Student loan debt bomb hits dropouts

Washington Post:

As the nation amasses more than $1 trillion in student loans, education experts say a vexing new problem has emerged: A growing number of young people have a mountain of debt but no degree to show for it. 

Nearly 30 percent of college students who took out loans dropped out of school, up from fewer than a quarter of students a decade ago, according to a recent analysis of government data by think tank Education Sector. College dropouts are also among the most likely to default on their loans, falling behind at a rate four times that of graduates. 

That is raising new questions about the wisdom of decades of public policy that focused on increasing access to higher learning but paid less attention to what happens once students arrive on campus. And some education experts have begun to argue that starting college — and going into debt to pay for it — without a clear plan for a diploma is a recipe for disaster. 

“They have the economic burden of the debt but they do not get the benefit of higher income and higher levels of employment that one gets with a college degree,” said Jack Remondi, chief operating officer at Sallie Mae, the nation’s largest private student lender. “Access and success are not linking up.” 

The Obama administration says it is trying to address the issue by coupling its goal of ensuring that high school students are prepared for at least one year of higher education with new targets for college graduation rates. 

The plight of “non-completers” has grown in magnitude as student debt tops $1 trillion, according to the Consumer Financial Protection Bureau. In addition, the sputtering economy has forced a growing number of students to make difficult choices between the benefits of a degree and the burden of paying for it. More students are balancing their studies with full- or part-time jobs or signing up for a reduced course load to save money, increasing the likelihood that they will not graduate. According to a 2009 study by Public Agenda, half of college dropouts said work was a major factor in their decision. Only a quarter said they had spent too much time socializing.

 ...

Students who are unsure about their goals should attend community college close to home so they do not incur debt before they have a viable plan.  The schools who are pushing this debt on students should be required to give them a debt service schedule that will tell them how much they are going to have to pay as soon as they graduate.

Many colleges are now overpriced for any expected return on the investment unless the student is studying to be an engineer or an accountant or some other profession.  Even students in those professions will have to postpone household creation until they pay down their debt.  It is effecting the economy and we need to take a serious look at Gov. Perry's plan for a $10,000 degree program.

Administrators at some colleges and universities are making millions of dollars and living off loans to unsophisticated students.  We should also look at predatory lending practices by some of these schools.

Robert Samuelson says we should also ditch the college for everyone model.