Posts Tagged ‘colleges’

Have You Heard?: Feds Investigate For-Profit Universities Amidst Growing Default

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ahhh, it’s like music to our ears? On June 21, 2010 a U.S. Senate Committee announced a hearing entitled “Emerging Risk? An Overview of the Federal Investment in For-Profit Education”:  US Senate Committee on Health, Education, Labor, & Pensions: Newsroom – Press Releases

With the current economy and an increase of debt and student loan defaults, the federal government finally became satiated and wants answers. I really don’t understand how such a big portion of the U.S. economy both mortgages and student loans could remain unregulated for two decades and after the emerging economic collapse the question is asked “what happened?” o.k…let’s see if a little common sense will clarify: when you don’t supervise a sector and allow them to run amuck they will do anything they can, find any loophole, use any possible agent, step on the average American to get that almighty dollar. But as long as it APPEARED that the economy is ok and the private sector seemed to know what it was doing a blind eye was turned. Now, evidence of the economic consequence is so great, the country has to address it, though it appears it’s too late. Then again, it’s not like the exact same people have been in control or even members of Congress for the past two decades–wait the majority has. Yet, we have to give credit to the federal government for taking a major step to address these issues. Anyway… 

“More than two decades have passed since Congress last examined the for-profit education sector and in that time, we have seen an explosion in growth in for-profit colleges, and in the federal taxpayer dollars they receive,” said Harkin.  With students, families and taxpayers investing so heavily in for-profit institutions through large loan debt and billions of dollars in federal student aid, we must ensure that student are actually getting the knowledge and skills they need to pay off the debt. Congress has notice the massive debt that university students incur, without the ability find jobs in this horrible economy or actually demonstrate practical skills in the job market, thus making the university student “unmarketable” because as you know, you are considered as a commodity. You are a social security number, a statistic, owned by the private industry, that’s why your debt can be traded to whoever buys it and you have no say in the matter. 

“While for-profit colleges have a responsibility to their shareholders, they also have a responsibility to provide educational value to their students, and an obligation to ensure that the federal dollars they receive are well spent, particularly now that Congress has made an historic investment in student aid.” Historic? This word should cause us all concern, this sounds like a venture that is unprecedented which will require a different type of solution. The past two decades the federal government increasingly spent taxpayer dollars on colleges and universities without seeing a return. Maybe now the federal government understands what the average law graduate deals with everyday of his/her life.  College students graduating to become working citizens and meaningful participants in the growth of the economy (no, buying branded lattes does not count). But, let’s face facts, the government is seeing a constant money loss and want their money back, which is its right, however my skepticism dictates that it hardly cares whether or not students received a valuable education, just that, because the latter is lacking so is the student loans’ repayment rate. 

Witnesses will include:
Panel I
Kathleen Tighe, Inspector General, Office of the Inspector General, U.S. Department of Education, Washington, DC
Panel II
Steven Eisman, Portfolio Manager, FrontPoint Financial Services Fund, LP, New York, NY
Yasmine Issa, former Sanford Brown Institute student, Yonkers, NY
Sharon Thomas Parrott, Senior Vice President, Government and Regulatory Affairs and Chief Compliance Officer, DeVry, Inc., Chicago, IL
Margaret Reiter, former Supervising Deputy Attorney General, Office of the Attorney General, California Department of Justice, San Francisco, CA
  
Notice that not one dean of student affairs, university president, graduate student, or parent with a PLUS loan aren’t participating in this hearing session. At least there is one undergraduate student, though she only has $20,000 of debt; compared to any graduate or professional school graduate we scoff at that, but suffering is suffering. Looking at numbers, filings and memoranda will not give the full picture of this epic problem. Sometimes putting the faces with the numbers, stories of devastated lives injects the creative adrenaline needed to garner a communicable solution.

In the first panel: Kathleen Tighe , Inspector General, Office of the Inspector General, U.S. Department of Education, Washington, DC, her testimony does not get too relevant until P. 12:   

“Considering the economic downturn over the last several years, combined with escalating student loan debts, a significant concern is the potential for increased loan defaults as we have seen the national cohort default rate increase recently.” I agree we all should be worried, but I wouldn’t characterize this particular concern as ‘potential’ I think it’s more accurate to say ‘inevitable.’ I had to find the definition of ‘cohort’ default rate which refers to borrowers entering into their repayment period. Those in deferment or forbearance mask what will be the default boom of student loans. 

Not addressed by this change were two issues noted in our earlier report. In that report, we identified that cohort default rates were not a true representation, as they were reduced by: (1) a statutory change to the HEA’s definition of default from 180 days of delinquency to 270 days of delinquency; this 90-day delay excludes a significant number of defaulters from the cohort default rate calculation; and (2) an increase in the use of deferments and forbearances. As well as providing an increased period of time for universities to seek more funding with a buffer period hiding the true default, thus making the institutions appear more qualified for additional federal funding, at least that’s my theory. 

 We found that deferments and forbearances had more than doubled in the period we examined.  Borrowers in deferment or forbearance do not make payments on their loans, so they are not counted as defaulters, but they continue to be counted with other students in the cohort, thus reducing the cohort rate. May she meant “reducing the ‘cohort default rate.”  I guess I did have the right line of thinking. 

