Tuesday, January 17, 2017

Obama's Department of Education grants automatic loan relief for all students who attended the American Career Institute: A puny effort--too little, too late

Last Friday, the U.S. Department of Education granted automatic debt relief to all students who attended American Career Institute. As Inside Higher Ed pointed out, this is "the first time the department has granted automatic loan relief to all students of a college without requiring individual applications." About 650 former ACI students received closed school discharges; but the rest--about 3,900 students--are getting their loans discharged en masse. In addition, DOE also announced it will grant Borrower Defense discharges to 28,000 student who had attended Corinthian Colleges.

This is a good thing, of course; but why now? And why so small a gesture?

After all, Corinthian Colleges, which closed and filed bankruptcy under allegations of fraud, had more than 300,000 students; and ITT, which also filed bankruptcy, had 191,000 enrollees.  Yet so far, DOE has only grant Borrower Defense discharges to 28,000 former Corinthian students.

As for the small size of the gesture, I think Luke Herrine, legal director of the Debt Collective, got it right. "There's just no coherent logic whatsoever," he said. "The only thing I can think of is it would be deeply embarrassing for them to stop collecting on so much debt." It is one thing to forgive the loans of 4,000 ACI students and a small percentage of Corinthian students; it is quite another to discharge the debt of a half million people.

As for the timing, I think the Obama administration has known for quite a while that the only responsible thing to do about millions of people who took out loans to attend flaky for-profit colleges is to grant massive debt relief to nearly everyone without the necessity of reviewing each case individually. But that is a difficult thing to do politically.

I think DOE waited until a week before Obama leaves officer to offer token relief to ACI students in order to highlight the student-loan crisis when there is no time left for the Obama administration to do something substantive.

Like a retreating army that spikes its cannons before being overwhelmed by the enemy, the Obama administration may have wanted to publicize the student loan crisis to create difficulties for Trump.

Here are my thoughts on DOE's surprising but welcome action:

1) Granting debt relief to ACI students is the first small step toward doing what the federal government will inevitably be forced to do: forgive student debt to nearly all of the millions of people who attended for-profit colleges and received no economic benefit.  Billions of dollars in student loans will eventually be written off.

2) I think Obama's DOE took the action that it did for ACI students because the Obama team thinks Trump, who takes office in a few days, will try to prop up the for profits at the expense of exploited students.

But the Obamacrats may be wrong. After all, President-elect Trump knows how to read a  balance sheet, and he may quickly grasp the fact that the student loan program is a catastrophe. 

And if Mr. Trump realizes the enormity of the student loan crisis, he might actually take decisive action.  Everyone agrees that Mr. Trump understands bankruptcy and its value for distressed debtors.  President Trump might surprise everyone and ease the path to bankruptcy relief for millions of student loan debtors who will never be able to pay back their college loans.



References

Andrew Kreighbaum. Education Department announces thousands of new loan discharges. Inside Higher Ed, January 16, 2017.



Monday, January 16, 2017

The Department of Education ignores signs of an impending student loan meltdown: The Deepwater Horizon Syndrome

Deepwater Horizon, a giant offshore drilling rig in the Gulf of Mexico, blew out on April 20, 2010.  Eleven workers died, and more than 200 million gallons of crude oil spewed into the Gulf.

According to the recent film about the blowout, this catastrophe could have been prevented. Instruments on the rig alerted workers that pressure was building around the concrete core and that a blowout was imminent; but supervisors convinced themselves that the instruments were malfunctioning and everything was fine. (John Malkovich, the movie's villain, plays Don Vidrine, a fiendish British Petroleum technocrat.)

John Malkovich in Deepwater Horizon
Something similar is happening with the student loan crisis. DOE issued its College Scorecard in 2015, which reported the percentage of students who are in repayment and actually paying down their loans.  DOE reported that 61.1 percent of student borrowers had made some progress toward paying down their loan balances 5 years into repayment.

But a coding error led to an erroneous report. As Robert Kelchen, a professor at Seton Hall University explained in a recent blog posting, the picture is much bleaker than DOE portrayed.

Five years into repayment, less than half of student borrowers have made any progress toward paying off their student loans. Among borrowers who attended for-profit colleges, the numbers are even more startling.  Five years into repayment only about a third of for-profit students (35 percent) had reduced their loan balances by even one dollar!

People who don't reduce their loan balances five years after beginning repayment are not likely to pay off their student loans--ever. In fact, the Brookings Institution reported in 2015 that nearly half of for-profit borrowers in a recent cohort had defaulted on their loans within 5 years (47 percent).

