<p>I posted this link on the Parent's Forum and one poster thought it would be helpful here. It is a chilling look from Insider Higher Ed at the industry of educational debt. Especially noteworthy are the real-life stories (in the comments below the article) from people who are suffering now from debt they took on without knowing how much pain debt might cause. Important stuff!</p>
<p>Facing</a> Up to Debt :: Inside Higher Ed :: Higher Education's Source for News, Views and Jobs</p>
<p>No offense intended to OP, but whenever I read articles such as these, I think "Duh." No one WANTS to take on big loans, but with the cost of college nowadays, debt is inevitable for many people, and the only alternative for them is to not go to college. Even if you go to cc for two years, you still need to come up with $50,000 (if you live in CA) to go to a good state university that is not in your neighborhood. Since income is now so out of sync with college costs, the only resolutions to the problem are for tuition to come way down, or for students to take on debt.</p>
<p>And this is why I'm busting my tush visiting hundreds of college websites searching out schools where my daughter can receive substantial merit scholarships and graduate from college debt-free.</p>
<p>Not going to college might, indeed, be a wiser choice financially for some people.</p>
<p>No doubt an awful lot of folks truly do have to borrow some funds, as I did, as my three kids have, but I worry as I read about the students who are sometimes willing to go DEEPLY into debt when other options exist for them. Some have even given up free rides for mountains of debt. Everyone must choose for him or herself, of course, but I hope with eyes wide open.</p>
<p>I think debt has a whole new definition this year (class of '09). I don't think there's going to be much because even if students and families are okay with it, I don't think banks are going to be in the position to offer it. Some schools are going to be in deep trouble.</p>
<p>Or the resolution would be to finally reform higher education funding. The excessive debt proportions are a condition which actually has developed over the last generation. And quite literally it can be tracked by reductions in non loan aid such as Pell Grants correlated to the rise of loan based student financing.
And it got much worse after the privatization of what had been effectively government controlled programs.
Canada has seen the light in regards to this issue as is evident from the recent reform of their laws dealing with student loans. But the US seems to be lagging far behind, which is ironic because many countries have long rejected the US model for student funding. It would seem that our representatives would have noticed by now...except the the large donations provided by the primary corporations in this business.
And many of the people responding to the Inside Higher Ed story did not start out with high loan amounts, but one of the dirty non secrets of this business is how quickly fees can escalate, often via very questionable means.
To help understand how bad the situation is read the following which is from the June 25th Edition of Higher Education watch, and nothing changes because a year earlier Stephen Burd investigative writer for that same organization posted an article about the issue. And Paul Baskin of the Chronicle has also written about the problem, but alas our esteemed representatives don't seem to be able to read academic news...
Excerpt from Higher Ed Watch, New America Foundation-</p>
<p>"A Well-Deserved Award
Stephen Burd -
June 25, 2008 - 2:08pm</p>
<p>Too many times of late, we have seen mainstream journalists fall for the spin of lenders, who in the wake of the credit crunch have had a vested interest in raising panic levels about the availability of student loans.</p>
<p>That's why it's such a pleasure for us to see good, critical, and insightful reporting on the loan industry receive the recognition it deserves. Case in point: Paul Basken, a senior reporter at The Chronicle of Higher Education, has received a National Press Club award for a revealing piece he wrote last May showing how the revolving door between the Bush Administration and the student loan industry brought great rewards to Sallie Mae and put financially needy students in harm's way. [Disclosure: the author of this post used to work for the Chronicle.]</p>
<p>We wrote about Basken's article last year. But at a time when the student loan scandals of yore are fading fast from memory, we felt that it was important to remind our readers of just what he found. The conflict of interest that he uncovered still exists and needs to be dealt with.</p>
<p>Going to Bat for Sallie Mae</p>
<p>The Chronicle article revealed that Matteo Fontana, a high-ranking official in the Department of Education's Federal Student Aid office, made "a controversial and high stakes legal ruling" in December 2004 that greatly benefited Sallie Mae, his former employer, the day before the company officially broke its ties with the federal government and became a private corporation. In fact, Fontana's action essentially removed the last obstacle to the company's long-sought transformation. [Yes, this is the same Matteo Fontana who was at the center of a Higher Ed Watch investigation that found that he held 10,500 shares of insider stock from Student Loan Xpress. Nearly 15 months later, Fontana remains on paid administrative leave pending the outcome of a Department investigation.]</p>
<p>In his ruling, Fontana rejected an opinion offered by the Department's Inspector General (IG) two years earlier that a lucrative arrangement that exists between Sallie Mae and USA Funds, the country's largest guarantee agency, violated the law and needed to be severed in order to protect borrowers.</p>
<p>Sallie Mae's relationship with USA Funds dates back to 2000 when the loan giant purchased the guarantor's parent company, USA Group, which had been one of its largest competitors.</p>
<p>On its face, the sale didn't give Sallie Mae control of USA Funds. Under federal law, for-profit lenders, such as Sallie Mae, are not allowed to own nonprofit entities such as guarantee agencies. That prohibition makes sense because the Higher Education Act puts guarantors in charge of overseeing loan providers -- making sure, for instance, that lenders do everything required to keep borrowers who are delinquent on their loans from defaulting.</p>
<p>Sallie Mae, however, found a creative way around the restriction. While the loan company's purchase didn't include USA Funds, it did gain control of USA Group Guarantee Services, a for-profit subsidiary that provided administrative services to help the guarantor carry out its functions. The deal also required USA Funds to contract its loan guarantee services to Sallie Mae.</p>
<p>USA Funds is now a shell of its former self. Sallie Mae employees carry out most of the agency's operations. Meanwhile, the guarantor pays Sallie Mae about $250 million a year for staffing and other purposes, according to the Chronicle.</p>
