Now, now, let’s not be hasty. As American taxpayers, we should continue to give our money to for-profit schools who, because of insanely high student default rates, are “manag[ing] (some would say, manipulat[ing]) default rates so they look better than they really are.”
CNBC calls it the “dirty little secret” of for-profit universities (most of their dirty stuff is public, not that anybody cares). They’re paying default management companies to “mak[e] sure default rates don’t exceed … statutory limits in the first two (and now three) years after a student gets a loan.”
Education Undersecretary James Kvaal frets about the “use of deferments and forbearances in a manner that leaves borrowers less able to repay their loans, but would delay any default until after the two-year window used to measure school default rates.”
Their worthless educations have made the students unemployable, or woefully underemployed. Now their loan repayments are going to go UP because the default managers are pressuring them to restructure.
A just-published Chronicle of Higher Ed analysis has shown that for-profits are “aggressively using ‘default management’ tools to mask problematic rates of default.”
It’s a beautiful thing when truly free marketeers get their hands on the education market, isn’t it? These aren’t non-profit pussies! Go go go boys! Take my tax dollars and do your thing!
March 15th, 2011 at 5:48AM
I’m going to resist the idea that these are ‘truly free marketeers’ – these are guys who have figured out how to game government subsidies. That they get them through blighting the hopes and dreams of the folks who take their classes is merely a side effect.
Much of the problem seems to me to stem from the inability to go bankrupt on student loans. I Googled around and found that lawyer Russell Demott has the following up on a bankruptcy site: “Student loans were dischargeable throughout most of the 20th century. In 1976 Congress enacted the Education Amendments, and in section 439A of that Act made student loans non-dischargeable if the first payment came due within five years of bankruptcy unless the debtor could prove “undue hardship.” In 1978, Congress repealed the Bankruptcy Act of 1898 and replaced it with the Bankruptcy Reform Act of 1978—the “Bankruptcy Act” then became the “Bankruptcy Code.” The bankruptcy Code adopted the Education Amendment provision in original section 523(a)(8): no discharge unless the first payment became due more than five years prior to the bankruptcy filing or the debtor could demonstrate undue hardship.
The call for the non-dischargeability provision in the Education Amendment dated back to the early 1970s. The perceived need for a non-dischargeability provision stemmed from a few extreme cases of doctors, lawyers, and other professionals discharging student loans prior to beginning lucrative careers. The idea was that if the remedy of a bankruptcy discharge was disallowed for five years, those students would become established in their careers and be able to repay their student loans.
Prior to the passage of the Bankruptcy Reform Act in 1978, the House and Senate disagreed strongly about the dischargeability of student loans. The House favored the pre-1976 Education Amendment standard of treating student loans like any other unsecured debt, while the Senate supported the Education Amendment provisions limiting discharge. In the end, however, the Senate won out, and Congress adopted the non-dischargeability provision of the Education Amendment.”
Where I am going with this is, the vampires now making loans to students who will obviously have no prospects of repayment (and let me bring in the sob stories of the students from not-for-profit universities who graduate with degrees called ‘…Studies’ and $100K in debt, too) will stop doing it if bankruptcy discharge becomes possible again. Yes, this will mean that if we want to have LPNs graduate in large numbers we have to pay for public community college programs to get them, but it will cut the bloodsuckers out of the picture and loans will get made only to the people with good prospects for repayment.