Student's Right to Choose their Lender

By law, a school participating in the FFEL (read: bank based) student loan program, must allow a student to borrow with any lender they choose. Many schools present student with a list of "preferred lenders" who the school believe are good institutions for their students to borrow from. Regardless, schools are supposed to allow a student to borrow with a lender off of that list. Now comes new allegations from the folks at MyRichUncle that schools are blocking or delaying students from borrowing through them.

Why would a school delay certification you ask? From talking to a mixture of lenders and financial aid folks it seems like reasons could range from well meaning oversight (a financial aid official may never have heard of this lender and worry about the service that the student would receive) to bias from preferential relationships that some schools have with lenders. One other explanation suggested to me is that certain large lenders provide schools with software that makes it easier to process their loans-and MRU may be a "more difficult" loan to process as a result.

Sallie Mae Receives Corporate Leadership Award

Apropos of nothing I grew up playing on the Ron Brown playground-we went to the same school in Manhattan. I thought Anya would probably post this:

SALLIE MAE AND WEYERHAEUSER COMPANY HONORED BY PRESIDENTIAL AWARD FOR CORPORATE LEADERSHIP
In recognition of outstanding achievement in employee and community relations, Secretary of Commerce Carlos M. Gutierrez presented the Ron Brown Award for Corporate Leadership to Sallie Mae and Weyerhaeuser Company. The Ron Brown Award is sponsored and managed by The Conference Board, a global research and business membership organization. President Bill Clinton established this Presidential Award in honor of the late U.S. Secretary of Commerce Ron Brown, who firmly believed that businesses do well by doing good. "Like Secretary Brown and other of my predecessors in office who traveled across this country and throughout the world, everywhere I go I see U.S. companies that are doing well and doing good," Gutierrez said. "They care about corporate success. They also care about people. They are invested in their employees, their neighborhoods and their communities. They see this investment as both a privilege and a responsibility that they accept and honor. Today we're delighted to celebrate and recognize two organizations for outstanding leadership in community and employee relations."

"Comeuppance is at hand"

That's the fate of the private loan companies as described by Barmak Nassirian, head of government relations at the American Association of Collegiate Registrars and Admissions Officers Barmak is the resident philosophe of the higher ed community and is renowned for, among other things, his amazing capacity for catchy quotes.

This particular quote hails from an LA Times article on Monday describing what new Congressional leadership means for private banks. The thesis has been repeated in a number of different sources (thought this may be the best article so far for its quotes from the lending industry and the Democrats)-but basically the Democrats believe that it's possible to more efficiently use higher education taxpayer dollars by cutting waste in the student loan programs and giving it to students.

The lenders are trying to make themselves look like victims-in part by playing revisionist history and claiming that banks, not students took serious cuts in last years reconciliation fight. That is not the case. We're going to have to make decisions in this country about whether we want our tax dollars going to Sallie Mae or to students....

To anyone who checks the blog regularly sorry for the absence-between the holiday and just a crush of work I've been tardy on this post.

Support for Cutting Student Loan Interest Rates [UPDATED]

From the Tennessean:

Resources are limited, and Congress must find responsible ways of managing the loan program. But if Congress wants to help American families in ways that strike directly at people's ability to make ends meet, it won't find many better places for that than in student financial assistance.

The article endorses the Congressional proposal to cut interest rates in half.

The Daily Tar Heel weighs in as well.

Building Student Leadership

Building progressive student leadership is a hot topic amongst some large funders and certainly amongst progressive groups. As someone who found political activism and engagement in college through a political group started by students I sometimes get the feeling that they miss the great organizations and models that already exist.

My thoughts are on this topic because I'm out in Portland, OR at the Northwest Student Leadership Conference, a great annual event put on by the Oregon Students Association-one of the nation's strongest and most effective state student advocates. (A couple years ago OSA ran a great campaign to freeze tuition featuring a giant freezer on the back of a truck that traveled around the state.) This weekend will see about 500 students mostly from around the Northwest (from as far east as Illinois) talking about organizing and advocating for a progressive student agenda.

I'm out here to run a training on Student Debt and Federal Student Aid. A quick perusal of the agenda finds great topics ranging from "How to Run for Student Government and Win" to "The Academic Bill of Rights--why it's really restrictions and what to do about it" to "Students as Consumers."

There is great work going on campuses and in states all across the country-but it always strikes me that there's particularly great progressive organizing in Oregon. Between OSA, OSPIRG and the Oregon Bus Project there are a set of great groups working to inspire, engage and train future young leaders and organizers.

A couple of resources for students around the country who want to be doing more to change the political environment:
Student Empowerment Training Project-works with Student Governments to make their campaigns more effective.
Center for Campus Free Speech-Works with students and faculty around academic freedom issues: Academic Bill of Rights, students rights to organize on campus, speech codes.
Student PIRGs-issue based campaign advocacy on topics from stopping global warming to addressing poverty in your campus community.

Big Education

With the results of the election last week speculating on what the Democrats will do starting in January is a full fledged, international industry. At stake in higher education are major issues such as: subsidies for private lenders, interest rate levels for students and parents, and federal grant aid.

Bethany McLean, Fortune editor-at-large, takes up the question of what will Democrats do in a new article. However, her speculation about what the Democrats will do takes a back seat to her outstanding analysis about the industry that has built up around higher ed, which she christens "Big Education."

In the corporate world, there's a short list of obvious suspects who may face tougher times under a Democratic Congress, including Big Pharma and Big Oil. Then there are the not-so-obvious suspects - like what might be called Big Education.

"Big Education" consists of the student loan and for-profit higher ed industries that have become big players through tried and true special interest tactics like massive campaign contributions and legions of former staffers as their lobbyists. Ms. McLean is also uniquely credible on the subject of corporate malfeasance, as she was the first reporter to write about Enron as financial miracle. She wrote a great piece on Sallie Mae last year.

I'm tempted to excerpt large pieces of the article but its worth everyone taking a look at it.

Greetings from Thailand

Today I walked into a dusty old museum on the grounds of a centuries-old temple and monestary, one of over 300 here in the beautiful northern city of Chiang Mai. The museum keeper, an old man speaking broken English, asked me where I was from. "Am-ri-ka," i answered in my best farang English. "Oh!! I think I see on the TV that the Democrats won the day!" he answered with a broad smile.

Since as Luke notes, youth voter turnout grew on Tuesday compared to '02, and we went for Dems by something like 22 points ( I voted absentee, by the way) seems to me like the Democrats have some promises to keep...including cutting student loan interest rates in half (Nancy Pelosi promised in June--look it up) and increasing student aid. It is up to you to hold them to it. While they're at it, how about expanding access to loan forgiveness and income-contingent programs such as we see in every other developed country?

Youth Vote Turns Out

One of the stories that will likely come out in the coming days is how young voters turned out in Tuesday's midterm elections. In 2006, 10 million 18-29 year olds voted, up 2 million from 2002. The most compelling statistic (although the wonkiest) is that young voters increased their share of the electorate (from 11% in 2002 to 13% in 2006) even as their percentage of the population decreased. That means that even as a smaller piece of the population, young voters turned out in such increased numbers that it registered in the national numbers.

In a number of states across the country PIRG students tracked turnout at precincts that are heavily youth centered. We saw big increases in Columbus, OH, Boulder, CO and Storrs, CT compared to 2002.

The generation that is now coming of age politically is more engaged than Gen's X and Y, and are making politicians pay attention to them.

Vote!

Election morning and I'm working with my colleagues on the State PIRGs New Voters Project calling media about youth GOTV efforts. PIRG students around the country will make 15,000 peer to peer contacts before the day is out.

Go vote!

Lender Campaign Contributions

Michael Dannenberg over at New America Foundation has new analysis about lender Nelnet's recent campaign contributions. According to the Department of Education's Inspector General Nelnet owes American taxpayers $278 million.

