Monday, July 07, 2014
Yes, it’s harder. Those of us on the ground have known that for a very long time. Cherry picking our best successes, and then blaming us for what’s left, just makes it that much harder.
Charters tend to thrive in large cities with high poverty. While officially enrollment is by lottery, there is often an arduous application process that families must complete to participate in the lottery (thus introducing selection bias for those families who can navigate the process). More cherry picking happens after enrollment as most charters do not systems in place in serve students with serve learning disabilities (which public schools are legally required to accommodate) and they reserve the right to dismiss students with behavioral problems (whom public schools may not dismiss) and students with low test scores. Some of the most prominent players in the Charter market (Geoffry Canada, Eva Moskowitz) have track records of dismissing large numbers of students who test poorly on standardized exams. The charter lobby and corporate-reform crowd then point those test scores as evidence of the success of charters, yet the students who took the state tests are only those who would test well in any environment.
The lenders might make a profit, and in that sense, they're no different from a bank that negotiates, say, a Home Equity Loan to help the homeowner pay off debt. Except in this case, the loan might be available to a wider pool of people (e.g., people who don't own a home on which to draw an equity loan).
It *could* become like the charter school example, with people pointing to the success "private-sector loans" as the reason to finally end or sharply curtail the federal student loan program. But in doing so, it might actually underscore the problem: college costs too much and students are taking out a lot of loans they find it very difficult to repay. The lending is bad not because it creates the problem, but because it highlights the problem.
Finally, the end result could (though I wouldn't hold my breath) serve as an argument for some sort of student loan forgiveness. People who secure loans through these startups are paying off the loans and right away. So the federal programs could lose some more money in writing off or forgiving bad loans because it's already been paid by those who went to the startups. Sure, I imagine the feds lose interest money--and maybe that's a big loss--but are they really in it for the interest?