Student loansinequality

a brief history

n Servicemans Readjustment Act aka GI Bill: gave funds to returning veterans to go to school; about 51 percent of them took advantage of the funds and 1/4 went to college n National Defense Education Act of 1958: Opened doors to civilians, womenn Higher Education Act: 1965 President Johnson made education a priorityn Reauthorization of HEA: 1972; most significant reauthorization, Senator Claiborne Pell – grants for individual students instead of to colleges

1944- 1972

1990- present (1)

1990- present (2)

1980- current stats

1944-1972

1980sa brief history

n GOP influence in the 80’s made it more difficult and more expensive to get student loans n By the late 80’s tuition costs were rising and aid was not n Loan borrowing outpaced grants, and loans created private profits for corporations and banksn Only bipartisan legislature on student aid was making the GI bill permanent

1944- 1972

1990- present (1)

1990- present (2)

1980- current stats

a brief history

n In the early 90’s, government started making loans directly to students and bypassing banksn1995-present, government became more polarized and dysfunctional and unable to pass or reform legislature: Republicans favor bank loans and Democrats favor direct loans through government

1990s to present

1944- 1972

1990- present (1)

1990- present (2)

1980- current stats

1990s to present

a brief history

n Sallie Mae became biggest lender with biggest profits; grants continued to dwindle and tuition climbed n Taxpayer Relief Act 1997 and Hope Scholarship tax credit let people deduct money from their taxes for each eligible student n Scholars deemed tax policies for students unproductive and ineffective n Lenders and colleges themselves have benefited most from legislature

(Continued)

1944- 1972

1990- present (1)

1990- present (2)

1980- current stats

currentlystats

Rising Partisan Polarization and the Demise of Lawmaking for Federal Student Aid, 1941-2009

currentlystats

Pell Grants Fall Behind and Student Borrowing Soars as Tuition Rises at Four-Year Public Institutions (2010 Dollars)

currentlystats

Percentage of first-time bachelor’s degree recipients under age 24 who did not live with family during their last year of undergraduate education but reported living with their

parents or in-laws 1 year after graduation, by level of total undergraduate borrowing: 1994, 2001, and 2009

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Average ratio of cumulative debt in federal loans to annual income among first-time bachelor’s degree recipients who borrowed for

their undergraduate education, by employment status 1 year after completing a bachelor’s degree, 1994, 2001, and 2009

currentlystats

Average cumulative debt of first-time bachelor’s degree recipients for their undergraduate education in 2009 dollars, by loan type and Pell recipient status: 1992-93, 1999-2000, and 2007-08

MilitaryFirst generationNon-traditionalFinancial stugglesLegacy Student

Activity

Debt

Low-income students

InequalIty Students who take less than 20 credit hours their first year are 1/3 less likely to graduate…what does this say for part time or impoverished students?n A student who works off campus is more likely to drop out and have a lower gpa than a student who doesn’t work…what does this say for students who HAVE to work?

n Grant money from federal and state levels has been cut/reduced.

n Significant detriment to low-income/low socioeconomic students

Changes in law

InequalIty

n Low socioeconomic students hit hardest by law changes; reductions in fundingn Who are the universities and policy makers looking out for? Poor constituents or donor constituents?

In the 1990s/2000s, laws changed to favor wealthy and corporations/ didn’t meet the needs of students and their families.

Enrollment patterns

InequalIty

n “Transfering between institutions, even transfers from 2yr to 4yr institutions, has long been assumed to be a negative indicator of degree completion.” n What happened to “from here, go anywhere?” TCC slogan...n Students who complete a reverse transfer (transferring from a 4yr to a 2yr school) are even less likely to earn a degree than students who complete upward and horizontal transfers n From a students point of view, nontraditional enrollment options may seem like they increase choice, increase institutional competition, and give better options for nontraditional students to achieve graduation; in opposition, as differential outcomes are linked to different attendance patterns, non traditional attendance could create disparities between students

Enrollment patterns differ by race and ethnicity, socioeconomic status, and first generation status, and that the different enrollment patterns relate to differential outcomes.

Enrollment patterns

n Those from lower income families more likely to be debt averse n Instead of borrowing, students may: n Begin at a community college with the intention of transferring later to a 4 yr school n Success rates of students beginning at community colleges is not good n 15 % lower chance of actually earning a bachelors degree n Colleges cannot support their current business models without raising tuition and are actively recruiting “full pay” students. Some “admit-deny.”