Young Voters

Two new articles on young voters: turnout and the issues that motivate them.

NY Times Op-Ed

College Aid Cutbacks

Pell Grants are one of the largest sources of federal help for low-income college students, and the most valuable form of aid, because the money doesn’t have to be paid back. But the level of aid is increasingly out of sync with the level of need.

Last week, the College Board reported that Pell Grants fell last year, for the first time in six years. The cuts were about $100 a year per recipient, on average, and came on top of other miserliness. It’s been four years since Congress last increased the maximum annual Pell Grant — by a mere $50 — bringing the top grant for a student who has no parental support to $4,050. Meanwhile, college costs are up 35 percent from five years ago. Tuition and fees at a typical four-year public university are closing in on $6,000 this year.

The recent cutbacks were set in motion in 2004, when the Department of Education reduced the number of students deemed eligible for Pell Grants and the amounts they were qualified to receive. Pell Grants now cover about a third of the average costs at a four-year public school, compared with 42 percent five years ago.

Government loans also have not kept pace with rising costs. Subsidized loans accounted for only 55 percent of student borrowing in the most recent academic year, down from 69 percent 10 years earlier.

Bush administration officials have said repeatedly that the solution to the nation’s growing income inequality is more education. That’s a gross oversimplification, but if they really believed it — and cared about a remedy — would federal college aid be declining? As things stand, privatization of college lending is the administration goal that is being advanced. As government aid has declined, loans from banks and other private lenders have soared, climbing to 20 percent of all education borrowing last year, up from 12 percent five years earlier.

The result is towering debt. The same bachelor’s degree will cost a student borrower far more than a student who can afford to pay. That’s not a path to greater equality.

That about says it.

CA Innovation continued

I don't know how to start this post without a series of "c's" but I'm long overdue for a mention of a cool coalition around California community college education called the Campaign for College Opportunity. The project is the brainchild of two former higher education exec's and a California state senator and brings together the education, Latino, business and religious communities to advocate for a long term plan to California's higher education needs. The state will have to find about 600,000 new seats for students over the next 10 years, in excess of what can be provided by current institutions.

Their ultimate goal is to get a long term plan for funding college in California, including firm commitments from the state legislature to stable funds over the next decade. In addition they've done some fun things to engage the state including a scholarship contest for k-12 students called "save me a spot in college."

State Higher Ed Funding Down

Apparently the anecdotal experience of students and faculty at public colleges who feel like their budgets haven't recovered since the most recent recession in 2001 isn't so anecdotal. A new report by the Center for the Study of Education Policy at Illinois State University has found that state funding levels are in fact down compared to state economic growth. From InsideHigherEd:

Roller coasters and yo-yos are among the metaphors frequently used when experts describe cycles of state appropriations for higher education. Recessions bring cuts, but recoveries allow public colleges and universities to regain funds and strength — at least until the next decline. And anyone who has worked at a public college has seen the pattern. After some tight years, there are usually headlines about legislators and governors approving substantial increases in state support.

A study being released today, however, suggests that thereÂ’s a reason that many who work at public colleges feel as if their classes are larger, their paychecks are not so large, and their students are having more difficulty getting into courses or paying their bills. The 25-year analysis of state spending on higher education finds that the improved finances that follow a recession rarely restore collegesÂ’ budgets to levels where they can provide what they had pre-recession.

NewsHour on Young Voters

Here's the NewsHour piece from Thursday on young voters with Anya.

Student Loan Mayhem

This great article is from a couple days ago on the Washington Times Editorial page. The author, Leslie Carbone, has serious conservative credentials and offers a searing critique of Sallie Mae. She writes:

While the [student loan] system has been lucrative for Sallie Mae, it has been downright harmful to the students and taxpayers whose interests federally guaranteed student loans were supposed to serve. Students assume the debt; taxpayers bear the risks, and Sallie Mae reaps the rewards.

She is dead on in her criticism of Sallie Mae causing me once again to wonder why there aren't more of a fiscally conservative/libertarian arguments about the waste in the student loan programs. There is broad political interest in more efficiently using federal resources. The question this column begs is what's her solution?

Loan to lEarn Cancels Caribbean Conference

Here's the story. Apparently being on the front page of the NY Times accused Abramoff-esque tricks caused private loan company Loan to lEarn to cancel their planned Caribbean Conference. This story has generated a lot of attention in the 48 hours since the Times and InsideHigherEd broke it, including garnering a reference for this blog in the Washington Post consumer blog.

PBS "GenerationNext"

Catch me (Anya) talking about Generation Debt and possibly featured with some of my friends tonight during the Jim Lehrer NewsHour as part of the doc series "Generation Next"with Judy Woodruff.

USA Today Article on Private Loans

Great article today in the USA Today that hits on a bunch of themes from yesterdays post regarding Loan to Learn in the broader context of rising student private student loan borrowing. One important piece at the end of the story is the discussion of the overly stringent bankruptcy protections in student lending. Sallie Mae throws out the consumer lending threat that without protections lenders can't offer cheaper loans. Deanne Loonin of the National Consumer Law Center smacks it right back at them:

Sallie Mae officials say that provision was needed to encourage lenders to offer private loans at reasonable rates.

"It's a loan being made to borrowers with no income, no near-term job prospects and no collateral," Goulding says. Giving additional bankruptcy protection to lenders, he says, "makes common sense."

Consumer groups counter that providers of private student loans don't deserve special bankruptcy protection, because there are no limits on the fees or interest rates they can charge borrowers. And because these loans lack protections included in federal loans, some borrowers could spend the rest of their lives paying off high-interest student loans, they say.

"The assumption is these people won't get stuck because college always works out financially," says Deanne Loonin, an attorney for the National Consumer Law Center. "I think that's a flawed assumption."

Innovation in Higher Ed--Finally

I sat at dinner tonight next to Geoff Cox, the president of Alliant International University, a small private school in San Francisco. He had previously been at Stanford and was hired to rescue a struggling school. Last December he lowered his school's tuition by 26 percent, from $19,000 to $14,000 a year. Why? To boost enrollment and increase their chances of survival. How? Well, he eliminated athletics completely. And most intriguingly to me, he eliminated the first two years of his degree programs, reasoning that California's community college system can prepare people better and cheaper. They are building alliances with the community colleges, including hiring the community colleges' own instructors to teach some of their own classes on those colleges' campuses.
He told me that he believes elite liberal arts colleges are in a completely different business from the state schools and community colleges that serve the vast majority of the nations' students, and so they should stop dictating public policy. This is a man with some really interesting ideas about how to move forward in education.

This is probly going to be my last post for a while, so i'll leave you in Luke's and Nathan's capable hands. Take care!

MyRichUncle and Lender Kickbacks

The New York Times article Luke just blogged about is open in crediting the role of MyRichUncle's recent marketing campaign in bringing other lenders' practices to scrutiny. I've blogged and written about the student lender before; it's encouraging to me to see a company finding a competitive advantage in offering discounts to students while also exposing corruption in the industry. I think it's no coincidence that they're also founded by 20somethings.

Lender Kickbacks and Caribbean Vacations

Two articles today, one in the NY Times and one in InsideHigherEd describe the extravagant Caribbean conference of the private loan company Loan to Learn. The New America Foundation helped break the story on their website yesterday. The company invites financial aid administrators and "a guest" for an all expense paid trip to Nevis. An estimate of the travel and accommodations costed the junket out at $3000 per person. While neither the agenda or list of invited guests are public, but this looks to all the world like an attempt to buy access into college financial aid offices.

Loan to Learn is making news for the second time in a month. In late September the United States Student Association filed a complaint with the Federal Trade Commission arguing that the company misleads students on its website. Loan to Learn, unlike other private lenders, only offers private or "alternative" loans rather than federally guaranteed loans. As such the company has encouraged students to skip the complicated federal process and just apply for private loans that are on average far more expensive than federal loans.

