Earlier this year, the U.S. House of Representatives voted to pass a bill with the impressive, everybody-can-get-behind-this title “Protecting Academic Freedom in Higher Education Act.” Sponsored by the ultra-conservative North Carolina Republican Virginia Foxx, the bill ostensibly took aim at an issue close to small-government-loving hearts: intrusive federal regulation of for-profit colleges — fast growing, highly profitable outfits like DeVry University or the online-only University of Phoenix.
Like so many of the bills passed by the House since Republicans gained the majority in the 2010 midterm elections, the bill was designed to repeal specific actions taken by the Obama administration. In this case, the issue at hand was the Obama administration’s efforts to ensure greater “program integrity” in the for-profit educational sector. Specifically, a new federal definition of what constitutes a legitimate academic “credit hour” and a new requirement that all online providers of post-secondary education be accredited in each and every state in which they do business.
Foxx’s bill repealed both measures. (The Senate has yet to address the measure.) According to Foxx, the new federal regulations threatened “innovation” in the educational sector. As reported by InsideHigherEducation, Foxx is on record as declaring that for-profit colleges do a “a better job of being mindful about efficiency and effectiveness than their nonprofit peers.” By, for example, flexibly providing online education when and where low-income working Americans want it, the for-profit free market delivers the kind of quality higher education that Americans so desperately need. The government should just stay out of their business. The College Conspiracy.
I stumbled upon this story while researching the student loan crisis and at first I was perplexed. I didn’t understand why Republicans were opposed to higher academic standards for the for-profit sector, and I didn’t get the connection to student loans. But it didn’t take much research to discover what was really going on: an example of blatant hypocrisy sufficient to outrage even the most jaded observer of American politics.
The for-profit educational sector is an industry almost entirely subsidized by the federal government. Around 70-80 percent of for-profit revenues are generated by federal student loans. At the same time, judging by sky-high dropout rates, the for-profit schools do a terrible job of educating students. The Obama administration’s efforts to define a credit hour and require state accreditation were motivated by a very understandable desire: to ensure that taxpayers are getting their money’s worth when federal cash pays for a student’s education. In contrast, Foxx’s legislation is designed to remove that taxpayer protection. So here’s a more accurate title for her bill: “The Protecting the Freedom of For-Profit Schools to Suck off the Government Teat Without Any Accountability Whatsoever Act.”
The for-profit educational sector has been growing extraordinarily rapidly for the past decade: 12 percent of all post-secondary students are now enrolled in for-profit schools, up from 3 percent 10 years ago. But the main beneficiaries of the growth appear to be the shareholders and executives of the largest publicly traded for-profit schools, not the students.
In 2008, for-profit schools registered a a graduation rate of 22 percent. (Public and private non-profits registered 55 percent and 65 percent respectively.)
54 percent of the students who enrolled in 2008-2009 in 14 publicly traded for-profit schools had withdrawn without a degree by 2010.
The biggest player in the for-profit sector, the University of Phoenix, graduated only 9 percent of its B.A. candidates within six years.
The pathetic performance of the for-profit sector in delivering actual degrees becomes all the more alarming when you realize that most of the students who are dropping out paid for their educations with student loans that have to be paid back: According to a report released in the summer of 2010 by Sen. Tom Harkin, D-Iowa, “Emerging Risk?: An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit Higher Education,” in 2009, the five largest for-profit schools reported that government grants and loans accounted for 77.4 percent of their revenue.
The Harkin reports comes to a stark conclusion:
The Federal government and taxpayers are making a large and rapidly growing investment in financial aid to for-profit schools, with few tools in place to gauge how well that money is being spent. Available data show that very few students enroll in for-profit schools without taking on debt, while a staggering number of students are leaving the schools, presumably many without completing a degree or certificate.
It is precisely this situation that the Obama administration’s efforts to ensure “program integrity” were designed to address. Student loans are tied to credit hours: By requiring a more rigorous definition of credit hour, the administration was attempting to make sure that government money was paying for actual education. Similarly, the requirement that all for-profit schools must be accredited by the individual states in which they do business was a measure designed to keep fly-by-night online schools operating out of states with weak accreditation requirements from enrolling out-of-state students and ripping them off. The issue is not “innovation.” The issue is basic consumer protection.