In short, DOE is behaving just like John Malkovich's character in the movie Deepwater Horizon. The data warn of an impending blowout; but DOE keeps pumping money to the for-profit colleges. A disaster is inevitable; and there are already millions of casualties.



References

Paul Fain. Feds' data error inflated loan repayment rates on the College Scoreboard. Inside Higher Ed, January 16, 2017.

Robert Kelchen. How Much Did a Coding Error Affect Student Loan Repayment Rates? Kelchen on Education, January 12, 2017.

Adam Looney & Constantine Yannelis, A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising default ratesWashington, DC: Brookings Institution (2015).

Michael Stratford. The New College Scorecard. Inside Higher Ed, September 14, 2015.

Friday, January 13, 2017

Older Americans are burdened by their children's student loans

Gold will turn to gray and youth will fade away
They'll never care about you, call you old and in the way


Old And In The Way
David Grisman
Recorded by the Grateful Dead


The Consumer Financial Protection Bureau issued a useful report a few days ago on student-loan indebtedness and older Americans.  Here are some of the CFPB's key findings:
  • "The number of consumers age 60 and older with outstanding student loan debt quadrupled from 2005 to 2015, increasing from about 700,000 to 2.8 million."
  • During this ten-year period, the share of older student loan borrowers more than doubled, rising from 2.7 percent to 6.4 percent of all student-loan debtors.
  • The average amount older Americans owe on student loans roughly doubled in ten years from $12,100 to $23,500.
  • Among federal student loan borrowers who are 65 years old or older, nearly 40 percent are in default.
  • In 2015, the total amount that older Americans owed for student loans was $66.7 billion.
All this is very interesting, but here is the CFPB's most disturbing finding: Almost three quarters of older Americans with student-loan debt (73 percent) reported that their loans were "for a child's and/or grandchild's education."

How did so many older Americans become burdened by loans taken out for their children or grandchildren? Two reasons: either they took out a federal Parent PLUS loan for a child's education or they co-signed a private student loan.

Currently, private banks hold about $102 billion in student loans. Except in rare circumstances, the banks will not issue private student loans unless a co-signer agrees to be responsible for the debt. In most cases, the co-signer on a private loan is a parent or grandparent. And, as the CFPB pointed out, more than half of all co-signers are 55 years or older.

This is a serious problem because a lot of older borrowers who are burdened by their children's or their grandchildren's education costs face serious financial challenges of their own. A great many are having trouble meeting their own health care costs or saving for their retirement. 

And here is the great tragedy behind the CFPB's report. Elderly people who co-sign a student loan for a child or grandchild cannot discharge that debt in bankruptcy unless they can meet the "undue hardship" test articulated by the bankruptcy courts. And that is a very hard test to meet.

And this is true whether an elderly person's debt arises from a federal student loan or a private student loan.  In fact, Congress revised the Bankruptcy Code in 2005 (under the leadership of Senator Joe Biden) to put private student loans under the same undue hardship standard that applies to federal loans.

This is unjust, and many commentators have argued that private student loans should be dischargeable in bankruptcy like any other unsecured debt. But Congress has not repaired its mistake by repealing that pernicious 2005 revision in the Bankruptcy Code.

A lot of liberal U.S. Senators and Congresspeople bleat in compassionate tones about the plight of distressed student-loan borrowers. But what have they done to bring tangible relief to millions of people--including elderly people--who are suffering under the weight of overwhelming debt?

Perhaps our national legislators will read the CFPB report and realize that elderly people who become overburdened by debt they incurred to educate their children or grandchildren should be able to discharge that debt in bankruptcy if they become insolvent without having to meet the Bankruptcy Code's undue hardship restriction.

But that will never happen. To paraphrase an old Grateful Dead song, Congress treats older Americans like they're just old and in the way.




References

Ron Lieber. The Big Pause You Should Take Before Co-Signing a Student LoanNew York Times, August 12, 2016.

Sirota, David. Joe Biden Backed Bills to Make It Harder For Americans To Reduce Their Student DebtInternational Business Times, September 15  , 2015. Accessible: http://www.ibtimes.com/joe-biden-backed-bills-make-it-harder-americans-reduce-their-student-debt-2094664

Thursday, January 12, 2017

The Department of Education's "Heightened Cash Monitoring" list and its list of programs that failed DOE's Gainful Employment Rule: Big Trouble Ahead for American Higher Education

As the Obama administration limps to a close, the U.S. Department of Education issued two lists that should scare the heck out of anyone working in the field of higher education.