The background on this issue is that financial aid administrators act as gate keepers between private lenders and students. Administrators have for decades vetted potential lenders and created "preferred lender lists" as a guide for students who are trying to pick a lender from amongst hundreds of similar options. Students are, as you can imagine, very reliant on the preferred lender list, meaning placement on that list (and even the order you appear on the list) can mean more or less borrowers. In this system a good relationship with an administrator can mean millions of dollars for a lender.

Financial aid administrators compose their preferred lender lists entirely out of view of the public. It is a private decision with large public consequences for the students attending that school. While it is virtually impossible to know whether any particular vacation or gift influences the administrators choice of lenders, it is equally impossible to disprove the influence or to ameliorate the concerns of onlookers. The only acceptable way to deal with this issue is to ban vacations, trips, fancy dinners. Some administrators will lament this-arguing that they work hard for students and if in the process they can benefit a little from the corporate largesse who really gets hurt? The answer is American higher education is hurt when the same people who compose financial aid packages are tied up with seedy sales efforts. Administrators are invited on these trips because they coincidentally stand between lenders and potential profit. We should not confuse this coincidence with entitlement to such luxuries.

The apt analogy to the administrator/lender relationship is the politician/corporate interest (contributor). Administrators like politicians have tremendous power that lenders hope to influence for their own financial benefit. It is impossible to know exactly whether a Caribbean vacation will result in Loan to Learn being added to any particular lender list, just like there's now way to know for sure that Jack Abramoff flying politicians to Ireland for golf outings influenced their particular votes. That's why we should set a higher standard for administrators and politicians alike-no expensive vacations, trips, fancy dinners.

Financial aid administrators will be outraged by the inference that a trip would influence their decision to list Loan to Learn or any other particular lender. They must accept that to all the world such a trip looks like an bribe or a kickback. Loan to Learn's Nevis vacation is the most extravagant such trip to get publicity but there are a myriad of smaller trips, dinners, meetings that loan companies run around the country for school officials. While we are discussing an exceptional occurrence, influence peddling is a systematic problem with serious consequences for students and the perception of American higher education.

Fantasy Congress

Apropos of nothing debt related here's a great NY Times story about a fantasy sports inspired game called Fantasy Congress. You pick legislators and get points for their "legislative efficacy," i.e. passing a bill or moving it through the process. It's a funny idea but I pass it along because the person described, Ellen Montgomery, is a friend and colleague of mine from Chicago.

The potentially fatal flaw here is that whereas sports statistics suggest the caliber of a player, bills passed (much like press clips) are a poor indicator of political efficacy or legislative power. For instance, Tom Delay ranks very low in their rankings, but probably was the most influential House member for the last several years.

The Irony of Google Ads

If you are willing to accept ads as a necessary cost of paying for the internet then Google ads seem like a great idea, an excellent way of linking people's interests with possible consumer goods. That being said for some blogs such as...well...say...this one Google ads generate ironic recommendations-quite simply, a lot of loan ads on a blog with a less than favorable inclination to crushing student debt.

The ad that has been on the site during my last couple of click throughs has been the following:

"Private Student Loans $1K-$200K
Instant Decision Loan For Tuition, Rent, Etc. Pay After Grad.
EducationFinancePartners.com"

There's lots to say on the topic of private (or "alternative) student lending. There have been some good articles on the subject recently and based on the calls I get from reporters it seems to be the new hot topic within student debt. Setting that aside I just wanted to pass along the quote prominently featured on educationfinancepartners.com's website from a university financial aid administrator:

"Education Finance Partners helps students bridge the gap so they can afford the education they are destined to have."

What does that mean? (For the record, I'm not sure the word "afford" has much place in a discussion about $200,000 of loans.) But really what does "education they are destined to have" mean? I think it means that students should pursue their "dreams of education" regardless of what it costs. That seems like bad advice to me, especially when we have a higher education system with a wide variety of quality options at different prices. When it comes to paying for college we ought to encourage students and parents to be thoughtful about the consequences of debt. This would seem to suggest the opposite, that people dismiss any consideration of cost to seek out their "destiny." I suppose there's a lot more demand for private student loans when people just focus on their destiny rather than their debt.

Affordable Higher Ed in Massachusetts

From my formerly adopted home state of Massachusetts comes a proposal to expand need-based grants to families with up to $70,000 in family income. The policy is coming from a legislative task force but would guarantee free or cheap tuition for a broader section of middle class Massachusetts students. Why is Massachusetts seeking to expand their grants?

"This is about the economy of Massachusetts," Higher Education Chancellor Patricia Plummer said of the new proposals. "The debt burdens that students are taking on only make living here that much more difficult. We want to try to keep young people here in Massachusetts."

The idea that "debt burden" is driving major higher education policy reflects a major step forward in public understanding of student loans in the last several years.

As an aside, the goal of keeping talented young college graduates in state is a motivation for a number of state-based efforts like the Maine students Anya has blogged about before. In the past this type of provincial policy focus has encouraged questionable policies like large merit aid programs. However, in these two instances it seems to be driving good policy in the northeast.

United Professionals

Thanks to Reader EI for the tip off about Barbara Ehrenreich's new organization United Professionals. According to their mission statement:

UP is a nonprofit, nonpartisan membership organization for white collar workers, regardless of profession or employment status. We reach out to all unemployed, underemployed and anxiously employed workers -- people who bought the American dream that education and credentials could lead to a secure middle class life, but now find their lives disrupted by forces beyond their control.

The organization is responding to the challenges facing recent graduates like lack of affordable health care. Two in five recent college grads will spend at least part of their first year out of school without health care. 30% of 18-24 year olds lack health care with 25-34 year olds doing only slightly better. If this organization did nothing more than make a dent in that number it would go a long way to helping out young Americans.

Guest Blogger: Luke Swarthout

Hi, my name is Luke Swarthout and I’m going to be guest blogging for Anya while she’s traveling over the next couple months. As a loyal Generation Debt blog reader and a fellow tiny violinist, I’m proud to fill in for Anya in her effort to highlight the growing problem of debt in our country.

A bit about me-I work for the US Public Interest Research Groups (PIRGs) as our Higher Education Advocate (read: policy analyst, lobbyist) in Washington, DC. The PIRGs were founded in the 1970’s on college campuses across the country by students who were tired of watching powerful interests rip off consumers, destroy the environment and who wanted to have a voice on meaningful political issues. Students formed chapters and pooled resources across the state to higher organizers and advocates to work on their behalf. I got my start in activism as a student with the MASSPIRG chapter at Amherst College working to register and mobilize my classmates to vote in the fall of 2000 and to protect 58 million acres of national forests. After I graduated from Amherst I took a job working for the PIRG students as their voice in Washington on higher education issues.

My own work focuses around issues of college access and affordability. It won’t come as a surprise to anyone reading this blog, but I believe that we are falling short of our nation’s goal of equal access to college. According to the Advisory Committee on Student Financial Assistance, 140,000 high school graduates forgo college every year, due largely to the financial barriers. This is an outrage to anyone who values equality of opportunity regardless of race or socioeconomic status. It is also a problem for our country, because we are missing the opportunity to invest in these young people and thereby invest in America’s civic and economic health.

The second major challenge facing American higher education is college affordability. In the face of falling state funding, more schools have pushed the cost of college onto the backs of students through larger loans and more work. I won’t go on about the challenge of student debt but I will point you to our website and a report I wrote this spring looking at the impact of student debt on students taking critical public service careers. Student debt is a core issue for this blog and also my work so I’ll likely spend a lot of time on it in the coming weeks.

One other note for readers. I'm going to try to keep up with the diverse range of topics that Anya has blogged about, but my own work and life are pretty focused around student organizing, Washington, DC and federal higher education policy. If you see a link or a story that you think should be part of the discussion please email me or post in the comments.

