Sunday, January 22, 2023

Robert Kelchen Calcuates Debt-to-Earnings Ratio For 45,000 Post-Secondary Programs: A Treasure Trove of Data

 As Education Secretary Miguel Cardona observed recently, college graduates, on average, make about one million dollars more over their working careers than people who only have high school credentials. 

I'm sure that's true, but that fact doesn't mean that all college programs lead to higher incomes or that all programs are reasonably priced.

Robert Kelchen, a professor at the University of Tennessee, Knoxville, performed a valuable service by creating a dataset that compares program-level debt with earnings outcomes for more than 45,000 postsecondary programs. This dataset calculates the debt-to-earnings ratio for students one year after they leave their respective institutions.

Obviously, this enormous dataset can be analyzed in many different ways. My brief analysis examined programs with the highest debt-to-earnings ratios--those that left former students with three times as much debt as their first-year earnings.

Forty programs are in this category, and all but six are graduate programs. Five Branches University, a private institution in California, tops the list with a debt-to-earnings ratio for its master's degree in Alternative and Complementary Medicine of more than nine to one. Its students leave the program with an average debt load of $144,276  and an average salary one year after leaving the school of only $16,011.

Second on the list, with a debt-to-earnings ratio of almost eight to one, is Bastyr University's program in Alternative and Complementary Medicine. One year after leaving the program, its former students have a median income of $22,411 and an average debt load of $175,690.

In fact, of the 40 programs with debt-to-earnings ratios of more than three to one, eleven are programs in alternative medicine, complementary medicine, or acupuncture.  

Film, fine arts, and drama are also well-represented among programs with high debt-to-earnings ratios. Of the 40 programs with debt-to-earnings ratios of more than three to one, thirteen are fine arts, film, or drama programs.

Professor Kelchen's database prompts this question.  How much should students borrow to fund their education? 

Camilo Maldonado, writing for Forbes, recommends a borrowing limit of no more than two-thirds of a graduate's expected starting salary. Thus, if you expect your starting salary to be $50,000, you should borrow at most about $33,000. 

Applying that formula to Professor Kelchen's database, students graduating from almost 4,000 academic programs are leaving school owing more money than they can comfortably pay back.

As Maldonado pointed out, the federal student loan system is designed to lend students potentially more money than they can repay. The colleges don't care how much debt their students amass to finance their studies.

On the contrary, students must decide for themselves how much college debt is prudent to accrue. Unfortunately, as Professor Kelchen's database makes clear, a great many students are not making that calculation. 

In his commentary, Maldonado reminds us that the price of a college education is increasing almost eight times faster than wages. Thus, Maldonado warns, "This means that overpaying for an education is becoming increasingly disastrous." 

Wednesday, January 18, 2023

DOE wants to modernize the student loan program but mucks up the planning process

Like a repentant boozer who promises to give up drinking, the Department of Education pledged to modernize its neanderthal student loan program. Unfortunately, like a chronic drunk, DOE simply can't clean up its act.

DOE's own Inspector General audited the Department's modernization efforts and issued a report last week.  The audit concluded that DOE bungled its modernization job.  

Typical of a government document, the Inspector General's report is written in govspeak and is almost incomprehensible.  Here's just one sentence from the audit report, which I urge you not to read:
FSA not completing the required or applicable planning steps or following best practices for acquisition planning for the Next Gen projects we reviewed may have contributed to the stakeholders’ misunderstandings regarding scope, project requirements, and stakeholder needs; and to multiple changes to some of the projects’ solicitations, multiple bid protests, budget deficiencies, and poorly scoped solutions that FSA described in its Summary of Lessons Learned for the Next Gen Enhanced Processing Solution and Interim Servicing Solution projects and in FSA’s Fiscal Year 2023 Congressional Budget Request.

Fortunately, Katherine Knott, an Inside Higher Ed reporter, understands govspeak and translated the auditor's report into plain English. In a nutshell, Knot reported that DOE "didn't follow best practices in budgeting, planning and managing the modernization of its student loan system." Knott also wrote that DOE's Office of Student Aid "didn't complete budget requests for many components of the modernization until after the bid solicitations were issued."Apparently, senior DOE officials couldn't even agree on the modernization initiative's objectives.