First, a few days ago, DOE issued its most recent list of colleges that it flagged for "Heightened Cash Monitoring." More than 500 colleges are on that list.

At about the same time, DOE also released its list  of post-secondary programs that failed DOE's "gainful employment" rule.  More than 800 programs are on that list.

DOE's Heightened Cash Monitoring List: 539 institutions

Let's look first a DOE's Heightened Cash Monitoring List. Most of the schools on this list are for-profit institutions, which shouldn't surprise anyone. Is anyone shocked to discover that Lubbock Hair Academy in Lubbock, Texas and the Institute for Therapeutic Massage in Haskell, New Jersey are on that list?

A lot of the colleges on DOE's Heightened Cash Monitoring List are nonprofit liberal arts schools, and that isn't surprising either. The small liberal arts colleges are finding it more and more difficult to attract students, and a number are on shaky financial ground.  Colleges on the list include secular institutions like Pine Manor College and Mount Ida College in Massachusetts and religious institutions like St. Gregory's University in Shawnee, Oklahoma and St. Mary of the Woods College in Indiana.

But I was surprised that DOE put 38 foreign colleges on its Heightened Cash Monitoring List. Who would have thought the federal government would issue student loans to Americans studying abroad? But it does, and some of those foreign schools have financial concerns that got them on DOE's Heightened Cash Monitoring List.

Here are just a few of the foreign schools that made the list: Medical University of Gdnask in Poland; Tyndale University College and Seminary in Toronto, Canada; and the University of Gloucestershire in Cheltenham, England.

But what surprised me most was the number of public institutions that were flagged by DOE for Heightened Cash Monitoring--84! In Minnesota, more than 30 public colleges and universities made the list, including regional universities like Bemidji State University and Minnesota State University in Mankato. Nine public institutions in Alabama are also on the list, including the University of North Alabama and the University of West Alabama.

In short, DOE's latest Heightened Cash Monitoring list shows us that a lot of for-profit colleges, non-flagship public colleges, and small liberal arts colleges are under financial strain. Not all of the 539 schools on that list will fail in coming years; but certainly some of them will.

More Than 800 Programs Failed DOE's Gainful -Employment Rule

The Department of Education adopted a Gainful-Employment Rule in 2014, which was designed to protect students from enrolling in expensive for-profit colleges that did not prepare them for good jobs. Under this rule, programs risk losing federal student aid money if their graduates do not make enough money on average to justify the expense of getting their education. Specifically, programs fail the Gainful-Employment Rule if their graduates have student-loan payments that exceed 12 percent of their total earnings or 30 percent of their discretionary income.

Over 800 higher-education programs failed DOE's gainful-employment test, which it released this week. As reported by the Chronicle of Higher Education, 98 percent of the failing programs were offered by for-profit institutions. But even the mighty Harvard University made the list for one of its programs--a certificate program in theater arts.

Here is what surprised me about the list of programs that failed the gainful-employment test: Only two law schools were on it. Florida Coastal School of Law and Charleston School of Law, both for-profit law schools failed to meet the debt-to-earning ratio that the Gainful Employment rules requires.

Given the damning evidence compiled by Law School Transparency, I was puzzled by the small number of law schools that failed DOE's gainful employment rules.  After all, LSAT scores for students at 7 law schools are so low that Law School Transparency estimates that 50 percent of their graduates are at "extreme risk" of failing their bar exams. And LSAT scores at 26 schools are so low that a quarter of their graduates run an extreme risk of failing their licensing exams.

Conclusion: Big Trouble Ahead For Higher Education

DOE's Heightened Cash Monitoring List and its list of programs that failed the Gainful-Employment Rule are warning signs that a number of higher education institutions are in trouble. For-profit institutions, non-prestigious public college, and small liberal arts schools are all surviving on federal student-aid money. If DOE turns off the spigot to any of the schools on these two lists, those schools will certainly close within a few months.

If higher education leaders are not concerned about the financial health of their industry, they certainly should be.

Gee, I'm scared!



References

Andrew Kreighbaum. Latest Heightened Cash Monitoring List. Inside Higher Ed, January 12, 2017.

Law School Transparency. 2015 State of Legal Education.

Karen Sloan. Two Law Schools Get an 'F' for High Debt From Education Dept. Law.com, January 11, 2017.

U.S. Department of Education press release. Obama Administration Announces Final Rules to Protect Students from Poor-Performing Career College Programs, October 30, 2014.

