Obama: Link student aid to college value

President Obama proposes rating colleges on tuition, student loan debt, graduation rates and graduates’ earnings so students can shop for the best value. Eventually, Congress will be asked to reward higher-performing colleges with larger Pell Grants and lower-cost loans for their students.

College costs will continue to rise, predicts an economist.

$188K in college debt — and she can’t write

At 25, Katie Brotherton is working two jobs, but living in a parent’s basement, dependent on Mom (or Dad) for food, gas and health insurance. She owes $188,307.22 for two college degrees at private universities, she writes on Cincinnati.com. (She doesn’t specify her major or her occupation.) Sadly, Brotherton didn’t learn to write or think clearly — and she certainly didn’t learn to do the math.

My pursuit in excellent education is rooted in a value system that promotes progressive thought for the betterment of the individual as well as society. Education is a core tenet and vested interest of the functioning democratic society. Upon that basic assumption and principle, I am overwhelmingly incensed by the silent epidemic of crippling student debt.

. . . this particularly sensitive conversation is being ignored by our mainstream consciousness. Perhaps I should be ashamed for buying such an unaffordable education and internalize my debts as personal failures. Perhaps my mistakes warrant pained silence. But silence breeds apathy, and in regard to the welfare of the American economy, I want to humanize the numbers and give voice to this reprehensible problem.

Due to reckless neglect, student debt will be the financial ruin of my generation, and there is an incredible need for a public discourse addressing this reality and its grave consequences.

I want answers and clarity as to why this happened. How did I arrive at this position in life so financially handicapped and disenfranchised? I followed societal expectations, earned an education and am employed. I will gladly repay my debts within the comfortable reason of affordability.

. . . I am owed answers simply because I have the right to pursue happiness. And since I am not alone in this debilitating epidemic, my peers deserve their voice as well.

Overborrowing and underthinking will get a gal in trouble, writes Bryan Preston on PJ Tatler.

Millennials are “the screwed generation,” some argue. They were told to “invest in yourself” and take on “good debt” to win a guaranteed college premium, writes Megan McCardle on The Daily Beast. As tuition goes up and up, the college premium is eroding for humanities and social sciences majors. For marginal students, college is a bad bet.

 The price of a McDonald’s hamburger has risen from 85 cents in 1995 to about a dollar today. The average price of all goods and services has risen about 50 percent. But the price of a college education has nearly doubled in that time. Is the education that today’s students are getting twice as good? Are new workers twice as smart? Have they become somehow massively more expensive to educate?

College costs rose faster than inflation by 1 percent a year till the mid-1980s, says Ohio University economist Richard Vedder.

“Now I see them rising 3 to 4 percent a year over inflation. What has happened? The federal government has started dropping money out of airplanes.” Aid has increased, subsidized loans have become available, and “the universities have gotten the money.”

“Even with these high prices, you’re still finding a high return for individuals who are bright and motivated,” says Nobel Prize-winning economist James Heckman. On the other hand, “if you’re not college ready, then the answer is no, it’s not worth it.”

And don’t go to a non-elite private college unless the financial-aid deal brings the cost down to the state university level.

Correction: As a commenter notes, Brotherton earned one of her degrees at Miami of Ohio, which is a public university.

College leaders fail Obama’s tuition plan

College leaders don’t like President Obama’s tuition-control plan, reports AP. In his State of the Union speech, the president threatened to cut some forms of federal aid to students at colleges that raise tuition or fail to provide “good value.”

Fuzzy math, Illinois State University’s president called it.

“Political theater of the worst sort,” said the University of Washington’s head.

States have reduced higher education funding, forcing public colleges and universities to raise tuition, university presidents say.

Under the president’s proposal, colleges would be judged on “responsible tuition policy,” either by “offering relatively lower net tuition prices” or “restraining tuition growth,” reports College Inc. In addition, the Education Department would evaluate how well colleges prepare graduates to get jobs and repay student loans, and their performance in enrolling and graduating low-income students.

The aid that colleges stand to lose under the president’s plan is not the Pell grant, the largest source of federal funds to students, but rather a package of “campus-based” programs that the federal government delivers to colleges. They are Federal Work Study, an initiative that subsidizes the expenses of campus jobs for needy students at 3,400 colleges; Supplemental Educational Opportunity Grants, a supplement to the Pell grant that awards needy students $100 to $4,000 a year; and the Perkins loan program, which delivers low-interest loans to students.

Obama is proposing to expand all three programs to the tune of about $10 billion — enhancing the Perkins program from $1 billion to $8 billion and augmenting Work Study and Opportunity Grants by a combined $2 billion.

While some believe higher education funding should be tied to performance, Obama’s proposal would deny aid to needy students, critics charge. “Ultimately, who you are punishing with this is the students,” said Haley Chitty, spokesman for the National Association of Student Financial Aid Administrators. “They’re the ones who get this aid.”

