DOE's Annual Report on Student Loan Defaults Is More Useful than Its Old Reports, But DOE Still Understates the Magnitude of the Student-Loan Crisis

The U.S. Department released its annual report on student-loan defaults a few days ago. For 2011, the percentage of borrowers who defaulted in the first two years of their repayment period was 9.1 percent, up slightly from the previous year.

Of course, most student-loan borrowers don't default in the first two years of the repayment period. According to a  New York Times story, the average time for an overburdened borrower to default is four years.

To get a better picture of the true default picture, DOE began publishing the three-year student-loan default rate.  Measuring default rates during the first three years of the repayment period causes the rate to rise from 9.1 percent to 13.4 percent.  For students who borrowed to attend for-profit colleges, the three-year default rate is higher--22.7 percent. In other words, more than one out of five students who borrowed to attend for-profit institutions defaulted within three years of the beginning of their repayment obligation according to DOE's most recent report.

How about the percentage of borrowers who default over the life of the loan?  The number is very high, particularly for the for-profit sector.  According to a DOE estimate (as reported in the New York Times), 49 percent of the students who borrow money to attend a for-profit college will ultimately default on their loans!

It should be obvious to everyone by now that the for-profit sector as a whole has been a failure at preparing students for the 21st century economy. The federal government should not be financing a sector that has a default rate of nearly 50 percent. Nevertheless, a sector that only enrolls about 10 percent of all post-secondary students draws 25 percent of federal student aid money.

This is a scandal, and it has brought great misery to students who borrowed money to attend for-profit colleges and then failed to get jobs that would allow them to pay back the money.

 My guess is that a great many student-loan defaulters have simply given up trying to become economically self-sufficient.  Having defaulted on their student loans, they are unable to participate in the student-loan program again until they pay back their old debt.  Under current bankruptcy law, it is virtually impossible for them to discharge their student loans in bankruptcy. Meanwhile, for most of them, the interest on their loans continues to accrue. Short of emigrating to another country, there is nothing many of these defaulters can do to get a fresh start.

References

Lewin, Tamar. Education Department Report Shows More Borrowers Defaulting on Student Loans. New York Times, September 29, 2012, p. A16..

Baloney about Higher Education from President of Wesleyan University

In Written on the Heart,  Philosopher J. Budziszewski's primer on natural law, Budziszewski argues that certain truths are innately known to all people. These truths form the natural law, and are, as it were, written on the heart. 

Midway through the book, Budziszewski describes this innate knowledge as our "baloney meter."  He maintains that all people know at some level that certain concepts are contrary to the natural law and are baloney.

Budziszewski believes (and I agree) that American higher education has adopted the mission of dismantling the baloney meters of the young people who study at our nation's colleges and universities. By the time they finish their studies, students have come to believe that there are no ultimate truths, no natural law, no fundamental principles for living. Instead they think that all truths are relative and changeable, that people make decisions based on their own self interest, and that the meaning of life is shaped by the quest for pleasure, power, and recognition. 

Yesterday's New York Times contains an example of higher education's baloney.  Michael Roth, president of Wesleyan University, responded to critics who charge that American higher education is outmoded.

Michael S. Roth, President of Wesleyan University

Basically, Mr. Roth is defending the status quo in Amerian higher education at places like Wesleyan. The purpose of higher education, Roth loftily maintains, is to "teach us habits of learning." Education should encourage students to developing an "openness to being shaped by experience."  Quoting Dewey, Roth writes, "The inclination to learn from life itself and to make the conditions of life such that all will learn in the process of living is the finest product of schooling."

In short, Roth argued, the purpose of higher education "is to give all citizens the opportunity to find 'large and human significance' in their lives and work.'"  And--Roth might have added--the cost of finding human significance at a university like Wesleyan is only about $40,000 a year.

Of course, Roth's defense of higher education is just baloney. In spite of the universities' efforts to dismantle their students' baloney meters, students are beginning to figure out that higher education is not worth what the universities are charging for it, particularly at institutions like Wesleyan, where many professors specialize in political correctness, deceptively packaged as "the liberal arts".

All university presidents can express high-minded ideals about the value of higher education, and some of them can quote John Dewey.  But we should not take these attestations seriously until we see college presidents rein in their own salaries, lower tuition costs, and figure out ways to make sure a college degree leads to a well-paying job.  By the way, Wesleyan University is one of the ten most expensive colleges in the United States.

References

Budziszewski, J. Written on the Heart: The Case for Natural Law. Intervarsity Press, 1997.

Dawson, Christopher. The Crisis of Western Education. Steubenville, OH: Franciscan University Press, 1989.

Roth, Michael. "Learning as Freedom." New York Times, September 6, 2012, p. A23.