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Making Schools Accountable for Bad Loans May Pay Off

Emil Photo Again Edited 61b7dabb61239

When a certain college that already costs in excess of $60,000 a year announced a tuition increase of $10,000 for next year, that was the last straw — at least for my family.

Higher ed doesn’t have to mean higher debt loads.

My student is now transferring to what is considered the best junior college in my home state.

These days a good junior college is like the Costco of higher ed.

The total cost of the upcoming school year? It’s a fraction of the cost at the big-city college.

Before spurning the big-city debt enabler, the school had suggested my family take out yet another large loan.

Of course. Isn’t debt always the answer?

The school had already given us the maximum in scholarships (which was still short of the mark). But there are always loans.

That’s when the prudent must learn to just say, “No.”

On both sides of the deal.

It’s time we break the school-student debt cycle.

Because the schools always win. The students and their families always lose.

When the Feds want their money back, it’s the poor students, not the more deep-pocketed and high-cost colleges that the loan-makers go after.

Colleges always seem to get a pass, but the students — who are encouraged to build up debt — are given little or no mercy.

Now there’s a move in Congress to get schools to accept a little more responsibility.

The Washington Post reports that a bipartisan push is on to get schools to share in the debt problem, and a plan could be linked to the reauthorization of the Higher Education Act.

Sen. Lamar Alexander, chair of the education committee, is said to be one of the proponents, which improves the legislation’s chances of becoming law.

But what would it look like? A bill in 2013 introduced in the Senate by Elizabeth Warren, D-Mass., and Jack Reed, D-R.I., had suggested that a school with default rates above 15 percent be required to reimburse the government 5 percent of the total debt.

It was tougher than what happens now, where schools would lose the federal loan program if it showed a 30-plus percent default rate for three years.

It just never gets to the point to where colleges seem scared about the debt in the same way as students and their families.

It’s pretty much a one-way shocker right now.

And the schools don’t seem to care. They just continue to raise costs and make the students get loans to balance the books.

Critics ­­­­­caution cutting back on loans, saying that it would keep low-income students, especially minorities, from getting the money they need.

But why are low-income students given loans at all?

Schools should be dipping into their endowments and raising alumni funds to give these kids all the scholarship money they need to stay free of debt.

Reigning in loans doesn’t have to hurt minorities.

Another idea is to reward schools that have low student-loan defaults by giving additional Pell Grant money. That will help the lower-income students. And give an incentive for colleges to be more responsible.

The bigger question remains: what makes the most alluring top-tier schools worth more than $65,000 a year in the first place?

They aren’t serving caviar in the dining halls, are they?

Is it all administrative salaries and pensions? And then how does that really relate to improving the student educational experience?

If there was a greater connection between “customer” satisfaction and price, I don’t think students and families would begrudge the schools any expense.

But the sticker shock never goes away. In fact, it hurts more when you write the check. And then later, when graduates struggle getting a top job to service their debt, it just seems unfair.

Longer deferrals may help, especially if we tie payback to one’s job and income. Newly minted doctors and lawyers should do well. But for the under/unemployed, they get the dunning notices, while the schools continue to do what they always do: raise costs and encourage new students to take out loans.

As it stands, financial aid based on student need is a joke. Schools’ financial needs are automatically passed on broadly as costs to students, who then pay a stiff price with loans.

Usually colleges wait for the alums to become rich to hit them up. Now they get you coming and going. Students are seen as the income source, and when they don’t have the money, they are told to borrow.

That thinking has to change.

Maybe legislation tied to the higher ed authorization is the best way to bring financial aid back to reality.

Emil Guillermo is an award-winning journalist and commentator who writes for the Asian American Legal Defense and Education Fund. Please visit and find him on Twitter @emilamok.

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