By Charlie Mitchell
OXFORD – Halloween is nearing. For-profit colleges are tricking people into signing papers that will treat them to a decade of debt. And Congress? Congress has chosen the role of the blonde oblivious to what’s going on. Climbing creaking steps, brushing aside cobwebs en route to an encounter with a chainsaw-wielding madman. Everybody sees it coming. No one does anything about it.
Why? Too many people – including those who praise themselves as champions of the poor – are making too much money off the future misery of young people who are unwittingly locking themselves into poverty.
Last week that student loan debt topped $1 trillion.
Federal involvement in financing higher education is only about 45 years old. The thinking behind the initial programs was not to address the imbalance of wealthy families who could send young people to college with poor families who could not. Not at all. Student loans were justified as a national security measure to help assure America would have as many scientists and engineers as Russia, China and other potential enemies.
In the first 35 or so years, the total wed by borrowers built to $500 billion. It has now doubled in 10 years.
Why should we care?
The cost of higher education is increasingly borne by taxpayers in two ways. One is the allocation of Pell Grants to lower-income students. That money, about $5,500 per student per year, is a gift of the people. It does not have to be repaid.
Loan programs are different. Previously, commercial lenders made money available to students, interest accrued and repayment (usually over a 10-year period) started when students graduated or stopped attending college. Banks were making this type of loan even before Congress got involved. But when Congress got involved, things got bizarre.
It is very hard to avoid student loan repayment. For example, even filing bankruptcy doesn’t erase student loan debt. It’s easier to beat the IRS than to skip out on student loans.
Drag on the economy
The second way is that students’ personal financial burdens become a drag on the national economy. Instead of becoming financially established, buying homes, cars, life insurance, having babies, starting savings plans and such, they’re paying student loans – often until they’re 40 or older.
According to the most recent federal data, the percentage of borrowers who are nine or more months behind on payments rose from 6.7 in 2007 to 8.8 in 2009.
Under the Obama administration, commercial banks have been taken out of the loop. What that means – and no crystal ball is needed to see this coming – is that eventually Congress will entertain the notion of an amnesty. It will be easier to tack another trillion onto the nearly $15 trillion America is now in the hole because the borrowers owe taxpayers directly, not banks.
Now here’s the totally bogus part. Most of this cash is not buying America more doctors and engineers. It is going to private education companies that sell diplomas like McDonald’s sells hamburgers. When Congress got into the student d business, entrepreneurs discovered there was money to be made, greased the right people and had their businesses designated to receive loan money. It would be unfair to say that all for-profit colleges are bogus. They do some people some good. But the statistics are striking: Eighty-eight percent of the money paid to the University of Phoenix, the nation’s largest such enterprise, comes from student loans. And although for-profit schools account for only 10 percent of all college students in America, those students account for half the loans in default.
The very necessary disclaimer here is that I work for a state university, meaning that some would find criticism of commercial universities self-serving. But I’m not questioning their quality, just their tactics – as the Government Accountability Office has done time and again.
If car dealers could do what for-profit colleges do, a young person could get a Porsche today and not make any payments for five or six years. And if the young person did not make payments, taxpayers would.
None of these facts is secret. Congress is fully aware of the victimization going on, yet continues to do nothing.
That’s what makes this a real horror story.
CORRECTION: The abortion rate in Mississippi, as calculated by the Kaiser Family Foundation, is five per year per 1,000 women 18-45. Last week’s column erroneously indicated five abortions per 1,000 pregnancies.
Charlie Mitchell is a Mississippi journalist. Write to him at Box 1, University, MS 38677, or email firstname.lastname@example.org.