U.S. Department of Education press release. Education Department Releases Final Debt-to-Earnings Rates for Gainful Employment Programs. January 9, 2017.

Fernanda Zamudio-Suarez. Over 800 Programs Fail Education Dept.'s Gainful-Employment Rule. Chronicle of Higher Education, January 9, 2017.

Fernanda Fernanda Zamudio-Suarez. Here Are the Programs That Failed the Gainful-Employment RuleChronicle of Higher Education, January 9, 2017.





Sunday, January 8, 2017

The Student Loan Bubble: Eerily Similar to the Home Mortgage Crisis

A few months ago, Steve Rhode posted a thought-provoking blog titled "The Student Loan Bubble That Many Don't Want to See."  He argued that student-loan indebtedness is in a bubble that will soon burst, creating two huge problems:

First, when the student-loan market collapses, postsecondary education will be out of reach for most people,  which will "put a drag on the overall economy as fewer and fewer people will be able to pay for tuition that outpaces inflation."

Second, a sharp contraction in federal student-loan revenue along with a shrinking student base will force many colleges to cut tuition, putting them under enormous financial stress. Rhode predicts that "[m]any schools, public and private, will fail."

Mr. Rhode sees a parallel between the the student loan program and the overheated housing market that led to a global financial crisis in 2008.  Just as financiers packaged home mortgages into mortgage-backed securities called ABS, the banks have bundled student loans into so-called SLABS, or student-loan asset backed securities.

The home-mortgage market went into free fall when investors woke up to the fact that the ratings services (Moody's, Fitch, etc.) had rated ABS as investment grade when in fact a lot of them were junk because they were packed with mortgages that were headed for default.

Now we see Moody's and Fitch downgrading SLABS based on the fact that student borrowers are not paying off their loans as investors expected. More than 5 million borrowers have signed up for income-driven repayment plans that lower monthly loan payments and stretch out the repayment period from 10 years to 20 or even 25 years. SLABS investors now don't know when or how much they are going to be paid on their investments.

Some policy commentators reject the notion that the student-loan market is in a bubble. In a book published last year, Beth Akers and Matthew M. Chingos wrote: "Student loans have a zero chance of becoming the next housing crisis because the market is too small and essentially functions as a government program rather than a market." Akers and Chingos point out that student debt represents only 10 percent of overall consumer debt while home mortgages accounts for 70 percent of household indebtedness.

Personally, I think Steve Rhode is right: Higher education is sustained by a student loan bubble that the nation's colleges and universities refuse to see. In fact, there are eerie similarities between the housing market before it crashed in 2008 and the current level of student-loan indebtedness.

First,  higher education at many colleges and universities is wildly overpriced, just as the housing market was overpriced in the early 2000s. This is particularly true in the for-profit sector and at private liberal arts colleges.

As as been widely reported, liberal arts colleges are now discounting tuition for freshman students by almost 50 percent--a clear sign that their posted tuition prices are too high. And for-profit colleges are seeing enrollment declines. University of Phoenix, for example, has seen its enrollments drop by about half over the past 5 years.

Second, the monitoring agencies for both markets failed to do their jobs. As illustrated in the movie The Big Short, the financial ratings agencies rated mortgage backed securities as investment grade when in fact those bundled mortgages included a lot of  subprime mortgages.

Likewise, the Department of Education reports three-year default rates for student loans that vastly understates how many student borrowers are failing to pay back their loans. DOE recently reported that about 10 percent of the most recent cohort of student borrowers defaulted within three years. But the five-year default rate is 28 percent; and the five-year default rate for a recent cohort of students who attended for-profit schools is a shocking 47 percent.

And of course the government's vigorous effort to get distressed student borrowers into income-driven repayment plans also helps hide the true default rate. A high percentage of people who enter IDRs are making loan payments so low that they will never pay off their loans.

In short, Steve Rhode's analysis is correct.  A rising level of student-loan debt has created a bubble; and the bubble is going to burst. Colleges raised tuition prices far above the nation's inflation rate, knowing that students would simply take out larger student loans to pay their tuition bills. Millions of Americans paid too much for their postsecondary education and can't pay back their loans.

So far, the Department of Education has hidden the magnitude of this crisis, but the game will soon be up. Colleges are closing at an accelerating rate, stock prices for publicly traded for-profit colleges are down, and long-term default rates are shockingly high.

It is true, as Akers and Chingos pointed out, that the student-loan market is not nearly as large as the home-mortgage market when it crashed in 2008. But Akers and Chingos fail to acknowledge the enormous human cost that has been imposed on millions of Americans who took out student loans in the hope of getting an education that would lead to a better life.

