It Ain’t Just Trump
Trump University was a way for The Donald to rip-off money from the federal government and poor students who were sold the dream of getting rich by Trump and his underlings. (And he’s calling Hillary crooked?) He lent his name and supposed knowledge to this scheme to teach people the real estate business so they would be able to coin money the way he did. Not surprisingly, this enterprise by The Donald went bust, with students and the government left holding the bag, while he may have made a few bucks.
But it ain’t just Trump who is generating student debt and not just his “university” that pushes students to take out loans for their education. Leaving college with a significant debt load is a major burden for many students and starts them off at a big disadvantage. And not all institutions are helpful in terms of finding students loans with the lowest interest rates, grants and scholarships.
Seventy percent of students graduating from American universities have educational loan debt, an average of more than $28,000 in 2013. However, a proportion of them have accumulated even higher debt, and one in ten have more than $40,000 outstanding. In 2013, the Consumer Financial Protection Bureau declared that student loan debt had cumulatively crossed the $1.2 trillion mark. That means student loans are the second highest type of consumer debt, lagging only mortgages. Put another way, when the national debt was $16.7 trillion, 6 percent of that was for student loans. Besides being bad for the individuals who have this encumbrance, it is also bad for the economy, leaving less money to be spent in other ways. Economic growth will slow under this burden, fewer jobs will be created, interest rates will eventually rise, and capital will be more difficult to access. And if people default on this debt, the American taxpayer will have to pick up the tab, since most loans have been guaranteed by the government.
But the real Trump look-alikes and bad actors are the for-profit schools and universities that graduate only a small percentage of their students and do not get those enrolled the jobs that were promised. These schools have generally been protected by Republicans in Congress who see them as free-market entities. Unfortunately, young people who have done poorly in high school and cannot obtain admission to established universities view these for-profit private schools as a way to get degrees and better jobs, notwithstanding the costs. They also provide more flexible schedules and on-line classes for working students or those with young children. As of 2013, 12 percent of all post-secondary school students, 2.4 million, were enrolled in for-profit universities.
However, the question of quality in these schools is constantly raised. Their primary goal is making a profit, with education secondary (as was true of The Donald’s venture). They are supported by $32 billion (2009-2010) in federal subsidies, of which $7.5 billion were Pell grants. And in the last few years, because of advertising, the number of students enrolled in for-profit universities has been increasing while community and four year public colleges have been losing students. A Senate investigation that ended in 2012 found the profit margin at for-profits schools was 19.7 percent, with 27 percent for the University of Phoenix which had 470,000 students enrolled in 2010. Only 17.7 percent of income was spent on student instruction, an average of $2050 per student compared to between $3344 and $11,128 at public schools. (The University of Phoenix spent only $892 per student.)
96 percent of students at for-profit colleges have to borrow money to attend compared to 13 percent at community colleges and 48 percent at four year public institutions. However, the most telling statistics for the for-profit colleges are the drop-out rates of 54 percent, with 60 percent at the University of Phoenix. Nationwide, half of all student default rates are from students who went to for-profit colleges, many of them who never attained a degree. Though the Education Department claims to have cracked down on predatory institutions, it continues to pay huge amounts to subsidize student “education” at these establishments. As noted in a New York Times article – “Despite stepped-up scrutiny, hundreds of schools that have failed regulatory standards or been accused of violating legal statutes are still hauling in billions of dollars of government funds. They include tiny beauty schools with staggering loan default rates and online law schools with dismal graduation records and no bar association accreditation. Without government funds that account for the overwhelming bulk of revenue, few of these institutions could attract students or stay in business.” Interestingly, the debt students incur often outlive the schools they attend, as many of the institutions fall by the wayside after deceiving their students and the government, as the Trumper did. (Crooked Hillary?)
In many ways, for-profit universities and colleges are a scam perpetrated on America’s youth. The money spent here should be diverted to community colleges and four year public universities that provide students with better educations and do not saddle them with back-breaking loans. It is up to the Department of Education together with Congress to change the financial formulas that allow these private schools to operate on the backs of young Americans grasping for higher education and better jobs, while putting taxpayers at risk.
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