The various letters and Op-Ed pieces regarding student loans have all missed the point in my view as a college counselor with over 40 years in the admissions/financial aid business. The system “screams” reform.
The whole college finance industry has been making big money off the backs of students and families ever since the 1958 National Defense Education Act. Many colleges in search for the “buck” grasp at any straw to “find” the tuition dollar. Students and their unsuspecting parents have been coerced into loans that the colleges know will financially strap them for a long time and maybe forever as we have seen in anecdotal cases. (Note the George Danby cartoon of May 15).
First of all, those who blame the borrowers are being unfair. Many high school counselors are just as uninformed and naive as their students, and the abuse by colleges got so bad that the U.S. Department of Education had to require colleges to provide loan counseling to students who still don’t have all the facts — does this sound like the predatory mortgage market that crashed in recent years?
Colleges use bait and switch in offering the typical financial aid package that does not usually cover all the costs for the year and at the last minute, usually after the student has committed to that school, a shortfall appears requiring yet another loan.
To make matters worse, many colleges do not guarantee the free aid, or college grants, for all four years so many students will find themselves way short in subsequent years and are forced to borrow more money to stay at that college. Maine, with one of the lowest college completion rates in the country, has too many students who had aspirations for a future but find themselves out of school with no degree and high student loan debt.
Six months after leaving college, the first payments are due. With no degree to show for it and to help pay, many loans end up in default thereby making them ineligible for future financial aid if they decide to return to school — they are forever failures. The worst offenders are the for-profit colleges and the federal government is trying to crack down on them.
Our military veterans with GI Bill benefits have been mercilessly targeted by these colleges. No self-respecting high school guidance counselor should ever allow a student to apply to a for-profit college. They are more expensive (read more loan) and offer no better a program than can be found at any of Maine’s community colleges.
Moreover, the for-profits target students and families who are first-time college seekers with lower academic preparation and are less likely to understand the total cost of financing required to actually earn a marketable degree. On the upside, some of the Ivy League schools with billion dollar endowments are making a commitment to no-loan, four-year financial aid packages.
Regarding the recent congressional debate over whether to continue subsidizing low-interest rates for subsidized loans, holding the rates low should be the first step in what should become a top-down total reform of the system. Huge money has been made over the years by student loan servicing companies. It’s time to reform the system so the subsidized billions benefit the student borrower rather than those aggressive collection servicing agencies.
If I had the power, the first reform step would be to fully fund students without loans for the first year to protect those many college “false starts” from finding themselves out of school with little or no credit and owing for classes they never finished. They will likely never go back to college. This reform could be accomplished by consolidating the guaranteed student loan maximum allowed amount over three years instead of four. This is not a new idea. One of the more egregious examples of college abuse of the system I can remember was seeing first-year students being kicked out of community college but having to sign their student loan promissory notes during the exit process for the school to get the tuition money still owed for incomplete classes.
There needs to be far better consumer protection for our students and their families. The megabillions they now owe are still financing our colleges and universities to operate in the style they now enjoy — think about those huge University of Southern Maine raises.
This is unsustainable, unfair and patently, fiscally corrupt and irresponsible. To make matters worse, student loans are exempt from bankruptcy relief so we have senior citizens going to the nursing homes and cemeteries still a debtor. RIP you college flunk-out loser. The most successful financial aid system in history remains the WWII GI Bill that enriched the lives of the “Greatest Generation” and paid the nation back many fold in increased productivity and tax revenues.
Peter Duston is a college counselor from Cherryfield.