Cost soars for public-service loan deal

Forgiving college loans for graduates who take “public service” jobs is a bonanza for borrowers and a rapidly growing cost for taxpayers, writes Jason Delisle on Brookings’ blog.

Thirty percent of those using the Public Service Loan Forgiveness (PSLF) program borrowed more than $100,000 to finance graduate degrees; the median debt is $60,000.

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They’ll pay a small percentage of their income for 10 years. Then the principal and interest will be forgiven.

In addition to working for the government, public service includes employment at a “non-profit organization with a 501(c)(3) designation, or another non-profit organization that does not have 501(c)(3) status but provides emergency management, public safety, or law enforcement services; health services; education or library services; school-based services; public interest law services; early childhood education; or public services for individuals with disabilities and the elderly,”  writes Delisle. That’s a quarter of the workforce.

Graduate schools will be able to hike tuition for degrees that have little market value, he writes. Students will have no incentive to limit debt that they’ll never have to repay.

Student loan crisis is oversold

The student loan crisis is media and political hype, argues Sandy Baum, a senior fellow at the Urban Institute and author of Student Debt: Rhetoric and Realities of Higher Education.

Federal Reserve Bank of New York


Courtesy of Federal Reserve Bank of New York

The 23-year-old graduate with heavy debt and a job at Starbucks is “rare,” Baum tells Claudio Sanchez at NPR. Most people who earn bachelor’s degrees will do fine.

But many go to college, borrow and leave with a low-value credential or no degree at all. “They tend to be older. They tend to come from disadvantaged, middle-income families and they’re struggling,” says Baum. But “not because they owe a lot of money.”

Flunking out of college doesn’t raise earnings. Many defaulters didn’t borrow very much, but they can’t handle the payments.

Baum’s book calls “free college” and “debt-free college” proposals “simplistic.”

It’s not realistic to say we’re going to pay people to go to college [for free]. Someone has to pay. We can have everyone pay much higher taxes. But short of that, it’s not clear how we would pay.

. . . Some schools don’t serve students well. Some students aren’t prepared to succeed no matter where they go to college. We just tell everybody: “Go to college. Borrow the money. It will be fine.”

We don’t give people very much advice and guidance about where … when to go to college, how to pay for it, what to study.

There’s plenty to worry about, Baum says.

. . . we should worry about the single mother of two, going back to school in her late 20s to try to get some training to help her get a job and support her children. We need to worry about supporting her and directing her in a way that will allow her to succeed. . . . We should worry a lot less about 18-year-olds going off to college and borrowing $20,000, $25,000, for a bachelor’s degree.

Student loan debt now totals $1.3 trillion. About half of that is held by 25 percent of graduates. Most borrowed for medical, law or business school, which means they’re high earners, says Baum.

Joe College doesn’t go here anymore

The Typical College Student Is Not Who You Think It Is, writes Conor Friedersdorf in The Atlantic. Joe College and Betty Co-Ed are a tiny minority.

Lumina Foundation’s Jamie Merisotis asks: “What percentage of students in American higher education today graduated from high school and enrolled in college within a year to attend a four year institution and live on campus?”

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Most college graduates guess “between forty and sixty percent,” he said, at an Aspen event. “The correct answer is five percent.”

Policy makers and the media are obsessed with elite students and colleges, warns Clay Shirky. “Public conversations about college are increasingly irrelevant to the lives of many of the actual students.”

Of the twenty million or so students in the US, only about one in ten lives on a campus. The remaining eighteen million—the ones who don’t have the grades for Swarthmore, or tens of thousands of dollars in free cash flow, or four years free of adult responsibility—are relying on education after high school not as a voyage of self-discovery but as a way to acquire training and a certificate of hireability.

. . . the bulk of students today are in their mid-20s or older, enrolled at a community or commuter school, and working towards a degree they will take too long to complete. One in three won’t complete, ever. Of the rest, two in three will leave in debt. The median member of this new student majority is just keeping her head above water financially.

“The bottom quintile is drowning,” he writes.

quarter of college students are enrolled full-time in four-year residential colleges and universities, according to a 2011 Complete College America survey. That includes some who are older students or living off-campus.

Student parents — “college kids with kids” — need flexible programs write Merisotis and Anne-Marie Slaughter in the New York Times. They advocate streamlining federal financial aid for online competency-based programs.

Parents struggle to pay kids’ college debts

College loans are bankrupting parents, reports the New York Times. Colleges encourage parents to take out Parent PLUS loans, which have more than doubled since 2000, to pay their children’s tuition. Others co-sign private student loans. If parents are hit by health problems, layoffs or divorce, there’s no repayment flexibility.

“You don’t want your children, much less your neighbors and friends, knowing that even though you’re living in a nice house, and you’ve been able to hold onto your job, your retirement money’s gone, you can’t pay your debts,” said a woman in Connecticut who took out $57,000 in federal loans. Between tough times at work and a divorce, she is now teetering on default.

People over 60, the fastest growing group of debtors,owe $43 billion, up from $8 billion seven years ago. More are defaulting. The government garnishes Social Security benefits to collect on unpaid student debt.

“It makes you feel like a failure as a parent, to be unable to help your children and to have all your hard work end in a pile of debt,” said one New Jersey man, who took out a second mortgage of $280,000 to help cover his children’s college costs. “I sent my older kids to private colleges, and I was happy to do it because it’s how you help them get started off. But I can’t do it for the youngest, and I haven’t even been able to start the conversation with him.”

Start talking, Dad.

A 27-year man about to complete his second bachelor’s degree — this one’s in Russian literature — tells the Times he doesn’t know how much he and his mother owe for his years in college.

Another reason to avoid college debt

College students are trying prostitution to pay off student loans (and credit card debt), reports the Huffington Post. Young “sugar babies” seek older “sugar daddies” (or “mommies”) through various online sites.

Over the past few years, the number of college students using our site has exploded,” says Brandon Wade, the 41-year-old founder of Seeking Arrangement. Of the site’s approximately 800,000 members, Wade estimates that 35 percent are students.

The site places pop-up ads that appear when someone types “tuition help” or “financial aid” into a search engine. College sugar baby membership has increased from 38,303 in 2007 to 179,906 this year. There are 10 “babies” for every “daddy.”

New York University ranks first in sugar babies with 498 signed up; Harvard University ranks ninth with 231. Let’s hope they all signed up as a joke and this is one of those phony trend stories.

British students should be able to sell a kidney to pay off student loans, says a Scottish professor.