Mobility? Non-profit colleges fall short

Upward mobility is a myth for many students who borrow to attend private non-profit colleges, a Third Way report, Incomplete: The Quality Crisis at America’s Private, Non-Profit Colleges.

New, full-time low- and moderate-income students who start at a four-year, nonprofit college have only a 50-50 shot at earning a degree, the report concludes.

Most low- and moderate-income students enroll in less selective colleges with low graduation rates. Looking at net price — what students pay after grants, scholarships and loans — the unselective colleges cost the most.

“Using our mobility metric, the average net tuition paid by low- and moderate-income students was lowest at top-quartile schools ($15,938) and highest at bottom-quartile schools ($18,776),” warns Third Way.

Six years after enrolling, nearly 40 percent of students who borrowed for college don’t earn any more than the average worker with only a high school diploma. On average, 19 percent of borrowers fall behind on repaying loans three years out of college.

Here’s what Third Way doesn’t quite say: College is an engine of upward mobility for students who have the academic preparation to get into a selective college and complete a degree. For those with weak academic skills or shaky motivation, college can lead to debt (that can’t be discharged by bankruptcy) without raising earning power.

“If we’re serious about promoting equality and removing barriers that keep the less fortunate from getting ahead,” we should ban the college box,” writes Glenn Reynolds in USA Today. “If you have to go to college to move up in the world, a lot of people aren’t going to move up.”

Detroit Isn’t The Only One

A few days ago I posted about Detroit Public Schools’ looming debt, today let’s learn about Los Angeles Unified’s financial problems:

Which has a better long-term fiscal outlook: L.A.’s print newspapers or its school district?

A report released in November and recently obtained by the Weekly (which is to say, we finally got around to reading it) describes a looming financial disaster the Los Angeles Unified School District faces in, oh, about three or four years, if doesn’t severely cut costs:

If the District desires to continue as a growing concern beyond [Fiscal Year] 2019-20, capable of improving the lives of students and their families, then a combination of difficult, substantial and immediate decisions will be required. Failure to do so could lead to the insolvency of the LAUSD, and the loss of local governance authority that comes from state takeover.

Ruh roh.

The report comes from something called the “Independent Financial Review Panel,” formed at the behest of recently retired Superintendent Ramon Cortines. The nine-member panel includes heavy-hitter analysts including the city of L.A.’s Chief Administrative Officer Miguel Santana, former State Treasurer Bill Lockyer, and former State Senate President pro tempore Darrell Steinberg.

LAUSD’s problem boils down to declining enrollment without proportionate spending cuts.

What Happens Next?

Detroit Public Schools is running out of money.  Can taxes be raised enough to bail them out, or is this uncharted territory?

The debt payments of Detroit Public Schools — already the highest of any school district in Michigan — are set to balloon in February to an amount nearly equal to the school district’s payroll and benefits as the city school system teeters on the edge of insolvency.

Detroit Public Schools has to begin making monthly $26 million payments starting in less than a month to chip away at the $121 million borrowed this school year for cash flow purposes and $139.8 million for operating debts incurred in prior years. The city school system’s total debt payments are 74 percent higher from last school year.

The debt costs continue to mount while Gov. Rick Snyder and the Legislature remain at odds over how to rescue Michigan’s largest school district. A bankruptcy of the district could leave state taxpayers on the hook for at least $1.5 billion in DPS debt.

A teacher who owes $410,000 in student loans

Liz Kelley, left, and her sister and fellow teacher, Sheryl Silverberg, 45, at Ms. Kelley’s home in Ballwin, Mo. Credit: Whitney Curtis/ New York Times

“The federal government has become the biggest, nicest and meanest student lender in the world,” writes Kevin Carey in the New York Times. It’s very easy to borrow for college. It’s easy to defer repayment. But it all comes due eventually.

A Missouri high school teacher owes the federal government $410,000 for student loans. Liz Kelley, 48, hasn’t made a single payment, so the interest keeps mounting.

Liz Kelley received her graduate education degree in 2001.

Liz Kelley received her graduate education degree in 2001.

She borrowed $26,278 for a bachelor’s degree in English from Maryville University, a private school near St. Louis. After graduating in 1994, Kelley enrolled in law school. That delayed repayment on her loans and let her borrow $37,000 for the first three semesters.

After a serious illness, she quit law school and decided to go into teaching. A married mother of four, Kelley borrowed to pay for child care and tuition so she could study education at Maryville. After finding a teaching job, she borrowed again to earn more graduate credits to raise her pay.

She stayed in graduate school for five years, which let her put off repaying her loans. Graduate school and child care added $60,700 to the principal and the interest kept mounting. Her debt totaled $194,603 by 2005.

