‘Repayment’ plan = loan forgiveness

President Obama’s more generous plan for income-based repayment of student loans means “typical undergraduate borrowers will not repay their loans,” writes Andrew Gillen, now research director at Education Sector.

Using the New America Foundation’s IBR calculator, Gillen looks at repayment for average student borrowers, who run up $26,600 in debt, and starts work at $27,000 with 3 percent salary growth per year.

To pay off the debt in the standard (10 year) plan, their monthly payment would be $307. But under IBR, their monthly payment in the first year drops to $63, which doesn’t even cover the interest on the loans (meaning their balance is growing over time). Over the 20 year life of the loan, they will repay less than what they borrowed (<$23,000), and will have over $40,000 of debt forgiven (paid by taxpayers).

Even if their starting salary is $35,000, they will still end up having $20,000 of debt forgiven. Moreover, borrowers who become parents during their loan repayment will find their monthly payments are reduced drastically. If the $35,000 starting salary graduate has children 5 and 7 years into repayment, they will repay much less than the principal of the loan (total payments <$18,000) and will have more than $45,000 of debt forgiven (paid by taxpayers).

Many borrowers won’t repay the principal, let alone the interest.

The priorities are skewed, Gillen writes. While low-income students will get $22,000 in Pell Grants to attend community college, upper-middle-class students will get a (delayed) grant of $40,000 or more, a gift from the taxpayers.

Big borrowers — those who’ve chosen a high-cost private college or earned a professional degree — get the best deal, notes the New America Foundation in Safety Net or Windfall?

. . .  contrary to benefitting low-income borrowers, the pending changes to IBR will actually provide generous benefits to borrowers with higher federal loan balances – those with graduate or professional degrees. A borrower with an MBA or a law degree can easily have a six-figure loan balance forgiven, even if his income exceeds $100,000 for much of his repayment term.

IBR treats the symptom (high college debt) rather than the disease (high college costs), Gillen writes on Minding the Campus. He favors income-contingent lending (ICL), which actually requires repaying loans.

College aid: Research, then reform

Pell Grants will go off a “funding cliff” in 2014. The federal college aid program needs to be reformed — but first research what’s working and what’s not, an analyst argues.

“Swirling” students who transfer multiple times may lose eligibility for Pell Grants under new time limits.

Aid tops tuition for community college students

While the “sticker price” at community colleges is up to $3,130, the average student receives more in grants, tax credits and other aid than tuition, leaving $1,220 for books, transportation and living expenses.

Community colleges are rethinking placement tests and looking for ways to start more students at the college level. About 60 percent of community college students are start in developmental education. Only 25 percent finish a credential in eight years, compared to 40 percent of students who start at the college level.

 

Obama, Romney vie for Hispanic college students

In an appeal to Hispanic voters, President Obama’s new campaign ad says Romney would cut Pell Grants, costing Hispanic students $1,000. In an interview with Univision, a Spanish-language network, the Republican challenger called for letting the maximum grant rise with inflation, a larger increase than the president’s proposed 1.5 percent boost.

Both candidates are running Spanish-language ads attacking the rise in college costs. Obama’s ad promises to decrease the  tuition growth rate by 50 percent over 10 years.

At the Univision event at the University of Miami, Romney told students that what they need is “good jobs,” not more loans. “I don’t want to overwhelm you with debts. I want to make sure you can pay back the debts you’ve already got and that will happen with good jobs.”

College access vs. success

College graduation rates are low for Pell Grant recipients, who come from low- and moderate-income families. But requiring colleges to raise Pell graduation rates would shut out the neediest students for whom the grants were created, writes an analyst.  “One of the easiest ways to increase graduation rates is to exclude high-risk students.”

Pell Grant spending declines

After nearly tripling in five years, federal spending for Pell Grants declined in the last fiscal year. The college aid program for low- and moderate-income students is 40 years old.

Dem platform lauds new standards, skips RTTT

The Democratic platform hails Common Core State Standards, allegedly a bipartisan state initiative, as an Obama administration achievement, notes Ed Week’s Politics K-12. Race to the Top, the administration’s signature education initiative, isn’t mentioned by name.

Republican convention-goers already fear “Obama Core” is “being used by the president to take over the nation’s educational system,” writes Andrew Ujufusa.

Not surprisingly, the platform praises teachers.

The party notes that Obama has acted to “save” more than 400,000 educator jobs, and that he wants to prevent even more layoffs while also “rewarding great teachers.” This is an apparent reference to the American Recovery and Reinvestment Act (known as the stimulus) as well as the Education Jobs Fund.

On the subject of evaluations, it tip-toes around sensitive issues (read: low-performing teachers who get fired) with the following language: “We also believe in carefully crafted evaluation systems that give struggling teachers a chance to succeed and protect due process if another teacher has to be put in the classroom.”

The platform also praises the government takeover of college loans, the increase in Pell Grants for low- and moderate-income students and Obama’s threat to reduce their federal aid to colleges that fail to control costs and double work-study jobs.

Montana Superintendent Denise Juneau, who didn’t apply for a NCLB waiver, was given a speaking slot. Though otherwise obscure, she’s a Native American.

Ed Week rounds up the education talk in the first-night speeches. President Obama is responsible for a low-performing Massachusetts K-8 school lengthening its school day (state funding) and using experiential learning, said Gov. Deval Patrick.

“Today’s Republicans and their nominee for president tell us that those 1st graders are on their own: on their own to deal with poverty, with ill-prepared young parents … with a job market that needs skills they don’t have, with no way to pay for college,” Patrick said.

I’m not surprised they don’t have job skills. They’re in first grade, for pete’s sake!

Without Pell, summer enrollment slips

Summer enrollment is down at many community colleges now that low-income students can’t get federal aid. In a bipartisan compromise last year, the “year-round” Pell Grant was cut from the budget to keep the maximum grant at $5,550.

How to reform Pell Grants

Once a sacred cow, Pell Grants’ growing cost — $36 billion and rising — have made changes inevitable. Can Pell be reformed to focus on the neediest students? Should it provide incentives to colleges that graduate their Pell students?

‘Pell runners’ steal $1 billion in aid

“Pell runners” — scammers who scram once they’ve collected their federal grants — are having a tougher time, but they still manage to steal an estimated $1 billion in aid annually.