Community Colleges Get Some Respect

Obama's main man Rahm Emanuel hinted at a big announcement that's coming from the administration soon to get 5 million extra students through community college in the next 10 years. Mainly the new funding will go toward vocational programs, likely through the reauth of the Workforce Reinvestment Act.

Obama's administration has been unusually respectful of the role of community colleges. I had the pleasure of interviewing Martha Kanter last month at Foothill-De Anza Community College in Los Altos, CA where she is the chancellor. She is the Undersecretary of Education-nominee --the first person with a community college background to be tapped for such a high position in the Department of Education.

I've said it before, I'll say it again: community colleges are the big, important, unsung heroes of the higher ed system in the US. They educate half of high school graduates, 11.5 million students in all.
Their enrollment is going up as the economy and their funding is going down. CCSF in San Francisco is having to cancel 800 classes for the fall unless they can find private donors to sponsor them.

Others have expressed concerns that expanding the role of community colleges, particularly with an emphasis on vocational training, will lead to a further stratification of our higher education system by class. Ideally, you don't want poor kids--solely due to income, not aptitude or interest--tracked into institutions with fewer resources overall, weaker liberal arts programs, and no original research. Conversely, middle class and rich kids who attend the four-year privates and publics may be overpaying for useless perks and filler and missing out on economically sound, reality-based vocational skills. ( I went to Yale: one journalism course, zero in personal finance. More would have been useful.)

I think the answer is to break down barriers among institutions to allow disaggregation of the various benefits of higher education, sharing of best practices and access to the best knowledge and research available, for everyone.

Cuomo Decides What to Do With Student Loan Blood Money: Lame

So a couple of years ago, NY Att'y General Andrew Cuomo pursued this huge crackdown on student lenders and college financial aid officers for improper business relationships and high-pressure marketing tactics. Total settlement payments collected: $13 million.

New York State is finally announcing what he's going to do with the cash: (1) create a "Web-based, live-operator staffed student loan center" to help students and parents choose the best loan options and minimize loan debt, and (2) produce a campaign of public service announcements about financing a college education, with an emphasis on avoiding loan debt.

Ok, another source of independent, easily accessible information for navigating the byzantine financial aid system is not a bad idea. Perhaps the Project on Student Debt could expand its excellent efforts along these lines into call-center model.

But PSAs? Really? Do students or families need to see TV commercials about the evils of loans?

America's Biggest Personal Debt Items

At Cnbc.com, in ascending order: Payday loans, small business loans, farm loans, car loans, tax debt (unpaid taxes), home equity lines of credit, and of course student loans (now at $583 billion).

Update :Good point! Medical debt, which is huge, is not included on this list b/c it's "not reliably tracked."

Advice For The Young And Jobless

NYT blog coverage of an event at the Century Foundation which I moderated yesterday...
My takehome messages from the event:

1) The job market is really terrible for everyone right now, but no one is better equipped to compete than young college grads.
2) The long-term outlook is much better than the short-term outlook.
3) The real opportunities lie in helping others (both people in your own social network, who are your richest resource to find work and vice versa, as well as actual job openings in education, health care, nonprofits and social services.)
4) What this country really needs is a labor movement to improve the quality of all jobs.

Hear Me on the Takeaway Talking Foreclosures, Health Care

Great show. I always marvel at live radio and how calm everyone stays under pressure. Another guest, a woman who almost lost her home, was supposed to call in but they couldn't reach her, so it was just John Hockenberry & me for 10 minutes.

How Much Student Debt is Too Much?

I have an answer on the New York Times' Room for Debate blog.

Podcast on Young People and Credit Unions

Private College President: Please, Save Us From Our Own Wasteful Ways!

“If we’re going to change our ways, we’re really going to need to be pushed,” Mr. Diver said, referring to colleges generally. “It’s not going to well up from within.”

Next Crisis for Business: Consumer Credit

From The Big Picture:






From Harvard Business Review:
(Ratio of household debt to earnings.)

So the average American household OWES 20% of their assets, 28% of their net worth, and 130% of what they earn in an average year. That includes mortgages, student loans, auto loans, and credit card debt--everything.

This bubble--everything but mortgages-- actually has yet to pop, and when it does, all kinds of businesses will be affected, according to a great article by William Jarvis and Ian MacMillan in the HBR.

That's because most of the American economy depends on consumer spending. 68% of the entire economy, to be exact, up from 63% in the 1950s.

