Category Archives: Student Debt

Forgiving Student Debt at Corinthian Colleges and Other For-Profits

Source: New York Times, Room for Debate, May 7, 2015

The for-profit Corinthian Colleges filed for bankruptcy after investigations into possible recruiting fraud led the Department of Education to suspend its access to federal student aid. Thousands of former students are asking the government to forgive their loans, arguing that the school used predatory practices to persuade them to borrow money. Other for-profit colleges have been accused of similar practices.

Loan relief for students could cost taxpayers millions of dollars, and establish a precedent for other students unhappy with their college degree. Who deserves debt forgiveness when for-profit colleges close or are accused of fraud?

Debaters include:
Insufficient Protections at the Department of Education
Ben Miller, New America Foundation
Students who borrow loans from the federal government have a reasonable expectation of protection.

Forgiving Loans Would Be a Mistake

Richard Vedder, Center for College Affordability and Productivity
Loan forgiveness would set a precedent and encourage excessive borrowing.

For-Profit College Student Debt Should Be Forgiven

Osamudia R. James, law professor
We cannot expect these students — who are mostly veterans, minority and low-income — to carry their debt burden back to already economically destabilized communities.

Align the Incentives of Students and Schools

Andrew Kelly, American Enterprise Institute
If an institution’s students cannot pay back their loans, the school should be on the hook to pay back a portion of the loan balance.

The Government Should Actively Notify Borrowers

Robyn Smith, National Consumer Law Center
Thousands of low-income borrowers whose debts should be forgiven instead struggle financially because of the government’s draconian powers to collect student loan debts.

Student Debt and Higher Education Risk

Source: Jonathan Glater, University of California – Irvine School of Law Research Paper No. 2015-46, April 21, 2015

From the abstract:
To borrow for college is to take a risk. Indebted students may not earn enough to repay their loans after they graduate or, worse, fail to graduate. For students who cannot pay for college without borrowing, this risk is both a disincentive and a penalty. Greater risk undermines the efficacy of federal financial aid policy that seeks to promote access to higher education. This Article situates education borrowing in the context of a larger, cultural and political trend toward placing risk on individuals, and criticizes this development for its failure to achieve any of the typical goals – such as particular public policy outcomes or prevention of moral hazard – of legislation that allocates risk.
The Article describes dramatic increases in student borrowing and explains the ill-effects of greater reliance on debt, which increases the riskiness of investing in higher education. The Article contends that recognizing that student debt is a mechanism that transfers risk bolsters criticisms of increased borrowing and suggests a consistent way to evaluate aid policy. The Article outlines an insurance regime, the logical response to undesirable or unmanageable risk, that could help preserve access to higher education while at the same time mitigating the downside risk of borrowing for college.

Student Debt: Who Borrows Most? What Lies Ahead?

Source: Sandy Baum, Martha C. Johnson, Urban Institute, April 2015

From the abstract:
This report describes the levels of cumulative education debt among students with different levels of educational attainment and examines factors associated with high borrowing levels. Those with the most debt tend to be among those who have pursued graduate study. Among undergraduate borrowers, students enrolled in for-profit institutions, those who are independent of their parents, and those who stay in school longer are more likely than others to accumulate large debts. Students from low-income families are not more likely than others to borrow large amounts, at least in part because they tend to stay in school for fewer years.

Sick of our loans: Student borrowing and the mental health of young adults in the United States

Source: Katrina M. Walsemann, Gilbert C. Gee, Danielle Gentile, Social Science & Medicine, Volume 124, January 2015
(subscription required)

