70% Defaulted in 2013
To add to this attention getter, 70% of all the students who defaulted in 2013 went to non-traditional schools or “for-profit” schools. Of students who graduated from traditional schools and were required to start paying back student loans in 2011, two percent of graduate students and eight percent of undergraduate students defaulted as compared to ~21% of students from non-traditional schools within two years. Mind you, this does not exonerate traditional schools from the financial burden placed upon graduating students. The only cost increasing at a faster rate than healthcare is the cost of pursuing a college education.
In 2000, one nontraditional school of the top ten schools was the second highest with associated student loan debt to attend it. University of Phoenix was second to a traditional school at $2.1 billion. In 2014, the University of Phoenix moved to #1 at $35 billion of associated student loan debt to attend it. Of the next 10 schools, 8 were non-traditional and 2 were traditional schools in 2014. New York University went from 1st on the list in 2000 to 8th on the list in 2014 with triple the amount of student debt associated with getting a degree there. The number two school in 2000, University of Phoenix amassed student loan debt of $35 billion to attend. This was more than 17 times what the University of Phoenix had in 2000.
The numbers of student loan borrowers doubled from 2000 to 2014 to 42 million and the debt quadrupled to $1.1 trillion. With this explosion in borrowers and increase in debt, defaults reached its highest level in 20 years. “Half of the borrowers exiting college in 2011 had attended a for-profit school or a 2 year college and represented 70% of the student loan defaults. As reported in “A Crisis in Student Loans?,” the default crisis centered around borrowers who attended non-traditional schools such as Phoenix and to a lesser extent two year colleges. In the past those who attended non-traditional schools represented a small portion of borrowers and those attending two year schools did not require borrowed funds to attend. So what changed?
Student loans are the roach motels of the banking/lending industry. Once you sign on the dotted line at 18 years old, you are little more than an indentured servant to the ultimate bill collector, the government, until the loan is paid off or you become disabled or die. This type of loan can not be discharged in bankruptcy. However, this is not just a story about young men and women going to college at 18. From 2000 onward with the decrease in higher paying and lower skill jobs, many older and low income people went back to school to improve their skills and knowledge in the hope of becoming technicians, nurses, etc. Especially in 2008 and afterwards when companies laid-off thousands of people, Labor went back to school as a panacea to lack of work. It did not work quite as they had hoped.
Schools and especially nontraditional schools engaged in deceptive advertisements for job placement and graduation rates advertising their offering of additional education in specific fields as the elixir to a lack of jobs in the less skilled fields. I am sure you have seen the TV commercials and billboards advertising making more money. Furthermore, most nontraditional schools did not offer grants or scholarships; however, the lower income students were eligible for the ~$5,000/year Pell Grants. 73% of the lower income students enrolled in nontraditional schools applied for these grants as opposed to 37 to 45% of students at traditional colleges and universities. Unfortunately, the Pell Grant paid only a portion of the average yearly tuition of ~$15,000 at a nontraditional school.
Nontraditional school students ran up against a limitation on Federal backed loans. The Federal Government restricts what an 18-year-old undergraduate can take out in loans to ~$31,000 and ~$57,000 for older, independent students. As a result, students at nontraditional schools needing more money turned to the shark-pool of commercial loans which also can not be discharged in bankruptcy and with the government acting as the “ultimate” bill collector again. Some nontraditional colleges also offered in-house student loans. Now in bankruptcy, Corinthian Colleges was one of the nontraditional schools offering their “Genesis Loan” with an interest rate sometimes as high as 15%. Finally waking up after the bankruptcy, the Consumer Financial Protection Bureau is suing the college for setting tuition as high as $75,000 for a bachelor’s degree forcing students to take loans, guiding students to in-house loans to pay the tuition, and partaking of some of the lender loan fees. This was also a practice engaged in by traditional schools, which ended in the late nineties as the government cracked down on the practice
As Adam Looney and Constantine Yannelis reported in A Crisis in Student Loans? the numbers of those defaulting on educational loans has dropped for nontraditional for-profit schools which means the twenty year high will also decrease over time. I would point out the schools such as the bankrupt Corinthian Colleges as well as DeVry, Kaplan, ITT Tech, and others are under government investigation for deceptive recruitment tactics, falsifying job placement, and graduation rates. There has been no solution for the thousands who took out loans in the hope of bettering their future. In the mean time, the government will continue ham-fisted-bill-collecting role for private businesses making the loans.
References
These are the Schools Driving America’s Student Loan CrisisJim Tankersley and Danielle Douglas-Gabriel, The Washington Post, September 10, 2015
A crisis in student loans? Adam Looney and Constantine Yannelis, BPEA Conference Draft, September 10 – 11, 2015
Well, that’s a rather misleading title, isn’t it?