As we might expect, DOE's officials had a govspeak excuse for the screwup. Stakeholders, including Congress, were confused and frustrated due in part to "inadequately defined changes in strategy and a failure to account for constituent feedback."

In short, DOE's bumbling effort to modernize its byzantine student loan program ended in a SNAFU: Situation Normal; All Fucked Up."

Hey, man. The situation is normal

Thursday, January 12, 2023

DOE plays Whack-a-Mole with the Student Loan Program: Not a safety net but a noose

According to Techopedia, the term “whack-a-mole” describes a process "where a pervasive problem keeps recurring after it is supposedly fixed."

That's a great description of what the Department of Education is doing with the federal student-loan program.  It's playing whack-a-mole.

Here's DOE's latest fun-house trick to create a "safety net" to "permanently fix a broken student loan system."

The Department is going to revamp its Rube Goldberg system of income-based repayment plans into a new program that will make college damn near free for millions of college students.

As DOE spokespeople explained, student debtors in income-based repayment plans will only be required to pay five percent of their discretionary income toward paying back their loans--no matter how much they borrow!

Pretty sweet. But the deal gets sweeter.  DOE's generous new repayment plan describes discretionary income as 225 percent of a person's income above the federal poverty level.

Here's an example of how DOE's new repayment scheme will work. Single student borrowers will only have to pay 5 percent of their annual income above $30,000 on their student debt. 

Let's suppose a single guy graduates from St. Nobody College owing $58,000 in student loans. (That's the average debt load for graduates of private schools.)

Let's further suppose our guy earns a salary of $55,000 a year, the average starting salary for a recent college graduate.

What will be our guy's monthly student-loan payment on the $58,000 he borrowed to attend St. Nobody? 

The math is simple. He will pay five percent of $25,000 ($55,000 minus $30,000). That's $1,250 a year or $104 a month.

And if our young scholar is married and has two children when he graduates from college, his discretionary income will be adjusted upward. He won't have to pay anything on his student loans--not one fuckin' dime!

Don't take my word for it. That's what DOE's January 10 press release reported. 

How about accruing interest? Under DOE's old income-based repayment plans, small monthly payments on student loans often don't cover accruing interest on the debt, so the debt grows larger with each passing month.

Again, no problem! Education Secretary Cardona's new student-loan bonanza won't charge you interest! 

In sum, Education Secretary Cardona is playing whack-a-mole with the student loan program. Instead of doing something to fix this trillion-dollar problem, he's rolling out a scheme that's designed so that most student borrowers don't have to pay back their debts.

James Kvall, Undersecretary of Education, described DOE's razzle-dazzle plan as a safety net.  But's he wrong. It's not a safety net; it's a noose designed to strangle American taxpayers.

Let's play whacka-mole!

Monday, January 9, 2023

Color Me Cynical. Department of Education Statement Out of Touch on Loan Forgiveness. Essay by Steve Rhode

Can we be honest for a minute?

The entire issue of forgiving student loans with a one-time approach is stupid. It does not address the systemic breakdown of the cost of higher education or the realities of the BS schools selling students into debt for the corporation’s benefit.

If the Biden student loan forgiveness plan were to be allowed, it would clear the debt of many, and the cycle would start over again.

Here is the POV from the Department of Education:

U.S. Secretary of Education Miguel Cardona issued the following statement after the Departments of Education and Justice filed a legal brief with the Supreme Court on the Biden-Harris Administration’s Student Debt Relief Program:
The Biden-Harris Administration remains committed to fighting to deliver essential student debt relief to tens of millions of Americans. As part of this commitment, today the Departments of Education and Justice filed a legal brief with the Supreme Court explaining our legal authority under the Higher Education Relief Opportunities for Students Act to carry out our program of one-time, targeted debt relief. We remain confident in our legal authority to adopt this program that will ensure the financial harms caused by the pandemic don’t drive borrowers into delinquency and default. We are unapologetically committed to helping borrowers recover from the pandemic and providing working families with the breathing room they need to prepare for student loan payments to resume. As previously announced, student loan payments and interests will remain paused until the Supreme Court resolves the case because it would be deeply unfair to ask borrowers to pay debt they wouldn’t have to pay, were it not for meritless lawsuits.”
If the Department of Education, Administration, and lawmakers were so committed to resolving this problem, it would take one action, allow all student loans to be dealt with in bankruptcy as any other debt.