If aid were tied to graduation rates …

Linking federal student aid to college graduation rates or other success measures could shake up higher education. Open-access colleges and universities enroll many low-income students who qualify for Pell Grants. Graduation rates are low.

Federal civil rights investigators are expanding their scope, including an investigation of whether low graduation rates at a community college violates students’ rights.

Payback

Which college graduates will earn enough to pay off their loans? Using PayScale data, SmartMoney looked at college costs and median alumni income two years and 15 years after graduation to calculate the return on investment.

For example, a hypothetical grad who spent $100,000 to attend college and now earns $150,000 a year would score 150. The higher the score, obviously, the better.

The payback rankings show flagship state universities provide faster payback than the high-priced Ivy League or other high-end private institutions. Ivy Leaguers earn more, but they paid a lot more. Georgia Tech, a public university that educates many engineers, has the highest payback rank at 221, followed by the University of Texas at Austin. Sarah Lawrence, a very expensive liberal arts college, is the tail-end Charlie at 60.

At Sarah Lawrence College, in Bronxville, N.Y., graduates often choose careers in education, public administration or social work, and come out earning, on average, just $38,600 after two years. (Officials at Sarah Lawrence say that figure may underestimate alumni salaries but also contend that’s beside the point: “Their rewards are measured not just by earnings but by how much they are giving back to society,” says Tom Blum, the vice president of administration.)

Smart Money analyzed only 50 colleges and universities: the eight Ivies, plus more than 40 of the priciest non-Ivy private schools and public universities (based on out-of-state tuition).

As Cost of College points out, the SmartMoney rankings assume students pay the full cost. Many students get some financial aid, especially at the elite private colleges, which have huge endowments. And public flagship universities are a very good deal for in-state students.

Rethinking Pell Grants

With the cost of Pell Grants soaring to $44 billion, it’s time to rethink the federal aid program for low-income college students. Should students get loans that convert to grants when they meet academic goals? How about bonuses for good performance or probationary grants for high-risk students?

College for all = loan defaults

President Obama is calling for more college degrees and a year of postsecondary education for everyone, but his Education Department wants to cut off loan eligibility to career colleges that give high-risk students a chance to fulfill the president’s goal. What’s the policy? asks Rick Hess.

You’re no Zuckerberg, so get a degree

On Community College Spotlight: Maybe Mark Zuckerberg did OK without a college degree, but the U.S. needs more college graduates.

Also, for-profit colleges get help in Congress in their battle against proposed Education Department rules that would deny loans to career colleges with high debt and default rates.

Accountability

2010 was the year of accountability for community colleges, which tried to balance access and success.

Also on Community College  Spotlight:  Public two-year college students post a 15.6 percent default rate on federal loans over the lifetime of the loan. That’s lower than the 18.6 percent default rate for students of for-profit colleges, but considerably higher than the default rate for four-year, private, nonprofit institutions (5.6 percent) and four-year public colleges (6.3 percent).

$200K in debt for a BA

With $200,000 in student loans and a job as an office manager, Kelli Space, 23, has put up a web site asking strangers to help pay off her debts.  A 2009 graduate of Northeastern University, Space pays $891 per month on her loans and is supposed to start paying $1,600 a month in November. She lives with her parents, who aren’t able to help her financially.  So far, she’s received more than $6,000 in donations — and a lot of criticism for asking others to pay for her mistakes.

Space, who doesn’t reveal her major, says she didn’t know how much she’d earn with a bachelor’s degree. (Update: Apparently, she majored in sociology, not typically the path to riches.) Her parents, who don’t have a college education, couldn’t advise her.

We applied for scholarships during the summer but they heard — as much as I did — that cost of tuition should never keep you from attending a great school. So… we made the mistake of following such romantic advice. Cue regret.

In an interview, Space blames herself for a series of poor decisions.

The first mistake was not exploring all possible options. The second mistake was not understanding finance (best practices anyway). The third was signing on the dotted line! The next was staying at Northeastern even after I realized the gravity of the situation. Do I regret my education? Absolutely not. Do I think it was worth it? No – not because it was a poor education, but because no education is worth borrowing that amount of money without guaranteeing the salary to pay the loans back afterward.

OOTS News: To do things over again, what would you do differently?

twohundredthou: I would have gone to a community college and then applied to larger universities a year or two later. I would have been secure on a major before I chose to borrow such an exorbitant amount of money. The regrets are plenty, and I’m still working on that time machine.

Space says she’s not a deadbeat: She plans to pay off her loans over the next 20 years. At least she can serve as a warning for other naive students that a bachelor’s degree in a field without engineering in the title doesn’t guarantee a ride on the gravy train.

Currently, Northeastern, a private university, charges $49,452 a year for tuition, fees, room and board. Borrowers, beware!