Democrats Reform Student Loans

rhadamanthus · Apr 20, 2012

rhadamanthus said: ↑

Rather blatant hypocrisy and corruption...

A huge student loan scam
With the help of Virginia Foxx, R-N.C., for-profit colleges are massively ripping off U.S. taxpayers
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Foxx continues to look foolish and deceitful and confused:

Compassionate conservatism, this is not. Virginia Foxx, the conservative North Carolina Republican who has been working so diligently to defend the for-profit college industry’s right to rip off the American taxpayer, said some unkind things about students who take on too much debt on the Gordon Liddy Radio Show last Thursday.

I went through school, I worked my way through, it took me seven years, I never borrowed a dime of money [...] I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that. We live in an opportunity society and people are forgetting that. I remind folks all the time that the Declaration of Independence says “life, liberty, and the pursuit of happiness.” You don’t have it dumped in your lap.
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At The Quick and the Ed, Rachel Fishman provides some useful context: When Foxx attended the University of North Carolina in 1961, tuition for one semester was $87.50.

To be fair, prices have gone up a lot since 1961. If you take that $87.50 and adjust it for inflation, the actual dollar amount is a whopping $671.30 per semester. Including tuition and fees, Representative Foxx would have paid $279 for the academic year—about $2,140 today. That’s about equivalent to what students pay right now at community colleges, not public four-year institutions—especially not public flagships.

In-state students at Representative Foxx’s alma mater pay $7,008—more than three times what Foxx paid.
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And that’s getting off relatively cheaply. In California, it’s five times more expensive to go to the University of California now than it was in 1975. Nationwide, tuition costs generally rise at about twice the rate of inflation.

But betraying basic misunderstanding of the changing economics of college is hardly the worst of Foxx’s sins. By trashing students who take on too much debt, Foxx is also trashing the basic business model of the for-profit colleges she has fought so hard for. As reported in Salon on Monday, between 70 to 80 percent of the revenues of the largest for-profit colleges come from federal student loans. If the low-income students who attend those schools stopped borrowing money, that revenue stream would dry right up. Shame on you, Virginia!
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rhadamanthus · May 8, 2012

A perturbing development....

Colleges are now acting as collection agencies

Dave Lindorff writes in the LA Times that growing numbers of students are discovering their old school is actively blocking them from getting a job or going on to a higher degree by refusing to issue an official transcript. The schools won't send the transcripts to potential employers or graduate admissions office if students are in default on student loans, or in many cases, even if they just fall one or two months behind. It's no accident that they're doing this. It turns out the federal government 'encourages' them to use this draconian tactic, saying that the policy 'has resulted in numerous loan repayments.' It is a strange position for colleges to take, writes Lindorff, since the schools themselves are not owed any money — student loan funds come from private banks or the federal government, and in the case of so-called Stafford loans, schools are not on the hook in any way. They are simply acting as collection agencies, and in fact may get paid for their efforts at collection. 'It's worse than indentured servitude,' says NYU Professor Andrew Ross, who helped organize the Occupy Student Debt movement last fall. 'With indentured servitude, you had to pay in order to work, but then at least you got to work. When universities withhold these transcripts, students who have been indentured by loans are being denied even the ability to work or to finish their education so they can repay their indenture.
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rhadamanthus · Jun 5, 2012

Long but interesting look at for-profit colleges

Excerpts:

For example, Corinthian had 71,246 students in July 2008, enrolled 120,638 new students during the following year, but ended up with only 89,479 by June 30, 2009. Recruiting all those new bodies costs a lot of money. In 2009, Corinthian spent almost a quarter of its $1.3 billion in revenues on advertising and recruitment.
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Corinthian schools have recorded some of the highest default rates on student loans in the country, a worrisome fact for a company that derives nearly 90 percent of its revenues from government loans and grants. If you want to understand why the Obama administration has been so steadfast in its efforts to crack down on the for-profit industry, Corinthian is as good a place as any to start.
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But perhaps the most embarrassing twist in Corinthian’s recent history came earlier this year in California. In 2012, a new state law came into effect that denied colleges access to the state’s Cal Grants financial aid program if the three-year student loan default rate at an institution exceeded 24.6 percent. Of the state’s 165 for-profit schools, 67 failed the test. Eighteen of those 67 schools are owned by Corinthian. In fact, some of Corinthian’s schools exhibited default rates of over 40 percent. None of California’s public schools failed.
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In other words, Corinthian students were being counseled on how to delay paying back their student loans, in order to avoid defaulting during the three-year window tracked by state and federal governments. However, the interest rates charged on student loans mean that the longer you wait to start repayment, the higher your debt load eventually becomes. According to U.S. Education Department data analyzed by Higher Education Watch, almost 75 percent of Corinthian students who had left their school within the previous four years had yet to pay down their student debt by a single dollar.
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For Corinthian, a 50 or even 60 percent default rate was acceptable precisely because the institutional loans make it possible to continue to access government funding. Even if Corinthian had to write off half of its annual disbursement of $150 million, the company more than made up for that loss in the revenue generated by government loans. As Sen. Durbin explained on the Senate floor last September: “The company is willing to take this loss of $75 million in private student loan defaults because these loans help ensure the federal loans and Pell grants will keep coming in to these students, despite the fact they are in over their head in debt and have nowhere to turn.”
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