Until that happens, the gyrations from what we want, and you can’t have camps, is just a waste of human energy and time.

The current student debt problem is not about federal student loans alone. This didn’t arise with the pandemic. This has been an epidemic in college financing and has been growing for decades.

I would love for student loan debtors today to have solutions and prevent future students from winding up in the same cesspit.

Someone needs to wipe the lipstick off of this pig.


This essay was originally posted on January 9, 2023, on the  Get Out of Debt Guy website. 

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve here.

Sunday, January 8, 2023

Elderly Student-Loan Defaulters Will See Their Social Security Checks Garnished When Pause on Student Loan Payments Ends

In response to the COVID pandemic, the Department of Education stopped garnishing the Social Security checks of elderly student-loan defaulters in March 2020. However, DOE will return to that practice soon--probably by midsummer 2023.

In an article posted on, Vance Cariaga estimated that garnishment of Social Security checks will cost senior student-loan defaulters, on average, about $2,500 a year. 

Only a small percentage of elderly Americans have outstanding student-loan debt, but that percentage will likely go up in coming years, partly because millions of college borrowers are signing up for income-based repayment plans that can stretch out for as long as a quarter of a century.

In fact, Variaga cited estimates that 22 percent of Black Social Security beneficiaries will have student-loan debt in the coming years, along with 14 percent of White Social Security beneficiaries and 10.4 percent of Hispanics. 

Think about that. Virtually every American is eligible for Social Security benefits. Thus, if the estimates Cariaga cited are accurate, more than one out of five Black Americans will still have student debt when they reach retirement age.

If we were to poll members of Congress, I doubt that a single one supports garnishing Social Security checks of student-loan defaulters in their senior years. Not only is it heartless, but it's also pointless. A Government Accountability Office report that appeared several years ago found that money collected from garnishing Social Security checks seldom reduced defaulters' loan balances. Most of the garnished funds went toward paying accrued interest.

Why doesn't DOE abandon the practice? Alternatively, why doesn't Congress abolish the practice?

I'll tell you why. Despite all the rhetoric, litigation, and policy proposals, our nation's education and political leaders refuse to focus on the core reality of the student loan crisis, which is that millions of college borrowers have had their lives blighted by student debt they can't pay back. Burdened by student loans, Americans are increasingly unable to buy homes, save for retirement, or even get married or start families.

If Congress truly grasped the magnitude of the student-loan catastrophe, it would do at least these two things: It would abolish the practice of garnishing Social Security checks of elderly student-loan defaulters, and it would allow overburdened student debtors to discharge their student loans in the bankruptcy courts. 

Federal Reserve says student-loan delinquencies will go up if Biden's loan forgiveness plan is scrapped

 Last August, President Biden announced his plan to forgive between $10,000 and $20,000 in student debt to individuals who make less than $125,000 a year. He also extended the pause on making student loan payments until at least midsummer.

Who could object?

Turns out, a lot of folks objected. The NAACP didn't think Biden's plan was generous enough, calling it "a slap in the face." Senate Minority Leader Mitch McConnell called the plan "wildly unfair" because it forces taxpayers to subsidize a government program that mainly benefits high-income individuals. 

Several state governments are also unhappy. A group of states sued the Biden Administration (Nebraska v. Biden), seeking a court ruling that the President's loan forgiveness program is illegal. The Eighth Circuit stopped Biden from implementing his plan pending a judicial ruling on its legality.  The Supreme  Court is reviewing the controversy and is expected to give a final decision on Biden's giveaway by the end of June.

A few days ago, the Federal Reserve Bank of New York weighed in with a highly technical report buttressed by multiple charts, graphs, and mathematical formulae. Here's what the New York Fed concluded about Biden's debt-forgiveness plan:

The plan will cost $441 billion and grant debt relief to 38 million eligible college borrowers. In the Fed's view, Biden's proposal is progressive. In other words, it does not disproportionately benefit rich people. The Fed also estimates that almost fifteen million borrowers with low loan balances will see their student debt wholly erased. 

Ominously, the Fed also noted a recent uptick in credit card and auto loan delinquencies, a sign that student borrowers are struggling to make ends meet even though they've been excused from making student-loan payments for almost three years.  The Fed predicts that the student-loan delinquency rate will rise if college borrowers don't get debt relief and are forced to resume making their monthly student-loan payments next summer.

