<p>By JONATHAN D. GLATER
Published: June 2, 2008</p>
<p>*Some of the nation’s biggest banks have closed their doors to students at community colleges, for-profit universities and other less competitive institutions, even as they continue to extend federally backed loans to students at the nation’s top universities. *</p>
<p>I can’t understand how these banks can quit lending to 2-yr college students, especially when the loans are backed by the federal government. (Am I right in assuming they talking about Stafford loans, or are all private loans backed by the Fed too?)</p>
<p>At the same time, California is probably going to stop giving Competitive Cal Grants to community college students (and some? 4-yr students).</p>
<p>I myself chose not to take loans or financial aid during my time at a “2” year community college, and worked full time instead. My reasoning was that the college was so inexpensive, but living expenses in the Bay Area so high, that it didn’t make sense to stop working (or to work very little) and take loans and/or financial aid mainly for living expenses. The problem with my reasoning was that, although I took classes every semester, it 1) took 7 years for me to complete my transfer credits, and 2) caused me to be ineligible for most financial aid and almost all grants due to my “high” personal income/EFC as I go into a much more expensive UC this fall. So I will probably graduate with just about the same amount in debt after my final 2 years as I would have if I had just bitten the bullet, quit my job, and attended CCC full time. But if I were at the beginning again, I probably would have done the same thing, work full time, school part time, simply to put off the headache of student loans, assuming I could even get one!</p>
<p>I recently interviewed for a financial aid job at an urban state university. They are in the process of changing from FFEL loans to Direct loans for this reason. They need to make sure that their students will be able to continue to borrow Stafford loans. Direct loans are through the feds … a pain for schools, but a good protective measure where the possibility of a loan pinch exists.</p>
<p>The job of private corporations is to maximize income for shareholders. If they make $x from community college students and $3x from 4-year U, then it is their obligation to shareholders to try to loan more to 4-year-U assuming limited resources.</p>
<p>There’s much more discussion on this in the Debt topic.</p>
<p>True that a corporation has a interest in good returns for their shareholders. However this is a somewhat unique situation insofar as these companies aren’t making widgets. And it has to be acknowledged that especially n the terms of subsidized loans the ability to make these profits is premised on government largess. Some of which ultimately derives from the same populations which are now no longer deemed risk worthy. And for the private loans, well those are still reliant on government money, albeit indirectly. There are points in an assessing the whole situation where even “The Good Soldier Svejk” would pass out from irony overload.
But in many regards it could be considered a long term benefit that many of these companies are leaving the 2 year institutions. Many of those who do graduate from these institutions will go into lower echelon trades and professions. And as such some will never make the money needed to resolve their obligations to some SL companies. Especially given the recent unilateral fee feeding frenzy that some of these certain of these companies have propagated.
In all probability they have made the decision to leave the CC market because they know the target population is no longer able to pay the tolls. But they do not seem to see the looming public relations disasters inherent to the decision. This isn’t going to be simply because they are going although some will raise a hue and cry over that. It will be because they will still exert substantial pressures on the CC population which did take out loans and is struggling. That’s very evident from some of their subsidiaries, for example take a look at the premierecredit.com. This could be dismissed as an example of a contingent who have all the marketing skills of a amphetamine crazed rhinoceros excepting the fact they are controlled by one of the largest SL providers in the country.
Its frightening that these are the type of people who’ve been turned loose on a vulnerable population.
And yes this issue and related concerns is being discussed in great detail over in the thread about debt…<br>
Perhaps there might be a genuine interest in reforms accidentally begun by the migration of the SL industry away the junior and vocational colleges. The move to direct loans is a start, but not enough. And until these situation is sorted out its going to be very hard on another group; the ethical school financial aid officers who have to be the face which the student’s and families see. And these officials are not given the power to fully explain to the student’s what has happened and who caused it.<br>
And yes, this issue is being discussed in great detail over in the thread on debt.</p>
<p>My position is that private companies shouldn’t be in the business of peddling student loans with rules lobbied for by the industry. I’m happy with companies making legal profits but this is one area where I think that the government (with all of its problems too) should work directly with students.</p>
<p>Well that is a concept that many would agree with, myself obviously included.
The dilemma is that when our government abrogated its ethical responsibilities and let these companies go trawling in academia…the whole situation became so profitable that it will be problematic getting them out. And even if they declare they are getting out, they will not be actually doing so. On the old subsidized notes the real cash flood tends to be in the enhanced fees and forcing these loans into default. At which point uncle bingo (Sam) ponies up the ensured amounts. And given the appalling regulations which these companies lobbied for even then its not over. They can compel an unfortunate student to be a debt servant for life, seize retirement and government payments, and even then harass to the point of breakdown. Granted some do default for improper reasons such as irresponsibility, but many do so because the income to education ratio is so skewed as to be impossible. And its a open secret that many of these companies have no interest in making reasonable accomodations for those in financial troubles. They don’t have to because of the unique privilages given to their industry.
Gould, Fisk, and Al Capone are seething with envy in whatever hell they no doubt inhabit.
And arguably when our representatives allowed that system to privatize what they achieved was the ultimate expression of corporate welfare.
After all largely what these companies did was to take over an already functioning public system, shift it to being a massive revenue stream for them and to get the people to believe that it was still for the public benefit.
And now, as noted these companies see that the well is drying out but they will not withdraw. What will happen is more government money will be handed to them to ‘save’ student loans for gateway schools.
However profitable it may be for certain corporations the situation is a social tsunami welling on the near horizon.</p>