One would imagine that Republicans, who theoretically oppose government involvement in the private sector, and are always looking for ways to cut government spending, would approve of efforts to seek greater accountability for taxpayer funds. Virginia Foxx, after all, was notorious for being one of only 11 members of Congress to vote against a federal relief package for victims of Hurricane Katrina, citing the “high potential for the waste, fraud and abuse of federal tax dollars.”
But as it turns out, Foxx herself is benefiting from the waste and abuse of federal tax dollars. Among the top 20 financial contributors to Foxx in the 2011-2012 cycle are the Association of Private Sector Colleges/Universities, the Apollo Group (owner of the University of Phoenix), and Corinthian Colleges. Since federal student loans comprise the vast majority of the revenues of those for-profit schools, it follows that their campaign contributions to Foxx are also made possible by U.S. taxpayers.
Student Loan Debt Hell: 21 Statistics That Will Make You Think Twice About Going To College
Is going to college a worthwhile investment? Is the education that our young people are receiving at our colleges and universities really worth all of the time, money and effort that is required? Decades ago, a college education was quite inexpensive and it was almost an automatic ticket to the middle class. But today all of that has changed. At this point, college education is a big business. There are currently more than 18 million students enrolled at the nearly 5,000 colleges and universities currently in operation throughout the United States. There are quite a few “institutions of higher learning” that now charge $40,000 or even $50,000 a year for tuition. That does not count room and board or living expenses. Meanwhile, as you will see from the statistics below, the quality of education at our colleges and universities has deteriorated. When graduation finally arrives many of our college students have actually learned very little. Tthey find themselves unable to get good jobs and end up trapped in student loan debt hell for essentially the rest of their lives.
Across America today, “guidance counselors” are pushing millions of high school students to go to the very best colleges that they can get into, but rarely do they caution them about how much it is going to cost or about the sad reality that they could end up being burdened by massive debt for decades.
Yes, college is a fun and it is a really unique experience. If you can get someone else to pay for it then you should definitely consider going!
There are also careers which absolutely require a college degree. Depending on your career goals, you may not have much of a choice of whether to go to college or not.
But that doesn’t mean that you have to go to student loan debt hell!
You don’t have to go to the most expensive school that you can get into.
You don’t have to take out huge student loans.
There is no shame in picking a school based on affordability.
The sad truth is that pretty much wherever you go to school the quality of the education is going to be rather pathetic. A highly trained cat could pass most college courses in the United States today.
Personally, I have had the chance to spend quite a number of years on college campuses. I enjoyed my time and I have some pretty pieces of parchment to put up on the wall. I have seen with my own eyes what goes on at our institutions of higher learning.
The vast majority of college students in America spend two to four hours a day in the classroom and maybe an hour or two outside the classroom studying. The remainder of the time these “students” are out drinking beer, partying, chasing after sex partners, going to sporting events, playing video games, hanging out with friends, chatting on Facebook or getting into trouble. When they say that college is the most fun that most people will ever have in their lives they mean it. It is basically one huge party.
If you are a parent and you are shelling out tens of thousands of dollars every year to pay for college you need to know the truth.
You are being ripped off.
Sadly, a college education just is not that good of an investment anymore. Tuition costs have absolutely skyrocketed even as the quality of education has plummeted.
A college education is not worth getting locked into crippling student loan payments for the next 30 years.
Even many university professors are now acknowledging that student loan debt has become a horrific societal problem. Just check out what one professor was quoted as saying in a recent article in The Huffington Post….
“Thirty years ago, college was a wise, modest investment,” says Fabio Rojas, a professor of sociology at Indiana University. He studies the politics of higher education. “Now, it’s a lifetime lock-in, an albatross you can’t escape.”
Anyone that is thinking of going to college needs to do a cost/benefit analysis.
Is it really going to be worth it?
For some people the answer will be “yes” and for some people the answer will be “no”.
But sadly, hardly anyone that goes to college these days gets a “good” education.
There’s Nothing Average About An Average Student Loan Debt
No human being is average. An average is a mathematical abstraction. You are no abstraction. You are a real soul with a desire to live and fulfill some purpose in life, for which you need to be free, so that you can meet this purposeful destiny.
To the great apostles of political freedom the word ‘freedom’ meant freedom from coercion, freedom from the arbitrary power of other men, release from the ties which left the individual no choice but obedience to the order of a superior to whom he was attached.
These are the words of Nobel laureate F.A. Hayek in his superb book The Road To Serfdom.
If you review your life, my friend, I doubt that you could argue that you’ve lived it under repression, where you’ve been coerced by an arbitrary power to break your ties with your beloved family and friends to be forced to obey without any other choice a superior to whom you were now dependent.
