There's been a lot of big-bank bashing over the housing bubble years, and rightly so. But this is something to think about. If you got a subprime mortgage and couldn't pay it back, what's the worst thing that would happen to you?
Now consider the results of borrowing money from the federal government for a student loan, and being unable to pay it back. Terrifying.
I've been reading up on the education bubble. How do you get blood from a turnip?
Update: The story has changed (link fixed). It's not surprising that there was a knee-jerk reaction all over the blogosphere and other media over this. I hope we get a follow-up, and I hope the guy gets a new door.
"A U.S. government official confirmed for News10 Wednesday morning federal agents with the Office of the Inspector General (OIG), not local S.W.A.T., served the search warrant. The official would not say specifically why the raid took place. He did say the search was not related to student loans in default.
He went on to say OIG is a semi-independent branch of the U.S. Department of Education that executes warrants for criminal offenses such as student aid fraud and embezzlement of federal aid."
15 comments:
Harriet-
The link you posted doesn't appear to work. Although I am sure I agree with it. It is really scary that many students come out with debt levels they can never pay off and you can not default on them :-/ With current education costs I am not sure college is the right solution for a lot of people these days. It costs more and I am not sure it promises you the great career that it used to. It is kind of sad saying that many people shouldn't go to college, but I think these days it really is a reality.
Regarding education crash: yes, I've been following this for some time too.
The government was right to cut-out the middle-men between federal student loans and the students (little remembered item that was snuck into the health care law). I recall many protesting that Obama was "nationalizing" the student loan program . . . all the while failing to consider that it was the nation's money after all. Conservatives may or may not have legitimate arguments to make about “smaller” government, but they lose all credibility with me when the action they seek results in profiteering by a select few. What a boondoggle -- “I use the government’s money to make loans and I’m *guaranteed* repayment.” Where do I sign-up?
Another aspect of reform is the for-profit education centers. All those folks protesting the new rules under the guise of “freedom” and “small government” should remember this: it’s our money. Sorry, you don’t get to use our money to sell worthless degrees for $100K. You are FREE, of course, to use your OWN money to make these stupid loans.
And remember, “KEEP the Gov’t out of my MEDICARE”!!! LOL
Mike,
Are you saying that non-profit education centers sell students a better education?
Not sure I agree with that.
I think easy money in the form of student loans is just as ripe for a bubble as anything else. Colleges charge as much as they do because they can. If we have widespread defaults, what will happen to the government lending business for student loans?
Harriet: “better” is so subjective. One of the things I’m saying is that students with for-profit degrees default on their student loans at an astronomically higher rate than students with degrees from public universities. Think subprime. It’s only sensible that the government enact common-sense safeguards so that corporations don’t binge on the government teat.
To be sure, public universities also offer degrees for which students should be cautious. But, the for-profit corporations have made an industry of it.
Harriet
My take is private for-profit educational companies should go to the Private markets for loan capital. If they offer such high value add, then the grads will easily pay this back and the business will work.
Private business should not be dipping into the public till for loans.
If we need a bridge, let a government borrow and build the bridge, if the bridge tolls work excellent, if not the taxpayers eat it but they own the bridge.
If a private company builds a bridge, then let them borrow, set their own rates and take risks. if they fail the bankers lose.
Harriet-
I can't find any stats on it quickly, but I am pretty sure that I have read something saying that students from ITT tech and the other for profit places have a much higher unemployment rate and make less money than people from public universities.
I also think the recruiting tactics for the profit based schools are terrible. They use a lot of fear techniques and lying to convince people to go to school there. The recruiting process for most public universities is not as intense.
This is something Suze Orman (yes, I'm a big fan of hers, I'll admit it!) stresses regularly. It is very tough for students coming out in today's economic environment who both have big loans AND have trouble finding good-paying full-time jobs needed to pay them back.
There is certainly a lot of evidence that--***in general***--most non-profit educational post-high school institutions provide a better quality of education than do most profit-making educational institutions, for MOST students. For easily accessible evidence, just check the flawed but pretty widely used magazine rankings such as US News, Business Week, etc. and international scales. Less easily accessible evidence also abounds--it just depends on what inputs, outcomes and other measures (e.g., quality, cost-effectiveness, placement success) you care about. The recent hearings provide some pretty scary evidence of abuses at some of these for-profit organizations.
Obviously, there are exceptions, and for people with certain needs, a particular profit-making educational inst. may be the best fit.
HB, I think some of the evidence has been presented in the hearings.
Also--note that there are (a) private, not-for-profit orgs. (such as Harvard); (b) public, not-for-profit orgs. (such as UVA); as well as private, for-profit orgs.
Here's a link to some of the hearing info, but I'm sure better ones are out there.
article
Also, I think there is a separate issue, that the people targeted by the for-profits tend to be young and inexperienced--and some may be the first in their families to try to go to college. While I don't think for-profits should be shut down, I certainly think a case can be made that they should not be permitted to engage in fraud and that consumer protections are especially appropriate with this population.
Even if you don't care about people not being "smart" enough to choose wisely, you may care about the cost to society of having to deal with the fallout of their making bad decisions to take out loans they have a high risk of being unable to repay later.
HB, I think agree some people are better off becoming plumbers and simply taking college classes in areas of interest to them, if they choose to do so. University education is supposed to be more than vocational training and has benefits to society beyond that. But there is a question of how it will be paid for and who has the right to make rules about it.
I personally would like to see more corporations that are currently legally avoiding all taxation but enjoying the benefits of having at least a somewhat well-educated workforce, paid for by the rest of us, step up to the plate more than they currently do.
Ace-
Good point when I wrote public universities I meant non-profit universities.
I would imagine though that in general a public university probably gives you the best bang for your buck particularly since we live in VA that has a ton of great universities. Maybe the best private degrees are worth the extra cost, but I would be amazed if the average ~40-50K/year private school is significantly better than VAs public schools that cost less than half that.
timely opinion piece regarding this. As may be evident, I share many of the author's views:
http://www.cnbc.com/id/43327470
HB, I think so too, though financial aid sometimes cuts that difference a lot, I imagine.
VA_I, remember the contemporary Rosemont house listed for $1.2 mill.? It sold for $950K. The agent who bought it (at the courthouse?) still made a pretty penny:
Rosemont frankly
Agent purchased for $725K
Ace-
Agreed about the financial aid. The top schools are particularly good about this. In addition to giving lots of aid they also tend to give no loans so you can graduate debt free.
Post a Comment