The move eliminates subsidized federal loans for graduate students -- loans, distributed by need, on which the government paid the interest that accrued while students were enrolled in school. The cuts will save the government about $18 billion over 10 years. The change won't reduce the amount that students can borrow, but it will shift about $125 billion from subsidized loans to unsubsidized loans.

The final decision to eliminate the loans is so recent that officials at many graduate schools said they haven’t determined what, if anything, they’ll be able to do to provide more aid to students when the cuts take effect in 2012. Still, the combination of declining state aid and possible cuts to federal research spending make it unlikely that they will be able to offer significantly larger stipends or grants to offset the added interest.

“Given our own limited budget situation, I can’t see how we’re going to be able to respond immediately,” said Patrick Osmer, vice provost and dean of the graduate school at Ohio State University and chairman of the Council of Graduate Schools. While Ohio State is still determining how students will be affected and what the university's response will be, “we’re just working through our budget constraints ourselves,” he said. “I think it’s just going to be something that people have to absorb.”

Congress voted to cut the subsidies as part of the final, last-minute deal to increase the debt ceiling on Aug. 2, but the eventual elimination of subsidized graduate loans had been all but certain since February, when President Obama proposed the cut to protect Pell Grants and other student aid programs in his budget plan for the 2012 fiscal year. Keeping the maximum Pell Grant at $5,550 was the administration’s top priority, and ending subsidized loans for graduate students was seen as the most palatable option.

Just over one-third of all graduate students took out a subsidized loan in 2007-8, the last year for which complete data are available through the National Center for Education Statistics. The average loan was $7,100, not far short of the maximum $8,500. Students pursuing law and medical degrees borrowed at the highest rate -- more than 70 percent.

Graduate students and schools, and their advocates, say they fear the change will discourage students from pursuing an advanced degree. "You're going to see more individuals who decide not to go back to graduate school," said Mary Winn, the legislative concerns chairwoman of the National Association of Graduate-Professional Students and a graduate student at the University of California-San Diego. "Graduate students really promote innovation" and a drop in the number of students who enroll will make the U.S. less competitive, she said.

Still, students in math, science and engineering are more likely to get a fellowship or tuition reimbursement to absorb at least some of the cost, Winn said. Students pursuing professional degrees, such as law or medicine, and those getting Ph.D.s in the humanities and social sciences, who are more likely to finance the majority of their own education, will be most affected by the cuts.

For medical students, who who not only tend to take on the most debt but frequently defer their loans or go into forbearance while they are continuing their training through residencies, the interest will accumulate quickly, said Matthew Shick, senior legislative analyst for the Association of American Medical Colleges. The association estimated that the change will cost the average medical student who has federal loans $10,000 to $20,000 more over the life of the loan.

But most medical schools aren’t likely to adjust financial aid to make up the difference, just as they would not if the interest rates on federal loans increased, Shick said. “I think this will be viewed probably from the financial aid perspective as a change in the terms of the loan,” he said. Since subsidized borrowing is capped at $65,500 for undergraduate and graduate studies combined, most medical students already take out unsubsidized loans to cover the bulk of their costs, he said.

Medical students have one other advantage in borrowing: their program is time-limited. Although a relatively small proportion of Ph.D. candidates borrow -- less than 30 percent, excluding Ph.D.s in education -- the uncertain length of Ph.D. programs means that those students who do borrow will be hit hard, said Lisa Tedesco, dean of the James T. Laney School of Graduate Studies at Emory University. Students who have to learn another language to complete their studies, or spend significant time abroad working on international collaborations, frequently borrow more to cover more years or more expenses, she said.

Emory has an emergency loan program that can cover up to $1,000 for unexpected expenses, and Tedesco said she expects more students will draw on that. The university also hopes to increase stipends to offset the additional loan costs -- but that would mean that programs might be able to admit fewer students because of the added expense.

“We might see students choosing to stop out or not come to graduate school, which depletes the talent pool,” she said, adding that she feared that first-generation college students would be disproportionately affected, because those students previously relied at least in part on subsidized loans and might be afraid to accumulate even more debt.