If you are or have been, on the contrary, like any typical student who has wished to join the ranks of the collegiate, by attending some university campus somewhere, then you voluntarily took on debt. With it you bought into the propaganda that a college degree was the best investment that you could make in your young life.
We really do need to rethink our approach to higher education in this country.
Posted below are 21 statistics about college tuition, student loan debt and the quality of college education in the United States…. #1 Since 1978, the cost of college tuition in the United States has gone up by over 900 percent.
#2 In 2010, the average college graduate had accumulated approximately $25,000 in student loan debt by graduation day.
#3 Approximately two-thirds of all college students graduate with student loans.
#4 Americans have accumulated well over $900 billion in student loan debt. That figure is higher than the total amount of credit card debt in the United States.
#5 The typical U.S. college student spends less than 30 hours a week on academics.
#6 According to very extensive research detailed in a new book entitled “Academically Adrift: Limited Learning on College Campuses”, 45 percent of U.S. college students exhibit “no significant gains in learning” after two years in college.
#7 Today, college students spend approximately 50% less time studying than U.S. college students did just a few decades ago.
#8 35% of U.S. college students spend 5 hours or less studying per week.
#9 50% of U.S. college students have never taken a class where they had to write more than 20 pages.
#10 32% of U.S. college students have never taken a class where they had to read more than 40 pages in a week.
#11 U.S. college students spend 24% of their time sleeping, 51% of their time socializing and 7% of their time studying.
#12 Federal statistics reveal that only 36 percent of the full-time students who began college in 2001 received a bachelor’s degree within four years.
#13 Nearly half of all the graduate science students enrolled at colleges and universities in the United States are foreigners.
#14 According to the Economic Policy Institute, the unemployment rate for college graduates younger than 25 years old was 9.3 percent in 2010.
#15 One-third of all college graduates end up taking jobs that don’t even require college degrees.
#16 In the United States today, over 18,000 parking lot attendants have college degrees.
#17 In the United States today, 317,000 waiters and waitresses have college degrees.
#18 In the United States today, approximately 365,000 cashiers have college degrees.
#19 In the United States today, 24.5 percent of all retail salespersons have a college degree.
#20 Once they get out into the “real world”, 70% of college graduates wish that they had spent more time preparing for the “real world” while they were still in school.
#21 Approximately 14 percent of all students that graduate with student loan debt end up defaulting within 3 years of making their first student loan payment.
There are millions of young college graduates running around out there that are wondering where all of the “good jobs” are. All of their lives they were promised that if they worked really hard and got good grades that the system would reward them.
Sometimes when you do everything right you still can’t get a job. A while back The Huffington Post featured the story of Kyle Daley – a highly qualified UCLA graduate who had been unemployed for 19 months at the time….
I spent my time at UCLA preparing for the outside world. I had internships in congressional offices, political action committees, non-profits and even as a personal intern to a successful venture capitalist. These weren’t the run-of-the-mill office internships; I worked in marketing, press relations, research and analysis. Additionally, the mayor and city council of my hometown appointed me to serve on two citywide governing bodies, the planning commission and the open government commission. I used to think that given my experience, finding work after graduation would be easy.
At this point, however, looking for a job is my job. I recently counted the number of job applications I have sent out over the past year — it amounts to several hundred. I have tried to find part-time work at local stores or restaurants, only to be turned away. Apparently, having a college degree implies that I might bail out quickly when a better opportunity comes along.
The sad truth is that a college degree is not an automatic ticket to the middle class any longer.
But for millions of young Americans a college degree is an automatic ticket to student loan debt hell.
Student loan debt is one of the most insidious forms of debt. You can’t get away from student loan debt no matter what you do! Federal bankruptcy law makes it nearly impossible to discharge student loan debts, and many recent grads end up with loan payments that absolutely devastate them financially at a time when they are struggling to get on their feet and make something of themselves.
So are you still sure that you want to go to college?
Another open secret is that most of our colleges and universities are little more than indoctrination centers. Most people would be absolutely shocked at how much unfiltered propaganda is being pounded into the heads of our young people.
At most colleges and universities, when it comes to the “big questions” there is a “right answer” and there is virtually no discussion of any other alternatives.
In most fields there is an “orthodoxy” that you had better adhere to if you want to get good grades.
