Thursday, December 10, 2015

Student Loans and Higher Ed


It's the end of fall semester for universities across the nation.  I generally find this time of year sort of a bummer.  

The days are shorter and colder.  The winter holidays are around the corner which I'm sure elate many, but I find that the holidays bring up an array of social concerns I have about consumption.  My birthday is also around this time and that became way less exciting around 29.  

Perhaps most of all though, the end of fall semester is a time of reckoning.  The semester starts of with great hope.  Students and faculty are relaxed and tan from their summer fun. First years are bright eyed and eager to solve the world's most difficult issues.  We all have our highlighters, stickies, and organizers in hand- THIS will be the semester that we: get that grant, publish that paper, get straight A's, accomplish all great tasks.  

Then December rolls around and we find, very clearly, what we have accomplished in the past 4 months or so and what we did not.  

No matter.  The wonder of higher education is that every semester holds this same hopeful promise.  

And so, those like myself, that find peace in the emotional volatility of living semester by semester go back for more degrees.  

Then there are those of us that drive ourselves mad jumping the hoops and dancing the jig that enables us to remain in the university setting teaching, researching, and providing service in the name of enlightenment.

Many incur substantial debt to do so.  

The Washington Center for Equitable Growth, a think tank, put together an interesting, interactive national map showing, who has the most debt, the greatest incomes, and the most loan delinquency.  

The think tank claim several findings: 
  • "...borrowers with the lowest student loan balances are the most likely to default because they are also the ones likely face the worst prospects in the labor market."
  • "As median income increases in a zip code, so does the average loan balance, until income reaches approximately $140,000. After that, the relationship becomes flat." 
  • ..."we calculate that student debt absorbs around 7 percent of gross income in zip codes where median income is $20,000, declining to 2 percent in the highest-income zip code"
The researchers attribute the inverse relationship between income and delinquency to two main causes: 
First, although graduate students take out the largest student loans, they are able to carry large debt burdens thanks to their higher salaries post-graduation. One study of student loans by institution type reports a three-year cohort default rate for graduate-only institutions of 2 percent to 3 percent.* Second, the rise in the number of students borrowing relatively small amounts for for-profit colleges has augmented the cumulative debt load, but because these borrowers face poor labor market outcomes and lower earnings upon graduation (if they do in fact graduate), their delinquency rates are much higher. This is further complicated by the fact that these for-profit college attendees generally come from lower-income families who may not be able to help with loan repayments.
They continue with an argument that those of lower incomes lack access to fair credit markets and this also attributes to the their high debt load and delinquency,
It might seem counterintuitive that lack of access to credit results in delinquency—seemingly a problem of “too much debt.” But in fact, lack of access to credit and delinquency are two sides of the same coin. Nearly everyone needs access to credit markets to meet basic economic needs, and if they can’t get loans through competitive, transparent financial networks, poor people are more likely to be subjected to exploitative credit arrangements in the form of very high rates and other onerous terms and penalties, including on student loans. That disadvantage interacts with and is magnified by their lack of labor market opportunities. The result is exactly what we see across time and space: high delinquency rates for those with the least access to credit markets.
Recently, several state attorney generals banded together to force a a for profit college company, Education Management Corporation, to forgive $102.8 million in educational loans.  

According to a NYTimes article, the corporation was accused of "boiler-room tactics to enroll students who had little chance of succeeding in college."

Thus comes a rather difficult moral situation.  Even if we leave the idea of "for profit" out of it, still universities and colleges have real world business concerns.  Running a university is expensive.  There is infrastructure, people, stuff, activities, etc.  Thus, there is an interest in recruiting students to attend.  

As well, everyone should have the opportunity to attain higher education.  

But at what point does recruiting students become predatory?  Who gets to decide that a student will be unable to successfully complete a degree program?  Should we be able to go door to door to recruit for religion and political campaigns but not college?   

It is fairly common to judge the abilities of a prospective student by their transcript and academic record.  But when all the transcript signs point to little chance of success and a perspective student would like to try anyway, then what?  

The nation can offer free community college for students below a certain high school GPA and income threshold.  But, that doesn't seem very promising... though hopeful and well intentioned.  

Difficult indeed; and a problem that we have been unable to resolve in the past four months. 

Better luck next semester.

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