People are furiously trying to get out from under this debt. Savings rates have bounced from -0.5% to almost 6% in scarcely a year. Until they pay it off, the US economy can't recover. And after they pay it off, it's hard to see how we can go back to the spending rates the economy depended on before.

5 Ways To Fix Colleges

So glad to see the Times staying on this topic.

"AMERICAN education was once the best in the world. But today, our private and public universities are losing their competitive edge to foreign institutions, they are losing the advertising wars to for-profit colleges and they are losing control over their own admissions because of an ill-conceived ranking system. With the recession causing big state budget cuts, the situation in higher education has turned critical. Here are a few radical ideas to improve matters."

Compared to the previous Op-Ed on the topic they ran, "End The University as We Know It," this one is a lot more practical and down to earth, but less provocative and memorable.

Opening the books on accreditation is a great suggestion. An extra year of compulsory schooling is interesting, but maybe too one-size-fits-all. I'm not sure that I agree that college should pay for huge mass-marketing campaigns though.
The two pieces taken together encompass a dichotomy in the way we tend to think about the purpose of higher education. One side is economic development and extending opportunity to the disadvantage. The other side is the advancement of knowledge, the liberal arts, and innovation.

What's Good for GM

"It's hard not to see GM's bankruptcy as a signal moment in a larger history. If mighty GM can fail, cannot also the United States? And the answer is, absolutely." The company's stark decline is "a rebuff of the notion of exceptionalism," notes Neil. "Any organization that fails to sufficiently safeguard its means of self-correction and reform, that forsakes long-term investment for short-term gain, that piles up debt year after year, will eventually fail, no matter how grand its history or noble its purpose.""

(Via Slate)

What Happened To My Loan Forgiveness Program?

My two best friends from college are pursuing careers as a public school principal and a public interest lawyer. Both are relying on loan forgiveness programs.
Now these programs, which were supposed to encourage people to enter essential public service occupations, are imperiled by the economy.

Loan forgiveness programs across the country , whether sponsored by states or private organizations, are reneging on millions of dollars in promises and leaving young workers in the lurch. Ron Lieber writes, in an important scoop,
"There are no guarantees that financing for the loan forgiveness programs will survive the next state legislative session (or that the economy will improve enough for them to find other ways of financing the forgiveness). We found this so disturbing that we decided to call up every single entity, state or federal, that we could find that offered loan forgiveness programs. Then, we asked them point-blank if they would like to offer an absolute promise to borrowers or potential borrowers that the loan forgiveness programs would not go away while the borrowers were still using them." The answer, often, was no. You can visit the New York Times website where they are building a database of the fates of various programs nationwide.

There is no way this can stand. It just isn't feasible, long term, to have people incur tens of thousands of dollars in debt to pursue basic middle class jobs.

A Moment of Clarity On Student Loans and the Bailout

Increasingly it looks like the combination of a credit crisis and Democratic leadership will do away with the FFEL (the lender-based student loan program that is more costly for taxpayers), saving up to $94 billion over 10 years that could be used for the Pell Grant. Even Sallie Mae is sorta playing ball.

But in attacking the FFEL program, the Department of Education has committed a gaffe (defined as "a politician accidentally telling the truth.")

"Education Department leaders repeatedly describe the guaranteed loan program as being "on life support," which strikes some loan industry officials as hypocritical since the White House boasts in many other settings that its efforts to shore up the financial industry have been hugely successful."

Let's not kid ourselves. The financial system as a whole IS on life support thanks to a free flowing IV drip of federal dollars, which ultimately swell the national debt that our grandchildren will be paying back. That includes the student loan industry, the mortgage industry, and the credit card industry.
I defer to those with greater expertise who say that this life support project is necessary in a broader sense; but for student loans, if a government department is in a position to take it over at less expense to taxpayers, let's do it.

Our Hero, Elizabeth Warren

Thanks, James Scurlock (the Morgan Spurlock of debt) who wrote a great piece about why Elizabeth Warren is so awesome. She gets what the real problem is: the financial system was profiting on the backs of American families. We're not going to be able to fix it or prop it up as long as people can't pay off their credit card debt. In fact several rounds of defaults are still looming.

"We can't have a modern economy without solvent banks, but we can't have solvent banks or a functioning economy without solvent families." That such a notion remains controversial is almost mind-numbing."

