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Paladin of Ice

The state of higher education in the United States

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Consumer Protection Bureau suing for profit colleges over abusive practices.


The Consumer Financial Protection Bureau is suing Corinthian Colleges (COCO), one of the largest operators of for-profit colleges in the U.S., on grounds that it deceived students and harassed them to collect on student loan debts. The CFPB, a federal government agency, charges (PDF) that Corinthian used false promises of employment prospects to lure students, induced them to take out predatory loans, and publicly humiliated them when they couldn’t pay.

“Corinthian has turned the American dream of higher education into an ongoing nightmare of debt and despair,” said CFPB Director Richard Cordray in a statement.

Corinthian Colleges reached an agreement with the government in June to shut down or sell all of its 97 U.S.-based schools amid allegations of abusive financial practices.

The California attorney general also sued the company for allegedly misleading students and falsifying job placement records.

Corinthian targeted students with “’low self-esteem’ who had ‘[f]ew people in their lives who care about them’ and who are ‘isolated,’ ‘stuck, unable to see and plan well for future’” according to internal company documents obtained by CFPB.

Most students at Corinthian came from poor or low-income backgrounds; 57 percent had household incomes of $19,000 or less in 2011. To pay for the unusually high cost of a for-profit education, students were encouraged to take on private loans in which the company had a stake, according to the suit.

The loans bore interest rates of nearly 15 percent in 2011, compared to around 6.8 percent for federal student loans. They also required students to start making payments toward the debt while they were in school. Students aren’t typically asked to start repaying federal loans or private loans until they finish their education.

College and tuition is one of the areas most urgently in need of reform, especially the way it has gone in the last 20-25 years.

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Consumer Protection Bureau suing for profit colleges over abusive practices.

College and tuition is one of the areas most urgently in need of reform, especially the way it has gone in the last 20-25 years.

Yes.

But it is a huge ball of yarn to disentangle. At the root of the problem, imo, is the abandoning of fiscal responsibilities to fund public higher educations by many states. This abdication of this civic service creates a dependence on tuition, which in turn spurs the need for higher levels of student loans. When there are student loans to be had, there will be bad lenders and swindlers, such as many of these private, for profit colleges.

Another important issue is the application of business models to running colleges. Faculty governance is largely diminished to nothing on campuses across the nation, and we see a gradual increase in administrator-to-teach staff ratio.

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Oh, entirely agreed TP. And it's all symptomatic of a larger problem of misplaced priorities where billions upon billions can go into making military aircraft that don't work or building more carriers when we already have more than the rest of the world combined, but we can't spend millions to keep our public universities working and support the students going to them.



It's beyond being a disgrace.


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Oh, entirely agreed TP. And it's all symptomatic of a larger problem of misplaced priorities where billions upon billions can go into making military aircraft that don't work or building more carriers when we already have more than the rest of the world combined, but we can't spend millions to keep our public universities working and support the students going to them.

My lovely young daughter went back to the community college a few weeks ago, taking out student loans and staying with me to keep the costs down. $140 for a USED textbook of maybe 200 pages (not even all that well written, from what I could see.) Had a few conversations about college costs with my Dad, a 'Tea Party' style republican. At first, his attitude was 'well, its a free market thing.' Then that shifted to 'over-paid teachers.' Explained to him about the student teachers (whatever the term is these days for more experienced students being paid slave wages to teach classes), and his attitude was 'well, that's just wrong. You don't spend that kind of money for a second rater.' Now, he's to the point where he can acknowledge issues with the college administration end of things - this from a hard core free market Tea Party type.

The other thing that's slowly been sinking in with him - because the younger relatives bring it up at the family get-togethers is the perpetual low wage thing. For a long, long time, Dad held resolutely to the belief there were 'starter jobs' for kids or extra cash that where a non-living wage was ok, because after a while you'd 'step up' to the real jobs. But after several years of listening to the younger relations, its dawning on him that the 'step up' jobs are going by the wayside, and the low wage stuff is pretty much what there is. Furthermore, he's starting to take issue with scheduling practices at these companies. Again, hard core free market Tea Party type.

A sign of hope?

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My lovely young daughter went back to the community college a few weeks ago, taking out student loans and staying with me to keep the costs down. $140 for a USED textbook of maybe 200 pages (not even all that well written, from what I could see.) Had a few conversations about college costs with my Dad, a 'Tea Party' style republican. At first, his attitude was 'well, its a free market thing.' Then that shifted to 'over-paid teachers.' Explained to him about the student teachers (whatever the term is these days for more experienced students being paid slave wages to teach classes), and his attitude was 'well, that's just wrong. You don't spend that kind of money for a second rater.' Now, he's to the point where he can acknowledge issues with the college administration end of things - this from a hard core free market Tea Party type.

