Showing posts with label African American default rates. Show all posts
Showing posts with label African American default rates. Show all posts

Friday, September 20, 2019

Student Debt Only Went Up 2 Percent Last Year! (Is This a Good News-Bad News Joke?)

An airline pilot, flying a transoceanic route, made an announcement over the intercom to the passengers. "I have some good news and bad news," he said.

"First, the bad news. One engine is on fire, we're low on fuel, and we have no idea where we are." But on the bright side, he continued, "We're making great time!"

The Institute for College Access and Success issued a report this week that strikes me as a good news-bad news joke. Student debt levels for the graduating class of 2018 was $29,200, only 2 percent more than the previous year. I suppose that's good news.

But the bad news is this: About 45 million Americans are student-loan debtors, and collectively they owe $1.6 trillion in student debt. According to TICAS, over 20 percent of African Americans will default on their student loans within 12 years of entering college, 7 times the rate for whites (p, 9).

Among students who began their studies at for-profit colleges, TICAS reported, 30 percent will default within 12 years of entering college, seven times the default rate for students who first enrolled at public institutions.

These dismal outcomes are happening during a nationwide enrollment decline, which is hitting the nonprofit private schools the hardest. The small liberal arts colleges are frantically trying to keep enrollments up. They've slashed tuition by an average of 50 percent. They've started new academic programs. They're cutting faculty lines, particularly in the humanities. They've hired marketing firms, and have tried re-branding themselves with billboards and hip slogans.

But for many liberal arts schools, these strategies will not keep them afloat. And this reminds me of another story.

A Texas rancher told a friend he had begun an experiment to lower his livestock feed bills.  "I began feeding my horse a little less hay everyday," he confided, "until I finally weaned him off hay altogether.

"How did that work out for you?, his friend asked.

"It was working great," the rancher said. "But unfortunately, my horse died before I was able to complete the experiment."


The experiment was a success, but the horse died.
Photo credit: DelawareOhioNews.com


Saturday, October 21, 2017

For-profit colleges are exploiting African Americans. But you already knew that.

The National Center for Education Statistics issued a report in early October on long-term, student-loan repayment patterns, and two independent analyses highlighted the loan repayment patterns for African Americans.  Almost half of all black students who entered postsecondary education in 2003-2004 (49 percent) had defaulted on at least one of their student loans within 12 years.

Think about this statistic for a moment.

The consequences of defaulting on a student loan are catastrophic: a ruined credit rating and a ballooning loan balance due to penalties, collection fees, and accelerating interest.  Individuals who default on their student loans will be crippled in their ability to buy a home, marry, have children, or save for retirement.  And bankruptcy relief, although not impossible, is very rare for student-loan debtors. In short, most people who default on their student loans will be burdened by their debt for the rest of their lives.

Who would construct a student-aid system that ruins the lives of half the African Americans who participate in it?

And the story gets worse.  Three out of four black students who took out student loans to attend a for-profit college and then dropped out defaulted within 12 years. In essence, African Americans who borrow to enroll in a for-profit institution and don't finish their programs are playing Russian roulette with their financial futures--Russian roulette with three bullets in a four-shot revolver.

As an Inside Higher Ed article noted, the Department of Education "has not collected much data on student debt that can be broken out by the race or ethnic background of borrowers." Why not? Because DOE does not want the public to know that African American are getting ripped off by the higher education industry--and the for-profits, in particular.

The historically black colleges and universities (HBCUs) benefit from the status quo, the for-profit industry benefits from the status quo, and Congress benefits from the status quo because our legislators take campaign contributions from entities that depend on federal student-aid dollars--including the private equity funds that own some of the for-profit colleges.

Will these recent reports, which highlight racial exploitation in higher education, bring about change? I seriously doubt it. Everyone who is profiting from the federal student-aid program is playing a short game. The insiders want to make as much money as they can before higher education collapses--and collapse is fast approaching.

Russian roulette with four bullets

References

Paul Fain. Half of black student loan borrowers default, new federal data show. Inside Higher Ed, October 17, 2017.

Robert Kelchen, New Data on Long-Term Student Loan Default Rates. October 6, 2017.

Ben Miller. New Federal Data Show a Student Loan Crisis for African American Borrowers. Center for American Progress, October 16, 2017.