The American Psychological Association has not yet analyzed the impact of the legislation on its members' graduate programs, but said the change was a “real concern for graduate education in psychology,” in part because psychologists tend to have lower starting salaries than students with other advanced degrees and the increased debt might be more daunting.

“Our association does have a concern that the elimination of the federal support for graduate students, especially for those most in need, might create a real barrier for those who want to enter the field,” Cynthia Belar, the APA’s executive director for education, wrote in an email.

For those graduate schools that compete for top-tier students, the loss of the loan subsidy adds another way for universities to make an offer, Tedesco said.

“We have to sharpen ourselves on all fronts to make sure our students are really well-served,” she said. “It’s really just going to put a lot more pressure on the system.”

Back to School for Grown-Ups is a relatively new enterprise in Minnesota that shares our zeal for dramatically increasing post-secondary attainment, with special emphasis on grown-ups of all ages who need to re-think, re-educate and re-train in a fast-changing economic world.

The key principal in the firm is Laura Gilbert, who produces books, blogs, research papers, presentations and counseling, all providing sound advice to young and older adults who are trying to navigate the ever trickier and more expensive path to four-year "sheepskins" or other higher-ed credentials.  Her book, "How to Save $50,000 on College" is a pocket-sized guide that cuts through a lot of the confusing fog and expensive obstacles to higher-ed completion.

Gilbert is a life-long learner whose biography fits her philosophy.  She picked up her credentials in stages, starting with a triple major in music from Metropolitan State in the Twin Cities, a master's in industrial relations in mid-career, and a PhD in educational psychology much later in life.

Among her more important contributions recently are a thoughtful white paper, "For-Profit Education Under Scrutiny: Issues and Challenges," issued earlier this summer.  Gilbert succinctly summarizes some of the more appalling abuses of the "bad actors" in the fast-growing field, providing a lesson in how privatizing the classic public and nonprofit functions of education, health and welfare comes fraught with risks.  Her charts showing comparative cost and value for public, private nonprofit, and for-profit rather strongly make the case for the former two rather than the latter.  But Gilbert also acknowledges the strengths of responsible for-profit models, especially through online learning, and concludes that expensive and prone to abuse as they can be, for-profits are a legitimate route and have become a "mainstay" of our sytem.

Gilbert's work features a sharp cut-to-the-chase style and she has a good sense of humor, as her blogs on the Larry Crowne movie attest.  Like many higher-ed enthusiasts who loved the premise of a laid-off "UMart" retail worker going back to school for a degree, Laura and I were disappointed in the "nice" but rather boring and implausible movie.  How can you fall so flat, with such an uplifting concept, and Tom Hanks and Julia Roberts?  And I agree with Gilbert that it would have been a lot more fun to send Buzz and Woody (those souls of aging obsolescence, from the Toy Story trilogy) back to school.

--Dane Smith 

 

Thanks Dane!

The project, dubbed “Aid Like a Paycheck,” just wrapped up its first year as a pilot program at Mt. San Antonio College, a community college east of Los Angeles. Researchers say that, while it’s too early to tell if distributing surplus money from Pell Grants will encourage students to finish their degrees, or hasten college completion, early results are promising.

“The brass ring, of course, is higher completion,” said Thomas Brock, director of young adults and postsecondary education policy for MDRC. But other benefits could improve faster degree completion, because students who are receiving a “paycheck” may be more likely to give their studies more focus, he added.

Tuition and fees at Mt. San Antonio College are low: $36 per course for California residents, with an additional $11 activities fee. Since some students are eligible for the maximum Pell Grant, $5,550, the leftover money -- even after buying books and supplies -- is substantial. Students were invited to volunteer to receive the extra in two-week paychecks. They also received some extra money from the Gates Foundation for a laptop or other big-ticket purchase on the first “paycheck,” Brock said.

The first group of 140 students began receiving checks last fall. While it’s too early to tell what the effect will be, the feedback from the students has been positive, the project’s directors said. Students have said that being paid to stay in college makes them take their studies more seriously, and that they have pared back hours on outside jobs, giving them more time to focus on school. The researchers hope this will translate into improved completion rates later on.