From the abstract:
Student loans are increasingly important and commonplace, especially among recent cohorts of young adults in the United States. These loans facilitate the acquisition of human capital in the form of education, but may also lead to stress and worries related to repayment. This study investigated two questions: 1) what is the association between the cumulative amount of student loans borrowed over the course of schooling and psychological functioning when individuals are 25–31 years old; and 2) what is the association between annual student loan borrowing and psychological functioning among currently enrolled college students? We also examined whether these relationships varied by parental wealth, college enrollment history (e.g. 2-year versus 4-year college), and educational attainment (for cumulative student loans only). We analyzed data from the National Longitudinal Survey of Youth 1997 (NLSY97), a nationally representative sample of young adults in the United States. Analyses employed multivariate linear regression and within-person fixed-effects models. Student loans were associated with poorer psychological functioning, adjusting for covariates, in both the multivariate linear regression and the within-person fixed effects models. This association varied by level of parental wealth in the multivariate linear regression models only, and did not vary by college enrollment history or educational attainment. The present findings raise novel questions for further research regarding student loan debt and the possible spillover effects on other life circumstances, such as occupational trajectories and health inequities. The study of student loans is even more timely and significant given the ongoing rise in the costs of higher education.

In at Least 22 States, Your Student Debt Could Cost You Your Job

Source: Chris Hicks, Jobs With Justice, February 9, 2015

….In at least 22 states, the government will revoke your professional license if you are unable to pay off your student loan debt. These state laws target a wide range of professions, including attorneys, physicians and therapists – even barbers make the list. But two professions show up over and over again: nurses and teachers. Both professions serve a critical role in our communities and are often wildly underpaid. Are we really in a position to be punishing the people we need the most? In Alaska, California, Florida, Georgia, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Massachusetts, Minnesota, Mississippi, Montana, New Jersey, North Dakota, Oklahoma, Tennessee, Texas, Virginia and Washington, nurses and health-care professionals can all be locked out from their job if they fall into default on their student loans. In Georgia, Hawaii, Iowa, Louisiana, Massachusetts, Montana, New Jersey, North Dakota, Oklahoma and Tennessee, laws prevent K–12 teachers from working until they begin to repay their student loans…..

Older Americans: Inability to Repay Student Loans May Affect Financial Security of a Small Percentage of Retirees

Source: United States Government Accountability Office, GAO-14-866T, September 10, 2014

From the summary:
Comparatively few households headed by older Americans carry student debt compared to other types of debt, such as for mortgages and credit cards. GAO’s analysis of the data from the Survey of Consumer Finances reveals that about 3 percent of households headed by those aged 65 or older—about 706,000 households—carry student loan debt. This compares to about 24 percent of households headed by those aged 64 or younger—22 million households. Compared to student loan debt, those 65 and older are much more likely to carry other types of debt. For example, about 29 percent carry home mortgage debt and 27 percent carry credit card debt. Still, student debt among older American households has grown in recent years. The percentage of households headed by those aged 65 to 74 having student debt grew from about 1 percent in 2004 to about 4 percent in 2010. While those 65 and older account for a small fraction of the total amount of outstanding federal student debt, the outstanding federal student debt for this age group grew from about $2.8 billion in 2005 to about $18.2 billion in 2013.

The Unsupportable Cost of Variable Pricing of Student Loans

Source: Jonathan Glater, University of California – Irvine School of Law Research Paper No. 2014-46, September 9, 2014

From the abstract:
Terms of student loans offer a tempting tool for encouraging students to choose particular paths through college. This Article offers a critique of a proposal to tie loan terms to student choices of major, arguing that punishing students who choose to study in fields associated with low wages will not achieve the goals of federal student aid. The Article argues that students who borrow should not be subject to additional restrictions on their life choices because of their lesser wealth or lower income.

The Affordable College Compact: A Federal-State Partnership to Increase State Investment and Return to Debt-Free Public Higher Education

Source: Mark Huelsman, Dēmos, September 2014

From the summary:
As a postsecondary degree has become more important than ever in the labor market, and the primary means by which one enters the middle class, the U.S. has simultaneously made it more difficult and more expensive to attain. Over the course of three decades, the cost of public colleges and universities—which educated nearly 3 in 4 students—has risen dramatically. The obvious result of increased cost during a period of stagnant incomes for low-income and middle-class families has been an increased reliance on debt as a way to finance a college education. Just 25 years ago, if a student wanted to attain a bachelor’s degree, it was more likely than not that he or she would be able to do so without borrowing. Now, borrowing is nearly required to graduate with a four-year degree, particularly for low- and middle-income students.

