Showing posts with label Urban Institute. Show all posts
Showing posts with label Urban Institute. Show all posts

Monday, September 24, 2018

College students spend more time working than attending classes but they're still forced to take out student loans

Many years ago, when I was a first-year law student at University of Texas, Professor Robert Hamilton, my law instructor, told our class of first-year students not to work while in law school. Working part-time, Professor Hamilton said, would distract us from our studies and degrade the quality of our law-school experience.

I remember thinking that was good advice for people from wealthy families, but it wouldn't work for me. I began working 20 hours a week at the Texas Attorney General's Office just as soon a finished my first year of classes; and I also got a work-study job at the law school.

In those hoary old days, students could actually work their way through college and even law school. My law-school tuition was only $1,000 a year, and by working part time, I graduated from law school with no debt.

Today, students are still working while in college, but their part-time jobs don't begin to cover the cost of tuition. Thus, even working students take out loans.

According to a recent HSBC report, 85 percent of current college students are working part-time jobs. In fact, they spend far more time working than attending classes or studying. On average, students work 4.5 hours a day, almost twice as much time as they spend in classes.

But those part-time jobs working as waiters, pizza cooks, rental-car agents, etc. hardly cover basic living expenses--food, shelter, cell phone, car insurances, etc. And so most students are borrowing to pay tuition. In 2017, college graduates finished their studies owing an average of almost $40,000. And that doesn't include credit card debt, averaging about $4,000.

A perception still exists that going to college and professional school is a time of awakening intellect when students develop personal and vocational identities sitting at the feet of wise and learned scholars. But that time is long gone--if it ever existed.

Today, students are stressed out by their college experience. Six out of ten report feeling anxious about financial concerns either frequently or all the time. And women report more financial anxiety than men.

Going to college now is like running a gauntlet between rows of vicious bureaucrats and money lenders trying to beat the student down. Some people survive the experience relatively unscathed and go one to get jobs that allow them to pay back modest of amounts of student debt.

But a growing number of young people finish their post-secondary studies worse off than before they first enrolled. They borrow far too much money and graduate with no skills and no idea what they want to do for a living. In some instances, students' parents get sucked into the maw of college debt, taking out Parent PLUS loans they can't pay back.

Indebted college graduates who don't find good jobs are often forced to obtain economic hardship deferments on their student loans, excusing them from making payments while the interest accrues. Others get pushed into 20- and 25-year repayment plans that are structured so that their debt keeps growing even if they faithfully make their monthly payments. And about one million people a year simply default on their loans--essentially committing financial suicide.

The higher education flacks say over and over that a college education is a ticket to a good job and a middle class lifestyle.  And for some people that's true. But its not true for everybody.

For millions of people, their college experience is nothing but a scam, and this is disproportionately true for women, minorities, and people from low-income families.

Going to college is like running the gauntlet




Friday, November 4, 2016

Psychological Costs of Student-Loan Debt: A Critique of Game of Loans by Beth Akers and Matthew Chingos

As I have pointed out more than once, several policy organizations argue tirelessly that worries about the nation's student-debt crisis are overblown. In particular, scholars at the the Urban Institute and the Brookings Institution have repeatedly published articles that minimize the magnitude of what I have long called a crisis.

It is not surprising then that Beth Akers, a fellow at the Brookings Institution, and Matthew Chingos, a fellow at the Urban Institute, published a book recently called Game of Loans, that essentially argued that the federal student-loan program is basically sound and under control.

In my view, Akers and Chingos widely missed the mark regarding the student loan crisis. They did not misrepresent the data about this problem or say anything that is technically inaccurate. Rather, in my view, they seriously misinterpreted data that warn of a coming catastrophe.

I won't attempt to articulate all my criticisms of Game of Loans in this essay. Rather I will focus on one point that Akers and Chingos made in Chapter 5, where they admit that "education debt is having negative psychological impacts on borrowers" (p. 95).

Of course this is true.  As Kathryn Hancock explained in a 2009 law review article, "Studies have consistently found that socioeconomic status and debt-to-income ratios are strongly associated with poor mental health." Student loans, in particular, Hancock wrote, "can be a chronic strain on an individual's financial and emotional well-being." Indeed, "[t]he mere thought of having thousands upon thousands of dollars worth of debt can severely impact those with already fragile mental health, especially if they will carry that debt for the rest of their lives" (Hancock, 2009, 160-161, internal quotation marks omitted).

But what solutions do Akers and Chingos offer for this problem? Solution number one, they say, is to dial down the rhetoric about the student loan crisis.  We need "to change the tone of the public discourse on this issue," Akers and Chingos counsel. In their mind, the "hysterical treatment" of the student-loan problem has caused some borrowers to worry more about their student loans than they should.

And solution number two? Akers and Chingos suggest that the psychological costs of student indebtedness could be reduced by creative repayment plans, including income-driven repayment plans.

In essence, Akers and Chingos are aligned with the Obama administration when it comes to addressing the student-loan crisis. Let's pretend there is no crisis and shove more students into long-term repayment plans.

Thanks, Ms. Akers and Mr. Chingos. You've been a big help.

References

Beth Akers and Matthew Chingos. Game of Loans: The Rhetoric and Reality of Student Debt. (Princeton, NJ: Princeton University Press, 2016).


