Author Suggests Making Federal Loans Contingent On Student Prospects
&Quot;These grants are an expression of American society’s willingness to
make higher education available even to students who are poor risks.
Giving Pell Grants is a societal bet -- though a long shot -- that
mediocre students are late bloomers and can do better scholastically in
the future, not that mediocrity is acceptable in itself." "Congress and the President should start to require the Department of
Education to make student loans contingent on the best available
evidence of the student’s prospects for repaying them, such as good job
prospects based on high school and college grades, curriculum in which
they enrolled, and their credit ratings. Defaults would still occur.
Predicting the earning potential of college students is chancy.
However, many young people would almost certainly be saved from
financial ruin, and American taxpayers would almost certainly not have
to bail out as many subprime student loans." ,
however, are expected to be repaid, and mediocre high school students
with bad credit ratings are likely to default on their loans, causing
serious financial problems for themselves and financial complications
for the American economy. Targeting loans to students with good
prospects for repaying them is more prudent financially and makes more
sense educationally. Some illiterate high school graduates have already
sued their high schools for educational malpractice; disappointed
college graduates may follow suit. Some diplomas are "tickets to
nowhere." [See SLA post about "failure factories" and information about low completion rates and their impact on student loan defaults] "Prevent them from
borrowing until they've demonstrated an ability to persist toward
a credential or a degree. I've been circulating a proposal to reform
federally guaranteed lending that removes all today's loan subsidies
and shifts that money to significantly increased Pell Grants.
Vulnerable students should be funded by grants and insulated from any
borrowing during their freshman and sophomore years."
With increasing concerns about the growth of government, I am not sure how the populace would feel about the Dept. of Education being the ultimate decider when it came to who did and didn't receive loans, even if they utilized very strict and transparent criteria. Maybe they could outsource this role to People Capital's Human Capital Score, which received a favorable review in the Wall Street Journal . Regardless of how the Dept. did it, rolling back what is perceived by many as an entitlement ("college loans for all") would be a challenge (how is that for an understatement?). Of course, we could just wait a generation for the market to solve this problem. The cohort most likely to default which " disproportionately includes low income students, racial and ethnic minorities and first-generation college attendees " would certainly pass along the ills of student loan borrowing to their children...let's hope that their negative loan experiences don't also affect their opinions about the value of higher education also (hmm..I think it might).
Or as one high-school friend put it to me recently "It does not
get much air time in DC but I think higher education costs may be the largest
risk we have to ensuring equal opportunity in the longer term (maybe even in
the short term)." I have a hunch that these higher costs which have led to increased borrowing (8.4% annual growth in student loans AFTER inflation over the past twenty years) may be one of the issues of the year in 2010. Just a hunch.
Professor Jackson Doby should keep his day job. He demonstrates ignorance about basic facts of federal student aid and credit in general. To wit:
His quote: "Giving Pell Grants is a societal bet -- though a long shot -- that mediocre students are late bloomers and can do better scholastically in the future"
The Reality: Pell grants are awarded on a financial need/capacity basis. They have nothing to do with student quality. Excellent students, good students, mediocre students and bad students alike receive Pell grants.
His quote: "...mediocre high school students with bad credit ratings are likely to default on their loans..."
The Reality: Most high school students have NO credit, NO credit history, and NO credit ratings. I doubt any research exists that correlates "bad credit ratings" among high school students with their grades.
His quote: "A different approach is justifiable because federal loans have much worse consequences for both students and taxpayers than federal grants.""
The Reality: The exact opposite is true. Grants have worse consequences for taxpayers because they are essentially a gift--no repayment needed. Loans at least are likely to be repaid. Until cohort default rates reach 100%, loans are still a better deal for taxpayers than grants.
Professor Doby might want to obtain a better understanding of the financial aid system before proposing its overhaul.
Source: Student Lending Analytics Blog
We exactly push the paperwork process through the bureaucracy of the Department of Education." This month, the California BBB opened a documentation on National Student Loan Solutions, also known as Nationwide Processing Center, after an enquiry about it,
The Hang on of Education has different repayment plans available for federal loans. If payments under a criterion 10-year repayment plan seem high and unsustainable, reward that you may not need to select this plan. Consider switching plans if you
