I seldom agree with the New York Times. I live in the real world, and the Times editorial writers and op ed essayists live in the land of gobbledygook. Nevertheless, every now and then the Times makes contact with planet earth and says something sensible.
And today is such a day. In an editorial entitled "Reining in Predatory Schools," the Times commended the Obama administration for its attempts to regulate the predatory for-profit trade-school industry that has hurt so many poor and disadvantaged students.
The Obama administration seeks to impose reasonable rules on the for-profit trade schools, requiring them to maintain average debt levels for their graduates that don't exceed 8 percent of their total annual earnings. In addition, to remain eligible for student-aid money, the trade schools must keep their student loan default rates at no more than 30 percent.
These are good rules, and the Obama administration deserves credit for pushing these rules forward in spite of ferocious opposition from the for-profit college industry, its lobbyists, and the lap-dog legislators who receive receive campaign contributions from the for-profits and do the industry's bidding. But--as the Times noted--the rules do not go far enough.
Currently, the for-profits risk being kicked out of the federal student-loan program if their student-loan default rates exceed 25 percent for three consecutive years. As I have pointed out before, the Feds only measure loan defaults during the first three years of a student's repayment period. Any student who defaults after three years is not counted in an institution's default rate.
The for-profits have been successful in hiding their true default rates by encouraging their former students to sign up for economic hardship deferments, which excuse students from making their loan payments. In fact, many for-profits have formal "default management" programs that target former students and help them get deferments.
Hundreds of thousands of former trade-school students who obtained economic hardship deferments will never pay back their loans and for all practical purposes are in default. The Times is right to say that this problem must be addressed.
And just as importantly, the federal government needs to identify all the people who took out federal loans to pay for worthless for-profit training programs-well over a million people--and forgive these loans. Otherwise, all the people who defaulted on these loans will be hounded by their student loan debts for the rest of their lives. As I have said before, these people deserve reasonable access to the bankruptcy courts.
I could say more on this topic, but today I simply tip my hat to the Obama administration for its efforts to rein in the predatory trade-school industry and to the New York Times for supporting the Obama administration and urging it to do more.
Editorial. Reining In Predatory Schools. New York Times, April 17, 2014, p. A20.