In the recession, the Kelleys lost their home to foreclosure and divorced. The loans came due — but the teacher was able to defer payments for three years due to hardship. She owed $260,000.

By this time, Ms. Kelley’s children were reaching college age. One received a financial aid package that included $12,000 in Parent PLUS loans, a federal program that allows parents to borrow money for their children’s college education after the children have reached the maximum on loans of their own. She agreed, hoping to minimize her children’s debt. She briefly enrolled in an education Ph.D. program at Texas A&M before withdrawing, but not fast enough to avoid an additional $7,458 in loans.

. . . After her loan deferment ended, she enrolled in another, similar federal program called forbearance, also because of an economic hardship. The hardship this time was the loans themselves.

In a little more than a year, the final forbearance will expire. The loan servicer could garnish her wages — she teaches at a parochial school — and eventually her Social Security.

“She had taken out her first student loan 25 years earlier and had yet to make a single payment,” writes Carey. With accumulated interest, she owes $410,000. Monthly loan payments would be $2,750 for 30 years.

If she found a public school job, she could use income-based repayment, which would link her payments to her income and erase the remaining debt after 10 years. “But that would still mean a decade of what she describes as ‘futile’ payments that won’t even cover her monthly interest expenses, leaving nothing to put away for retirement.” Carey writes.

I guess she objects to paying anything, ever.

For-profit colleges and the mobility lie

As a for-profit college inspector, Michael Fitzgerald called recruiters, pretending to be a potential student, to see if they were lying. His employer in the summer job was a large chain of for-profit colleges that wanted to protect itself from fraud charges, he writes in Pacific Standard.

Recruiters didn’t lie very often, Fitzgerald reports. They didn’t have to. “They were pitching a product—upward mobility via higher education — that the rest of society had already primed their customers to desire, no matter the cost.”

Raised in a low-income family, Fitzgerald turned down a scholarship to University of Vermont to attend the more prestigious Carnegie Mellon. He used a $5,000 annual Pell Grant, and federal loans — the interest rate was seven percent — to pay the $40,960 annual bill for tuition, room and board. He ran up more than $70,000 in student debt.

I wish anyone involved in my indebtedness—my family, Carnegie Mellon, the federal government, the state of Pennsylvania, or even the Middle States Commission on Higher Education (which accredits both Carnegie Mellon and many of the for-profit schools I called as a fake prospective student) had asked me what I planned to major in and what career I aspired to. Then, maybe, when I’d said “English” and “writer,” they’d have denied me a $5 loan for cab fare home, or told me they’d rather see an armed robber in their office. I would have had to seek out a solid, affordable state school.

His Carnegie Mellon degree helped him get “a salaried position in a competitive field of my choosing,” he writes. He’s paying off his loans.

Marginal students drawn to for-profit colleges typically start poor and remain poor — and in debt — after trying and failing to earn a degree, Brookings warns.

Young people are told that “college is a must-make, can’t-lose investment,” writes Fitzgerald. “For some people, it’s a shouldn’t-make, can’t-win investment.”

Every job is a ‘public service’

Two students borrow to earn nursing degrees. The one who works at a public hospital can pay an “affordable” percentage of his income for 10 years, then erase the rest of the debt under the Public Service Loan Forgiveness program (PSLF). The other works as a nurse at a private hospital. That’s not considered public service, so the debt has to be repaid in full.

Every job is a public service, argues Alexander Holt on EdCentral.

Under PSLF, anyone who works for a government agency or non-profit — payroll supervisor, computer tech, accountant — is a public service worker. About a quarter of the workforce qualifies.

Nobody who works for a for-profit company — no matter what they do — can get the same debt forgiveness deal.

Young farmers believe growing the nation’s food is a public service, reports MarketWatch.

Emily Best, 32, works on a Pennsylvania farm for $1,600 a month plus room and board. She “has tens of thousands of dollars in loans, mostly from graduate school, where she studied environmental policy with a focus on farming and agriculture,” reports MarketWatch.

Under the income-based repayment open to all borrowers, she’s able to defer paying her loans without defaulting. But the debt won’t go away.

“Best thinks she deserves to have her loans forgiven” after 10 years like others who serve the public interest, writes Holt.

. . . Best certainly is performing a public service. And so is the truck driver delivering his food to the grocery store, and the grocery store clerk, selling me my food. So too is the parent without any paid job, taking care of a child at home. Children, after all, are the future. The question for Best, and the government, is who isn’t working in the service of the public?

Student debt is worse than you think, writes Kevin Carey. Schools may have low default rates but high non-repayment rates. Students can defer or delay making loan payments “based on economic hardship, continuing education and other factors.” The interest keeps mounting up.

Here’s who can’t repay student loans

To the extent there is a college debt crisis, “it is concentrated among borrowers from for-profit schools and, to a lesser extent, two-year institutions,” concludes a Brookings paper.