Sadly, there are actually two types of teachers you might be thinking of. The first is grad student teaching assistants. In theory, these do not actually teach classes -- they are supposed to be helping a professor do it. In practice... well, some professors don't like to teach and the grad students wind up doing the work. The second are adjunct professors who are not actually professors in the sense people usually think of the word, but in fact just people hired to teach a course with no further commitment on part of the university. Both are paid slave wages, though the grad students at least get compensated in tuition. They're not necessarily second-rate teachers though; it's surprising how little having a great deal of extra knowledge (as full professors generally do) correlates with being able to get a small piece of that knowledge across to somebody who doesn't know it.

As to the costs, it's a combination of the free market and the government interacting in the worst possible way. The government makes it so that it is easy to get student loans without having any idea of how one would pay them off and these same loans are generally not dischargeable in bankruptcy like practically all other loans in the US. Add the fact that the people getting these loans are at the midpoint between childhood and adulthood and... well, this is basically the dream of lending agencies come true. Given all this money, colleges then compete for students in expensive and completely unnecessary ways -- it's free market competition all right, just in a very unnatural set of circumstances.

The bureaucracy and administrative bloat is another combination of the government and the market acting in concert. On the one hand, the government mandates compliance with a long list of regulations as a condition for federal aid qualification (without which it is basically impossible to do research). On the other hand, colleges again compete to provide a variety of student services. Both are well and good... but somebody has to pay for them.

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My wife is finishing up a couple classes and starting nursing school next year. She is taking two classes this semester, the cost of books was $465. One of those books was 200 pages of looseleaf paper, like the campus store just printed off a copy of the text. They didn't come in a binder or prepared in any way at all, they just printed it off and put it in plastic wrap. $285.



This is one bubble I can't wait to burst.


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Anything that is subsidized becomes more expensive



It's why I'm somewhat skeptical of vouchers.



If a school charges $5k tuition, and everyone gets a $5k tuition voucher, it should be possible to raise the tuition to $10k and attract the same customers.



Higher ed is no different. Zero interest rate, government guaranteed student loans incentivize debt and higher tuition.


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Anything that is subsidized becomes more expensive

Yes, this is why our gas is more expensive than most of the EU's. And high fructose corn syrup and other corn-based products are solely the purview of the wealthy.

Possum: Uh, I'm not sure you want to climb on that horse just yet. He's 19. I'd really rather not have stuff I said when I was 16 on the internet dragged up into the public consciousness either, since, well, I've grown up a lot since then. I didn't use racial slurs, but I'm sure I used gendered ones at some point. I don't remember a lot of it, possibly as a defense mechanism, but just knowing mid-teen males makes me sure I was a little shit.

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Anything that is subsidized becomes more expensive

It's why I'm somewhat skeptical of vouchers.

If a school charges $5k tuition, and everyone gets a $5k tuition voucher, it should be possible to raise the tuition to $10k and attract the same customers.

Add in lack of public transportation for kids and you will understand why I see the voucher fight as an attempt to re- segregate schools based on economic class.

Damn, I have semi-agreed with you a couple times this week. What is going on around here?

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There are lots of reasons to oppose vouchers. That one seems reasonable to me. I also see them as the early stages of an attempt to dismantle the public education system, and as a force for inequity in education.

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To the extent that tax dollars exist to fund education, it is preferable that they be controlled by the customer (the parent). Food stamps are preferable to public grocery stores dispensing government produced food.



Tuition inflation is a downside, but the benefit is increased choice and improved quality from schools competing for dollars controlled by parents.


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The only reason there is a problem is because student loans can't be discharged in bankruptcy. That creates a special protected kind of lending with utterly zero risk relative to other lending, that creates a massive incentive to flood the market and encourage as much borrowing as possible in that sector of the market. That flood of unlimited risk free borrowed money is what drives cost inflation because there is such a huge pool of money that prices go up and up and up without ever impacting demand or depleting the infinite supply of risk free lending.

You can solve and probably reverse the cost inflation in higher ed extremely simply, make student loans dischargeable in bankruptcy.

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Edit - to MerenthaClone

The problem is that now a lot of things are online forever. I am 27 and have had various forms of social media since I was 17 or 18. In that time I am sure I made many, many stupid remarks that should never see the light of day and which don't represent who I am now at all, yet were I to run for office, they may come to light.

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The only reason there is a problem is because student loans can't be discharged in bankruptcy. That creates a special protected kind of lending with utterly zero risk relative to other lending, that creates a massive incentive to flood the market and encourage as much borrowing as possible in that sector of the market. That flood of unlimited risk free borrowed money is what drives cost inflation because there is such a huge pool of money that prices go up and up and up without ever impacting demand or depleting the infinite supply of risk free lending.

