I find Pacific Standard to be one of the best all-around reads on the web today. A new story, "Confessions of a For-Profit College Inspector," by Michael Fitzgerald is a well-written article about the author's stint as an in-house regulator of an unnamed for-profit college (think DeVry, University of Phoenix, etc.). In the middle of the story, which is very much in the "college-loan-debt is a big, big problem" tradition, comes this confession:
When I applied to college, the most appealing acceptance letters had come from the University of Vermont and Carnegie Mellon University. The former came with a scholarship, plus a chance to establish residency in the state, amounting to a bill of under $15,000 per year. The latter offered no such incentives: charges were $40,960 for tuition, fees, room, and board for the first year, and they increased each year thereafter. But I knew Carnegie Mellon ranked high academically, and I didn't think much about the financial consequences in practice.
This sort of admission is pretty fascinating, especially in a story ostensibly about sleazy practices of for-profit colleges (and let's be honest: all colleges are run for profit, even if they are technically nonprofit corporate entities). Fitzgerald, who comes from a lower-income background but is sharp enough to get into good schools, is handed an opportunity to get a B.A. at UVM for less than $60,000 in total but instead opts for the joint costing over $40,000 per year. But it's somebody else's fault, or something:
I wish anyone involved in my indebtedness—my family, Carnegie Mellon, the federal government, the state of Pennsylvania, or even the Middle States Commission on Higher Education (which accredits both Carnegie Mellon and many of the for-profit schools I called as a fake prospective student) had asked me what I planned to major in and what career I aspired to. Then, maybe, when I'd said "English" and "writer," they'd have denied me a $5 loan for cab fare home, or told me they'd rather see an armed robber in their office. I would have had to seek out a solid, affordable state school. I would not have tens of thousands of dollars in outstanding loans.
Yeah, no. A state school would have doubtlessly been cheaper than Carnegie Mellon (indeed, UVM is a state school that offered Fitzgerald a tremendously better deal, and in a tremendously better location to boot). But let's kill the canard that being an English major is a career death sentence. A 2014 study of recent college grads found that English majors had a lower unemployment rate than did econ majors. There's plently of work out there for those willing to do it and being to sling words and synthesize information (as Fitzgerald does extremely well) is always a meal ticket. In any case, the larger point of the study is that however tough it may be for college grads, it's always tougher for non-college grads.
Fitzgerald notes at some point in the story that he's carrying over $70,000 in debt. And again, despite his own personal tale, what he's really worried about is the for-profit racket, from which relatively few people graduate.
The Obama administration has made some efforts to address this vast, tangled problem, going after for-profit colleges by implementing the so-called gainful-employment rule, which can bar schools from accepting federal aid if their graduates' annual loan re-payments exceed 12 percent of their total earnings. It has also taken major steps toward enrolling students in income-based re-payment plans that limit the percentage of their monthly income that can go toward debt payments. Many college companies, including Big School, are facing multimillion-dollar lawsuits from the Department of Justice over their recruiting practices—the practices I was screening for in the summer of 2008.
Read the whole thing, which is, as I noted, well-written, wry, and highly informative.
This type of story always leaves me wondering: So what's the next step, really? Is it denying student loans and easy credit to people who don't really need them? A recent New York Federal Reserve study shows pretty conclusively what basic theory suggests: Large amounts of free and reduced-price money in the form of grants and loans and financial aid simply drives up the cost of higher education. Figuring out how to help folks who can't afford college out of pocket without making school more expensive for everyone is no easy matter. But killing credit for poor folks is not much of answer. I know because I used all sorts of credit not simply to fund my own higher education (I paid for my bachelor's, master's, and doctorate out of my pocket) but my early adulthood too. And the answer isn't to dwell on the relatively few people who always show up in college-debt horror stories. The vast majority of student borrowers are pretty smart and pretty responsible. According to an Urban Institute study released earlier this year, only about 10 percent of recent B.A. grads had borrowed $50,000 or more. Thirty percent didn't borrow at all and the average amount is closer to $25,000, with the median lower still.
There are many problems with the government heavily subsidizing college tuition (first and foremost, as mentioned, it drives up the cost of education). But there's relatively little to complain about from the borrower's side. Indeed, if your main complaint is that it's too easy for you to get money, that's gonna fall on mostly deaf ears. And it should. And for god's sake, if you're not wealthy, go to the cheapest school you can afford, because it really doesn't matter in the end which joint you attend (though it does matter which schools you can get into).
Related: 3 Reasons We Shouldn't Bail Out Student Loan Borrowers (2011).