Home again: The boomerang grads

Annie Kasinecz, 27, lives with her mother in Downers Grove, Illinois. She borrowed $75,000 to earn a degree in advertising and public relations at Loyola University in Chicago. Now working as a project coordinator, she’s lived at home rent-free for four years.  Credit Damon Casarez for The New York Times

The Boomerang Kids Won’t Leave home, predicts the New York Times Magazine. With college loans and low-paying jobs, they can’t afford to pay rent.

One in five people in their 20s and early 30s is currently living with his or her parents. And 60 percent of all young adults receive financial support from them. That’s a significant increase from a generation ago, when only one in 10 young adults moved back home and few received financial support.

. . . Those who graduated college as the housing market and financial system were imploding faced the highest debt burden of any graduating class in history. Nearly 45 percent of 25-year-olds, for instance, have outstanding loans, with an average debt above $20,000. . . . And more than half of recent college graduates are unemployed or underemployed, meaning they make substandard wages in jobs that don’t require a college degree.

The photographer, who lives at home and freelances, was graduated from an art college with $120,000 in debt. 

Alexandria Romo, 28, also a Loyola graduate, earned an economics degree but says she “had no idea what I was doing when I took out those loans” at the age of 18. She borrowed $90,000. Romo wishes she’d been taught about student loans, math and finance before borrowing at 12.5 percent interest. Romo lives at home in Austin and works at a security-guard company. Her dream is to be an environmentalist.

Ed Trust: Cut aid to low-quality colleges

Cut federal grants, loans and tax benefits to “college dropout factories,” “diploma mills” and “engines of inequality,” argues Education Trust in a new report. The “engines” are institutions — including some state universities — that admit few low- and moderate-income students eligible for Pell Grants.

Borrowing trouble

President Obama’s expansion of income-based repayment offers short-term relief, but will encourage reckless borrowing, enable colleges to keep raising tuition and promote the idea that everyone needs a four-year degree.

As long as college loans aren’t linked to the degree’s value — which varies depending on the major — young people will borrow too much.

The high-priced Ivory Tower

Ivory Tower, a new documentary, blames soaring college costs on decreased state funding for higher education and increased spending on campuses. Colleges are competing for student loan dollars, says filmmaker Andrew Rossi.

Obama extends 10% cap on loan repayment

Using an executive order, President Obama extended generous income-based repayment terms to an estimated five million more student loan debtors. People with student loans will be able to limit payments to 10 percent of their discretionary incomes. Loans will be forgiven in 20 years — or 10 years if they take public-service (government) jobs.

The big winners are people who borrowed for graduate school and private colleges, which can keep raising tuition without fear of scaring away students.

Feds will make college pay — or else

For now, proposed “gainful employment” regulations are aimed at for-profit colleges and career programs at nonprofits. If too many students in a program default on loans or pile up too much debt relative to income, the feds will cut off student aid. Once the bills start coming in for income-based repayment of student loans, “the government is just going to have to shut down the free money fountain” for all of higher ed, predicts EduBubble.

College must cut defaults or lose federal aid

Lane Community College students will lose access to federal loans and grants unless the Oregon college can cut the default rate, which is running above 30 percent. The college, which has a low graduation rate, is trying to discourage “overborrowing.”

Why college costs so much

What’s Behind America’s Soaring College Costs? Private college tuition tripled over the past 40 years in real dollars, writes  Ronan Keenan in The Atlantic. “In the last decade the increase was a staggering 25 percent.”

Federal student aid more than doubled from 2002 to 2012, he writes. That enabled colleges to raise tuition. Lenders bear no risk because student loans are guaranteed by the government.

Colleges have effectively been guaranteed an income stream and have used that certainty to partake in an arms race against each other by constructing lavish facilities and inflating administrative processes. The pursuit of education has turned into a vicious circle in which students need bigger loans to pay for higher costs, and colleges charge higher costs because students are getting bigger loans.

University presidents are paid lavishly, like CEOs of big companies.

Professors are teaching less. Only 43.6 percent of full-time faculty members spent nine hours or more teaching, according to a 2011 survey by the Higher Education Research Institute. That’s down from 63.4 percent in 1991. Hours spent preparing to teach also fell. 

The only way to control tuition costs is to reduce government support, writes Keenan. If student loans weren’t backed by the government, lenders would be reluctant to loan large amounts to humanities majors with low earnings prospects and to unprepared students who are unlikely to graduate.

Both colleges and employers must embrace three-year bachelors degrees; the traditional four years is an arbitrary number that just extends the time in education. Institutions can also reduce costs by adapting to the modern age and offer more online learning. But they will only do this is if the government limits the ability of students to pay the prevailing high tuition costs.

The current model enriches the universities while “graduates drown in debt,” Keenan concludes. 

His proposal would cut access to higher education — and it would force colleges to cut costs. Is it worth it?

‘Gainful employment’ rules are ‘awful’

 New “gainful employment” rules for student loans are “awful,” ”unfair and discriminatory,” writes Richard Vedder, director of the Center for College Affordability and Productivity.  The regulations apply to vocational programs at career colleges (primarily for-profit) and community colleges. If the goal is to stop wasting government money,”why not scrutinize students majoring in, for example, sociology, from Wayne State University?” he asks.

Students see loans as ‘easy money’

Community college students see student “loans as an easy source of money,” says Pat Hurley, a financial aid officer at Glendale Community College in California. Tuition is relatively low: Students are borrowing almost entirely to pay for living expenses.

Nationwide, community college students are more likely to borrow and default on their loans than in the past.