 While we recognize that the Congress has provided additional repayment flexibilities, when borrowers reach the limits on deferments and begin repayment they may still lack the income and eventually default and are not accounted for in the cohort default rate. The rest of her testimony can be read here: [http://help.senate.gov/imo/media/doc/Tighe.pdf

I wanted to highlight one of the other testifiers Yasmine Issa, as she starts you feel as if she took a portion of your life transcript:  

Thank you for inviting me to speak today. My name is Yasmine Issa. I thought that going to school to learn a marketable skill would allow me to provide for my family. Instead it has left me more than $20,000 in debt, and unable to be hired in the field I trained for. The resounding imagery of your life has now flashed before your eyes. As you can see, she assumed that what she learn was actually a marketable skill, and as with many lawyers and law graduates was left unemployed. Oh and multiply that $20,000 by 5 and you have the average student loan debt for law graduates. The rest of her story diverges as her training was not from a certified school while law schools have no problem with accredidation [http://help.senate.gov/imo/media/doc/Issa.pdf]. I may have to do a Part II, but am unsure I can stomach it.

Is China America’s Mirror?: Newsweek: Smart, Young, and Broke: White-Collar Workers are China’s Newest Underclass

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Melinda Liu and Marjie Vlaskamp, p. 40, June 28 & July 5, 2010; online version: China’s New Underclass: White-Collar Workers – NewsweekAnd you thought it was bad here. Must we wonder why globalization may not be such a good idea? Because when a bunch of countries jump on a bandwagon, say the proliferation of higher education, there’s little to no room for recovery, and no I’m not referring to fleeing to another country, well not necessarily!

“Guo and an estimated million others like him represent and unprecedented and troublesome development in China: a fast-growing white-collar underclass. Since the ‘90s, Chinese universities have doubled their admissions, far outpacing the job market for college grads.” [emphasis mine] My word, does this sound familiar? I know these blogs are dedicated to the law school (graduate level) industry, but I am sure that American undergraduate universities have been doing the same thing. I’ve read commentators and some bloggers suggest leaving the U.S., should you be that desparate—choose wisely!

I wonder if the author’s been reading these blogs, then again just the sad, universal reality of university systems here and abroad:  This year China’s universities and tech institutes churned out roughly 6.3 million graduates.  Many grew up in impoverished rural towns and villages and attended second- or third-tier schools in provinces, trusting that studying hard would bring them better lives than their parents had.  Interesting, we see that the promise of upward mobility is not only promoted here as the American Dream, but in other countries for hope as well. I wonder how their medical and legal fields are doing?

They may be smart and energetic, but some are starting to ask if the promise of a better life was a lie. If you have to ask, then you likely know the answer.

They’re known as “ants,” for their willingness to work, their dirt-poor living conditions, and the seeming futility of their efforts.  “These ants have high ambitions but virtually no practical skills”…

The similarities between those Chinese graduates in the tech field and American law graduates is simply astonishing. It’s a potentially explosive situation. It sure is. Just imagine how many millions of unemployed, educated persons who were deluded will lose patience with the current trend. Someone commented before about potential riots and living near concentrated urban areas.

The discontent rising among the ants is even more worrying. Blue-collar wages have actually soared recently, while white-collar pay is shrinking. This resonates so deeply right now I’m confident we can superimpose attorney with computer programmer and change the geographic region and we will have a sufficient description of the American legal industry.

…the government admits that at least one in eight is permanently unemployed. And those who get jobs don’t always find work in their chosen fields. Ditto. College grads have far higher expectations than the migrant laborers who have fueled China’s growth for three decades.  “Ants are educated. They speak foreign languages. They’re Internet-savvy.  It’s that potential for trouble that has the government worried,” he says.  “If they aren’t satisfied with their living conditions and want to start a movement, like the 1989 Tiananmen Square protests, it becomes a huge problem.”

This is an interesting take, the Chinese government is concerned about the educated persons becoming unruly. In a way it makes sense. People who lived in poverty most of their lives and chose not to attain higher education and debt are accustomed to a lower standard of living. Those who work hard, with aspirations of attaining a “better life” are crudely disappointed with the all-encompassing economic reality. Thus, the former, really did not have any thing to lose, while the latter has invested time, money, effort and sacrificed aspects of normal social living based on societal and other assurances that it will be compensated for upon completion. Very interesting. Though it’s not simply black and white, of course there will be poor people who are willing to cause harm and take what’s not theirs, but I think this article shed some light (at least for me) on how we compartmentalize (poor vs. middle class or wealthy, educated vs. uneducated, etc) but the variables may cross depending on the circumstances.

This guy gives some ideas on how an uprising would occur. Is it just me or do governments tend to look at suppressing uprisings, stemming tides of frustration but oft-times do not offer or work with those affected to create solutions to the circumstances that originated the frustrations?

The ants don’t seem to be organizing in any big way so far. But they clearly have the necessary technical skills and a sense of common backgrounds and objectives.  “it’s like I’ve joined an army,” says Wang Lei, a young University of Innder Mongolia graduate who has found steady work as a computer programmer after months o searching.  “For the rest of my life, I’ll meet former Tanjialing inhabitants and have strong ties with them because of our shared experience.” Comments like this make China’s leaders nervous, not least because the ant tribes are so fluid and difficult to monitor.  If they were somehow to make common cause with other restive rural-born Chinese, such as landless farmers or migrant workers, they’d be extremely hard to suppress.”

This wouldn’t happen in America, we’re too individualistic, judge people by their clothes and there’s too much racism and haves vs. have-nots. In China, although there are ethnic Chinese and others, they’re more homogenous than Americans. So, it’s not just bad here for educated folks, just look around you.