Let’s just say that “independent thought” and “critical thinking” are not encouraged at most of our institutions of higher learning.
Am I bitter because I didn’t do well? No, I actually did extremely well in school. I have seen the system from the inside. I know how it works.
It is a giant fraud.
If you want to go to college because you want to have a good time or because it will help you get your career started then by all means go for it.
Just realize what you are signing up for…..
If you have a degree, you may have bought into the belief that an average student loan debt was no big deal since, being average, most students were assuming it to be “the thing to do for anyone going to college.”
The new freedom promised, however, was to freedom from necessity, release from the compulsion of the circumstances which inevitably limit the range of choice of all of us. Freedom in this sense is, of course merely another name for power or wealth.
Doesn’t this sound more like you, nevertheless? Isn’t this what you really wanted? Wasn’t it a desire for freedom from necessity and from having to confront the simple fact that you live in a world where you cannot do everything that your heart desires, that encouraged that voice to whisper in your ear: “With a college degree in my hands I will have the power to become wealthy”?
So, you went ahead and fell for an ancient trick. You had the expectation that you would succeed in showing off to others how free you truly could become, merely by postponing the inevitable – having to pay that average student loan debt.
Yet this trick chained you to a rail along the long road to serfdom. For you will have to pay off those loans. And you will give up far more than they’re worth for it. And who cares if others are now slaves along with you?
Is it not always better to be an insignificant freeman than an average slave?
The Average Student Loan Debt Is More Than What You Owe A Bank!
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes it virtually impossible for you to discharge student loan debt through bankruptcy. For as long as you can make money in any way, you will be required by those in real power – your masters, the lenders – to pay what you owe them.
If this “investment” that you made doesn’t pay off, if this average student loan debt proves unweilding, then you literally won’t be able to pay off your loan as you’ve anticipated; that is, you won’t be able to pay it off according to your time line or even your liking. But pay it you shall for as long as you’re alive making traceable money somewhere, somehow.
You will be a slave fettered with electronic chains to your lender’s collections agency. An agency can garnish your wages if your disposable earnings per week exceed thirty times the federal minimum hourly wage.
average student loan debt shakedown.
Put another way, this means that if you make $154.50 or more per week your wages will be garnished.
Your disposable income, which is whatever money you have left after paying all required taxes and national insurances, will not be yours but will belong to the lender by federal law.
What’s the likelihood of this happening to you? Well, you do the math.
Let’s see what should have been the most that you should have paid for your college education. If you’ve paid more than you should have, then you’re screwed.
To estimate this valuation we must calculate what’s known as your capitalization rate or the cap rate of this college “investment” that you’re the proud owner of. Of course, this is a calculation that you should have made way before taking on any student loans. But this exercise should prove valuable to you in many other ways.
The cap rate is a very useful tool because it helps you figure out whether you should buy an income-producing asset by borrowing for it. Do you think your college education is an asset that can generate income for you? Then let’s determine its cap rate.
To begin this calculation we’re going to use an example to make things easy to understand. We’re going to estimate first the cap rate for an actual business. Then we will use your average student loan debt to estimate your own cap rate for college.
Let’s say that there is an in-home seniors care provider business that you want to buy. It’s going for $25,000. This business produces $2,500 per month after taxes and insurance. Annual net income therefore is $30,000. Let’s say the bank charges 5.25% fixed interest for your loan, and you want to pay the loan in 15 years.
How much of the loan are you paying per year? Dividing 100% by 15 tells you that you’re paying 6.67% of the loan every year. This is your repayment rate. You also already know that you have to pay interest of 5.25% per year for 15 years. So now add the 6.67% repayment rate to your 5.25% interest rate. You end up with 11.92%. This is your cap rate or 0.1192 in decimal form.
Here’s how to use your cap rate to determine whether buying this senior care business makes sense.
Take the $30,000 worth of annual income and divide it by your cap rate of 0.1192, which will give you $201,342. This is the maximum amount of money that you should pay for this business. If you buy it by borrowing $25,000 at 6.67% for 15 years to make $30,000 per year, then you are buying it at a bargain price.
Now let’s estimate a cap rate for an undergraduate in the social sciences going into an entry level job and see how he fairs having embraced an average student loan debt of $24,000.
Should You Have Sought Even For An Average Student Loan Debt?