Instead, all many Americans got by taking out student loans is an enormous debt load that they can't pay off or discharge in bankruptcy. Eight million Americans have defaulted on their student loans; 5.6 million are in income-driven repayment plans that stretch their payment obligations out for as long as 25 years, and millions more are playing for time by putting their loans in forbearance or deferment.

References

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

Anamaria Andriotis. Debt Relief for Students Snarls Market for Their Loans. Wall Street Journal, September 23, 2015.

Patrick Gillespie. University of Phoenix has lost half its students. CNN Money, March 25, 2015.

Adam Looney & Constantine Yannelis, A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising default ratesWashington, DC: Brookings Institution (2015).

Steve Rhode. The Student loan Bubble That Many Don't Want to See. Get Out of Debt Guy, July 15, 2016.

Amy Thielen. Declines at For-Profit Colleges Take a Big Toll on Their Stocks. The Street, May 8, 2015.

Kellie Woodhouse. Discounting Grows Again. Inside Higher Ed, August 25, 2015.










Friday, January 6, 2017

Globe University and Minnesota School of Business are closing: We need federal legislation to manage college shutdowns

Globe University and Minnesota School of Business (MSB) began closing their campuses last month. The two for-profit institutions once operated in three states--Minnesota, South Dakota, and Wisconsin; but a series of regulatory and court actions brought them down.

In September, a Minnesota court ruled that Globe and MSB committed fraud by inducing students to enroll in their criminal justice programs.  Not long after, the Department of Education cut them off from federal student-aid funding. No for-profit college can survive a month without federal student-loan revenue, so DOE's action amounted to a death sentence for both institutions.

The demise of Globe and MSB follow in a train of college shutdowns over the past couple of years. The casualty lists includes Corinthian Colleges and ITT, two for-profits that declared bankruptcy. St. Catharine College and Dowling College also shut their doors, along with Virginia Intermont College.

DOE has more than 500 colleges on its "heightened cash monitoring" watch list, and many of these schools will shut down within the next three or four years. In a 2015 report, Moody's Investment Services predicted colleges would close at the rate of 15 per year commencing this year.

Now is the time for Congress to pass legislation to protect colleges' former students when the institution they attended shuts down. At a minimum, Congress should do the following:

I. Congress should pass legislation requiring every defunct college to deposit all student records in a central federal depository.

First student records at failed colleges must be preserved. Former students will need access to their official transcripts for decades after their alma mater closes, but how will they get those transcripts 25 years after the institution they attended shut its doors?

Currently, some closing colleges are voluntarily making arrangements to preserve student records. Dowling College, for example, which filed for bankruptcy in 2016, sent its student records to nearby Long Island University.

But not all closing colleges will act as responsibly as Dowling. In particular, colleges that are accused of defrauding their students have no incentive to preserve student records because those records might be used against them in legal proceedings.

Congress needs to adopt legislation that requires every college that receives federal funds to send all student records, including transcripts, to a federal records depository in the event of a closure. And colleges should be required to digitize their student records according to a standardized protocol so that the process of transferring records after a college closes can be done quickly and efficiently.

II. Non-operating colleges should forgive any loans owed to them by former students.

Most nonpublic colleges depend on federal student aid money for the bulk of their revenues, but some also lend money directly to their students.  For example, Globe and MSB loaned money to their students at interest rates as high as 18 percent. According to a Minnesota court decision, the two institutions  loaned money to approximately 6,000 students between 2009 and 2016.

Globe and MSB will be defunct in a matter of weeks, but the loans they made to students are debts they may try to collect. Federal law should require every college that loans money to students to forgive those loans if the college closes. As a matter of simple justice, a college that shuts down shouldn't be chasing after students who owe it money.

III. Congress should ease the path to bankruptcy relief for students who attended for-profit colleges.

Finally, Congress needs to streamline the loan-forgiveness process for students who attend for-profit colleges and received no economic benefit from the experience. It is particularly unjust for students to be on the hook for student loans taken out to attend a for-profit college that closed after being found guilty of fraud.

Under DOE regulations, students can apply to have their student loans discharged if they can make one of two showings: 1) they were induced to enroll based on fraud, or 2) they took out loans to attend a college that closed while they were enrolled or within 120 days of being enrolled.

Unfortunately, the administrative process for resolving discharge applications is slow and entirely inadequate to deal with the potential volume of claims. After all, Corinthian Colleges and ITT, which are both in bankruptcy, have around a half million former students between them.

