Tag Archives: student loan debt

Jiggering Tuition Costs to Employment Yield

New Orleans      Thinking about student loan debt and the soaring costs of university education is interesting, even if it almost guarantees a migraine or a pain on the south side.

The backstory runs in several channels.  The huge gift at Morehouse College by billionaire Robert Smith and his offer to pay the student debt of almost 400 in this year’s graduating class has unleashed a tsunami of discussion.  His generosity and good will is indisputable, but equally inarguable is the public policy crisis reflected by the cost of higher education and the extended burden of student debt.

The Obama administration in attempting to rein in for profit higher education institutions disqualified certain programs and institutions from federally guaranteed student loans because of the limited prospect of graduates ever earning enough money to repay the cost of the program.  Not only did this approach hammer the Phoenix Universities of the country, it also exposed the graduate theater program at Harvard as unsustainable on these terms.

An executive order from President Trump now requires the average amount of debt incurred by graduates of different academic programs and all higher ed institutions to be reported, and the first returns are now available.  Senator Lamar Alexander, Republican from Tennessee and chair of the Education Committee, has now proposed going a step farther than the Obama rules by legislating a system that would not be institution-based, but program-based within institutions.  He’s claiming this would offer an incentive for colleges to reduce tuition costs for some programs based on employment outcomes by forcing a change on the one cost covers everything whether liberal arts or business and engineering with high pay.

The old “education for education’s sake” crowd that has bunkered down in liberal arts and other programs for literally centuries is under assault.  I’m actually sympathetic to that argument both intellectually and almost genetically.  Education shouldn’t be allowed to be transactional.

At the same time, costs and debt are totally out of control, so it is impossible not to see higher education as having earned a huge disruption of their business model.  And, let’s be honest, universities are already charging based on employment.  In the San Jose area recently I heard they were charging $96,000 for an MBA program at Santa Clara University, so don’t tell me that’s not calibrated to current and future earnings.

The Times’ reporter, Kevin Carey, nailed the problem saying, “…while college is about more than money, it can be paid only with money.”

We haven’t hit the right solution yet, but the solution in predatory markets requires using “affordability” as the benchmark for a loan.  I would argue that affordability needs to be test for every student entering the institution, regardless of program or degree, and that higher education facilities need to learn to apply that test more accurately just as they do in accounting for every penny of a family’s income.


Please enjoy Coyote by Mako.

Thanks to KABF.


The Government Con Job on Student Loan Forgiveness

San Francisco    There ought to be a law.  In the case of student loan forgiveness, there is a law, it just seems that the government is not willing to follow the law, or worse, not willing to make it work.  This has created a classic bait-and-switch, leaving tens of thousands of students operating in good faith in pursuing careers in public service, and still finding they are on the hook for the loans rather than having achieved forgiveness.   This is just wrong in so many ways,

The Public Service Loan Forgiveness program was created in 2007.  The purpose was laudatory.  Congress wanted to create an incentive program to allow young people to finance the educational requirements, often entailing advanced degrees in law or medical school, that would allow them to be sustainable in public interest careers without permanent loan burdens.  What could go wrong?  A win-win.

More than a decade later it’s a hot mess.

To earn loan forgiveness, there were a list of conditions that students had to meet in addition to simply getting job with a nonprofit or governmental outfit.  They had to enroll in a repayment plan and make essentially ten years of timely payments on their loans, or they would be disqualified.  The carrot and the stick were pretty clear.  The tricks for that treat turned out to be less than clear.  To earn forgiveness the borrower also had to have a certain type of loan.

73,000 people have now gone through the application process to receive debt forgiveness.  According to the Education Department but only 864 have made it through to the other side to have their loan forgiven.  The Education Department says 16% were busted out for the wrong type of loan.  25% were rejected on a claim of missing information on their applications 53% were denied for not making enough payments or making them untimely, but as the Wall Street Journal reported, this “could have been due to a simple counting error or being enrolled in an ineligible repayment plan.”

So, you know this is complicated, but are you following this Catch-22, a student could have both the wrong loan and the wrong repayment plan or the right loan and the wrong repayment loan or the wrong loan and the right repayment all of which could leave them tricked and in huge debt.  Or, they could have made payments that turned out to be timely but too small.  Jiminy Cricket!  Even Congress, which is never wrong, agreed in 2018 that they had flubbed this and created a $700 million fund to cover borrowers who had made payments but the Education Department has allowed them to enroll in ineligible repayment plans.  Oh, but only 442 people have gotten loan relief from that lifesaver effort.  A fair number of the forgiven loans have also gone to big money doctors at nonprofit hospitals and high-paid professors at universities, but I don’t even want to go there.

Why hasn’t the government just fixed this and done the right thing, especially since many of these students have gone to work for governmental units?  Part of the answer may lie in the fact that the government has taken over the $1.45 trillion student loan portfolio and now the Governmental Accounting Office says they will break even over time and make a little on the interest, but the administrative cost will be more than $3 billion a year for a decade as well.  Yes, that’s the big kahuna loan program, not the baby public service program, but with Secretary Betsy DeVos in charge of Education it gives her a wailing wall about all of the student loan debt and therefore cover for bureaucrats and elected officials not to admit this was a long con, and it’s time to be honest, do right, and make this work.