You can solve and probably reverse the cost inflation in higher ed extremely simply, make student loans dischargeable in bankruptcy.

It's a little more complicated than that. The fact that student loans are much harder to discharge in bankruptcy is itself a reaction to the fact that student loans, particularly federally subsidized student loans, are basically a form of government subsidy and given out under terms that are insane under any reasonable lending criteria. No sane person would given tens of thousands of dollars to a child with no credit history, at artificially low, fixed interest rates, on the promise of repayment 4+ years into the future, based upon the assumption that a child majoring in art history is going to get a job where he makes enough to pay off the loans. In exchange for giving out loans to lots of people that probably shouldn't have them, you make them harder than normal to discharge.

Of course, this doesn't necessarily apply to private student loans, many of which are made under more defensible lending criteria, may require a parent to co-sign, etc. I don't see any reason to exempt these from standard bankruptcy discharge, other than the fact that it will definitely make them more scarce, which is why they're exempt in the first place.

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The solution is to vastly increase state funding for universities and eliminate the need for student loans to 90% of the student body. But that will never happen because the business is too entrenched.

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Anything that is subsidized becomes more expensive

Sure it is.

Higher ed is no different. Zero interest rate, government guaranteed student loans incentivize debt and higher tuition.

Grants are not loans. Student loans have interest rates, while grants do not need to be repaid. I haven't looked for student loans since... 20 years ago, but even then, there were none that were 0%. Are there actually 0% loans now? Some loans allow you to deelay interest accumulation while you're in school, but that is not 0% interest in any sense of the word. It used to be that interest accumulation can be delayed also if you pursue post-baccalaureat studies but that is no longer the case.

The Federal government offers several loan options directly, where the government is the lender. These programs can be need-based, or not. The interest rates for these range from about 4% to about 5% (summary PDF here: https://studentaid.ed.gov/sites/default/files/federal-loan-programs.pdf ). If even the government is charging interest, I cannot imagine that private lenders will offer 0% interest. So, I don't think your "zero interest rate" claim isin any way reflective of reality. But if you have links to 0% interest student loans, pleasae, do share.

Nowadays, attending colleges means clobbering together a mixture of financial resources. Federal loans, family savings, and work-study hours are the most commom, although private loans are also critical for many students. I have many students who are taking on 2 jobs to pay for college. Granted, some of them are probably prioritizing things incorrectly or mis-managing their funds, but some do have legitimate expenses they need to cover, e.g. small children to take care of, or medical needs.

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The solution is to vastly increase state funding for universities and eliminate the need for student loans to 90% of the student body. But that will never happen because the business is too entrenched.

Plus state governments are too cheap to do that, although in fairness they have to prioritize among a large number of expenses. If you can only raise a certain amount of money from taxes and fees before your constituents revolt and throw you out of office, and it's spending more on universities versus spending more on Medicaid, you're probably going to spend more on Medicaid.

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Plus state governments are too cheap to do that, although in fairness they have to prioritize among a large number of expenses. If you can only raise a certain amount of money from taxes and fees before your constituents revolt and throw you out of office, and it's spending more on universities versus spending more on Medicaid, you're probably going to spend more on Medicaid.

I am skeptical of this. Look at, for instsance, the infographics on how Pennsylvania budgets for education versus prisons. Some of those are federal monies given to the state to spend, sure, but some of that is also from state revenues. Yes, we cannot raise unlimited amounts of money, but states can, and I would argue should, prioritize better. Education is investment in the states' future, and imprisonment is... not.

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Yes.

Another important issue is the application of business models to running colleges. Faculty governance is largely diminished to nothing on campuses across the nation, and we see a gradual increase in administrator-to-teach staff ratio.

Yes, Yes, Yes!

This may be getting a bit off topic and maybe we should have a separate thread on what's wrong with American higher ed -- but going along with the above is the fact that more and more college administrators are people who don't have much experience as faculty themselves and don't know what they are talking about in terms of education. There was another faculty member at my place who was actually told by an assistant dean here last week that graduate courses should be no more rigorous than undergraduate courses -- the amount of work a graduate student should be putting it for a three-credit-hour class should be the same as an undergraduate, and that if we required more for a graduate student they would sue us because we were giving them too much work! Though I work at a non-profit place this assistant dean was recently hired here after leaving a job at one of the large for-profits. So the business mentality of the for-profits has hugely influenced what's going on at the nominally non-profit private institutions around the country, except perhaps for the most elite ones.

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