Some student loans are misappropriation of money
Sunday, August 17, 2014 10:00 PM
Misguided legislation allowing for-profit colleges to receive student loans, federal grants and financial aid is a misappropriation of tax dollars offering little benefit to students, and potentially limiting economic growth.
Student loan debt in the U.S. has doubled since 2007 and now totals almost one trillion dollars, surpassing credit card and auto loan debt. One factor is legislation allowing for-profit colleges - the ones that spend half their revenue advertising relentlessly on TV - to receive financial aid and federally backed student loan monies. This has resulted in the proliferation of exploitative for-profit institutions.
Although for-profits account for only 13 percent of students, they account for 30 percent of student loans and 50 percent of student loan defaults. Half the students who attend a two-year for-profit college do not graduate, leaving them with debt they cannot repay. Those who graduate and find jobs often do not earn enough in the career they trained for to pay back the amount of debt they incurred to pay for the training.
Graduation rates, post graduation salaries, ability to pass licensing exams, and levels of debt and default are much more favorable for students who attend private, community and state colleges than for students who attend for-profit institutions. Almost 100 percent of tuition at for-profit colleges is paid with student loans or financial aid. The only requirement for admission is the ability to qualify for this financial aid to cover the exorbitant cost, which is on average four times that of comparable programs at community and state universities.
A cost-conscious student can attend a community college for two years, then transfer to a state university, earning a 4-year Bachelors Degree in Nursing (BSN) for around $27,000 in tuition. The graduate with a BSN can expect a starting salary of $55,000 per year, with quick and significant career advancement and salary growth. Alternatively, students who choose the for-profit route will pay around $34,000 for a mere 15-month program resulting in a Licensed Practical Nursing (LPN) degree. The LPN degree costs more but is worth less to the graduate than the BSN degree, with half the expected first year salary, and fewer opportunities for advancement or salary increases. This same LPN degree that costs $34,000 at a for-profit college, would cost $7,000 at Ivy Tech.
At the graduate level, for-profit law school students average over $200,000 each in student loan debt yet over 25 percent are still unemployed a year after graduation. Of the students who find work, virtually none earn a salary large enough to justify such a magnitude of debt. Since for-profit law schools admit students with such low test scores that no other ABA-accredited law school would consider admitting them, more than half are unable to pass bar exams after graduation, meaning that if they are working a year later, they are most likely working at Starbucks or Home Depot, earning a salary that is insufficient to repay $200,000 in student loans. Unlike other forms of debt, bad credit scores from student loan defaults follow students their entire lives and, since they're backed by the federal government, we the tax payers ultimately foot the bill for these bad investments.
Seven of 8 publicly-traded companies that operate the largest for-profit colleges are currently under investigation by state attorneys general and federal agencies for deceptive recruiting practices and other violations of Federal law. It's been documented that their recruiting tactics mislead prospective students with regard to the cost of programs, graduation rates, job placement and transferability of credits. For-profits have been accused of preying on anyone who can qualify for financial aid, including minorities, low-income students and vulnerable military personnel. One of the most egregious reports involved a for-profit recruiter who visited Camp Lejeune in North Carolina, where he signed up Marines with serious brain injuries for degree programs. The fact that these Marines could not remember what classes they had signed up for was immaterial - whether or not these men who had sacrificed so much for our country could complete the program was of no significance to the college once they had their money.
Despite unethical business practices, well-funded lobbying campaigns enable for-profits to avoid meaningful oversight, claiming federal aid is good for the economy, resulting in more degrees and more jobs. In reality it allows for-profits to victimize the most vulnerable students with overpriced, often inferior educations, while financial institutions engage in predatory lending practices, saddling lower income students with taxpayer-backed, subprime loans that 50 percent are unable to repay. Loan defaults of this magnitude waste tax dollars, but also drag down our economy, much like subprime mortgages did years ago. People who default on student loans cannot finance homes, cars, or other big-ticket items, and due to low credit scores may even have trouble finding jobs. Federally backed loans for for-profit colleges benefit the overpaid owners and executives of those colleges - not students.