Luke

Guest blogger

Well, I've been successful in finding an excellent replacement to blog on Generation Debt issues while I'm out of the country between now and January. My guest is an expert in higher education policy and politics, and an advocate for students and youth involvement who also happens to belong squarely in our generation. Watch this spot for his contributions. I may be dropping in from time to time as well.

More Roundup

David Burstein, a 17-year-old filmmaker, is making a documentary about first-time voters. He writes:

"I'm 18 in '08" is about the issues at stake for young people in the next presidential election, when many of us in the baby boomlet generation, like me, will be voting for the first time. The film is also about why young people don’t always vote as heavily as they should, and ultimately the film is a call for young people to get more involved in the political process and of course—vote.

I enjoyed reading your book Generation Debt and I think it raises a great deal of very important issues that can hopefully call young people to the polls in upcoming elections.

As a person dedicated to service myself, and a student who will be voting for the first times in the 2006 midterms and 2008 presidential elections, I have become increasingly concerned with getting out the vote and getting those who will be first time voters in 2008 (myself being one) not only to vote, but to become members of the political process. Having created and grown a film festival for high school students three years ago and witnessed the power of film, I have great faith that this is the most effective way to get young people engaged. Since the start of my work, I have conducted interviews with Senators, Congressmen, policy, and media figures about the issues and taking them to task on what they can do to encourage more young people to get active."

Radio Silence

Sorry I haven't been posting lately. Lost time to various personal events, and I'll be out of the country for the rest of 2007. I'm trying to convince some friends to take over here at Generation Debt, so check back for occasional updates.

In the meantime, check out this 50-state map of young voters' power, this free pdf on getting out of debt, detailed analysis on the types and amounts of debt held by 25-34-year-olds ("In 2001, 85% of young adults carried at least some debt, compared with 75.1% of all households. ...The median young adult household owes about $25,000...this amount is well above the median of $14,300 for all households"), and a new scholarly work on the economics of being young.

Pay off student loans or invest the cash?

Michelle Singletary takes a look at this question and has an intriguing answer: think of paying off a debt as a risk-free investment with a guaranteed return, equal to the interest on the debt.

That is a simplified way to look at money management: paying off debt is just another investment.

Go Vote!

Most registration deadlines for the November elections are in a week or so. You can fill out a form at govote.org . Here are some reasons to vote.

The Secretary of Education Speaks: Is Our Children Learning?

The Chronicle and Inside Higher Ed both carry news today of Education Sec'y Margaret Spellings' comments on the big-ass final report (download here) by the Commission on the Future of Higher Education. She didn't sound too encouraging on the commission's best recommendation--that the buying power of the maximum Pell Grant be raised to 70% of the average state university tuition, approximately the 1970s buying power. She said Bush has called for increases in the Pell Grant, which in fact has been flat-funded for the past 5 years.

She was warmer on the also good recommendations to simplify the financial aid application process, although careful to say that cutting more subsidies to corporate lenders--oh, sorry, "reviewing and streamlining the entire federal system of student financial aid" is up to Congress.
And she engaged in what Inside Higher Ed called "higher-ed bashing" over the many recommendations for measurement, comprehensive student tracking, and money tied to accountability, suggesting that any college that doesn't want its students ear-tagged is operating from "fear" of scrutiny.

I have no doubt that there are lots of ways colleges can and should save money, nor that they could improve accountability. How much of the cost increases come from the vast expansion in colleges' missions over the past 30 years, the need to add new technologies? How is it that productivity has increased so much everywhere in our economy except for health care and education?

But you're not going to get improved results in our education system from a corporate downsizing mentality. The Bush Administration's record over the past six years should raise some suspicion that they know the true meaning of the word efficiency and can even recognize competence, let alone measure it.

UPDATE: Rep George Miller sez:

"The Bush administration and Republican-controlled Congress, far from addressing the college cost crisis, have actually made it worse. Earlier this year they cut $12 billion out of the federal student aid programs, pushing college further out of reach for American families. Nor have they done anything to boost need-based scholarships for low- and moderate-income students. The Pell Grant scholarship has been frozen for four years, and it is worth over $900 less, in inflation-adjusted terms, than it was 30 years ago. For these reasons, it is hard to take the Bush administration's sudden commitment to college access and affordability seriously.
"Democrats believe that we must act immediately to put college back within reach of all Americans. We have introduced legislation to lower college costs by cutting interest rates in half on college loans for students and parents in the most need. It is time for a new direction for America so that every qualified student who wants a good college education can afford to get one."

No Debt is Good Debt

Michelle Singletary, who I've had the pleasure of meeting and also interviewing, devotes her personal finance column in the Washington Post yesterday to arguing that the best student loan debt is no student loan debt.

"The rising student loan levels are so troubling, it's time we stop saying this is good debt."Having over $100,000 in student loan debt is not fun," wrote one reader, a new lawyer who joined me during a recent online discussion. "Do I regret going? No, but it certainly didn't pan out the way I thought it would."

Amen.

Opportunity Maine

Orono, ME: Another day, another innovative student-led initative to conquer loan debt. Tonight I spoke to a, let's say, selective audience at the University of Maine and had the privilege to eat dinner with Andrew Bossie, a student at the University of Southern Maine and, I was told, the major architect of the Opportunity Maine ballot initiative.

If this initiative is passed, graduates of Maine's public colleges and universities will receive tax credits to offset the full amount of their student loan payments for every year that they remain in the state. Their employer can also take on the student loan and get the tax credit.

They did careful polling to shape this policy, drafted with the help of the Secretary of State, which includes no new taxes and combats brain drain. They need 60,000 signatures before the vote in November 2007. Good luck, guys!

Time looks at Internships

I am quoted in support of the point that unpaid internships are unfair to all but rich kids.

Big, Sick Kids

(Mirrored at the Huffington Post)

Last week, Jennifer 8. Lee of the Times did a great job on a story I covered in the Village Voice about seven months ago and wrote about in Generation Debt: a trend of laws in several states that extend health care coverage to young adults up to age 30 on their parents' plans.
Young people are twice as likely to be uninsured as the population at large.

For me, this story is extremely timely. I've had four health care plans in the last five years, through COBRA, a freelance journalists' association, domestic partner coverage from my fiance's job, and finally an employer, which is ending in December. These have ranged widely in their generosity, adequacy and responsiveness, and at times, I've needed help to pay the bills. My fiancee is currently figuring out how he's going to afford coverage for an upcoming gap between school and work.

"The rise of uninsured young adults results from two main economic forces, analysts say. Changes in the workplace mean that fewer jobs now have full benefits, which disproportionately affects the newest workers. In addition, the rising cost of premiums, whether shared with an employer or paid individually, makes insurance less attractive to a relatively healthy population."

Lee and I both made the obvious points that this policy is a little infantilizing (as is the phrase "adult children." When did that oxymoron become acceptable?) but that it is providing a useful stopgap for a specific group that is relatively cheap to insure.

Two other points need to be made, however. One is the class implications of such a policy. If your parents don't happen to have a solid job with benefits, you're SOL. The other is that policies like these are no more than Band-Aids. The larger trend, as the excellent health research group the Commonwealth Fund recently underlined with a new survey, is declining employer coverage and increased cost to the individual. What we need is comprehensive reform and large-scale risk pooling, not stopgap measures that protect a small, relatively privileged and relatively healthy proportion of the population.

Loan Consolidation is the Priciest Adword

(For more about adwords and cost-per-click go here and here).
An informant writes:

The top 50 most expensive adwords "Loan consolidation" ($69.16) currently owns them all

This is the list of the top 50 most expensive Google adwords as of September 11, 2006 (GMT+1) (according to wget, grep, sed & friends). Prices are shown in estimated average CPC (costs per click). Yes, just one tiny click from someone searching for these keywords is worth almost $70 to someone, apparently.