A bachelor’s recipient has a 7-in-10 chance of taking on loans in order to graduate, and 9-in-10 Pell Grant recipients graduate with debt. Average debt at graduation is approaching $30,000 (and is over $30,000 for Pell Grant recipients). Even average borrowing for graduates at public schools—which educate three in four students—is up by nearly a third over the past decade. 64% of bachelor’s degree recipients at public colleges graduate with debt, and even 42% of associate’s degree holders from public schools leave with debt. Black and Hispanic graduates also incur more debt than their white counterparts.

What’s worse, these students may be the best off. Those with credentials are likely to be the best suited to handle student debt, but almost a third—29%—of student borrowers drop out of school, and non-graduates are more likely to face serious trouble repaying loans, becoming delinquent, or defaulting4 Students who choose not to take on debt are faced with the choice of working longer hours or enrolling part-time, both of which may decrease the likelihood of graduating.

Reversing these trends matters not just for our economy, but for notions of equity as well. The specter of student debt has the ability to fundamentally change student aspirations, and also raises the stakes of failure with regard to college completion—the rates of which have barely increased just as college costs and debt levels have increased….

Why Easing Education Debt Won’t Necessarily Help the Economy

Source: Beth Akers, Brookings Institution, Brown Center Chalkboard blog, July 24, 2014

Student loan debt has become the scapegoat for nearly all that ails the U.S. economy, from depressed home ownership, to lower rates of entrepreneurship, and even the sluggish recovery from the great recession. The problem with all of this blame is that the accusations are difficult to substantiate. Much of the discussion about the effects of student loan debt focuses on comparing outcomes faced by individuals with student loan debt to those of individuals without student loan debt. The differences in observed outcomes are cited as evidence of an impact of student loan debt. But, there are two reasons why this approach doesn’t tell us what we need to know about the effects of education debt.

First, the population of individuals who take on debt to pay for college is different from the population of individuals who take on little or no education debt. These differences are sometimes observable and sometimes not. This means that outcomes faced by borrowers and non-borrowers are likely to differ for reasons that are unrelated to the debt itself. In order to effectively measure the effect of debt, we would need to be able to control for all of these differences. This presents a methodological challenge because not all of the differences are observable.

Second, the population of borrowers (and non-borrowers) has been changing over time. This means that longitudinal studies comparing borrowers and non-borrowers are difficult to interpret. The changes in behavior, such as home ownership, that occur over time may be due to trends in borrowing, but could also be due to the changing characteristics of the borrowing population. …

Millennial Movements: Occupy Wall Street and the Dreamers

Source: Ruth Milkman, Dissent Magazine, Vol. 61 no. 3, Summer 2014

… Occupiers and Dreamers alike are sharply critical of the political establishment, Obama included, and of the explosive growth in inequality since the 1970s. Both movements use the tactics of civil disobedience and direct action, including occupations of public spaces. Both support racial and gender equality and LGBT rights. Both movements also rely heavily on social media, as Millennials famously do in every aspect of their lives.

But despite their many similarities, Occupiers and Dreamers also differ in some key respects. One is demographic: white males were overrepresented among Occupy activists. Although many women and people of color were involved, they were less numerous and less visible. By contrast, the Dreamers are disproportionately led by Latina and Asian women, and nearly all participants are people of color.

The two movements also differ in their discursive strategies. The Dreamers made extensive use of storytelling as they built their movement. Occupiers occasionally told stories as well, but their main public narrative targeted class inequality and “the 1 percent.”

Finally, the two movements featured different organizational structures. The Dreamers used conventional political organizations and methods of decision making and had identifiable leaders. But Occupy rejected traditional structures in favor of “participatory democracy” and making all decisions by consensus. While Occupy shunned immediate demands, the Dreamers focus on specific policies, like in-state tuition rates for undocumented students as well as the DREAM Act itself.

The activism of both groups reflects the demographic makeup of Millennials and their economic prospects. They are more racially and ethnically diverse than any previous generation: about 43 percent are non-white (Latinos are the largest and fastest growing group). And they are the most highly educated generation in U.S. history: a third of Millennials over age twenty-six have a four-year college degree or more. But they have paid a high price for this achievement: two-thirds of recent college graduates have outstanding student debt, averaging $27,000….