Junior has consolidated his loans at a rate of 6.75%. His average student loan debt repayment plan calls for paying $24,000 over 20 years. He believes that he will average a gross salary of $50,000 per year. His cap rate is 11.75% which, when divided into $50,000 yields $425,532 as the maximum that he should have paid for his college education. Pretty nifty, huh? Seems like junior made a great decision, except for a few intrusive points.
What if junior can’t get work, can’t break into his career field and ends up working at a job that doesn’t require a degree, making half of what he expected?
What if junior doesn’t have the average student loan debt but more like $35,000, $50,000, $80,000 even $125,000 or more in loans? What then should his education have cost him?
What if junior, being a wage earner rather than a business owner, gets stuck in a tax bracket that doesn’t allow him to net out more than $40,000? After all the median household income in the United States is $46,326.
So half of American households live on less than this income amount gross every year. Only 34% of all U.S. households make more than $65,000. Only 17.8% make more than $118,200 a year and just 2.67% make more than $200,000. College doesn’t guarantee you an individual income in any particular income bracket.
More importantly, we must apply the cap rate to junior’s net income, which is the money from his wages that he has left after paying all his interests, taxes and insurance expenses. That’s called junior’s disposable income.
How much of a personal disposable income would junior have if he had to pay a big student loan, a ton of credit card debt, FICA, unemployment and all kinds of other taxes, plus his insurance premiums for his car, property and health?
The U.S. Census indicates that per capita disposable income in this country is around $35,000. But that’s just the nation’s total disposable income divided by the total population. What if your personal disposable income is only one-third of this?
Do you think it farfetched?
What if I told you that 1 in 5 people filing for bankruptcy right now are college students and that this is just a point along a trend going back for 2 decades?
Here’s what the Networks Financial Institute at Indiana State University had to say about young adults of college age and beyond. Does it sound like people who have lots of personal disposable income?
Americans aged 25-34 have the second highest rate of bankruptcy (just after those aged 35 to 44). The bankruptcy rate among 25-34 year olds increased between 1991 and 2001, indicating the GenXers were more likely to file bankruptcy than were young baby Boomers at the same age.
average student loan debt forgiveness And what if you owed $80,000 more than the average student loan debt and you had to pay it at 6.75% for 15 years because of minimum monthly payment requirements by your lender?
Now we’re talking!
Do the math. Your cap rate would be 13.42% and your disposable income $11,655, which means that the most that you should have paid for college should have been $86,848.
Yet you paid $104,000 for it. That’s a 20% premium beyond what you should have paid for your education. Now, how smart of an investment was that for an educated person?
Can you say “I’m broke but can’t go bankrupted.” Say then, “I’m a serf of my lender.”
You might think that you’re safe so long as your average student loan debt stays, well, average. But even if you had loaded yourself with just an average student loan debt, in conclusion this burden leaves you at a disadvantage because, had you spent the money in building a business, you would have benefitted, in this example, from a net income of $30,000 rather than a personal disposable income of only $11,655, since businesses face tax deductions that wage earner do not. So as a business owner you end up ahead of an employee.
In the end, debt proves to be a terrible deterrent to entrepreneurship and risk-taking, despite the promise of riches that a college degree might have lured you to believe would be within you reach if you borrowed for it.
But if you cannot get a job to pay your loan back, and you can neither get out of debt nor escape it through loan forgiveness, then you need to look at entrepreneurship in a different light, because this may be the only way that you could achieve deliverance from the life of serfdom that even an average student loan debt burden will force you to serve out.
The infographic also lists the most expensive colleges based on total cost (tuition + room and board) for the 2008-2009 school year. Here are the 25 most expensive colleges in 2008-2009:
1. Sarah Lawrence College | $53,166
2. George Washington University | $50,312
3. New York University | $50,182
4. Georgetown University | $49,689
5. Connecticut College | $49,385
6. Bates College | $49,350
7. Johns Hopkins University | $49,278
8. Skidmore College | $49,266
9. Scripps College | $49,236
10. Middlebury College | $49,210
11. Carnegie Mellon University | $49,200
12. Boston College | $49,020
13. Wesleyan University | $49,000
14. Colgate University | $48,900
15. Claremont McKenna College | $48,755
16. Vassar College | $48,675
17. Haverford College | $48,625
18. University of Chicago | $48,588
19. Union College (NY) | $48,552
20. Colby College | $48,520
21. Mount Holyoke College | $48,500
22. Tufts University | $48,470
23. Bard College at Simon’s Rock | $48,460
24. Franklin & Marshall College | $48,450
25. Bard College | $48,438