Friday, May 27, 2011

Why fixing federal student aid is going to be difficult.....

Now the main point of this article here is that President Obama rightly faces strong resistance to his plan to censure for profit colleges, especially trade schools.  He's not entirely off base here, though, as hiring rates for their graduates are low, and loan default rates are high.  Of course, about 40% of students which attend traditional colleges leave without a diploma as well, and I can't see that that helps them find useful employment or repay their student loans, either.

Which is to say that overall, there needs to be a move to make sure that the taxpayer isn't left holding the bag for students who aren't going to be able to pay back the loans.  Now in a private system, this would be no problem.  Students who want to spend $300k to get a degree in gender and ethnic studies, or who want to go to college for something where employers will train you, would be politely told that the loan will not be forthcoming--or else the loan officer will need to find a new career when the inevitable happens.

For government, of course, it's more difficult, as they can't just admit that their whole program has been all about sending people to college who never belonged there.  Put in an SAT minimum?  You've just shut down trade schools that don't require it and don't need it.  Try to put in minimum qualifications depending on the school's majors, graduation rates, and hiring rates?  Good luck getting government bureaucrats and college officials to agree on that one and not take it to court.  Continue as we're going now?  I'm told that the higher education "bubble" of loans that might not be repaid is close to a trillion dollars--nearly the size of the mortgage bubble. 

Suffice it to say that I'm pretty confident that we're running into a nasty situation caused by our unwillingness that some people simply don't belong in ivy towers, and pretending they do is going to cause the very most pain to precisely those people--and then quite a bit of pain to the rest of us.  Pray that our legislators get a dose of maturity they haven't shown much lately.


MainiacJoe said...

I'm currently building up credits towards loan forgiveness through the Public Service Loan Forgiveness program. If I make 120 payments while working at a non-profit, school, or other such entity, then the remainder of principal will be forgiven (not counted as income that year). I don't feel like a leech on society because I've already chosen to eschew a higher salary in industry to serve the public through science education. My only concern is that this program will be discontinued before my eligibility matures in 2018, and the concerns you raise make this a real risk.

Bike Bubba said...

Joe, good to hear from you--hope you're doing well. You may actually have bigger things to worry about than whether the loan program continues. To put it mildly, the real national debt is well over fifty trillion dollars, and increasing at two to three trillion dollars annually--plus the stated national debt.

Which is to say that the loan program is small fry on the scale of things with the fiscal disaster that's looking us in the eyes right now.

(difference between real and government accounting for debt; GAAP)

Bike Bubba said...

BTW, hang in there with those school loans--and keep in mind that those 120 payments can be a ten year shackle instead of a blessing.

MainiacJoe said...

I am of course not unaware of the fiscal catastrophe looming. As for the 120 payments, each one has a value of zero because of my lousy salary/family size ratio, and as such they are quite manageable.