“Project on Student Debt” Double Speak

“Since community college tuitions are relatively low and large numbers of their students qualify for Pell Grants and other federal grants, most two-year institutions could avoid any penalties for having high default rates.”

These folks, who are essentially arguing for students to INCREASE their debt, miss the point. Those institutions which have elected not to push student debt down their students throats are focused on the penalties to students, not themselves.

A default is still a penalty for the STUDENT even if the school will not suffer the consequences! How irresponsible!

Are the people at the PSD so dull that they think that the FAO’s at these schools are not aware of the federal regs which protect schools from the skewed math of a small sample? It was the FAO’s at those schools that were effected that argued for the change to the law in the first place for gods sake so that each institution could assess their own situation and make an institutional choice. One size does NOT fit all PSD.

The point is that they may have a small volume loan portfolio’s now, but from experience I can tell you that loan portfolio’s grow and take on a life of their own. Loan volume does NOT decline over time, unless you are one of the elite endowed colleges which can essentially pay it off.

Not an option for CC’s.

Community Colleges have their own intrinsic, strategic value, i.e. students walk away with a solid education AND very little debt. The PSD wants them to give up their strategic advantage for a short term benefit. How shortsighted and wrongheaded can they be?

Hey PSD wonks, why don’t you spend your time doing something useful...like advocating an increase to Pell grants and work-study!

R.F., at 9:25 am EDT on August 29, 2008

Credit Card Debt

“Community colleges who refuse to allow federal loans to be part of their students’ financial aid package are displaying their usual lack of concern for their clients.”

You bias is showing. If you make the assertion give evidence please.

“When it comes to making college financial decisions, these two year schools offer no help to their students. They are left on their own to use high interest credit cards and payday loans to make up their tuition gaps.”

First, they help by not adding to students unnecessary debt, which if as you assert they are not helping these students, I would wonder at your conclusion that more is better.

Second, if you assert that no CC’s give their student’s any help...again you need some evidence.

Third, cite your research that shows what percentage of total credit card debt is attributable to tuition and what percentage of the total it represents. Then show how much of the attributed debt was paid off the following month by the students own funds or by refunded Pell grants, FSEOG, ACG, State grant, Institutional grants and scholarships. Or how many were paid off at the end of the semester by employer tuition reimbursement. Give the average interest rate for each and how much interest was paid.

If you assume credit cards are always bad prove it!

“How can that be a better option than using a fixed 6% loan that offers deferment, forbearance and consolidation features?”

These features have not helped those who have defaulted despite them. Further, Student loans are not dischargeable under bankruptcy...while credit card debt is!

Also, some of us remember fixed %10 Stafford loans...

BTW, consolidation is no longer a gimme.

“Rather than changing the reporting formulas, the U.S. government would do better to mandate that all federal aid options be available to all U.S. college students.”

I might agree...if the feds mandate that all schools currently not participating in campus based programs (FWS/Perkins/FSEOG)were incentivized to participate first, but I would not hold my breath for the massive increase in those funds necessary to do so.

If student loan debt is such an overwhelming problem at public/private 4 year and for-profit schools, then I fail to see how forceing community colleges to be like them is a positive.

R.F., at 12:40 pm EDT on August 29, 2008

Bank decisions

I am one of the couple thousand lender reps that are now without a job thanks to all this political BS. Please tell me how all this “poor students” “bad banks” has done one thing for the students. Why is it okay for the Democratic party going on right now that they are sitting down to filet, lobster, prawn dinners being paid by private interest groups to get laws they want, or don’t want in place, ok? They had a dinner last night for all who gave more than $100k this year to the party. We are talking about laws that help the big boys and leave us to foot the bill. Now for all those at the top of the lender chain making millions, lets say there were less than 100 making the real big bucks, the rest of us making a normal paycheck like you are now left without a job in a dead economy. AND not one student has yet to reap benefits from this nor NOT one student has been found to have been harmed. Why didn’t they really fix the problem. How about a student loan company can only make x amount of dollars of profit and then it has to go into scholarhip programs etc. Like a casino where they have to put in a certain percent of winning based on the number of placed. One more thing, the reasons banks had to pull away from some schools is that with the changes made, a lender is in the hole if a loan is less than $6000. At the point the loan is requested by the borrower, the lender would make $1.20. Now after they pay the people for their work on that loan, they pay the bank for the wire of the funds, they borrow the money to even disburse the loan, they are way in the hole on that $6000 loan. Lenders had no choice but to pull certain schools. No one can operate business under those conditions. Your school would no longer exist if they operated that way and then you would be without a job. So while Kennedy, Cuomo dined on lobster last night paid for by some huge company with an agenda, I was trying to figure out how to pay my house payment, car payment and feed my two children with the $1500 a month I am getting in my unemployment. NOW, SCHOOLS DON’T KNOW WHAT THEY ARE GOING TO DO AND STUDENTS CAN’T GO BACK TO SCHOOL BECAUSE THEY CAN NO LONGER GET THE FUNDING THEY NEED. I JUST DO NOT SEE WHAT THE HECK MR CUOMO DID THAT IS SO GREAT.

D Williams, at 7:20 am EDT on August 30, 2008

I read through this article after doing a search for student loan default rates on Google during the course of personal research. Because of the ongoing credit crunch, I was curious to see the state of affairs for students who got in over their heads during the past decade or so.

“Are students overburdened with debt like the American consumer?” I wondered.

After reading the comments, I see all kinds of programs out there are/were available for students of all stripes. What I don’t see, however, is an analysis of what access to these types of funds actually has on the cost of education.

In a free market, easy money inevitably leads to price inflation. Initially, access to funding for all gives more people an opportunity to get a higher education, and appears to be beneficial, but the long-term ramifications are higher prices and increasing personal debt. Eventually, the house of cards comes crashing down.

I believe the community college approach of not participating in these programs to be a very wise and prescient move. The ongoing credit crunch will inevitably lead to lower tuitions at private institutions since the ballooning cost of education was directly connected to the easy availability of money. With all of those doors closing, maybe things will finally come into balance.

I long for the days when one could take on a job and work to pay for one’s education without mortgaging the house; burdening one’s parents; and afterwards living for decades with the curse of student loans over one’s head.

Student loan programs are a symptom of the new American way: Spend money one doesn’t have by placing a best-guess future value on something one doesn’t own based on the monthly payment instead of the loan amount. We know this approach fails in the stock market; it falters in the real estate market; yet we somehow expect it to work for the way one values one’s education and the debt one’s willing to assume in order to get it?

I would venture to guess that the current cost of a higher education is not what the market price is now dictating. But that is quickly starting to change...

Phil Steinschneider, at 10:25 am EDT on September 9, 2008