Monday, November 28, 2011

Financial Industry And Education Advocates Now Complaining That College Students Aren't Taking Out Enough Loans And Assuming Enough Debt

Apparently college students are getting the message that student debt is not a good thing. Private borrowing, considered more hazardous to students, has dropped from about $24 billion in 2007-2008 to about $8 billion last year. To minimize borrowing, students are working longer hours at jobs and taking fewer credits. They're less likely to enroll full-time. They're living at home to avoid dormitory costs. They're choosing less selective institutions with lower prices, and heading first to less expensive community colleges.

And these trends are making the financial industry nervous. So they're acting in partnership with education advocates to shame and intimidate college students into taking on more debt. One of the advocates fronting for the financial industry is Deborah Santiago, co-founder and vice president for policy research at the Hispanic group Excelencia in Education, who said "There's been such attention on student debt being unmanageable that current students have internalized that...If you can take out a little bit of loan you're more likely to complete. If you can go to a more selective institution that gives you more resources and support, you're more likely to complete".

Naturally they trot out a gaggle of statistics designed to intellectually bully students into taking out more loans. Here are some findings cited in the Yahoo News story:

-- 86 percent of students who borrow for college are able to attend full-time, compared to 70 percent of students who don't borrow.

-- 60 percent of full-time students receive a bachelor's degree within eight years, compared to 25 percent of part-time students.

-- 26 percent of students who enroll in a community college hoping eventually to earn a four-year bachelor's degree succeed within nine years. That compares to 50 percent starting at non-selective four-year colleges and 73 percent at selective schools.

But does it really matter whether one takes four years, eight years, or even 12 years to obtain a bachelor's degree? And does it really matter whether one attends a selective or "name brand" school vs. a "commuter" school? Much is said about the value of a degree from Yale or Harvard, but the fact that George W. Bush was able to get a degree from Yale and Barack Obama a degree from Harvard doesn't seem like a powerful endorsement of either school. A member of the Church of Jesus Christ of Latter-day Saints can obtain just as good of an education from Brigham Young University -- and the LDS Church partially subsidizes it. Other Christians undoubtedly could obtain just as good of an education from Liberty University.

And why would anyone want to take on student debt without the realistic expectation of a good job after graduation? One of the primary motivators behind the Occupy Wall Street protests is the lack of jobs for college graduates. Further, in the more technical fields, many jobs end up going to H-2B immigrants from other countries as employers pay them less wages; the jobs are often not prominently advertised to Americans. Meanwhile, all that the self-righteous blowhard Newt Gingrich tells the OWS protesters is to take a bath and get a job, but Gingrich already has his financial calling and election assured.

I recall the words of LDS Church President David O. McKay ringing in my ears when I first joined the Church in 1963 -- "Get out of debt and stay out of debt". Those words must have penetrated my soul, for I've lived by them, and have avoided the financial problems which bedevil so many people. Obviously, some debt for big-ticket necessities such as a home and a vehicle will be necessary, and emergencies may require additional borrowing. But unnecessary debt is to be avoided.

Reaction to the KSL Channel 5 version of the story shows that the financial industry and their allies in the education lobby have been unpersuasive, if not an epic fail. In fact, one commenter thinks the KSL story was actually ghost-written by the financial industry. Here's a small sampling:

Easton J. posted November 27th around 6:00 P.M:
This article is a solution looking for a problem. The student described isn't doing any of the things that the article says is a problem. He's not taking less classes or moving back home. He's not taking extra time to get through college. He's taking a very heavy load and scrimping and saving every penny. How is this a bad thing?

A lot of the "problems" listed aren't problems at all. What's wrong with going to community college for 2 years and then finishing at the university? That makes great financial sense. Is it bad that students are choosing less prestigious schools based on cost? No. This makes sense too.

This was a very poorly written article. The example given is contrary to everything the article is trying to convey. I wonder if this article was ghost written by the financial aid industry.

gadvice posted November 27th around 6:00 P.M:
I find this article incredibly biased. It basically mocks the idea of being frugal with ones college education. It sounds like the institutions of higher education have a financial incentive to get students to pay or borrow as much as possible. Considering they have the least amount of risk involved they would be wise to encourage students to borrow as much as possible.

"Students who take extreme steps to avoid debt at all costs, they say, may get stuck with something much more financially damaging than moderate student loan debt. They may not wind up with a college degree."

I disagree with this. What would be more damaging is to take out significant debt and not graduate with a degree. This happens all the time. If you have no debt and no degree then you are no better or worse off.

"If you can go to a more selective institution that gives you more resources and support, you're more likely to complete."

More selective (expensive in this case) has no correlation in regards to resources or support. In fact you might have more of both if you started out at a community college or two-year junior college.

"Student debt aversion" is what we need more of in this country.

George_Kaplan posted November 27th around 6:00 P.M:
The problem isn't too little debt, its the fact that the cost of education has gone up at more than double the rate of inflation. Schools, realizing that degrees were necessary, started to ratchet up the price of education and banks happily lent money to desprate students. The student is nothing more than amedium to get money from banks to schools, and as a result the student accepts the debt and there is no accountability for the school to graduate employable graduates. The junk that I've seen get passing grades is deplorable.

Student debt isn't the problem, the financial-scholastic relationship is.

Brent B. posted November 28th around 6:00 P.M:
Student Loans are the worst type of loan. Ever since they amended the BK act in has seriously messed up the economoy. I would recommend that you get as much education that you can afford. Avoid debt like a plague.

All the time and effort one can put into getting a loan they should put that same effort into other solutions.

Right now, you can graduate and still not get a job regardless of degree. You have to compete. No easy handouts. With the job sector and people behaviors pre-pared to accept other type of work. In state and out of state.

There is a job market. And there is jobs. It will require and much stronger attitude and good networking skills in order to get the job. Patience is a virtue. You will need it. And if you get a job quick, Just count your blessings that you exceeded the averages.

If you do get debt, stay away from private education loans. They worse then federal. Stay away from federal student loans. Best to get a low interest credit card rate like 0% and play the balance transfer game. Keep you balances less then 33% of the credit line. Have several open and ready in advance. Lenders like to get paid off and they hate borrowers maxing lines. Its all about percieve risk.

In the end, just get it paid off. You will find life more enjoyable since most people get fixated on that problem and worry of debt.

School is often over-rated. So go to school with purpose. Other wise you will feel ripped off.

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