(loan consolidation-related keywords make up 13 of the top 20!)

Adword	Average CPC
school loan consolidation	$69.16
college loan consolidation	$68.35
car insurance quotes	$66.88
school consolidation	$66.29
auto insurance quotes	$65.90
college consolidation	$64.04
student loan consolidation rates	$60.14
sell structured settlement	$59.82
sell annuity	$58.92
federal student loan consolidation	$58.58
auto quotes	$58.09
auto insurance quote	$57.99
student consolidation	$56.96
student loan consolidation	$56.91
student loan consolidation interest rate	$56.52
consolidate student loan	$54.61
san diego dui attorney	$54.56
car insurance	$53.16
structured settlement	$52.96
consolidate school loans	$52.88
student loan refinance	$52.44
consolidation of student loans	$52.43

Graduation Rates in the Toilet

In Chicago: At Northeastern Illinois University, a tidy commuter campus on the North Side of Chicago, only 17 percent of students who enroll as full-time freshmen graduate within six years, according to data collected by the federal Department of Education. At Chicago State University on the South Side, the overall graduation rate is 16 percent.

Money quote:
“When you have a system where virtually everyone fails, how is that different from designing a system in which the point is for people to fail?” [Kevin Carey, the research and policy manager at the Education Sector] added. “No one can look at that and say this is the best we can do.”

US News on Free Tuition Programs

Article by a University of Rochester grad who emails:

I have been following your blog for a while. Your issues are ones that are very near and dear to my heart.
These programs don’t completely make college tuition affordable because most of these programs only cover tuition and 50 percent or more of college costs can be due to room, board, fees, and other expenses at public schools. But these
programs are recognizing that college tuition is spiraling out of reach for low and middle-income families and trying to correct it. I think they are a step in the right direction.

The University of North Carolina-Chapel Hill, Michigan State University, Miami University in Ohio, the University of Pennsylvania, and Rice University have all eliminated loans from the financial aid packages of low-income students. Princeton University offers loan-free packages to all students who qualify for financial aid. Other schools, like Harvard, Yale, and Stanford universities, eliminate the parental contribution for low-income students but retain the student contribution. So the student may still require loans to cover tuition.

Basically, I agree with the author's take. School-based aid is never going to level the playing field, but competitive, well-endowed schools are often beacons for the rest of the field.

Where All The Children Are Above Average

Last Thursday I had the privilege of speaking at Winona State University in Winona, Minnesota, both about Generation Debt and to Mass Communication students about my short career in journalism. The highlight of my trip was meeting the students of the Minnesota State University Students Association, some of whom drove 2 1/2 hours from the Twin Cities. MSUSA is essentially a state version of the successful student unions found in Canada and Europe, founded in 1967 and funded by a small per-credit student fee. They make a lobbying trip to Washington each spring. They are up on the issue of student debt.
At Winona State, the Student Senate has a page for people to register their hometowns, majors, and cumulative student loans.

Nonprofits' role in Rebuilding New Orleans

I wrote about the rebuilding process here, and here.

I want to recommend this blog post by Becky Houtman, a New Orleans neighborhood activist, to anyone interested in the operation of nonprofits more generally. Basically, as a local person she's arguing for local input in the huge science project that is New orleans, and points out that in general nonprofits' record of promoting democracy and reaching out to the public is less than perfect.

Awesome research on education and the labor market

Dr. Cecilia Rouse, quoted in the New York Times story mentioned below, is the author of a forthcoming book that sounds like Generation Debt: Academic Edition. Her Princeton website has links to some fascinating-sounding articles, including

"Labor Market Returns to Two- and Four-year College,"
"The Community College: Educating Students at the Margin Between College and Work,"
and (no link)
"Putting Students and Workers First? Education and Labor Policy in the 1990s" (with Alan Krueger) in Economic Policy in the 1990s, Jeffrey Frankel and Peter Orszag, editors, (Cambridge, MA: MIT Press, 2002): 663-728.

Hmm, Sounds Familiar

This Labor Day, the 45 million young people in the nation’s work force face a choppy job market in which entry-level wages have often trailed inflation, making it hard for many to cope with high housing costs and rising college debt loads.
Entry-level wages for college and high school graduates fell by more than 4 percent from 2001 to 2005, after factoring in inflation, according to an analysis of Labor Department data by the Economic Policy Institute. In addition, the percentage of college graduates receiving health and pension benefits in their entry-level jobs has dropped sharply.

...Census Bureau data released last week underlined the difficulties for young workers, showing that median income for families with at least one parent age 25 to 34 fell $3,009 from 2000 to 2005, sliding to $48,405, a 5.9 percent drop, after having jumped 12 percent in the late 1990’s.

Worsening the financial crunch, far more college graduates are borrowing to pay for their education, and the amount borrowed has jumped by more than 50 percent in recent years, largely because of soaring tuition.

Dialogue with Richard Power

I recently had the honor to become acquainted with Richard Power, who runs a blog commenting on national and world events here.
Why should you listen to what he has to say on world events?

PBS's Frontline calls him
an internationally recognized authority on computer crime, information security, industrial espionage...
and his own bio says As Editorial Director of the Computer Security Institute (CSI), he was widely and frequently quoted in mainstream news media. He established the CSI/FBI Computer Crime and Security Survey, testified for the U.S. Senate Permanent Sub-Committee on Investigations, and was featured on PBS Frontline. Power also authored of Tangled Web: Tales of Digital Crime from the Shadows of Cyberspace (Que, 078972443X).
Later, as Director of Global Security Intelligence for Deloitte Touche Tohmatsu (DTT), Power developed a Global Security and Crisis Management Strategy, including all aspects of personnel, physical and cyber security, for a workforce of over 100,000 people in over 100 countries.
In 2005, he founded GS(3) Intelligence and Words of Power to write, speak and consultant independently. With leading forensic expert Dario Forte, Power co-authors “War and Peace in Cyberspace,” a monthly column, published in Computer Fraud and Security Journal (Elsevier).

Now that you're perhaps suitably impressed, check out his interview with me and review of the book on his blog.

Fast Company feature on Jeff Skoll online

from the September issue:
I'm not the first blonde to find herself standing with eyes closed in an office in Beverly Hills, eager to be manipulated by a Hollywood executive. "Hold out your hands," says Jeff Skoll, founder of Participant Productions, the film company behind Good Night, and Good Luck, Syriana, and An Inconvenient Truth. "Now, imagine that your right hand is holding a heavy book. Your left hand is attached to a helium balloon." When I open my eyes, my hands are about six inches apart--a hypnosis test indicating some, but not extreme, suggestibility.

It's Class...Stupid

I don't know how i've missed Thomas Frank's guest columns in the New York Times. But the one published on Tuesday (sorry, select) is just brilliant. Basically, liberalism is dying because we don't go back to our roots and admit that class matters.

"in “The Disposable American,” a disturbing history of job security, Louis Uchitelle points out that the New Democrats’ emphasis on retraining (as opposed to broader solutions that Old Democrats used to favor) is merely a kinder version of the 19th-century view of unemployment, in which economic dislocation always boils down to the fitness of the unemployed person himself.

Or take the “inevitability” of recent economic changes, a word that the centrist liberals of the Washington school like to pair with “globalization.” We are told to regard the “free-trade” deals that have hammered the working class almost as acts of nature. As the economist Dean Baker points out, however, we could just as easily have crafted “free-trade” agreements that protected manufacturing while exposing professions like law, journalism and even medicine to ruinous foreign competition, losing nothing in quality but saving consumers far more than Nafta did."

