Thursday, May 06, 2010


Dropouts with Loans

In thinking some more about the Frontline episode, and reading through all the comments, it occurred to me that I had left out two major issues.

The first I've addressed before: the pyramid scheme of graduate education has produced the faculty to work in the for-profits. If the for-profits couldn't find faculty, they wouldn't be able to do what they do. They can, because the non-profits have failed to bring their training in line with their hiring. Seems to me a smart critter wrote something a while back about a system sowing the seeds of its own destruction; that seems to be the case here. It's why I worked at Proprietary U in the first place; the only gigs I could get at traditional colleges at the time were adjunct, and I needed to support myself. Now that the proprietaries are moving into graduate education, an accidental mechanism is starting to look like a perpetual motion machine. Any proposed reform that doesn't address the surfeit of qualified prospective faculty won't get the job done. Regional accreditors, I'm looking at youuuu........

The second I haven't really addressed before in any serious way, and I should have. It's dropouts with loans.

Graduates with loans often have issues repaying them, but at least we can say that they got something for their debt. A degree is no guarantee of a job, as plenty of recent grads found out in the Great Recession, but that isn't the fault of the college. And when things bounce back, a degree in hand will often count for something, and sometimes for quite a bit.

But a dropout with loans is just hosed. Student loans are tenacious and often quite high; carrying that debt load while working high-school-diploma jobs can't be easy. Most of the time, I'm still comfortable saying that a college degree is a good economic idea. But dropping out after a few semesters could easily leave someone much worse off financially than never attending in the first place.

That matters because such a large number of students who start degrees don't finish them. This isn't a problem confined to a few people who spent their time shrooming when they should have been studying (even conceding that some of those folks exist). And I'm not referring to the community college student who does a year at a cc and then transfers to a four-year school and graduates. (That student shows up in our numbers as attrition, which is kind of annoying.) I'm referring to the millions of students who get some semesters behind them but never get the degree.

From a student loan perspective, if you're going to drop out, the best time to drop out is your first semester. This may help explain why first semester students drop out at much higher rates than students who are farther along. (There are plenty of other factors, of course.) At least at that point you haven't lost nearly as much time and money as you would if you had stuck around for another year.

I'm not sure if there's a good public policy answer to this.

Presumably, in the name of harm reduction, public systems might try charging less for the earlier semesters and more for the later ones. In a sense, that happens now with students who do two years at a cc followed by two years at a state college or university. Or they could weight financial aid differently, with more scholarship or grant aid frontloaded and loans comprising larger percentages towards the end. (Interestingly, that's the opposite of the way Snooty Liberal Arts College did it. There, the senior year got a better aid package than the year before. The idea, I suspect, was to cultivate future alumni as future donors.) A former colleague once suggested that matriculating students put down "graduation deposits" of enough money that they actually feel it; when they graduate, they get it back. I doubt that we could actually get away with it, but to the extent that it incentivizes graduation, I could see the appeal. (To get around a conflict of interest, the college couldn't keep forfeited deposits; I imagine they'd revert to the state.)

Alternately, we could greatly reduce access to college in the first place. Highly selective colleges have much lower attrition rates, generally speaking, than do open-admissions ones; if you just screened out the higher-risk students in the first place, you could solve most of the dropout problem.

That argument makes a certain limited sense, until you imagine being told that you don't get to go to college anywhere, ever. Given the very shaky predictive validity of tests given in high school, I'd be wary of banning anyone for life. Some people who were screwups at 18 come back as motivated go-getters at 28, having been kicked around by life in the intervening years. I'd hate to take away their second chances. Second chances are inefficient by definition, but they serve a valid social purpose.

The downside of letting people have a chance to fail is that some of them will take you up on it. They'll walk away without credentials but with student loan payments. That's a real burden, and one that shouldn't be left out of these discussions.

Wise and worldly readers, do you have a better idea for the problem of dropouts with loans?

I think part of the problem is that the US has a very strong "must go to college immediately after high school" mentality these days. I've had some students who I could tell would have benefited much more from taking a year or two off and figuring out what they want. The UK is much better about taking time off - lots of students go on a "gap year" or two and travel or work before deciding on college.

Part of the problem is that students lose their parents' health insurance coverage as soon as they stop going full time. I'm not a fan of Britain's national health insurance (I don't call it health care because the "care" part sucks), but at the very least students can take a year off from school without worrying about what to do if they're sick. I do think that letting students wait until they're ready for college, rather than pushing them in after high school, would have an impact on their success rate.

Speaking of the UK, Oxford has exams at the end of the first year that determine whether they can continue to study in the program. The exams are tough, but it's probably better to catch them now than to have them fail out after two or three years.
When I flunked out of undergrad, I couldn't pay my school loans and I ended up defaulting on them. This was really a double whammy. In order to get back to school, I not only had to convince a college to take a chance on me, but I had to get out of default first. I can tell you from personal experience that my earning potential as a high school grad made this nearly impossible.