“If you can frame aid as a way to help support your time at school, because going to school is an important job, perhaps you can help improve outcome,” said Lauren Asher, president of the Institute for College Access and Success.

Although tuition and fees at community colleges are low, that doesn’t mean the students are free from financial pressures, she said. Many struggle to cover living expenses, whether for themselves or their families. Students frequently work one or more jobs while enrolled full-time, and students often “stop out,” ceasing to attend for a year or two in order to earn more money.

“Do they feel like they’re a student first and also working, or a working person who happens to be going to school?” Asher said. “There are all these time factors that play a big role in student success.”

Distributing the aid as a paycheck was meant to explore what it means for students to “put themselves through school” by working, and what role student aid plays in that equation. Students were also encouraged to open a bank account and use direct deposit, which encourages financial literacy, Brock said.

So far, students have indicated that they liked the idea of receiving a regular paycheck, and that they worked fewer hours, he said. Students also liked that they had a predictable amount of money coming in, Asher said.

MDRC and the Institute for College Access and Success plan to report on the study’s pilot phase in early 2012. For now, they are considering expanding the idea to other states and campuses, and have also discussed “aid like a paycheck” with the Education Department as an alternative way of distributing Pell Grants.

Illinois has expressed interest in distributing state grants as a paycheck, Brock said. Michigan has suggested disbursing student loans -- which would lead to a bigger “paycheck” and could also raise questions about whether it encourages students to borrow responsibly.

Some colleges might be reluctant to issue checks every two weeks, which can add time and expense, Brock said. But the pilot phase indicated that it could be done.

“It’s really too soon to tell what the impact might be, but there are some promising signs,” Asher said. “Really, the goal is to help support choices that correlate with increased success.”

« A statement for government redesign, goal-setting, and budgeting for outcomes | Main

July 27, 2011

Another Minnesota voice for post-secondary completion, and an even-handed critique of for-profit higher education

Back to School for Grown-Ups is a relatively new enterprise in Minnesota that shares our zeal for dramatically incresing post-secondary attainment,  with special emphasis on grown-ups of all ages who need to re-think, re-educate and re-train in a fast-changing economic world.

The key principal in the firm is Laura Gilbert, who produces books, blogs, research papers, presentations and counseling, all providing sound advice to young and older adults who are trying to navigate the ever trickier and more expensive path to four-year "sheepskins'' or other higher-ed credentials.    Her book, "How to Save $50,000 on College" is a pocket-sized guide that cuts through a lot of the confusing fog and expensive obstacles to higher-ed completion.

Gilbert is a life-long learner whose biography fits her philosophy.   She picked up her credentials in stages, starting with a triple major in music from Metropolitan State in the Twin Cities, a master's in industrial relations in mid-career, and a PhD in educational psychology much later in life.   

Among her more important contributions recently are a thoughtful white paper,  "For-Profit Education Under Scrutiny: Issues and Challenges," issued earlier this summer.   Gilbert succintly summarizes some of the more appalling abuses of the "bad actors'' in the fast-growing field, providing a lesson in how privatizing the classic public and non-profit functions of education, health and welfare comes fraught with risks.    Her charts showing comparative cost and value for public, private non-profit, and for-profit rather strongly make the case for the former two rather than the latter.   But Gilbert also acknowledges the strengths of responsible for-profit models, especially through on-line learning, and concludes that expensive and prone to abuse as they can be, for-profits are a legitimate route and have become a "mainstay'' of our sytem.

Gilbert's work features a sharp cut-to-the-chase style and she  has a good sense of humor, as her blogs on the Larry Crowne movie attest.   Like many higher-ed enthusiasts who loved the premise of a laid-off "UMart'' retail worker going back to school for a degree, Laura and I were disappointed in the "nice'' but rather boring and implausible movie.  How can you fall so flat, with such an uplifting concept, and Tom Hanks and Julia Roberts?   And I agree with Gilbert that  it would have been a lot more fun to send Buzz and Woody (those souls of aging obsolescence, from the Toy Story trilogy) back to school. 