In fairness, journalists *are* exposed to lots of foreign competition via the Internet, not free trade agreements. And paralegals and some radiologists are getting outsourced too now. But I think the critique of the hypocrisy of professional protectionism is right on. Nowhere more obviously than in the academic world. The BA is the required credential for most decent jobs and a pretty expensive one, too--but what does it really teach you? or prepare you for? More and more, I'm realizing that Frank is right, education is not the only answer for what ails us.

Payday Lenders Target our Armed Forces

USA Today:
As many as one in five members of the armed services are being preyed on by loan centers set up near military bases that can charge cash-strapped military families interest of 400% or more, a new Pentagon report has found.

“We're seeing a growing trend of folks who are not eligible to deploy because of financial problems,” says Capt. Mark Patton, commander of Naval Base Point Loma in California. Patton says debt problems can cost some servicemembers their security clearances.

This is just brilliant. I thought soldiers were supposed to be safe on their home base.

Filipino Student Txtivists: An Adventure Story

They organize protests via cell phone text messages.

"When Estrada was ousted, we realized the power of texting,"
said Palatino, the slight, well-spoken president of a
national youth party. "Since then we have never stopped
using it to advance our causes."
...
At 1:45, Palatino's phone pinged again, this time with the
message: "ASSEMBLE RIGHT NOW!"

A smile crossed his face. With a few more taps of his
thumbs, he forwarded the command down the text brigade
ranks. He sent it to those on his phone list, and each who
received it did the same. In seconds, about 1,000 students
were in the street, stopping traffic and sending cars and
bicycle taxis scattering.
Two students quickly hooked up a public address system to
the battery of a vehicle. One by one, leaders climbed on top
of it to fire up the crowd. Palatino demanded that President
Arroyo do more to end the killings and allocate more money
for universities.
"Books, not bullets!" he shouted.

We American kids really need to get on this. Where's our national youth party? Where's our texting armies? All of y'all Facebook people, what's up??

Times continued great coverage of class, economy

I think it's great the Times made this the lead story today:

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s.

Update:a followup story:
The nation’s median household income rose slightly faster than inflation last year for the first time in six years, the Census Bureau reported yesterday.
The rise, however, had little to do with bigger paychecks — in fact, both men and women earned less in 2005 than 2004. Rather, census officials said, more family members were taking jobs to make ends meet, and some people made more money from investments and other sources beyond wages.

Dazzling Demographics

Some 55 million youngsters are enrolling for classes in the nation’s schools this fall, making this the largest group of students in America’s history and, in ethnic terms, the most dazzlingly diverse since waves of European immigrants washed through the public schools a century ago.


They're the Millennials. And they're coming to getcha.

Love and Loans

Headline: Getting married? Now you can register for student loan relief

via this website.

A Couple of Katrina Stories

From TomPaine, on public housing; from Village Voice, on neighborhood rebuilding (bunch of photos there by me and some awesome ones from Bart Everson, a blogger, community activist and all around nice guy.) I also interviewed Maitri V-R and Karen Gadbois, two more New Orleans community activists who blog.

On the wider front, some good stories in the Times and Times Magazine, some great ones in the Times-Picayune , and this one's from Reuters.

Fair and Balanced?

You can catch me in a Fox News documentary this Sunday night, the 27th, at 8 PM Eastern (note new time). The title is
Why Does College Cost so Much--And is it Worth it?

The star is, um, Newt Gingrich. Yup, that Newt.

They filmed me in the basement of a local cafe where i sometimes bring my laptop...it was a long time before i could go back there. : )

Diagnosis: Deficit Addiction

From TomPaine.com:
For the past few decades the federal government has been racking up massive amounts of debt without frightening away lenders thanks to a sterling reputation of debt repayment. Those days, however, may be gone as we stand at the precipice of the retirement of the Baby Boom Generation and our political leaders are increasingly unable to prepare for the impending crisis. Today, as yet another fiscally irresponsible and reckless session of Congress winds down, we find ourselves confronting a half-trillion dollar war (so far); a massive, multibillion dollar Gulf Coast rebuilding effort; a looming energy crisis; a $260 billion deficit and an $8.5 trillion national debt. But the real challenges lay ahead, toward the obligations to this nation's citizens, and the magnitude of the problem should give even the most reckless of congressional members pause.

----Isn't the deficit basically an example of intergenerational imperialism? Generations X, Y, and those beyond us are subject to taxation without representation.

Excellent Essay on the Meaning of Student Debt

From Dissent, via Alternet.

DEBT IS NOT just a mode of financing but a mode of pedagogy. We tend to think of it as a necessary evil attached to higher education but extraneous to the aims of higher education. What if we were to see it as central to people's actual experience of college? What do we teach students when we usher them into the post-welfare state university?

College Rankings

And whether we're doing them right, in the NYT business section:

So do we spend too much time worrying about college rankings? Or not nearly enough?

Not so long ago, college administrators could respond that they seemed to be doing just fine. American universities have long attracted talented students from other continents, and this country’s population was once the most educated in the world.

But it isn’t anymore. Today the United States ranks ninth among industrialized nations in higher-education attainment, in large measure because only 53 percent of students who enter college emerge with a bachelor’s degree, according to census data. And those who don’t finish pay an enormous price. For every $1 earned by a college graduate, someone leaving before obtaining a four-year degree earns only 67 cents.

Last week, in a report to the Education Department, a group called the Commission on the Future of Higher Education bluntly pointed out the economic dangers of these trends. “What we have learned over the last year makes clear that American higher education has become what, in the business world, would be called a mature enterprise: increasingly risk-averse, at times self-satisfied, and unduly expensive,” it said. “To meet the challenges of the 21st century, higher education must change from a system primarily based on reputation to one based on performance.”

Privatizing Higher Ed

The Commission on the Future of Higher Education published its final report yesterday. I'm down in New Orleans, so I haven't had a chance to read it and will post when I have. The Times focuses on the calls for increased federal grants (great), standardized tests (!) and federal monitoring (!!) of colleges (David Horowitz and his uber-Orwell "Students" for Academic "Freedom" must be thrilled).

ON the tests, I'll quote a correspondent from my email inbox:

I'm totally against state standardized tests. It will erode the integrity of higher education just like it
has to early education. The government needs to learn that it can't stick it's nose into everything. Let
the market determine the strengths and weaknesses of our higher education system and allow it to adjust
accordingly or perish.

MSNBC Covers MyRichUncle

What's striking to me about this story is that basic facts about the student loan program are being covered as news--that students have a choice of lenders, for example, or that lenders are insured by guarantee agencies and in turn by the federal government.
People don't understand this stuff, because it's demonically complicated, and that may be the biggest way that students suffer.

Unfair Internships--The Blog

Someone has set up a blog to examine the "Unfair Internship" issue. From the FAQs:

What’s an “unfair internship”?
It’s an entry-level position with normal responsibilities that benefit the employer but called an “internship” so as to avoid paying an entry-level salary or any salary at all.

What’s a “fair internship”?
It’s an internship that should be called an apprenticeship: the intern receives a lot of coaching (more than a regular new staff), his presence is more of a burden than a benefit for the organization. If the intern receives an entry-level salary, with normal responsibilities, it’s a job by another name.

It includes resources on what to do if you see that your internship is illegal under the Fair Labor Standards Act.
It also has a fair assessment of my NYT piece. I want to clarify one point: I stated in the piece that internships are not real jobs, only simulations.

Some internships involve real work. In that case, I think the intern should be fairly compensated as this blog argues.
Some internships do not involve real work. They involve busywork, and lots of staring at computer screens. In that case, I think the intern should quit.

Starbucks Labor Revolutionary Canned

My post is over at Huffington Post.
A couple of commenters point out that Starbucks jobs are better than your average retail job. They pay around $7 an hour and you can get health benefits. True, but I still support the Starbucks workers' fundamental right to organize.

What's the real federal deficit?