Why?  Students who choose for-profit colleges and community colleges disproportionately are less-prepared students from lower-income families. The weakest students gain the smallest benefit from enrolling in college. Even a small loan is hard to repay.

“Colleges with lower standards offer a way to get a degree without being very bright, writes FuturePundit. It’s not surprising that “students who to go the low IQ colleges default at much higher rates.

He adds: “Kids who aren’t too bright are being economically harmed by delaying work to go to colleges where they won’t learn anything useful.”

College payoff is shrinking

What Is College Worth? asks John Cassidy in The New Yorker.  Despite increasing costs, the number of young people going to college keeps going up, he writes.

Some 70 percent of high school graduates enroll in college and half of Americans between 25 and 34 have a college degree.Product Details

“College has been life changing for most people and a tremendous financial investment for many of them,” writes Peter Cappelli, a professor of management at Wharton, in his new book, Will College Pay Off? Yet, for some, “it has been financially crippling.”

The “college wage premium” has stopped growing, writes Cassidy.

In 2001, according to theEconomic Policy Institute, a liberal think tank in Washington, workers with undergraduate degrees (but not graduate degrees) earned, on average, $30.05 an hour; last year, they earned $29.55 an hour.

Other sources show even more dramatic falls. “Between 2001 and 2013, the average wage of workers with a bachelor’s degree declined 10.3 percent, and the average wage of those with an associate’s degree declined 11.1 percent,” the New York Fed reported in its study.

New graduates with bachelor’s degrees have been hit hard by falling wages and rising unemployment. Non-graduates are doing even worse, but that’s little comfort.

“The big news about the payoff from college should be the incredible variation in it across colleges,” Cappelli writes. “The payoff from many college programs—as much as one in four—is actually negative. Incredibly, the schools seem to add nothing to the market value of the students.”

College payoff is less for blacks, Hispanics

College-educated blacks and Latinos fared significantly worse in the recession than less-educated minorities, concludes a Federal Reserve Bank of St. Louis report.

Earning a college degree raises earnings for blacks and Latinos, but it also may add to debts. “Higher education alone cannot level the playing field,” the report concluded. “College degrees alone do not provide short-term wealth protection, nor do they guarantee long-term wealth accumulation.”

race-wealth-income“Better-educated African American and Latinos were more likely to own homes, and those homes tended to be their primary source of wealth, so when the housing market collapsed, their residences transformed from piggy banks into anchors,” writes Joseph Williams on TakePart.

Minority and low-income students “don’t attend the best possible colleges they could (based on grades, etc.),” which lowers earnings, S. Michael Gaddis, a Penn State sociology professor, told TakePart.

Black and Latino graduates earn significantly less than whites and Asian-Americans.

In a study Gaddis conducted in March, job applications with “white” names resulted in more job offers for higher pay than those with “black” names. Fictional jobseekers who claimed to be graduates of elite colleges did better than those from less-elite colleges, but race mattered. “Education apparently has its limits because even a Harvard degree cannot make DaQuan as enticing as Charlie to employers,” Gaddis wrote.

An Ivy education can be free — with no degree

Guillaume Dumas, a 28-year-old Canadian, participated in classes, partied and networked at Yale, Brown, Berkeley, Stanford and more — without paying tuition — from 2008 to 2012, he told Joe Pinsker at The Atlantic. He didn’t enroll. He dropped in.

For a few hundred dollars a month in living expenses, Dumas “reaped most of the perks of college: learning, partying, and meeting intelligent, like-minded people,” writes Pinsker. He didn’t earn a degree — or go into debt.

Guillaume Dumas

Guillaume Dumas

At 19, Dumas enrolled at a city college in his native Quebec “because that’s what everybody does,” he says. He started on a psychology degree, but wanted more.

“I was just sneaking into classrooms in literature and philosophy and poli-sci and even psychiatry,” he says.

He began sampling classes at Canadian universities, such as Concordia, University of Montreal and McGill, then tried Brown and Yale and later Berkeley and Stanford.

“A diploma starts to look a lot like a receipt printed on fine cardstock,” writes Pinsker. “It is proof not that one has learned something in college, but that one has paid for it.”

Dumas now runs a dating service for upscale singles, which provides an adequate income.  “There’s never been so many career or business opportunities in the world that don’t require a proper diploma,” he says.

Some people would be better off “not paying tuition and keeping that money to travel the world and launch a business,” says Dumas. He estimates that 5,000 or 10,000 people could drop in to college without anyone noticing. “They will just disappear in the huge institution.”

My first husband attended graduate classes at Stanford without being enrolled. A professor hired him as a research and teaching assistant, though he was forced to lay him off after a year or so.