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.


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.

College learning takes 2.76 hours/day 

“The average full-time college student spends only 2.76 hours per day on all education-related activities,” according to a Heritage study. No wonder few complete a four-year degree in four years, write Lindsey Burke, Jamie Bryan Hall and Mary Clare Reim.

Based on the Bureau of Labor Statistics’s American Time Use Survey from 2003–2014, full-time college students average 1.18 hours in class per day and 1.53 hours studying for a total of 19.3 hours per week.

By contrast, they spend 31 hours a week on socializing and recreation.

Sixty percent of full-time college students have jobs, Heritage reports. They average 16.3 hours per week of work. That doesn’t add up to a very tough schedule, the authors point out. “Why are taxpayers heavily subsidizing a period in some people’s lives when combined education and work efforts are at their lowest?”

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?”


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.

Know before you go

Colorado universities aren’t happy about a new web site,, which helps potential students estimate the return of investment on college based on their major, school and degree.

For example, a dental hygienist with a two-year degree can expect to earn considerably more than a sociologist with a four-year degree.

Dental hygienists with a certificate or two-year degree earn more than many non-technical college graduates.

Dental hygienists with a certificate or two-year degree earn more than many non-technical college graduates.

The site includes survey of graduates’ satisfaction with their jobs (often low) and with their lives (typically quite high).

A graph shows graduates’ earnings vs. a high school graduate with no college credential. Some college grads take many years to equal and then surpass the earnings of less-educated workers.

“There are many degrees that don’t have a return on investment, and you should know before you go,” said Mark Schneider president of College Measures, which helped launch the site.

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.”

Student aid leads to tuition hikes

A large fraction of the rise in college tuition is explained by the rise in financial aid, concludes a new NBER paper.

The researchers’ model supported the Bennett hypothesis, which states that colleges will raise tuition to capture increased student aid. (It’s named after William Bennett, Reagan’s Education secretary.)

The Bennett hypothesis “fully explains all the tuition increases between 1987 and 2010, according to the study,” reports Reason.

Increasing subsidies doesn’t increase enrollment because the aid is canceled out by tuition hikes, the study found. Instead, students borrow more, leading to more loan defaults down the road.

A study by the New York Federal Reserve also found linked student aid to rising tuition.

Here’s The Atlantic‘s round-up of proposals to make college affordable from Hillary Clinton, Bernie Sanders and Marco Rubio.



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.