USA Today says, according to an audited financial statement produced by the government's own accountants, it's more than twice as much as the official $318 billion figure--$760 billion. That's not including Social Security & Medicare--it's mostly because of the cost of federal employee pensions& retiree benefits.

Am I a dork because I think an article discussing& simplifying federal budgets and accounting methods is really cool?

The Catch-22,000

This Alternet article, sent my way by Liberal Arts Dude, is a seriously eloquent and illuminating testimony from one type of person most hurt by student loans. It seems this young woman, who now owes over $70,000, had just the wrong combination of low family income, high achievement, high aspirations, and an enduring belief that more and more education would vault her over the wall into the mythical "middle class" where hours are shorter, salaries bigger, and debt no big deal:

"To be fair, I made the choices that put me in this situation. I attended an expensive university 3,000 miles from home. I stayed at that school, even though I could get a cheaper education elsewhere. I studied an impractical subject that I loved, then continued my studies at an obscure foreign university. I wasn't always aware of financial consequences.

Yet I made my choices based on the values I had been taught -- that helping others is more important than making money for yourself, meaningful career is more important than net worth, and brains, determination, and charisma are the key ingredients of success. I realize now that I subscribed to the fantasy of an equal society, when in fact everyone's options arise from class, race, gender, and a thousand other subtle differences in our experiences, assumptions, and privileges...What is writ large in corporate bankruptcies, withering federal programs and industrial outsourcing is writ small in stories of impossible choices and shattered educational dreams. The real tragedy is not that America's young people can't afford their college education -- the tragedy is that they are told their entire lives that education is their birthright and a chance to social mobility, and then are forced to watch that birthright crumble under the weight of unbearable debt."

I think this girl is totally right, and it's terrible what happened, but she also made mistakes that others can learn from. I so wish I could give everybody this news:

1. You likely don't need a graduate degree to do what you love, unless what you love is to practice medicine. (this girl decided to enter a master's program in "social change.")

2. Your first job is probably going to suck. You stuck out school for four years, so give the first job a chance for 2 years [she was "burnt out" after 6 months as a union organizer and "retreated" (her words) back to school. Big mistake.]

3. Big student loan debt is a big deal.

US Economy Worse Than Europe's

When it comes to income inequality and employment for disadvantaged populations. That's according to the Center for Economic and Policy Research :


“Is the U.S. a Good Model for Reducing Social Exclusion in Europe?,” by economist John Schmitt and researcher Ben Zipperer, found that the United States fares worse than Europe on a range of social and economic indicators, including most measures of poverty, health, education and crime rates.. the U.S. is the most unequal of the major OECD countries, with a higher Gini coefficient, lower relative incomes among poor households and a bigger gap between rich and poor. The report notes that:
- The U.S. has a smaller share of low-income workers that make it to higher income levels than any other OECD country. This contradicts the widespread belief that American workers have a much greater chance of getting ahead than do European workers.

In totally unrelated news, House Republicans pulled a major slime move this week, passing a $2 minimum wage increase BUT tying it to a repeal of the estate tax, which helps a tiny percentage of the very very rich. NYT: Democrats criticized the decision as a cynical charade intended
to give Republicans the appearance of supporting an increase in the
minimum wage through a bill that would not clear the Senate because of
opposition to an estate tax change aimed at extremely affluent
Americans.

"In all my years here, this is the height of hypocrisy," said
Representative Sander M. Levin, Democrat of Michigan, who said
Republicans considered a raise in the minimum wage only out of fear of
losing House seats in November. "If you really cared, you would have
acted long ago. This is not an election-year conversion; it is an
election-year trick."

Best Loans May Be Outside University Preferred list

Obvious, but bears repeating:
Colleges and universities do not always push students toward the lenders with the best rates, Bloomberg News Columnist John Wasik said.

In many cases, because of marketing agreements, students are given a list of preferred lenders, generating the perception that they are the best loans available because they are chosen by the school.

The best deals are often to be had outside financial aid offices, certified public accountants said.

House Reauthorizes Vocational Ed

Congress voted strongly to reauthorize the Vocational Education Act, which Bush recommended getting rid of.
From Congressman George Miller's press release:
"President Bush wanted to eliminate this program entirely, which would have cut $1.3 billion from programs that train today's workers and future workers for high- wage, high-skill careers." The bill supports high school and post-secondary programs.

I saw an ad for one of these programs on the subway the other day, training women for nontraditional jobs like electricians and engineers.

Geraldo at Large

I didn't get to meet Mr. Rivera but the clip's on the website. Mostly about credit cards.

David Brooks is Full of It

I was crafting a response to David Brooks's column on why tuition assistance for families having trouble paying for college is useless, but this TimesSelect reader did it for me:

James Hathaway, Charlotte, N.C.: Predictably, you are making excuses for why the government shouldn't be spending money, though there is a clear need for the expenditure. Yes, there are many social reasons why some students fail to complete college besides finances, but that doesn't mean that there isn't a desperate need for financial support. For those of us who are not in the standard tax bracket for financial conservatives, the cost of college — even the cheapest state schools — has become prohibitive, and continues to become more so. Many of the social problems you cite are really red herrings, either issues that are insoluble — for instance, the divorce rate — or prohibitively expensive to fix, like public education.

I've been working in higher education for over 20 years and have seen the stress that college cost puts on even highly motivated students. Many work full-time while trying to carry a full course load and then — guess what? Yes, many are poorly prepared and many are unmotivated, but the financial burden is generally one of the most likely straws to break the camel's back.

More to the point of the current legislation, as Congress continues to cut things like Pell Grants, is the fact that unless something is done quickly, the number of students who drop out or who don't apply at all is going to increase rapidly. My own children have guidance counselors who advise vast swaths of their charges to go to community college instead for the first two years because it is cheaper in the long run. But it's actually not. You worry periodically about the future competitiveness of America — think about this a bit the next time before you create more spin for why it is futile to support education in America.

MyRichUncle Backlash

The Chronicle says the nation's financial aid administrators aren't happy that MyRichUncle took out an ad saying they have special relationships with lenders and don't always steer students toward the best deal.

"In its advertisement, MyRichUncle says some financial-aid administrators take "kickbacks" and "payola" from lenders who wish to become exclusive providers of loans on the administrators' campuses. None of these charges is particularly new. Over the past several years, Democratic lawmakers, student-loan watchdog groups, and even some loan-industry officials -- as well as the Education Department's own inspector general's office -- have urged the Education Department to be more aggressive in ensuring that lenders abide by rules that prohibit them from offering colleges inducements to secure applicants for federal loans. Despite these misgivings, department officials have largely refused to regulate in this area, leaving it up to the loan industry to police itself (The Chronicle, October 17, 2003, and November 28, 2003)."

Here's the kicker: Two financial aid advisors go on to say, well, even if MyRichUncle offers the best loan deal going right now, they won't tell students about it--because MRU hasn't established the right relationship.

""I told their representative not to visit me," said David R. Gelinas, who is the financial-aid director at the University of the South and also a member of [NASFAA]s board. "I told him that I found their approach to be offensive."
Walter O'Neill, assistant vice president for financial aid at Roosevelt University, agreed. "There's going to be a backlash against the company because they have shown that they don't have integrity or credibility.""

How is it showing a lack of integrity or credibility to publicize widely known and substantiated charges about an industry where you're trying to do something different? It's like a plumber in an ad saying, "some plumbers will overcharge you. They inflate the bill cause they're getting kickbacks from suppliers. Ask a plumber these questions to find out how independent they are. And trust us, cause we're telling you this."

Colleges Step Up to Ease Burden for Interns

Yay!
Internships have displaced casual hourly jobs as the more typical summer experience for college students — one that may provide valuable professional contacts or even lead to full-time employment after graduation. In a survey by Vault.com, which tracks student employment trends, 62 percent of college students planned to do an internship this summer, up from 41 percent two years ago.