InequalIty

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International Students

n The Unted States charges international students out-of-state tuition feesn Must prove financial accessn Restrictions on working

InequalIty

What does it all mean?

n Our poorest students are getting left behindn Our richest students are getting even farther aheadn This is increasing the gap and therefore increasing inequality among those who have access to college funding and opportunity for completion

InequalIty

Occupy Student Debt movement

possible solutions

n Inspired by Occupy Wall Streetn Suggests that all student loan debt should be forgivenn Occupy student debt website: “borrowers default on their student loan payments after one million individuals have similarly signed the debtors’ pledge”n Blanket student-loan forgiveness will do little to stimulate the economy

Private grants/scholarships

possible solutions

Rolling Jubilee is a project of economic activists called Strike Debt, which formed out of Occupy Wall Street

n Has erased $3.9 million in private student loansn Buys student loan debt for less than 3 cents on the dollar - instead of trying to collect the debt, the group makes it disappearn Online donationsn Nearly 3,000 student of for-profit collegesn The amount erases by Rolling Jubilee and the number of students helped will not make a practical dent in the $1.2 trillion student loan debt

ACE Alternative Credit Project, funded by $1.86 million Bill & Melinda Gates Foundation

n Boost the ability of nontraditional learners to gain a college degreen Pool of about 100 low- or no-cost, lower division courses and gen ed online courses across 20-30 subject areasn 40 colleges/universities will agree to accept transfer credit for these courses

college spending reform

possible solutions

n Much of the spending has been on new buildings, administration, or “amenities” spending, rather than on the education itselfn For systemic reform to work, the government will have to take a leading role in fixing incentives and stopping the college spending arms race in its tracksn Schools with large endowments can cover shortfalls in tuition by drawing from these reserves

n If the spending arms race is a fight for more spending on financial aid, rather than other expenditures, it would be an arms race worth havingn The rise of MOOCs raises the hope that we could slash the price of college by replacing expensive college campuses with technology

Pictured: Arizona

State University

Income-contingent loan repayments

possible solutions

n Superior option to blanket student-loan debt forgivenessn When incomes go up, payments go up. If incomes go down, payments go downn The Obama administration plans to reduce the amount of income to be repaid from the current 15% to 10%n The payment structure could be incorporated into tax returns, for instance, with student loan debt being withheld in the same manner as FICA taxes are currently.n Graduates need not ever face the prospect of default - just the possibility of a longer time frame for repayment

state & federal reform

possible solutions

n States are now spending 28% less per college student than they were in 2008n Budget cuts have forced states to raise their tuitionn We need to restore funding of public universities and increase that fundingn The government can tie its financial aid support to the elimination of the arms racen Push for policies to promote full employment and the creation of good jobs that do not require a college educationn Hold lending services accountable: Senator Elizabeth Warren brought attention to Navient (Sallie Mae company) broke laws, got a new contract with Dept of Education, makes more money, doesn’t treat borrowers better

http://youtu.be/9k19ZrwM58cVideo

state & federal reform

possible solutions

n There is bipartisan interest in a solutionn Hears more about student debt than any other issuen Proposed the Dynamic Student Loan Repayment Act (with Senator Marco Rubio) to consolidate, simplify and improve income-based repayment options for federal student loans

Senator Mark Warner came to ODU on 9/2/14 to speak with students about financial aid

Possible solutions suggestions

n Shorten time in college (high school credits, community college)n Revisit articulation agreements with community colleges to be sure credits will transfern Site similar to Zillow for colleges (Know Before You Go)n Financial literacy should be part of educationn Reduce student loan interestn Income-based repayment capped at 10%n Employers take certain dollar amount of your salary and apply it pre-tax to tuition or student debtn Make FAFSA easier to file

(Continued)

Education bubble

Future implications

Surowiecki, 2011 states that young people today are radically overestimating the economic value of going to college, and that many of them would be better off doing something else with their time and money.

If this is true, it will have significant consequences on all of the young adults graduating college that expect a different outcome.

Future implications

Debt aversionNot trusting themselves with the money, missing the opportunity to be more financially literate. What students can do to combat loans can hurt their chances of graduating college.

Blanket Forgiveness?

Future implications

Occupy Student Debt Movement’s plan is to have people default on loans and randomly pay off people’s loans in full.

This does not stimulate the economy. One time transfers help one group of individuals, with no promise of future aid.

Marriage

Future implications

Gicheva (2011) suggests that additional student debt of $10,000 decreases the long-term probability of marriage by 7 percentage points.

Small businesses

Future implications n 60% of jobs

are created by small businesses n Higher loans can cut the ability to create small businesses and can harm the economyn People only have a certain amount of “debt capacity”

Future implications

IndependenceA 2010 poll found that 85 percent of college graduates were planning to move back home after graduation.

Proper Representation

Future implications

Student from an affluent family 7/8 times more likely to attend college.

RECAPn Historyn Current Staten Affects on Inequalityn Possible Solutionsn Future Implications

Student loanS and inequality

The conver sation

Student loanS and inequality

n Biggest issues going forward for this country; Hear more about it than any other issuen Turning away international students

n Financial literacy and more education on loans and student aid in high school and collegen Average student loan debt is $20,000 and students are paying their loans overall, but there are students that are not in this picture.n Adopting some of the potential solutionsn Colleges need to allocate funds away from unnecessary spending and put it towards aid.

Student loanS and inequality

Discussion / Q&A