Here's my take on President Biden's student-loan forgiveness plan and the litigation it triggered.

First, I support modest debt relief for some student debtors. Many college borrowers with low loan balances are college dropouts who took a few courses but never got a degree.  Given all the helicopter money the government dumped on the business community during the COVID crisis, forgiving $10,000 or $20,000 in student debt seems reasonable. 

However, if Biden's proposal is such a good idea, why didn't Congress initiate the plan through legislation? It's Congress's job--not President Biden's--to preside over what the Fed called "the largest mass discharge of consumer debt in modern history."  I think the Supreme  Court will likely strike down Biden's loan-forgiveness scheme when it rules on Nebraska v. Biden later this year.

Finally, as the Federal Reserve Bank pointed out in its report, loan forgiveness will not solve the growing crisis in college affordability. 

This one-time forgiveness event [the Fed report stated]does not directly address the rising cost of post-secondary education that led to ever-exploding balances in the first place. In fact, if borrowers expect future debt cancellation events, they may borrow even more if there is some chance it will be forgiven in the future. 

Let's face it. A college education costs too damn much. It's nuts to ask students to pay $50,000 a year in tuition to get a college degree in liberal arts or the social sciences. 

Unfortunately, our nation's politicians and policymakers aren't even asking universities to reign in their costs, and college leaders inexorably raise their tuition rates year after year. 

We will never get the student loan crisis under control until we get college costs under control. But the federal government is not doing that. Instead, it subsidizes the increasingly dysfunctional and irrelevant college industry and forces college students to pay the bill.



Monday, January 2, 2023

'Is Harvard turning into a huge joke?' Grade inflation is a product of laziness

 Brad Polumbo recently posted an essay in the Washington Examiner titled "Is Harvard turning into a huge joke?" Polumbo focused on rampant grade inflation at the dowdy old school, where the average GPA for undergraduates is 3.8 out of 4.0. In other words, most Harvard students get As on their report cards.

In fact, grade inflation is so bad that Harvard abolished its Dean's List because most students were on it.  And this is not a new phenomenon. In 2001, more than twenty years ago, 91 percent of Harvard students graduated with Latin honors (summa, magna, or cum laude). Since then, the university has tightened its standards for an honors degree, but it still awards Latin honors to 50 percent of its graduates. 

As Polumbo points out, Harvard's grading system essentially gives students participation awards--turning America's most famous university into "glorified academic daycare."

Of course, Harvard is not the only university that has succumbed to grade inflation. I worked at four public universities before I retired, and I am confident that 95 percent of graduate students in the field of education received an A or B grade.  

Polumbo suggested that economics may explain the decline of rigorous grading. Colleges are desperate to enroll and retain students because they need the tuition revenue. They will do almost anything to keep their students happy.

However, that theory doesn't explain grade inflation at Harvard. Harvard College has a highly selective admissions process; it only admits about 4 percent of all applicants.  Harvard administrators are not worried about attracting and retaining students.

Grade inflation at Harvard and colleges across the country can best be explained by an age-old human weakness--sloth. 

 Grading a stack of student essays takes a lot of work. It is difficult to determine which students turned in superior work that deserves an A. It is even more challenging to establish which students submitted above-average work worthy of a B or a B+ but not an A-.

And it is excruciatingly onerous to hand out C grades for mediocre exams and then articulate an objective justification for that grade to a disappointed and angry student who might slap a professor with a grade appeal to the Dean.

It is much easier to distribute A grades to everyone, much like tossing out beads and baubles from a Mardis Gras float.

Of course, there is a price to be paid for grade inflation. Exceptionally bright students lose their enthusiasm for learning when they realize they will get the same grade whether or not they push themselves to excel.

Likewise, lazy students soon figure out that they will probably get a high grade even if they turn in shoddy work.  

Moreover, the value of a college degree is eroded by grade inflation. If the universities do not insist on rigor, how can they justify their exorbitant tuition prices? 

More ominously, once university culture is dominated by mediocrity, that ethos will seep into American society as a whole. Young people who slouch their way through college will be programmed to slouch their way through life.

Everybody gets an A!
Photo credit: KPEL