pros and cons of for profit education

[cookderosa]

You can default, but you can't discharge the debt in bankruptcy. This is a matter of the government getting its money back and has nothing to do with the tuition schools charge. The schools don't need to negotiate when a student defaults because they've already been paid. It's the government that has to worry about getting its money back when it comes to government loans. If people could get rid of their debt, it would actually give colleges more of an incentive to raise their tuition rates. Schools, such as ITT Tech, have directly offered students loans, but their loans have no connection to the government.

According to the link you provided, FFEL was guaranteed loans offered by banks and non-profit organizations. Now, instead of having banks and organizations as middle men, the federal government directly offers the loans. There is no difference in the share of students who now have access to federal loans. You just get your federal loan from the government rather than through a bank. There was never a credit check for Stafford loans offered through the banks. People can still get non-government, student loans from banks. That has not changed.

Also mentioned in the article you linked to, is that Bush I and Bush II pushed for direct loans to be used more than guaranteed loans because it would reduce administrative costs, eliminate subsidies to banks and make the system simpler. All Obama did was further the goal of eliminating FFEL, and it will result in a cost savings of $68.7 billion over 10 years. Nothing about eliminating FFEL has to do with expanding access to student loans or eliminating private, student loans.

Here is a chart showing the differences between Direct, Perkins, and FFEL loans when it comes to forgiveness, discharge in bankruptcy, and other types of discharges and cancellations. Essentially, there is no difference between Direct and FFEL loans, except that Direct loans qualify for public service forgiveness. Both of them can be discharged in bankruptcy, but it is very difficult to do.

https://6173-presscdn-0-2-pagely.netdna-...id_new.pdf

I misspoke- I didn't mean default, I meant discharge. This is a HUGE deal. It's a domino. The entire scenario mirrors the housing crisis/bubble that exploded in 2009. The Fed backing all loans means any lender has our (USA) written guarantee that we (USA) will cover the costs if the student (graduate or not) can't pay (employed or not). It's all covered.

I've clearly expressed why I think this is DEVASTATING for students and probably the PRIMARY cause of disproportionate tuition increases. But, clearly some folks think it's a good idea or it wouldn't have passed.

To expand and add one more point, it's like we've just co-signed for our teenager and sent him to the car dealership with a blank check. In this case, it's not blank, it's $57,500. If they go straight into grad school, they can add another $138,500. https://studentaid.ed.gov/sa/types/loans...subsidized

[davewill]

You're both right. Subsidies help cause tuition inflation, no doubt about it. However, subsidies are what enables opportunity for lower and middle income students. Without it, we end up with a relatively uneducated workforce and only the rich able to access higher education.

The answer is what Bernie Sanders and Pres. Obama have been talking about, free tuition. With the government paying the tuition directly, it can also control what that tuition is. That's why primary and secondary education costs don't skyrocket in the same way. Doing this would have the effect of saving tax dollars over the subsidies we use now.

The truth is that subsidizing without regulating just distorts the market and causes inflation. Conversely, an unregulated market always produces a tiny class of haves supported by a huge underclass.

BTW, That's the problem with Obamacare, it subsidizes without regulating expenses enough (it does a little bit). We will finally need to go to single payer healthcare if we ever want to truly achieve universal healthcare.

[sanantone]

I misspoke- I didn't mean default, I meant discharge. This is a HUGE deal. It's a domino. The entire scenario mirrors the housing crisis/bubble that exploded in 2009. The Fed backing all loans means any lender has our (USA) written guarantee that we (USA) will cover the costs if the student (graduate or not) can't pay (employed or not). It's all covered.

I've clearly expressed why I think this is DEVASTATING for students and probably the PRIMARY cause of disproportionate tuition increases. But, clearly some folks think it's a good idea or it wouldn't have passed.

To expand and add one more point, it's like we've just co-signed for our teenager and sent him to the car dealership with a blank check. In this case, it's not blank, it's $57,500. If they go straight into grad school, they can add another $138,500. https://studentaid.ed.gov/sa/types/loans...subsidized

I guess I wasn't clear the first time. There is really no difference between FFEL and Direct Student Loans. They are both government-backed loans. They are both loans that are guaranteed by the federal government. I received a federal loan through the bank. There was no credit check because it was guaranteed by the government. Now, that same type of loan comes directly from the government. The only difference here is that direct loans are cheaper for the government to administer. That cost savings is now being used to increase the Pell Grant award.