<p>Raising Red Flags</p>
<p>In 2002, the Department's IG raised a giant red flag. Sallie Mae's relationship with USA Funds, the IG's office wrote, presents "a conflict of interest" that needs to be cured. Because Sallie Mae effectively controls the guarantor, the IG pointed out, there is no independent agency ensuring that the loan giant is doing all it can to ensure borrowers don't fall behind on their payments. By working hand-in-hand, the two entities actually have a perverse incentive to let borrowers fall behind so that the USA Funds can collect the generous subsidies the government provides guarantors for keeping delinquent borrowers out of default.</p>
<p>What makes the story especially outrageous is that the Federal Student Aid office initially agreed with the IG's assessment. In March 2004, Fontana sent a letter to USA Funds saying the "conflict of interest" needed to be eliminated. But on the eve of the day Sallie Mae was finally to become a fully private for-profit company, he had a change of heart.</p>
<p>In the follow-up letter he sent that December, Fontana wrote that the Department "had reconsidered its prior position." He said the conflict of interest did not exist because the Sallie Mae (SLM) subsidiaries that helped manage USA Funds had separate tax identification numbers from other parts of the company. "It is apparent from SLM's website that SLM regards these subsidiaries as separate corporate entities," he wrote. Great detective work there.</p>
<p>Basken's piece showed how Sallie Mae's friends at the Department went to bat for the corporation, despite having concerns that students could be hurt. Hopefully next year, when the Department's leadership changes, the agency will revisit this dubious decision and, as a change of pace, put the interests of students first." </p>
<p>The problem is we've had an entire generation subjected to this kind of treatment and abuses so now we think its a normal state of affairs. But we're close to the point that if these financially appalling and predatory activities continue its going to be goodbye to college education for the next generation. Many of the preceding generation are struggling to pay these inflated tolls, and some are little more than economic servants to these unethical companies.
And the example I posted involves only two of the larger holdings. The USDOE and the loan industry are rampant with these ethical outrages. To the extent that the retiring investigative official Higgin's expressed that despite his 40 years of service he expects that the corruption will still run rampant.</p>
<p>The problem, as I see it is with the abysmally low graduation rates. 3 out of 7 students do not graduate within 6 years of starting. OP's article touches on this in terms of default rates.</p>
<p>
[quote]
While widely-reported 2-year default rates hover below 5 percent, the 10-year default rate for low-income students is more than 15 percent. For students who borrow more than $15,000, its more than 20 percent. For black students, its nearly 40 percent. These numbers, moreover, are for students who graduated from a four-year college. Default rates for drop-outs, of which there are many in higher education, are substantially worse.
[/quote]
</p>
<p>What a waste for everyone involved: the student, the school, the govt, and taxpayers. Students really need to be committed to obtaining a degree in 4 years, or less.</p>
<p>The students do need to keep after the goal, but many schools do take students who simply are not ready for collegiate studies. And that's an increasing issue due to problems connected to troubles within the public schools. The misapplication of self esteem theories has been especially problematic insofar as some never gain the appreciation of how necessary it is to excel or even to perceive that they need to improve. Perhaps an pedagogical emphasis such as those advocated by such theorists as James, Dewey, or Vygotsky might serve better but I don't see that philosophical change coming anytime soon. </p>
<p>But there are also systemic problems within academia which tend to contribute to the problem. For example there are schools wherein the courses needed to meet a course track are not routinely offered. This problem also correlates to the increased use of adjunct faculty as courses are routinely shut down for lesser enrollment and stability for instructors is non existent. </p>
<p>And state departments of education have the problem of course track bloating due to political pressures. When teacher ed is criticized their response is usually to add more courses, rather than addressing qualitative issues. </p>
<p>And since US education policies transitioned to a loan based model there hasn't been much impetus to encourage four year graduations. The grant model at least provided some regulatory incentive to do so. But with the loan based model, 4-5-6 years is a cash bonanza for the loan companies whether the debts are accrued by subs or private loans it's still incredibly profitable for the loan cabal. And indirectly for the colleges receiving their share of the funds. It's more than coincidental that the 'lifelong learner' marketing appeared during the transition to loan based funding. </p>
<p>Plus as has been posted elsewhere on these threads, the loan default rate is actually higher than the posted numbers because of the manner in which these are calculated. This relates to defaults which are another revenue bonanza for the edudebt people, its not unknown for reconciliation fees to approach 25%. But its not to their political advantage to allow accurate stats because of the outrage it might provoke. And because of problems with crony appointments the USDOE doesn't exactly have the inclination to provide accurate stats when these are available. </p>
<p>Socially its incredibly detrimental and costs an appalling amount of money, much of which is public funds redirected to corporations. And they've made a killing at the expense of students and the systemic credibility and morality of academia. </p>
<p>So students do have obligations but the reality is they're caught up in a system which is a profiteers dream but a social and moral nightmare. And it's soon to be an economic bad dream of massive scale...</p>
<p>Owlice, No doubt your correct..."Not going to college might, indeed, be a wiser choice financially for some people." </p>
<p>However until this country develops a better vo-tech training system with the attendant respect for the trades most will perceive college as the only route. Plus collegiate marketing and that of the edudebt people is incredibly pervasive. </p>
<p>The real trouble in your statement is that some of us within academia would agree and believe your idea would be beneficial for an increasing proportion of the populations we serve. Simply because the debt to benefit equation has become so skewed that even heretofore safe degrees are a liability. And some degrees perhaps should cease to be offered because the imbalance of debt to income is so skewed that crucifixions on the college common might be kinder...</p>