Currently, the Bankruptcy Code bars debtors from discharging student loans in bankruptcy unless they can show that paying back their loans would create an "undue hardship."  Most bankruptcy courts have interpreted the undue hardship standard harshly, making it incredibly difficult for most college borrowers to clear their student loans through the bankruptcy process.

Congress should pass legislation that eliminates the undue hardship standard for all people who took out loans to attend a for-profit college and wound up broke.  The five-year default rate for a recent cohort of students who attended for-profit colleges is 47 percent--a clear indication that a lot of people got no benefit from attending a for-profit institution.

Conclusion: The Nation faces a swelling tide of college closures and needs an orderly process for shutting down higher education institutions.

One thing is certain: colleges are closing at an accelerating rate; and the Nation need an orderly process to minimize the harm to defunct colleges' former students. Student records must be safeguarded, student debt to failed institutions should be wiped out, and Congress needs to amend the Bankruptcy Code to allow former for-profit college students to obtain bankruptcy relief.

Photo credit: Wisconsin Public Radio


References

Christopher Magan. Globe U. and Minnesota School of Business to start closing campuses. Twin Cities Pioneer Press, December 21, 2016.

Rick Seltzer. Virginia Intermont's campus sale begs question of how colleges close accounts. Inside Higher Ed, January 5, 2017.

State of Minnesota v. Minnesota School of Business, 885 N.W.2d 512 (Minn. Ct. App. 2016).

Alia Wong. Farewell to America's Small Colleges, Atlantic, October 2, 2015.

Tuesday, January 3, 2017

Governor Cuomo proposes free college education at New York's public institutions, but the for-profits and private liberal arts schools will likely oppose this plan

Earlier this week, New York Governor Andrew Cuomo announced his plan to offer a free college education at New York's public colleges and universities for all New York families making $125,000 or less. This plan is nearly identical to the proposal put forward by Hillary Clinton last fall during the presidential campaign.

In a press release, U.S. Secretary of Education  John B. King quickly endorsed Cuomo's plan, noting that it is similar to President Obama's proposal for a free community-college education.  "I applaud Governor Andrew Cuomo for his leadership in expanding the doors of opportunity for New Yorkers, particularly those who otherwise may not be able to afford [a college education]," King said.

Governor Cuomo's proposal is a sound idea, Hillary Clinton's proposal is a sound idea, and President Obama's proposal for a free community-college education is a sound idea as well. And, contrary to what critics have said about these plans, they are not financially irresponsible.

The federal government already spends $150 billion a year on student aid programs--Pell grants, student loans, work-study programs, etc. The states also spend billions on higher education every year. New York, for example, spends a $1 billion a year in tuition assistance for the state's students.

If all this money was dedicated toward offering a free college education at public colleges and universities, taxpayers might actually save money.  But none of these plans will work if the federal and state governments continue to subsidize the for-profit college industry and private nonprofit colleges.

If Governor Cuomo's plan moves forward, you can expect to see for-profit and nonprofit colleges oppose it. Catharine Hill, president of Vassar College, came out against free college tuition in a New York Times op ed essay last year--back when Bernie Sanders was the only politician endorsing the idea. And New York's association of private colleges has already expressed skepticism about Governor Cuomo's free tuition plan.

The next six months will be a time of great turmoil for higher education. A number of for-profit colleges have closed or gone bankrupt, and many more are hanging on by their fingernails, hoping the Trump administration treats them more kindly than the Obama administration did during its waning days.  Several nonprofit liberal arts colleges have closed as well and more are on the brink of closing.

If the for-profit college industry collapses and the nonprofit college sector shrinks dramatically, then proposals to offer a free college education at public colleges might actually work. But they will not work if federal and state governments continue to prop up the nonpublic college sector with public money.

Bernie & Andrew Cuomo support free college education at public institutions
(photo credit, Sam Hodgson, New York Times)


References

Catharine Hill. Free Tuition Is Not the AnswerNew York Times, November 30, 2015, p. A23.

Jesse McKinley. Cuomo Proposes Free Tuition at New York State Colleges for Eligible Students. New York Times, January 3, 2017.

Rick Seltzer. Free Tuition Idea Revived. Inside Higher Ed, January 4, 2017.

U.S. Department of Education Press Release. U.S. Education Secretary John B. King Jr.'s statement on New York Gove. Andrew Cuomo's free college tuition proposal. U.S. Department of Education, January 3, 2017.