Over at Alternet, Sarah Jaffe recently covered the looming student loan crisis; with youth unemployment soaring even as the costs of college rise while available grants drop, many of the people who graduated this May and June have no jobs, and no prospects of work. Within months, their student lenders are going to come knocking to demand money. Student loan debt is mounting higher than ever before and it’s forcing many young adults back home, to live with their parents while they try to figure out what to do with their lives, and their loans. Loan debt has gotten so bad that Congress is considering debt relief to address the issue.
Some of us in the United States are raised with the expectation that we will go to college, supported as we pursue college applications and encouraged to go even though the promissory notes we sign may look scary. When I was preparing to go to college and blanched at the first one, my father assured me that the money would seem like ‘nothing’ after I graduated with a college degree, found good work in my field, and paid my loan back at generous terms over an extended period of time. Students in positions to be encouraged to go to college are told that it will build them a better future; disadvantaged students are often not encouraged to go to college, let alone presented with college as an option, but when they are, they get the same line: You have to go to college, because it will create opportunities, open doors, and offer a chance out of alternatives like the poverty draft.
College is ‘winning the future.’ For-profit colleges are well aware of this, and this year, they’ve come under increasing scrutiny for their dubious enrollment practices, abuse of government funds, and predatory attitudes toward their students. Frontline’s ‘College, Inc.‘ was an excellent and eye-opening documentary on the subject, if you’re inclined to spend an hour learning about the for-profit college industry in the United States. Highlighting the problem with for-profit colleges is the debt differential:
Bachelor’s degree recipients at for-profits have median debt of $31,190 compared with $17,040 at private, nonprofit institutions and $7,960 at public colleges, according to Education Trust, a Washington-based nonprofit research and student-advocacy organization. (Business Week)
That is a significant disparity. For-profit colleges have been singled out for attention because of the alarmingly large debt their students tend to accumulate, combined with poor graduation rates. Students may get tens of thousands of dollars in debt and still not receive any certification or degree that they could use in an attempt to repay their debt. They end up defaulting, and are penalised, because you cannot discharge student loans through bankruptcy, and you cannot get more loans once you default, which means that students who want to return to school may not be able to afford it. Investigative reports have revealed horrific practices at for-profit colleges, which essentially exploit people for the federal aid monies they can bring in.
Congress promised to put a check on things, and failed. An initially aggressive set of new regulations to rein in the for-profit college industry were watered down by the time the Department of Education released them in early June. Under the new regulations, to be eligible to receive federal funds for student aid, for-profit colleges must have a 35% repayment rate, and graduates cannot spend more than 12% of total earnings (or 30% of discretionary income) on their student loan payments.
Meanwhile, aggressive and abusive practices will continue. Starting with recruitment practices, where personnel are trained to use a hard sell, and many are compensated by signup, creating an incentive to force as many people as possible to enroll so they get more pay, and are eligible for bonuses. For-profits also engage in highly predatory marketing practices; they are extremely active in minority and low-income communities, selling a dream of hope and change in the form of technical training and a chance at a better career. Traveling in low-income communities in various regions of the United States, I’ve seen scores of billboards and other advertisements promising a career at a set annual salary to graduates, something that turns out to be a pipe dream, as many people learn after they graduate deep in debt with no realistic way of repaying it.
For-profit colleges create a debt trap for their students; even for those who graduate, the debt is substantial, and they may not make enough to remain current on their student loan payments. This closes numerous avenues to graduates. You cannot get a mortgage or a car loan if you’ve defaulted on student loans. You may have difficulty getting a rental. You do not qualify for some social services. You certainly can’t get more student loans. You exist in a cash-only bubble inside a credit world, and you may work endlessly at the treadmill without getting ahead.
Good luck on walking away from your student loans; not only are they not dischargeable through bankruptcy, but the Department of Education can garnish your wages if you go into default. And this is just for the federal loans. Students at for-profit colleges may be encouraged to take on private loans, which come with much higher rates of interest and much less forgiving repayment terms. My federal lender is fine with waiving payments for a month or two on the grounds of financial hardship without penalties. Private lenders are not nearly so relaxed. Thus, students may be struggling to repay both private and public loans, which can eat up a substantial amount of monthly income, making it impossible to set funds aside to save for, well, anything. Not just to save up for a down payment on a home or car, but to save enough money to cover unexpected medical expenses, the deposit on a new home if you need to move. For-profit graduates forced to work in service, or entry level positions, or seasonal positions, don’t exactly have access to health care and retirement benefits.
Lashing out in response to a series of investigations, for-profit colleges trot out their success stories, or claim that it’s unfair to lump them all together. They argue that it’s a ‘a few bad apples’ that are causing the problem, and that most for-profit colleges really are committed to education and opportunities and have excellent graduation rates and low debt. I’m reminded of the financial industry and its insistence that it was those banks over there that were to blame, not the industry as a whole. For-profit education is rotten from the bottom up, it needs to be regulated, and the resistance to regulation makes the industry look churlish.
For-profit graduates are a significant component of the youth underclass in the United States. These graduates are disproportionately people of colour, people from a low-income background, people who are already marginalised minorities. They’re doing what they are told to do and attempting to bootstrap themselves, and they’re being punished for it. They’re being told that this is their fault, and the sky-high debts they graduate with are totally reasonable:
“There are first-year residents from Harvard Medical School whose student loan payments eat up 20 or 25 percent of their income. Is Harvard Medical School a bad medical school? I sure don’t think so,” Rob Andrews, a Democratic Congressman from New Jersey, told Fox. (Wall Street Journal)
Because graduating with an MD is totally equivalent to dropping out after two years of an electronics programme with $45,000 in debt.