No, its explained.
This is what happens when we allow our corporations to ship all our mfg. and jobs over seas. How many creative financing degrees do we really need out there if no body is making, mining or growing ,the only true sources of wealth creation. Wait until all these folks go to collect S.S. that many will not have paid into. What a strain-drain on society that will be. I did recently read that by then they will figure out a way to pass the debt to the family when they die. So not to worry about the education bubble…Education should be a means of acquiring the necessary needed tools to succeed. Not a means of letting the parasites of society game the system for unchecked greed and exploitation. Perhaps if they would have sold the students a STEM education rather than creative finance the students would have a much better chance at employment and paying off their huge loans.
I cannot say I am surprised. Right now, about 55% of all 18-19 year-old people attend college. That means that about 10% of those matriculating are BELOW AVERAGE.
And who attends ITT and Kaplan and DeVry? Those who cannot get into a regular 4-year college, and who cannot even cut it in a community college. They need special attention to get through, and even if they get that attention are much less likely to graduate, and less likely to succeed in their careers.
The myth that you need an education to succeed comes from so many successful people attending college. College was not the cause of their success, only the means by which they applied their intellect to succeed. If you are a moron, getting a college degree will not make you less of a moron. It will make you a moron with a college degree.
So we see below-average people who have been sold this lie, as much by the government as by anyone else, and they find they still cannot get ahead of those more intelligent people who attended normal, accredited colleges, and may find themselves only marginally ahead of those of similar intellect who went to trade school or directly into the workforce. But now, they are saddled with student loan debt. (ITT costs about $20,000 per year. A two year program would be $40,000, and a four-year program $80,000.)
By making these student loans available, the government is setting people up to fail.
Warren:
“By making these student loans available, the government is setting people up to fail.”
The Gov does not make loans beyond $31,000 available, Commercial banks and the schools do. Like I said the cost of education is the one thing which out performs healthcare in rising costs. One thing the Gov could do is enforce graduation rates on nontraditional and traditional colleges. This last year, several college fell below the requirement and the Gov let them off the hook. The Gov could make the schools responsible for promises of getting a job which is pretty much fraud. It could enforce the laws and make them accountable for what they promise. We do have a Congress beholden to commercial interests which love to fleece the public.
Manufacturing and jobs? Right, but those jobs weren’t really shipped. They were used to create service jobs via consumption. Much like 1800’s America was for Europe.
People still don’t get it and will probably never get it.
run75441: “The Gov does not make loans beyond $31,000 available, Commercial banks and the schools do.”
You were the one who wrote that such loans, “can not be discharged in bankruptcy” and that “the government [acts] as the ‘ultimate’ bill collector” for such loans.
The fact is that the government, from both sides of the aisle, has promulgated this myth that college is for everyone and everyone needs to go to college. And to try to make the myth reality, the government has subsidized college loans. Putting more money into the system, and getting more people to try to buy a college education, has driven up prices to where people need loans.
Gee, thanks.
Warren:
What I said is true.
Warren: “Well, that’s a rather misleading title, isn’t it?”
run75441: “No, its explained.”
Well, then, 70% of whom defaulted?
70% of students in for-profit colleges? No, 21% of them defaulted.
70% of undergraduate students in traditional colleges? No, 8% of them defaulted.
70% of graduate students in traditional colleges? No, 2% of them defaulted.
So I ask again, 70% OF WHAT GROUP defaulted on their student loans?
You can ask all you wish to ask; but, it is pretty clear in the cited article; “Of all the borrowers who were in default in 2013, 70 percent were non-traditional students.” Mind you the math may be a bit blurred; but, this is in the article and repeated in my first line. Get it right Warren and don’t screw with me.
Later . . .
This isn’t that complicated. States used to pay for higher education. It used to be the case that one year of college (all costs) worked out to 3 months full-time at minimum wage plus part-time during the school year.
UMass, Tuition, Room & Board, 1956-57
$690
U.S. minimum wage, 1956-57:
$1.00
*40hrs*12weeks= $480 (Summer)
10hrs*35weeks= $350 (Part time during school).
https://www.umass.edu/oir/sites/default/files/publications/factsheets/student_charges/FS_chg_02.pdf
Thorton:
My Tuition at a small Catholic College was covered by the the Illinois State Grant. My Masters was $350 a course at Loyola Univ. Chicago. I understand what you are saying; however, it is not just inflation we are discussing here. The student loan business is the wild west of loans. Pretty much anything goes and the sure winner are the banks and the gov with the sure losers being students and their parents.
@Warren
By everybody you mean 62%?
Because that’s the percentage of Americans with “some college” and above.