It took me ten years before I finally went back to finish my degree (and I'm a doctoral candidate now). I know exactly how lucky I am. I'm pretty sure that most people in my situation wouldn't have been able to come back from it.
I think Kait raises a good point. There is too much pressure in the US for kids to attend college. There are cases where kids lack the maturity, aptitude or desire to go to college. There is nothing wrong with a kid pursuing something different.

The other problem of course with student loans is that the are not dischargeable in bankruptcy. There is a hardship exception, but that is usually reserved for extreme circumstance's and is quite difficult to prove.

I wish I knew the answer.
Reading all this, I wonder why we allow for profits to collect federal financial aid. Just stop already!!! Each student should get a flat amount and that's it - the current system rewards students for getting the most expensive education they can find.

I hate to say it but one of the great advantages of the current lack of funding for public ed is that our state colleges have become more selective simply because there are fewer spaces available. I can't tell you how many people we accepted that should never have been in college. In fact, I would support a measure that prevented any student from entering a 4-year in my state if they tested below the college level in math or english. 4-years should not be teaching remedial classes period. This would in part solve drop out with loans problem by assuring that students entering the more expensive 4-year university were at least nominally prepared to do college work. It would also eliminate 70% of the students admitted at my college and would devastate our state funding.

In reflecting on your comments yesterday DD, it occurred to me that at my state funded school, until this year, growth was revenue generating. We have for years (in the name of access) taking just about any student who graduates from high school with a B- average or better. We did this to meet enrollment targets that, if exceeded, generated even more money for our school. When the recession hit, we were 10% over subscribed and had to shrink fast because the bonus went away and we started having a penalty for exceeding target. This is, of course, when everyone and their mom decided to go back to school after being laid off (13% unemployment for my region - can you say ouch?)

Healthcare reform will help with part of this as kids will be covered until age 26. But the only thing that will really help with this will be if people are prevented from entering college unprepared. I recognize that this would increase attrition at the CC but from a tax perspective it's cheaper to lose them at the CC level than the 4-year level.
First things first, America is the land of opportunity. If we ever got rid of open-enrollment institutions, that would be one of the biggest shames we've ever committed.

As for the student loan issue (I have lots of them) I don't have the answer to that either. What I do believe is that the whole system is broken. We're willing to let 18 year-olds borrow significant sums of money without ever making them think long and hard about their ability to pay it back. Get a co-signer and the sky is the limit.

The student loan issue runs deeper than just those who drop out. Getting a BA with a $100,000 in debt doesn't make matters much better.
This is a little bit off-topic, but Dean Dad's comment, "Regional accreditors, I'm looking at youuuu. . . " reminded me of my entirely negative experience teaching at a for-profit.

Do students at for-profits get the same education they'd get at state colleges and universities? If not, how do for-profits get their accreditation in the first place, and how do they maintain it?

Student loans run by private companies are excessively incentiveized for the companies; we have to make it possible to expunge them by bankruptcy. Whether we're talking dropouts or not.
It's not the only solution, but it's an important component of a reasonable strategy.
Philip, I have asked that same question about a particular public university. I have to say that my opinion is that the bar has been set VERY low by our regional accreditor. I know (from reverse transfer transcripts) that our college is very careful about academic issues that they simply ignore.

Let's just say that it is hard enough teaching a second semester class when everyone has passed the prerequisite course; I can't imagine what it is like to teach one where some (many?) of the students failed the first one.
The for-profit I had worked for did not have regional accredidation, but some other type. This meant that students could not transfer the credit to another college except a for-profit. That is a scam within itself, but federal loans should have a cap per student if the college does not have high accredidation. That would at least put some incentive for the for-profit to spend money on education, be it a proper library, student services, etc.
Accreditation? Don't get me started. My sense is that accreditation is a joke. It's a compliance game, where if you tick off all the checkboxes and produce cartons of paperwork and bow to the mighty accreditors, they give you the piece of the paper. The quality of your education, or whether it serves students well, is basically irrelevant.
The last time I watched a for-profit recruiting pitch, the recruiter compared the cost of a four-year engineering degree with residence to the cost of his two-year technical diploma without living expenses to 'prove' that it was cheaper than university'.

Take away residence and the university was cheaper.

Rather disturbingly, the high school guidance councillor sitting in the room didn't spot the scam and reinforced his point with the kids.
Very Nice.
Student loans run by private companies are excessively incentiveized for the companies; we have to make it possible to expunge them by bankruptcy.
If this is done, the private loans will cease to exist. Who is going to give a large unsecured loan to someone with no current and questionable future earnings potential if they can simply declare bankruptcy after graduation? And a certain number will strategically default, even if they do have good earnings potential.
I don't understand why this is a problem -- if you accept that college is, for 80% of its students, a meaningless ritual that has little or nothing to do with the jobs available, then you can see that anyone you cast aside in the process is chaff. Once you destroy the idea of a high school diploma job, everything is bad forever.

The system works as designed.
What destroyed the idea of a high school diploma job was the deteriorating value of a high school diploma.

Anyone who doubts this has only to look at the remedial placement scores of the middle third of HS grads that show up at our CC!

I like the suggestion that students with really low placement scores should take remedial classes at a CC, but what would happen to the football team?
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