Private student loans from banks were available before the elimination of FFEL, and they are available now. These are not government-backed loans. Again, there is no difference between now and before, except that you get your government loans directly from the government. The government no longer has to pay subsidies to the banks and other organizations, and the financial aid system is easier for schools to deal with. Also, because all government loans are being offered directly by the government, there is no lender that the government is guaranteeing payment to. FFEL is the system that used external lenders. There is no other lender than the federal government with direct loans.

And, only independent students qualify for that high of a cap. Most teenagers will be dependent students and will only qualify for a max of $31,000 for their undergraduate degree.

To simplify:

FFEL Loans - Government guaranteed loans offered through banks and non-profits. Anyone could get these loans because there were no credit requirements. The caps on borrowing were basically the same. Caps only go up to keep up with inflation. There are lenders the government has to pay.

Direct Student Loans - There are no lenders that the government has to pay because the government is the lender. There are no banks or non-profits to subsidize. Other than the things previously mentioned, direct loans operate the same way as FFEL loans.

Private Loans - These are loans directly from banks that are not subsidized or guaranteed by the government. They require a certain income and credit standing or a cosigner with good credit and enough income. These were available pre-2009, and they are available now.

[sanantone]

You're both right. Subsidies help cause tuition inflation, no doubt about it. However, subsidies are what enables opportunity for lower and middle income students. Without it, we end up with a relatively uneducated workforce and only the rich able to access higher education.

The answer is what Bernie Sanders and Pres. Obama have been talking about, free tuition. With the government paying the tuition directly, it can also control what that tuition is. That's why primary and secondary education costs don't skyrocket in the same way. Doing this would have the effect of saving tax dollars over the subsidies we use now.

The truth is that subsidizing without regulating just distorts the market and causes inflation. Conversely, an unregulated market always produces a tiny class of haves supported by a huge underclass.

BTW, That's the problem with Obamacare, it subsidizes without regulating expenses enough (it does a little bit). We will finally need to go to single payer healthcare if we ever want to truly achieve universal healthcare.

I agree with this. I do not believe in subsidizing without regulation. If the U.S. and states completely controlled the funding of public colleges and universities, they would be able to control costs. This is what some European countries do. It is true that it was very difficult for low-income people to attend college before the Pell Grant and government loans. People love to tell fairy tales about how tuition was so cheap that anyone could afford to pay for college out of pocket, but that was not true. A lot of people could not afford to pay for college out of pocket.

[dfrecore]

You're both right. Subsidies help cause tuition inflation, no doubt about it. However, subsidies are what enables opportunity for lower and middle income students. Without it, we end up with a relatively uneducated workforce and only the rich able to access higher education.

The answer is what Bernie Sanders and Pres. Obama have been talking about, free tuition. With the government paying the tuition directly, it can also control what that tuition is. That's why primary and secondary education costs don't skyrocket in the same way. Doing this would have the effect of saving tax dollars over the subsidies we use now.

The truth is that subsidizing without regulating just distorts the market and causes inflation. Conversely, an unregulated market always produces a tiny class of haves supported by a huge underclass.

BTW, That's the problem with Obamacare, it subsidizes without regulating expenses enough (it does a little bit). We will finally need to go to single payer healthcare if we ever want to truly achieve universal healthcare.

I hope you know that FREE tuition is paid for by taxpayers? Because nothing is free - somebody has to pay for it.

And since the government caused the tuition inflation, then how can you say that if they just paid for tuition directly, that schools would automatically lower prices? That doesn't make sense to me at all.

If you want to discuss single-payer healthcare, I hate to point out that we have this in America for military/vets - it's called the VA. They have done such a fabulous job running that, I really can't wait until we ALL get that fantastic level of care. Thanks, but no thanks. We can come up with something better.

[TrailRunr]

There is a single payer health program that works very well in the US for decades. It's called traditional Medicare where you can see any doctor you like with no copays under supplement plan F, which is what Obama promised many years ago and he couldn't deliver. The government pays medical providers directly. That's it. Traditional Medicare is being slowly dismantled by Medicare Advantage (part C) with seniors who are stupid enough to save a few bucks on premiums and cheap doodads and trade single payer for a very restrictive HMO insurer system like Kaiser acting as a 3rd party where the doctors are partners in the for-profit partnership of a supposedly non-profit entity. In the meantime, there is an unfunded Medicare prescription benefit program (part D) that is quickly bankrupting Medicare system as a whole with overpriced RX drugs. There is corruption and evil all over this country far beyond education, and we are getting worse over time.