And do you imagine that more than 40% jobs can be had with a HS diploma? Keeping in mind that a phlebotomist needs post secondary education?
http://www.forbes.com/sites/akelly/2015/04/28/the-neglected-majority-what-americans-without-a-college-degree-think-about-higher-education-part-1/
I agree that student loans are the Wild West. Thanks to the CFPB (guessing), I’m now allowed(!) to use direct debit to pay my loans down faster. It used to be you had to mail in a seperate check to the servicing company (owned by Xerox of all people).
But there’s this idea out there that “kids today are borrowing more than they should” but the cranky white dudes who say that went to college at a time when state taxes–drawn overwhelmingly from people who did not go to college and whose children would not go to college–paid most of the costs.
And do you imagine that more than 40% jobs can be had with a HS diploma? Keeping in mind that a phlebotomist needs post secondary education?
– See more at: http://angrybearblog.strategydemo.com/2015/09/70-defaulted-in-2013.html#comment-2674495
Thornton Hall: “And do you imagine that more than 40% jobs can be had with a HS diploma? Keeping in mind that a phlebotomist needs post secondary education?”
Yes, I do, and no, it doesn’t: http://www.medtech.edu/explore/phlebotomy.php
Please forgive the previous premature posting.
@Warren
I’m genuinely confused. MedTech (formerly Sanz School) is post secondary education.
Thornton Hall: “MedTech (formerly Sanz School) is post secondary education.”
Yes — “secondary” being High School, as opposed to “primary” which is up to 5th or 6th grade. My wife taught there for many years. At that time, they taught ESOL (English for Speakers of Other Languages) in a 9-level, 9-month course as preparation for training to be a Medical Technician.
Being a Phlebotomist does not require a college degree: http://www.collegesanddegrees.com/programs/phlebotomy/education-requirements
The fact is, most jobs don’t need a college degree. However, since so many people have them, employers use it as a proxy, assuming that if one can get through a four-year degree, one is not a total idiot.
@Warren
For someone who got darn pedantic about the OP and its headline (although you are basically right on that one) you sure do get slippery in your own arguments.
“Most jobs don’t require a college degree.”
This is a claim about college degrees. Only 40% of Americans have an Associates or above. So this makes sense.
“Being a phlebotomist requires post secondary education.”
This is not a claim about college degrees. And, WTF do you think we are talking about, anyway. Whether or not “everybody” should go to college? Because that’s an asinine conversation. Of course not. “College” is a particular kind of education that is kind of a waste of time for some people.
But the OP is about paying for school. And what really matters is that the 20th Century was the American Century because, before any other nation in the world, we realized that universal education was something states should guarantee and pay for. And they did.
In the 21st Century, making a living wage requires, not college, necessarily, but more than high school. Do we pay for it collectively, or tell 17 year olds to sink or swim? History tells us that success follows the first path. Instead, we have chosen the second. And for some reason, probably b/c it makes you feel like a self-made man, you like the second, the one that doesn’t work very well.
Thornton, you are right. I did misread what you wrote, and assumed you meant that a college degree was necessary for phlebotomy.
The O.P. was about the high default rate of students in for-profit colleges. Sanz/MedTech is not a for-profit college, but a trade school (with ESL available, too). To my mind, that is the way most people should be leaning — either to a trade school or to an Associate’s degree, not to a four-year degree. But according to Wikipedia, 44% of people between the ages of 25 and 29 have a Bachelor’s degree or higher, compared to 10% with an Associate’s degree. Another 10% have “some college”. (Dropouts?)
https://en.wikipedia.org/wiki/Educational_attainment_in_the_United_States
I do think that there are some people who think everyone should go to college. The public school curriculum bought into that a while ago. (They may finally be moving away from that again, though.)
You say that making a “living wage” (whatever that is) requires more than a High School diploma. Let’s take that as a given, and turn to WHY more is needed. The short answer is that more than 90% of people are getting one, compared to about 50% in 1950. Obviously, to even get into the middle quintile, you have to have more than a High School diploma, which only puts you ahead of 10% of the people (still in the bottom quintile).
The solution is not to pay for the first two years of college, but to make the High School diploma harder to get. Frankly, I think the German education system has it right. Yes, college is (mostly) free there, but one must first get through a Gymnasium, and less than 30% of students even attend a Gymnasium.
https://en.wikipedia.org/wiki/Education_in_Germany
Again, please accept my apologies for misreading your comments.
In 2003, and IG study that followed a large number of students leaving school in 1995 estimated that the true, lifetime default rate for 4-year, 2-year, and proprietary schools was 25%, 35%, and 45%, respectively.
More recent data indicated that the lifetime default rate for for-profits was about 60%. Even this data, however, is more than 5 years old. I would venture to say that the true, lifetime default rate for proprietary schools is, indeed approaching 70%, which is horrible.