more efficient because it cut out the loanshark middlemen.
ReplyDeleteA factoid in today's Chronicle Online: "Students at for-profit colleges, who make up about 10 percent of the nation's college enrollments, accounted for nearly half of all the defaults—47 percent—the draft data show"
ReplyDeleteMuch of this student loan bubble stuff is driven by the for-profits.
What's also interesting is that ALL 2-3 year schools seem to be the problem, which might partly bolster the argument that it's the STUDENTS who are a big part of the problem.
ReplyDeleteFY 2009 2-year default rates:
Public 2-3 years 12.1%
Private 2-3 years 14.8%
Non-profit 2-3 years 15%
Public 4 years 5.2%
Private 4 years 4.6%
Non-profit 4 years 15.6%
Where did those stats come from? The nonprofit numbers don't match the Chronicle's:
ReplyDeleteOverall default rates (I think they lumped 2 year and 4 year programs together) according to the Chronicle
public: 7.3
private nonprofit: 4.7
private for-profit: 15.2
As you can see, for-profits have a much higher default rate 2 years out than either public or private nonprofits.
SORRY! I got the numbers from a link in the article, BUT I messed up the info. I should have labeled the last category NON-Profit and the private 2-3 years number was WRONG. I corrected it below, but I think my point is still valid. The 2-year schools seem to be a significant part f the problem, in whatever category. So it could be the students (low SES) or maybe just an intrinsic problem with 2-year schools and their mission.
ReplyDeleteFY 2009 2-year default rates:
Public 2-3 years 12.1%
Private 2-3 years 10.1%
FOR-profit 2-3 years 15%
Public 4 years 5.2%
Private 4 years 4.6%
FOR-profit 4 years 15.6%
Here's the link:
http://ifap.ed.gov/eannouncements/attachments/052011AttachFY2009FY2009DraftNationalCDRWithPrior2yrscomparison.pdf
I realized a made ANOTHER mistake in my previous post.
ReplyDelete"I should have labeled the last category FOR-Profit."
Sheesh!
But notice that the default rate for for-profit 4 year schools is much higher than either public or private 4 year schools. So it isn't just a problem with 2 year schools. Also remember that students at public 2 year schools are far less likely to take out loans at all - at many public 2 year schools, the Pell covers the tuition. That might skew the statistics.
ReplyDeleteYup,not only a problem with 2 year schools.
ReplyDelete