And that Ms. Warren would be attacked and berated for it by a usually incredibly smart and savvy financial journalist on a podcast, Planet Money, that I listen to every week is kinda bewildering. What I heard NPR's Adam Davidson say last week is that Ms. Warren is improperly imposing her "out of the mainstream" views on a process, the TARP, that is supposed to be led by sober "elder statesmen" (yes, he did say statesMEN--unfortunate choice of phrase). But her ideas should not be out of the mainstream. They are the new mainstream. She belongs to a select group of economic observers who warned that a day of debt reckoning was coming--not with scary voodoo or black swan hocus pocus but in plain, sober, easy-to-understand terms--"the problem is as much a credit crisis as a slide in conditions for average American families."

The Two-Income Trap should be required reading for Tim Geithner and crew.

NACE Can't Sugarcoat: Job Market for New Grads Sucks

You can usually rely on the National Association of Colleges and Employers for some happy talk about how this year is the "best ever" for employment for new grads.

Not in 2009.

"NACE’s 2009 Student Survey shows that just 19.7 percent of 2009 graduates who applied for a job actually have one. In comparison, 51 percent of those graduating in 2007 and 26 percent of those graduating in 2008 who had applied for a job had one in hand by the time of graduation."

Not only have fewer found jobs, fewer are even looking for work. And, interestingly, you don't see too many going to grad school, either.
What's the plan, guys? Move to Norway?

chart via Planet Money

The Trouble With Suze

Generally, I think my fellow Yahoo! Finance Expert gives pretty solid financial advice. Sure, she's compromised somewhat by her endorsements like MyFICO.com, but she seems to genuinely care about helping people, the opposite of an irresponsible clown like Jim Cramer.

However, after reading her profile in the New York Times Magazine, I realized that I think her priorities are totally screwed up. She seems to equate financial security with being rich.
I mean, maybe this is obvious, since she wrote a book called "The Courage To Be Rich." But really, that's BS.

If we learned anything from the past year's fiscal insanity, it's that financial security, financial integrity, and financial freedom have nothing to do with having a ton of money. You have financial security if you are able to cover your basic expenses and save for the future. You have financial integrity if you're not fronting by buying a bunch of crap you can't afford while neglecting your future. And financial freedom, for life, means the ability to live well within your means. They are relational values, not absolutes.

Ok, you might argue that "basic expenses" requires a certain dollar value per year, but I think it's all contextual. You could live on the beach in Goa for $10,000 a year, and as long as you manage to play enough guitar to clear $11,000 in tips, presto, you have financial freedom.

This was the part of the story I found the most galling:
"She has been reluctant to work on school curricula on personal finance, because she says students can’t learn empowerment from people who aren’t empowered, and teachers, she says, are too underpaid ever to have any real self-worth."

Seriously?? Suze is suggesting that people who go into teaching aren't empowered and don't value themselves because they're too big of losers not to become a stockbroker or a TV personality like she did? Teachers, who do the most important job in our society, have no self worth because they're underpaid? Ok, I might agree that they're underpaid, but in point of fact, in most places in the US they make a solid middle class living, with security and benefits that are unheard-of in most careers. Teaching is an enviable career to a huge chunk of the American public. This is incredibly out of touch.

Suze's right about one thing: young people shouldn't be learning about personal finance from her.

Young People Cutting Back More In Recession

The Pew Research Center takes a look at the impact of the recession on various age groups. Not surprisingly, folks my parents' age are the hardest hit since they've lost so much of their nest eggs. Older, retired people are feeling the least stress since they hopefully already had most of their finances squared away. Young adults had very little money to lose in the stock market, but they're cutting back more on spending. Which is a good thing.

Amazing Piece By Design Legend Tim Brown

From FastCompany.com, titled "Creating a Post-Crisis Economy: Moving Beyond Consumption

"Whether it is reputations created through brands, relationships created through services, ideas created through knowledge, or access created through networks, many more forms of value are now created in our modern information society. And yet, our economy does not measure those in any meaningful way."

Important Article: End Universities As We Know Them

"If American higher education is to thrive in the 21st century, colleges and universities, like Wall Street and Detroit, must be rigorously regulated and completely restructured."

It's so interesting that this is written by a religion professor. He must be a brave guy.
See also:

Graduate School In the Humanities--Just Don't Go

The Capital Is Personal

By me, via Reality Sandwich:
" to make amends in the wake of the financial crisis, the path is toward healing the separation between our "economics" and our politics, our morality, our friendships, our earth, our family, and our spirituality."