The best way to prevent college dropouts is to stop admitting unprepared students to four-year colleges and universities, argues Richard Vedder. People with “some college, no degree” earn little more than high school-only workers, but most have student loans to repay. If they’d started at community college, they might have job skills without the debt.
Under pressure to cut student loan defaults, colleges are refusing to accept unsubsidized federal loans that require students to begin making interest payments immediately. Florida’s Broward College won’t accept private loans. Would-be borrowers have to attend a money-management workshop. Defaults are down.
Fourteen historically black colleges were at risk of losing access to federal student aid because of high default rates on student loans. At the last minute, the U.S. Education Department changed the method used to calculate default rates: 20 for-profit colleges and one public adult education program remain on the list of colleges facing sanctions.
The public service loan forgiveness (PSLF) program offers big benefits and bad incentives, writes New America’s Jason Delisle in Zero Marginal Cost. For graduate students planning careers in teaching, social work and government, it’s likely “the federal government will finance the entire cost, without limit, including all living expenses.”
Combining PSLF with Income-Based Repayment encourages graduate and professional students to borrow more and sign up for degree programs of questionable value. Colleges will be able to raise tuition once borrowers realize they’re not going to have to pay back their loans.
At a minimum, lawmakers should cap loan forgiveness under PSLF at $30,000, aligning it with the limit for Pell Grants to low-income undergraduate students. (There is currently no limit.) The federal government should not provide more in loan forgiveness to graduate students than it is willing to provide in grant aid for a low-income student to pursue an undergraduate education.
There is also a case for eliminating PSLF altogether. Because IBR makes any loan size affordable, PSLF isn’t a necessary component of the insurance IBR provides. Rather, it makes IBR do double duty as generous graduate school tuition assistance for those who want to work in non-profit or government jobs—even high-paying ones.
Teachers can use several, overlapping loan forgiveness programs, if they can navigate the complex, confusing federal aid system.
If too many students default on their loans, colleges risk losing access to federal student aid. That’s motivated community colleges to develop default management plans. But denying federal loans to high-risk students isn’t an option.
Millions of laid-off Americans have used federal aid to train for new jobs, yet found themselves unemployed and in debt.
It’s not clear the $3.1 billion Workforce Investment Act (WIA), which was reauthorized last month, improves trainees’ odds of finding a job or raising their earnings. Nobody keeps track.
People who’ve fallen behind on their debts will be able to take out federal Parent PLUS college loans under a proposed regulation relaxing credit requirements. Borrowers don’t have to show their income, employment status or ability to repay the loan.
To qualify for federal aid, students must enroll in accredited, degree-granting programs. Utah Sen. Mike Lee proposes letting states accredit alternative postsecondary programs, such as job training, apprenticeships and distance-learning options. People seeking skills — but not necessarily a degree — could assemble the education they need, a la carte, using federal grants and loans to pay their costs.
Despite rising college costs, a four-year college education is a better investment of time and money than being chained to a radiator in a dank, unlit basement, concludes a new study reported in The Onion.
“Compared to the intellectual stimulation and personal growth achieved in a university setting, there is less to be gained from 48 months in which one is tightly shackled about the ankle and connected by a short length of chain to a leaking, immovable cast-iron radiator,” read the report.
However, the prisoner who’s freed after four years will not owe any money.
Community colleges could be penalized for high default rates on student loans — even if few students are borrowing. Colleges could lose eligibility for all federal student aid programs if the default rate exceeds 30 percent for three consecutive years.