Thanks, NY Times, for Another Tepid Editorial About the Student Loan Crisis

In The Big Lebowski, Bunny Lebowski tells the Dude that her boyfriend is a nihilist. "He doesn't care about anything," she explains.

The Dude, Donny and Walter:

"That must be exhausting," the Dude replies sympathetically.

This scene reminds me of the New York Times editorial writers. Every day, they go to work and pen editorials opining on all the world's problems: global warming, the crisis in the Middle East, the European Debt crisis, obsesity--it must be exhausting!

Of course, not all of the Times' editorial advice is useful.  Earlier this week, a Times editorial, entitled "College's True Cost," commended the Obama administration's efforts to get colleges to communicate more clearly with students about the cost of attending college. As the Times reported approvingly, "[t]he Obama administration is developing a standardized form" that all colleges can use to report on how much a year of college costs and estimating the monthly payments students will owe when paying off their student loans.

"Unfortunately," the Times concluded, "colleges are unlikely to embrace this forthright approach unless the federal government makes it mandatory." Right. More government regulations will solve all our problems.

Obviously, givng students more information about their student-loan obligations is a good thing. But giving students clearer information about their student-loan debt burden is not going to solve the student-loan crisis any more than telling people how many calories are in a Big Mac will solve the nation's obesity crisis. People are still going to buy those Big Macs and students are still going to take out college loans because most of them can't afford to attend college without borrowing a lot of money.

Solving the student-loan debt crisis is going to take more than the creation of a standardized form for colleges to give students when they dole out student-loan money. As I've said before, these things must be done:

• The Department of Education must stop hiding the true student-loan default rate and give the public more accurate reports on how many people have stopped paying on their student loans.
• Insolvent student-loan debtors must be given reasonable access to the bankruptcy courts.
• The Federal government must stop financing the for-profit schools and colleges, which have extraordinarily high student-loan default rates.
• Colleges must operate more efficiently and rein in their costs.

Unless these things are done, other reform tactics are just a cosmetic approach to a very serious national problem.

References

Editorial (2012, June 7). College's true cost. New York Times, p. A24.

The Federal Government Should Stop Bankrolling the For-Profit College Industry

Floyd Norris recently wrote a mild but provocative article in the New York Times that focused on ITT Educational Services, a for-profit corporation that offers post-secondary education programs in 48 states. Norris reported that ITT students pay an average cost of $48,000 in tuition and fees to receive a two-year associate's degree in business administration.

Of course students can obtain a two-year associate's degree from a public community college for a fraction of that cost. One would think the federal government would develop policies to encourage students to attend reasonably priced community colleges instead of supporting the for-profit college industry.

As has been widely reported, for-profit colleges enroll about 10 percent of all post-secondary students but get about 25 percent of the federal student-aid money. According to Norris, the federal government guaranteed nearly $24 billion in loans for students attending for-profit schools in 2010-2011 and  distributed nearly $9 billion in grants that went to for-profit institutions.

Without question, most of the for-profit colleges could not exist without federal student-aid money.  For example, in 2011, ITT received 89 percent of its revenues from the federal government in the form of student loans and grants. (Norris, 2012, p. B7)  Meanwhile, state and local-government are drastically cutting their financial support for public colleges and universities.

In my opinion, the federal government should stop funding the for-profit colleges altogether and redirect the money toward public community colleges.  Unfortunately, such a reform is not coming any time soon.  The for-profits pay highly effective lobbyists to protect their interests (Kirkham, 2012), and they make strategic political contributions to key legislators in Washington (Kirkham, 2011).

So this is the situation. Billions of federal dollars flow each year into the coffers of for-profit schools and colleges that educate about 10 percent of the nation's post-secondary students and account for about half of all the student-loan defaults (Kirkham, 2012). Until Congress stops subsidizing the for-profit colleges industry, we will never solve the student-loan crisis, which is growing worse with each passing year.

References
Kirkham, C. (2012, February 3). Auction 2012: For-profit colleges win when lobbying blitz weakens regs. Huffington Post.   http://www.huffingtonpost.com/2012/02/03/auction-2012-education-for-profit-colleges_n_1251072.html

Kirkham, C. (2011, July 29). John Boehner backed deregulation of online learning, leading to explosive growth at for-profit colleges. Huffington Post. http://www.huffingtonpost.com/2011/07/29/john-boehner-for-profit-colleges_n_909589.html

Norris, F. (2012, May 25). Colleges for profit are growing, with U.S. aid. New York Times, p. B1.

Today’s New York Times Editorial About Student Loans is Not Very Useful

Today’s lead editorial in the New York Times is entitled “Full Disclosure for Student Borrowers.” Basically, the Times says that “[c]olleges, lenders and Congress must ensure that students understand their debt burden.”

Pardon me, Mr. and Ms. New York Times editorial writers, but that advice is not very useful. It is true that a lot of student-loan borrowers did not understand the nature of their loan obligations. Some did not realize they had borrowed from private lenders instead of the federal student loan program, for example; and a great many made poor decisions with regard to what they chose to study. People who borrowed a $100,000 or more to pursue degrees in religious studies, sociology, or some other non-remunerative field did not make smart decisions.

But the fact that many students took out college loans without understanding the consequences is only part of the problem. A bigger part of the program is this: The student loan program has spawned a rapacious for-profit college industry, which Congress refuses to regulate. As a whole, this industry has very high student-loan default rates; and many of them are much more expensive than public-college alternatives. Today, the for-profit institutions enroll about 10 percent of all the post-secondary loan borrowers but they receive about 25 percent of the Federal student aid money.

Another problem is the private student-loan market, which generally charges students higher interest rates than the federal student-loan program and offers students fewer protections like economic hardship deferments. Congress passed legislation that makes it almost impossible for students to discharge their private student loans in bankruptcy, which is an outrage.

If the New York Times wishes to offer useful advice about solving the trillion-dollar student-loan mess, it needs to endorse the following actions:

More accurate reporting of student-loan default rates by the U.S. Department of Education, particularly the default rate for students enrolled in for-profit schools,

Repeal of the statutes making it nearly impossible for insolvent students to discharge their student loans in bankruptcy,

Passage of effective consumer-protection laws that will protect students from unscrupulous college recruiters and colleges’ misleading representations about job prospects for graduates of post-secondary programs,

Congressional or executive action to stop the federal government and the student-loan guarantee agencies from garnishing elderly defaulters’ Social Security checks.

Perhaps the New York Times has offered more useful information about the student-loan crisis in the past.  But the advice offered on today’s editorial page does not go nearly far enough toward solving a problem that is causing hardship and suffering for millions of people.

References

Editorial (2012, May 23). Full disclosure for student borrowers. New York Times, p. A20.