Katheryn E. Hancock, "A Certainty of Hopelessness, Depression, and The Discharge of Student Loans Under the Bankruptcy Code," 33 Law & Psychology Review 151, 160-161 (2009) (internal citations and internal quotation marks omitted). psychology 


Sunday, April 12, 2015

The Urban Institute's Sandy Baum: Is She a Bag Man for the Higher Education Industry?

My favorite scene in the movie Michael Clayton is a dialogue between Michael Clayton (played by George Clooney), who is a lawyer in a 600-person law firm, and Arthur Edens (played by Tom Wilkinson), a senior partner in the same firm.

Edens is a manic depressive handling a major piece of litigation for an international corporation accused of intentionally marketing a product that causes people to get cancer. During depositions, Edens has a manic episode and his continuing bizarre behavior threatens to expose the corporate client's skulduggery, potentially costing it billions.

The firm's senior partner directs Clayton to get Edens under control, and Clayton talks to him very persuasively, while implicitly threatening to have him committed to a mental institution.

But Edens is having none of it.

"Michael," Tom Wilkinson's character kindly says to George Clooney's character, "I have great affection for you and you live a very rich and interesting life, but you're a bag man not an attorney."

If I ever meet Sandy Baum, I'm tempted to say very much the same thing. Baum is a senior fellow at the Urban Institute and a highly respected analyst of higher-education finance. For many years, she has co-authored the College Board's annual publications Trends in Student Aid and Trends in College Pricing; and she has conducted studies on college costs for the Brookings Institution. She has a Ph.D. in economics and is a research professor at George Washington University, a position she holds while working with the Urban Institute. Very impressive.

Over the years, Sandy Baum has emerged as one of the leading apologists for the higher education industry. Everyone knows that college costs have skyrocketed and that the federal student loan program is totally out of control. Millions of people have defaulted on their loans and millions more have obtained economic hardship deferments that excuse them from making student-loan payments.

Nevertheless, Sandy Baum coos soothingly that college costs are really not as high as they seem to be and, in any event, rising costs are not the fault of the colleges and universities. In 2013, Baum co-authored a report for the College Board that actually argued that college costs have not gone up much at all. It is true, the College Board acknowledged, that the sticker price for attending college has gone up significantly over the past ten years. But when discounts, grants and tax benefits are calculated, the real cost that students pay has remained virtually steady over the past decade. In fact, according to the College Board (as reported in the New York Times), when adjusted for inflation, the net cost of attending college (looking only at tuition and fees) has actually gone down over the past ten years.

Indeed, as Sandy Baum told the New York Times, "I think the hand-wringing about the trend [in college costs] is greatly exaggerated."

And--if there has been an increase in college costs, it is because the states have cut back on their support for higher education. "So it's not that colleges are spending more money to educate students," Baum told NPR radio. "It's that they have to get that money from someplace to replace their lost state funding--and that's from tuition and fees from students and families."

So which is it, Sandy? Has college tuition gone up due to reduced state funding or have costs not gone up after adjusting for inflation, grants, and tax benefits?

And if everything is under control, why did Baum praise President Obama for encouraging students to sign up for long-term income-based repayment plans--plans that can extend the student-loan repayment period to 20 or 25 years? In fact, Baum even recommended that long-term repayment plans be the "default option" for college students who take out student loans.

Paul Campos, in a New York Times op ed essay, challenged the notion that the states' support for higher education has gone down, which is the standard reason the higher education industry gives for rising college costs. According to Campos, "[P]ublic investment in higher education in America is vastly larger today, in inflation-adjusted dollars, than it was during the supposed golden age of public funding in the 1960s." 

Campos thinks a major explanation for rising college costs is "the constant expansion of university administration." Campos cites data that administrative positions at colleges and universities grew by 60 percent between 1993 and 2009, which is reportedly 10 times the rate of growth for tenured faculty positions.

In my opinion, Campos' analysis of college costs is more accurate and helpful than the self-serving explanations that are offered by the higher education industry and the entities that issue reports that align with its interests--the College Board, the Urban Institute, and the Brookings Institution.

Campos is right. An increase in the number of administrators is at least part of the reason for rising college costs. And a lot of those administrators are making too much money, particularly when their salaries are compared to the salaries of the faculty members who are actually teaching students.

References

Sandy Baum & Michael McPherson. Obama's Aid Proposals Could Use a Reality Check. Chronicle of Higher Education, August 26, 2013. Accessible at: http://chronicle.com/article/Obamas-Aid-Proposals-Could/141265/

Paul Campos. The Real Reason College Costs So Much. New York Times, April 5, 2015, Sunday Review Section, p. 4.

College Board. Trends in College Pricing 2013. Accessible at: http://trends.collegeboard.org/college-pricing

Andrew P. Kelly(2013, October 24. New data on tuition prices: Is it possible it's even worse than we thought? AEI Ideas blog. Accessible at: http://www.aei-ideas.org/2013/10/new-data-on-tuition-prices-is-it-possible-its-even-worse-than-we-thought/

Richard Perez-Pena (2013, October 25). Despite Risking Stick Prices, Actual College Costs Stable Over the Decade, Study Says. New York Times, p. A14.

Note: Quotes by Sandy Baum come from the Perez-Pena article or the Campos essay, both of which appeared in the New York Times and are cited in the references.