[davewill]

I hope you know that FREE tuition is paid for by taxpayers? Because nothing is free - somebody has to pay for it.

And since the government caused the tuition inflation, then how can you say that if they just paid for tuition directly, that schools would automatically lower prices? That doesn't make sense to me at all.

If you want to discuss single-payer healthcare, I hate to point out that we have this in America for military/vets - it's called the VA. They have done such a fabulous job running that, I really can't wait until we ALL get that fantastic level of care. Thanks, but no thanks. We can come up with something better.

You didn't read what I wrote, there would be nothing "automatic" about it. You have to regulate the costs. Well end up spending less than we do now and get better outcomes. Your suggestion is just a return to a free market for education, which promotes inequity and a less educated workforce as opportunity dries up. We can't afford that in an era where there are so few middle class jobs that don't require higher ed.

You apparently don't know much about the VA, either. It outperforms the private sector on outcomes and satisfaction.

Forbes 3 Things You Should Know Before You Judge the VA

It's only problem is Congress' unwillingness to fund it properly. After all you can't fight wars and create huge numbers of disabled vets and expect not to have to pay for it. Big surprise that increasing caseloads without increasing resources accordingly produced longer wait times.

However, that's always been the Conservative plan, starve programs until they break, then "drown them in the bathtub." We'll be back to the days of the robber barons in no time.

[cookderosa]

I guess I wasn't clear the first time. There is really no difference between FFEL and Direct Student Loans. They are both government-backed loans. They are both loans that are guaranteed by the federal government. I received a federal loan through the bank. There was no credit check because it was guaranteed by the government. Now, that same type of loan comes directly from the government. The only difference here is that direct loans are cheaper for the government to administer. That cost savings is now being used to increase the Pell Grant award.

Private student loans from banks were available before the elimination of FFEL, and they are available now. These are not government-backed loans. Again, there is no difference between now and before, except that you get your government loans directly from the government. The government no longer has to pay subsidies to the banks and other organizations, and the financial aid system is easier for schools to deal with. Also, because all government loans are being offered directly by the government, there is no lender that the government is guaranteeing payment to. FFEL is the system that used external lenders. There is no other lender than the federal government with direct loans.

And, only independent students qualify for that high of a cap. Most teenagers will be dependent students and will only qualify for a max of $31,000 for their undergraduate degree.

To simplify:

FFEL Loans - Government guaranteed loans offered through banks and non-profits. Anyone could get these loans because there were no credit requirements. The caps on borrowing were basically the same. Caps only go up to keep up with inflation. There are lenders the government has to pay.

Direct Student Loans - There are no lenders that the government has to pay because the government is the lender. There are no banks or non-profits to subsidize. Other than the things previously mentioned, direct loans operate the same way as FFEL loans.

Private Loans - These are loans directly from banks that are not subsidized or guaranteed by the government. They require a certain income and credit standing or a cosigner with good credit and enough income. These were available pre-2009, and they are available now.

I get it, you support the change, which is fine. I think it's probably a political difference of opinion, and I don't evangelize, so carry on.

[sanantone]

I support the change because it saves taxpayer money, which is why conservatives preferred the direct loans, and it makes no difference in the percentage of loans guaranteed by the government because FFEL loans were guaranteed loans. Also, direct loans do not take away access to private student loans. I'm just correcting misinformation.

This thread is supposed to be about for-profit colleges and has gone way off topic because someone wanted to make it political and erroneously attribute a problem to a president just because he is not a part of her political party. Obama expanding access to federal loans or causing the federal government to guarantee 100% of student loans are patently false statements. What is extremely false is that direct loans are guaranteeing payments to lenders because there are no lenders except for the government. FFEL had outside lenders. I don't even understand how someone can even like a post that is blatantly incorrect and isn't supported by the facts.

This is why I'm an independent. I wish people were more loyal to facts, logic, rationality, and their country than to a political party. The liberals demonized Bush for everything they could, and now the conservatives are demonizing Obama for everything they can. It's absurd. The banks didn't even have enough cash on hand to fulfill the FFEL loans during the recession and had to get it from the government.

[clep3705]

This thread is supposed to be about for-profit colleges and has gone way off topic ...

I started the thread. I have no preconceptions about what this thread should be. There was never any intention for it to remain on or diverge from for-profit education. It's the internet. Threads diverge and get hijacked. People get political. I read interesting points of view and hopefully I won't reveal anything about my point of view. I read the discussions to learn.

From time to time I post links without commentary just to see what will happen.