But as many as half of all internships are unpaid or low-paid, career counselors say. Some students even effectively end up paying tuition to do unpaid internships because some companies, concerned about labor laws, require students to receive academic credit for the experience. And so college administrators nationwide have become more concerned about access to internships at all socioeconomic levels. The solution, they say, is to provide financial assistance.

“It’s all about equality,” said Lanch McCormick, the associate director of undergraduate career services at Yale, which also subsidizes summer internships. “It’s all about being able to offer these opportunities to all students.”

That's right, and that's great. But what about asking companies in these industries to contribute, too?

More on Interest rate competition

This article suggests " The higher interest rates on federally guaranteed student loans may make private loans a more affordable alternative because they may include lower interest rates."

I wonder if that's true. Right now private loans are running almost 1.5% on average above federal student loans. But the interest rate hike and especially the fixed rate does leave room for price competition.

Truth in Advertising

I wrote aboutMyRichUncle, an upstart student loan company founded by two 20-somethings (full disclosure, one of whom is a friend of a friend) in Fast Company about six months ago. Back then their angle was private loans with low rates and their own proprietary lending criteria:

Their proprietary software predicts student income based on transcripts, school, course of study, and other data; a business student with stellar grades might get a .25% reduction over a pottery student with a spotty record. Khan and Garg believe they can drive down defaults by knowing their borrowers better, but they also offer unique sweeteners: They can get you your money in five days (versus several weeks with traditional lenders) or make interest-rate reductions if you choose automatic payments. MRU’s basic variable APR was 6.38% in January 2006, near the lowest in the industry.

Yesterday MRU had a 2-page ad in the Sunday New York Times announcing their entry into the federal student loan business. A couple of things made me say, "wow!" One is that they are to my knowledge the first company ever to discount federal student loans, 1.5 to 2 points below the federally allowable rate. The second is that with a full page list of questions to ask your student financial aid administrator, they are publicizing to students and families all of the shady practices that go on between lenders and schools, and making sure people know that they have a right to choose a lender beyond their school's "preferred" list.
In current circumstances, I still think a student should usually choose a direct student loan because of the extra protections available. But I am very into what MRU is doing. It's great for students to have a real alternative.

Article on Sallie Mae's Growing Clout

IN the NYT business section. A little credulous and ignoring some of the political issues in there, such as this graf:

Changes in the law — including longer repayment periods on loans, bankruptcy overhaul [TRY: THE ELIMINATION OF BANKRUPTCY PROTECTION FOR BORROWERS] and the rise of products that let students refinance their debts at more manageable rates — have not only brought default rates to record lows but also attracted swarms of new lenders. And during the Clinton administration, the federal government itself got into the direct lending business, essentially competing with the banks.

Colleges that Profit when Student Loans Grow

Interesting press release from the National Direct Student Loan Coalition. Maybe right-wingers who think that government spending is the real problem in the student loan equation should look into reforming the loophole that allows colleges to profit directly by lending loans to their students.

The National Direct Student Loan Coalition Calls on Congress to Fix the Eligible Lender Trustee Loophole

In defiance of the intent of Congress when it recently passed restrictions on the School as Lender (SAL) program, some colleges and universities have found a loophole that allows them to garner profits from their student borrowers far in excess of what they could ever make through SAL.

Using an eligible lender trustee to manage their lending function for them, schools can bypass SAL restrictions imposed by Congress and lend not only Stafford to their graduate students, but PLUS loans, Graduate PLUS loans, and undergraduate Stafford loans as well. The U.S. Department of Education has confirmed to the Coalition that they consider this activity legal under current law.

When it created the School as Lender option in the Federal Family Education Loan Program (FFELP), Congress did not intend to create a major profit center for institutions of higher education, but simply to ensure that institutions could potentially serve as lenders of last resort to their students when banks refused to do so. Fortunately, the need for serving as a lender of last resort no longer exists.

School as Lender is in and of itself bad public policy – it is harmful to students who often have higher loan fees than through traditional federal programs, harmful to taxpayers when the less expensive Direct Loan Program volume decreases, and harmful to institutions of higher education who jeopardize their credibility through a profit-scheme that is rife with conflict of interest and inherent incentives to increase the cost of education.

In addition, this eligible lender trustee loophole has the potential to not only decrease loan volume in both DL and traditional FFELP, but could inevitably lead to the weakening and ultimate demise of the FFEL program itself.

Congress must quickly move to close this eligible lender trustee loophole to protect the integrity of the federal student loan programs.

Adult Dorm Life

NYT, on 20somethings sharing apartments in a building in Harlem:

Asked how adult-dorm life differed from college-dorm life [29-year-old], Mr. Fenn said: “You’re not really at the same place where you were psychologically. Now, for me, I’m kind of wondering: When does this end? When do I get to be able to buy a place and settle down?”

also interesting...

New York City has long been a magnet for the young, well educated and ambitious. According to a report published by the Census Bureau in 2003, nearly 132,500 young, single, college-educated people poured into the New York metropolitan area between 1995 and 2000, more than into any other metropolitan area in the United States.

“Sometimes we underestimate how important that is in generating the city’s creativity,” said Frank Braconi, chief economist for the city comptroller’s office. “To the degree that housing costs become a barrier to that group, it can in the long run sap us of that creative potential that we would otherwise have.”

What surprised me about this article wasn't any of the facts but the rents people are paying for "affordable" housing. $850 a month? That's why you have to shack up as quickly as possible, so you can share a one bedroom or a studio. When I first moved here, in 2002-2003, I was living for awhile with five people in a three-bedroom apartment.

Live Blogging at the Campus Progress Conference-the change track

I couldn't be there but you can read about it here. I like this idea of a panel about "Making Change a Career."

"They all made it sound so easy (other than the whole graduating magnum cum laude from Harvard Law) and maybe that's because it is: find what you want change, what needs to be changed, and do it." Well, that's the thing, i guess--If you can afford to graduate magnum cum laude from Harvard law without $200K in debt, then yes, there are some awesome opportunities out there to0 do well and do good. If you can't then there are still awesome opportunities out there, but it's gonna harder.

I was talking to pioneering social entrepreneur, Bill Drayton of Ashoka, for a story the other day and he told me that he's extremely optimistic about young people lining up for opportunities in the change-the-world industry. "People see that this is the best job available. It has the fastest growing salaries-- gaining on the private sector--values and work line up perfectly, there's so much demand, almost no glass ceiling, and your colleagues are high value, not cynical." This guy David Bornstein wrote a book called How to Change the World about an explosion in the nonprofit or pro-social sector. "Around the world, the fastest-growing segment of society is the nonprofit sector, as millions of ordinary people--social entrepreneurs--are increasingly stepping in to solve the problems where governments and bureaucracies have failed."

Big news--and good news, for anybody who's young ambitous and worried like me about the future.

The View

This Friday, July 14, you can catch me on the first five minutes of ABC's The View. Booking on this show has been an interesting process--far more prep for this "chat" show than for any of the news programs I've been on. I'll see how it goes.

National Shitstorm

WaPo: " A Driven President Faces a World of Crises."

I am hard-pressed to think of any other moment in modern times where there have been so many challenges facing this country simultaneously," said Richard N. Haass, a former senior Bush administration official who heads the Council on Foreign Relations. "The danger is that Mr. Bush will hand over a White House to a successor that will face a far messier world, with far fewer resources left to cope with it."

And they're just talking about international issues here, not the national debt, social security, health care, global warming or energy dependence

Making Connections

I recently heard from a couple of interesting and somewhat related writers/bloggers: Kevin Smokler (news, books, movies, websites, cultural commentary, etc) and "The Liberal Arts Dude." ("About the trials and tribulations of being a Liberal Arts graduate in the job market. Sound advice, amusing stories and information that relate to young adults feeling their way around the job market for the first time.")