Private student loans could function more effectively -- and be a more useful tool for helping students pay for postsecondary education -- if lenders made them using criteria such as institutional quality and the likely return on a student's investment rather than credit scores and co-signers, the authors of a new report from the American Enterprise Institute argue.
The authors, Andrew P. Kelly and Kevin J. James, say that student loans made by non-government lenders -- which have shrunk to under 10 percent of all loans disbursed to students -- could play a more central role if they are were based more on market forces and if they were not backed by significant federal guarantees.
"Guarantees reinforce the most significant flaw in the current system: loans are given out with little regard for whether students will be able to pay them back," Kelly and James write. "In contrast, the promise of new ii forward-looking lenders is that by underwriting based on students’ potential -- rather than their background -- these organizations can expand opportunity while strengthening market discipline. Greater market discipline, in turn, can foster a system that is more affordable and higher quality."
A new report from the Center for American Progress looks at how federal health care and housing benefits address affordability and how those programs could help inform a rethinking of federal financial aid in higher education.
"The result of an expectation-light approach to college affordability is that the ability of federal postsecondary benefits to achieve their desired aims is completely dependent upon the choices made by schools, governors and legislatures across the country," the report said. It adds that "changing federal financial aid benefits to guarantee recipients can purchase a specific set of goods, not just receive a set amount of money, will better conform these programs to the rest of the U.S. social safety net."
Key points from the comparison, the center said, are:
Areas such as health care set distinct affordability policies for the most vulnerable individuals that result in minimal to no expectations for out-of-pocket spending.
The federal government limits which products within a market it will make affordable, refusing to subsidize the priciest options.
Related to this sense of limits, the federal government also creates affordability standards -- specifically, when it deals with debt in areas related to housing -- to protect consumers from unaffordable payments.
The federal government does not always pursue affordability on its own. For crucial items such as health insurance, it enlists the help of states and employers to achieve its aims.
Those with student debt -- whether they graduated from or dropped out of college -- are less likely than their counterparts without debt to accumulate assets in the years after leaving college, according to a new study. The research linked debt with borrowers, compared to others, having lower net worth, fewer financial and nonfinancial assets, and homes with lower market values. The study, accepted for publication in Children and Youth Services Review, was written by Min Zhan, a professor of social work at the University of Illinois at Urbana-Champaign.
The interest rates on federal student loans will fall by about half a percentage point in the 2016-17 academic year, to the lowest point in history, based on the results of the Treasury Department's auction on 10-year notes. The rate on federal undergraduate loans will drop to 3.76 percent from the current 4.29 percent, and the rate for graduate Stafford loans will fall to 5.31 percent and for Grad PLUS and Parent PLUS loans to 6.31 percent.
The interest rates on student loans used to be set by congressional action, but 2013 legislation linked the rates to market fluctuations.
Many worry that rising levels of student debt limit home ownership. But a new study from the Brookings Institution says that data cited as proof of those fears don't actually demonstrate their accuracy. What the statistics show, the Brookings analysis says, is that the dividing line between those who own homes and those who don't is actually between those with a college education and those who lack one. The study was done by Susan Dynarski, a professor of public policy, education and economics at the University of Michigan.
The Wall Street Journal on Friday published an article revealing the 21 colleges that benefited from an adjustment the U.S. Department of Education made to the institutions' student loan default rates. The department had not disclosed which colleges received the controversial default-rate tweaks, even when members of the U.S. Congress asked.
The newspaper filed a Freedom of Information Act request to get the list, as did Inside Higher Ed, unsuccessfully. But the department mistakenly released the information to the Journal. The colleges included 10 for-profits, many of them small, six historically black colleges or universities, and five community colleges.
The U.S. Department of Education will offer researchers new access to federal data for studies that "can inform and advance policies and practices that support students’ postsecondary success and strengthen repayment outcomes for borrowers," the White House announced last week. The pilot program will allow experts -- starting with Federal Reserve Board researchers this fall -- to apply to access and match student-aid data files with other surveys and administrative data, the Obama administration said, while keeping data safeguards in place.
The new Advancing Insights Through Data program "builds on the administration’s recent efforts to leverage government data in ways that can improve service delivery, promote transparency and strengthen accountability, particularly through the College Scorecard, which includes the most comprehensive, reliable data ever published on students’ postcollege earnings and repayment outcomes," the White House said.
JetBlue on Monday announced a new employer-sponsored college degree program with some unusual features. The airline is offering its employees with at least 15 previous college credits the chance to earn a bachelor's degree for $3,500 or less.
So far 400 JetBlue employees have signed up for the program. Each is assigned one of six success coaches JetBlue has trained and employs. The airline and its coaches then help employee students map a path to a degree from Thomas Edison State University, an online, public university based in New Jersey.
Students will receive prior learning credits for skills and knowledge they've picked up on the job. They also will be directed to online courses from Sophia, StraighterLine.com and Study.com, which in turn can earn students credit recommendations from the American Council on Education, which Thomas Edison accepts.
"We give them one class at a time," said Bonny Simi, president of JetBlue Technology Ventures, who helped create the program. She said the airline sought to eliminate some of the complexity in earning a degree and to use coaches to review students' transcripts and to help them fill in the gaps.
The company is planning for 1,000 of its 18,000 employees to be enrolled in the degree program on an annual basis, Simi said.