U.S. 'Special Master' Issues Last Report on Debt Relief

The "special master" hired by the U.S. Education Department to oversee the initial process of deciding which student loan borrowers should get relief from their debt because of institutional fraud issued his fourth and final report Wednesday. The report by Joseph A. Smith, whose position was set up to expire within a year, shows that thousands of students from the now-defunct Corinthian Colleges have been relieved of their debt, a combined total of about $170 million, among other findings.

Ad keywords: 

Provost Ousted, Aid Shortfall at Temple U

Temple University announced Tuesday that Hai-Lung Dai (right), the provost, "has been relieved of his administrative responsibilities effective immediately," The Philadelphia Inquirer reported. The same day, the university announced that it has committed to spending $22 million more on financial aid in 2016-17 than was planned in the budget. Officials said that aid commitments would be met, and that the overspending was due to more students enrolling who were eligible for non-need-based scholarships. Dai's lawyer said that he viewed the provost's dismissal "as rash and completely unjustified." The lawyer said Dai had achieved notable successes in recruiting top faculty members and building the university's research stature.

Hillary Clinton student loan proposals are a giveaway to Silicon Valley

Yesterday, Hillary Clinton offered new student loan forgiveness proposals as part of a broader set of ideas on technology and innovation. In trying to prove how much she believes in innovation and how much Silicon Valley investors should donate to her campaign, Clinton proposed some of the most complicated ideas for loan forgiveness ever. Not only are they hard to implement, but they would help wealthy Americans over everyone else.

Clinton has two loan proposals. First, anyone starting a business who has federal student loans can choose to not pay the loans for three years and not accrue any interest. She would also “explore” applying this to the first 10 or 20 employees of a new company.

If Clinton wants to give away money to people who will eventually be wealthy, this proposal is a great idea. People working in tech start-ups will likely go on to earn a fairly high income in life. If a young entrepreneur has a degree from a good school and highly valuable skills, she can still get a high-paying job even if the company fails. If her company succeeds, she will eventually have a lot of money.

Clinton's Innovation Agenda
The presumptive Democratic
nominee outlines her plan
for spurring innovation,
in part through changes
in higher education.

That person doesn’t need an interest-free loan. What she needs is a program that allows her to pay a low amount or nothing toward her student loans while she makes little to no money launching her business. Interest will accrue, but once she earns a lot, she’ll be able to pay everything back. If she never makes a lot, the loans will eventually be forgiven.

Of course, that plan is already available to all federal student loan borrowers. It’s called income-based repayment, it is used by many people, and it protects all borrowers, whether they’re “innovators” or not. Clinton’s plan is a giveaway to kids who went to Stanford and attend TEDx talks for the networking opportunities.

Clinton’s second proposal is that “for young innovators who decide to launch either new businesses that operate in distressed communities, or social enterprises that provide measurable social impact and benefit, she will offer forgiveness of up to $17,500 of their student loans after five years.”

Let’s see how that would work. Government officials would first have to define “distressed community.” Perhaps they would define it as any ZIP code where average earnings are less than 150 percent of the poverty line. That means that a bunch of Stanford graduates with master’s degrees in computer science who work out of office space in a poor part of Oakland could get $17,500 loan forgiveness after five years -- even if their company is being funded by venture capitalists. Why would we ever want that? If anything, this seems like a plan to speed up gentrification in Northern California.

But what about those businesses that help these “distressed communities”? The government will have to define “measurable impact.” How might that be done? If I invented the next Candy Crush and everyone in the neighborhood played it, that would certainly have a measurable impact on the community. Should I get loan forgiveness? If I start a farm and sell vegetables in a distressed community once a week, is that “measurable impact?”

There’s no good way to define it. When Congress tried to define “public service” for federal student loan forgiveness, it ended up counting any job with the government or a nonprofit. Which raises another question: the government already has public service loan forgiveness, so for whom, exactly, is Clinton’s proposed program? This election cycle, Clinton herself has seemed increasingly skeptical of greedy, for-profit businesses. If someone really wanted to help a community, why wouldn’t they just start a nonprofit?

Clinton seems to want more young people to start businesses. And while some economists are concerned that few young people are doing just that, it’s probably because of changes in demographics and the economy rather than young people having to pay interest on student debt. Students already have income-based repayment, which allows them to have affordable monthly payments. Those looking to help poor communities already qualify for public service loan forgiveness.

Our obsession with student loans leads to some terrible policy choices. With her new proposal, Hillary Clinton may be cultivating her next generation of Silicon Valley donors, but that’s not the same as prudent policy.

If anyone should get loan forgiveness, it’s not “innovators” who go on to earn high incomes, but those who never earn a high income. And it shouldn’t be for college graduates who start a business in a “distressed community,” but for borrowers who went to predatory schools and can’t find work. Those are the truly distressed.

Alexander Holt is a policy analyst with the education policy program at New America.

Image Source: 
Gage Skidmore

Changed Aid Application System for Homeless Students

The U.S. Department of Education has simplified and clarified the process through which homeless students can apply for federal financial aid. John King, the U.S. Secretary of Education, described changes to the Free Application for Federal Student Aid and to the department's website in a letter to Senator Patty Murray, the Democrat from Washington State who had called for a more streamlined process. The U.S. Government Accountability Office recently found that homeless students face unnecessary and cumbersome barriers when seeking to apply for federal aid.

Underestimating Financial Aid Eligibility

Slightly less than one-quarter of parents and 37 percent of students believe they will qualify for financial aid, according to the results of a survey released this week by Royall & Company, a division of the Education Advisory Board (EAB). The findings, which are based on a survey of 5,133 college-bound high school students and their parents, stand in contrast to federal data showing that 85 percent of all college-going students receive aid in the form of grants or low-interest loans from the federal government.

Among the survey's parent respondents from households with annual incomes of $60,000 or less, 66 percent said they expect to quality for need-based financial aid. But an EAB analysis of federal data found that 84 percent of students in that income bracket receive Pell Grants.

U.S. expands Pell Grant program to 12,000 in prison

Smart Title: 

After receiving 200 applications, U.S. Education Department releases a list of colleges that will offer need-based grants to prisoners pursuing a degree.

How California’s student aid program helps students over their lifetimes

Smart Title: 

Researchers say the real test of a state student aid program may not be enrollment alone, but graduate school, lifetime income and more.

Report Finds Uneven Sanctioning by Accreditors

An analysis of key actions 10 institutional accrediting agencies took over five years found a "highly uneven and inconsistent system of sanctions." The report from the Center for American Progress, which has previously chided accreditors for their oversight of poor-performing colleges, found that national accreditors are more likely to sanction their member colleges, but that regional agencies keep institutions on sanction for longer periods of time. The group recommended "clearer, common rules of the road about sanction terminology, definitions and use."

What other countries can teach the U.S. about student loans

Smart Title: 

Could student loan repayment models from other countries work in the United States?

Increase in Pell and NIH Funding Advances in Senate

The full Senate Appropriations Committee on Thursday approved legislation that would reinstate year-round Pell Grants for low-income students and provide a $2 billion boost for the National Institutes of Health. The 2017 appropriations bill for the Departments of Education, Labor and Health and Human Services would increase the maximum Pell Grant to $5,935 and once again allow students to receive the grants in the summer, a benefit that was eliminated in 2011 amid a spike in the program's costs.

Despite the increases, advocates for students criticized the Senate measure for using $1.2 billion in surplus Pell Grant funds for other programs. They started a petition asking Congress to stop the "raid" on Pell funding.

Ad keywords: 


Subscribe to RSS - studentaid
Back to Top