Dane Smith 

 

Posted at 07:12 AM in Budgets & Spending, Business, Current Affairs, Economic Development, Economic Justice, Education, Education Innovation, Employment, Government Effectiveness, Privatization, Progressive Thought, Prosperity Gap, Public Infrastructure, Public Investment | Permalink

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Dr. Gilbert has a keen view of education in the real world.
Brava!!

Posted by: Ann Bottolene | July 27, 2011 at 10:10 AM

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Credit cards are still a bad idea for students and a great idea for the vendors.

Under the new rules, programs would lose their eligibility to dispense federal student aid — and as a practical matter, be shut down — if, over the next four years, their graduates fail to meet new benchmarks for loan repayment and ratio of debt to income. But amid intense lobbying by the for-profit college industry and pressure from Republican lawmakers, the department significantly eased the rules from an earlier draft: officials said, for example, that no program would lose eligibility until 2015.

“We believe that very few programs will be forcibly closed by our standards,” Secretary of Education Arne Duncan said. “We want to give people a chance to reform. As a country, we need this sector to succeed. This is not about ‘gotcha.’ ”

These rules, which try to define how such programs prepare students for “gainful employment,” have been the hardest-fought issue in the debate over exploitive and fraudulent practices in the industry. The colleges and their allies spent $12 million lobbying against the rules since the start of 2010, and this spring, the House passed a budget amendment that would have blocked the department’s work on them. The rules were supposed to be issued last summer, but were delayed after the Education Department received a record 90,000 comments on its draft proposal.

The colleges contend the rules are unnecessary and illegal, and would limit educational opportunities for the low-income and minority students who make up most of their enrollment. An industry spokesman said litigation or a new legislative challenge to block the rules were possibilities.

“It still has the same basic framework, so we’re still going to be looking at their statutory authority to create these metrics,” Harris Miller, president of the Association of Private Sector Colleges and Universities, said Wednesday night. “But there’s no doubt that they have taken into account our concerns about issues such as time and giving schools an opportunity to make some changes.”

In the last year, Senate hearings and news reports about abuses in the for-profit education industry have documented how millions of low-income students borrow heavily for training programs that often do not help them land good jobs. Students at for-profit colleges make up 12 percent of those in higher education, but almost half of those who default on student loans.

Although the new rules are a particular threat to for-profit schools, which charge high tuition for vocational programs, they apply broadly to career education, including certificate programs at public and nonprofit colleges, which the Higher Education Act requires to “prepare students for gainful employment in a recognized occupation.”

On Wednesday, department officials estimated that 5 percent of the 13,155 for-profit programs covered by the rules, and 1 percent of the 42,290 public and nonprofit programs, would lose their eligibility for student aid.

A program would lose eligibility for federal aid only if: fewer than 35 percent of its graduates are repaying principal on their student loans three years out, and, for the typical graduate, loan payments exceed 30 percent of discretionary income as well as 12 percent of total earnings.

“We’re asking companies that get up to 90 percent of their profits from taxpayer dollars to be at least 35 percent effective,” Mr. Duncan said.

The new rules take a “three strikes and you’re out” approach. The first time a program failed to meet all three criteria, it would have to report by how much it missed the benchmarks, and outline what it would do to improve. The second time, it would have to warn students that they may not be able to repay their debt and that the program could lose its eligibility. Only a third strike in four years would result in curtailing student aid.

Terry W. Hartle, senior vice president of the American Council on Education, said it was impossible to predict how the industry would react, or know whether the rules were weakened too much.

“No one can really say if it will affect 10 percent of programs, or a 10th of a percent,” he said.

In a conference call with reporters on Wednesday, Gene B. Sperling, director of the National Economic Council, warned that the explosive growth of the for-profit education sector had many of the “same characteristics of what happened with subprime housing and securitization, namely that they can capture all the upside of increasing volume while shifting all of the downside to somewhere else, which is students and taxpayers.”

He said the rules would “only decrease access to very weak programs that leave students with a crushing debt burden.”

THE GAINFUL EMPLOYMENT REGS ARE IN!