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Colleges/Universities Leave Lower Income Students Behind

Posted by Larry Doyle on May 8, 2013 9:50 AM |

The business of higher education is changing rapidly.

With family incomes stagnant, job prospects for graduates challenging, and pressure on the bottom line — for families and schools alike — increasing like never before, those within the executive offices of our nation’s ivory towers are scrambling.

What is one area that is getting a lot of focus? The manner in which schools dispense financial aid, which for more and more families is becoming THE key variable in determining where little Susie or Joey might go to school. In a report that is troubling to those who know that higher education is THE only real path for those in the lower income strata of our nation to advance, the New America Foundation writes this morning:

Nearly fifty years ago, the federal government committed itself to removing the financial barriers that prevent low-income students from enrolling in and completing colleges. For years, colleges complemented the government’s efforts by using their financial aid resources to open the doors to the neediest students. But those days appear to be in the past. With their relentless pursuit of prestige and revenue, the nation’s public and private four-year colleges and universities are now in danger of shutting down what has long been a pathway to the middle class for low-income and working-class students.

Undermining Pell presents a new analysis of little-examined U.S. Department of Education data showing the “net price” — the amount students pay after all grant aid has been exhausted — for low-income students at thousands of individual colleges.

The analysis shows that hundreds of public and private non-profit colleges expect the neediest students to pay an amount that is equal to or even more than their families’ yearly earnings.

As a result, these students are left with little choice but to take on heavy debt loads or engage in activities that reduce their likelihood of earning their degrees, such as working full-time while enrolled or dropping out until they can afford to return.

What are more and more schools doing with their increasingly precious financial aid dollars? Providing marginal discounts to students and families who can otherwise pay the entire freight. That is, they are trying to “buy students” in an attempt to: 1) support their bottom line, and 2) attract  stronger students who might otherwise not attend.

What is the message to lower income students and especially those who are qualified and capable of doing the work at many of these schools?

In its latest survey of college admissions directors, Inside Higher Ed found that more than one-third of public colleges and nearly two thirds of private colleges engage in “gapping” — providing lower-income students with aid packages that don’t come close to meeting their financial need. In the parlance of enrollment management, this is often called “admit-deny,” in which schools deliberately underfund financially needy students in order to discourage them from enrolling.

Selected schools with meaningful endowments such as Amherst College have been able to buck this trend by really working at it. Other schools with enormous endowments such as Harvard seem to be less motivated to truly address this issue.

While I am not surprised by the reality of this situation, the simple fact is it is troubling as this situation will certainly lead to an even greater disparity in opportunities and incomes in America for future generations.

Would love to hear what people from all ends of the spectrum and especially those facing this issue  have to say.

Larry Doyle

Isn’t  it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • james

    Smells like a market getting poised to break lower in price. Wish I could short this market segment.

  • Eddie

    I’m pretty Sure i’ve vented with you on this before? Firstly, it’s supply rising to meet subsidized demand. That’s the first price distortion.

    Sounds like the housing market and currently the government is putting the bubble in bonds too. The government only has certain things it can do to intervene in a private economy, it puts in caps, floors, it taxes or subsidizes, there’s a few more but they think subsidizing will help this.

    It does for a while but eventually you’ll see the unintended consequences and then they will achieve the opposite. The incentives of the participants are distorted and the contrived system is not a solution just because politicians say it is. To me it’s the law of intervention.

    My question is, should the government be involved in education?

  • LD

    Indeed we have. I too wish I could short the private college market.

    Great question you pose although the GI bill was the ticket for a lot of people to get educated after the war so if done properly (a BIG IF) I think there is a place to help those who really need the help.

    Need to get the rackets out of it and right now large parts of it remain a racket.

  • Ted

    #1 In 1993, the average student loan debt burden at graduation was $9,320. Today it is $28,720.

    #2 In 1989, only 9 percent of all U.S. households were paying off student loan debt. Today, 19 percent of all U.S. households are.

    #3 Young households are being hit particularly hard by student loan debt. In America today, 40 percent of all households that are led by someone under the age of 35 are paying off student loan debt. Back in 1989, that figure was below 20 percent.

    #4 According to the Consumer Finance Protection Bureau, Americans owe more than a trillion dollars on their student loans.

    #5 According to the Federal Reserve, the total amount of student loan debt has increased by a whopping 275 percent since 2003.

    #6 Approximately 65 percent of all student loan debt is owed by those under the age of 40.

    #7 The delinquency rate on student loans is currently 14 percent and it is steadily rising.

    #8 The delinquency rate on student loans for students that attended a “for profit” college is an astounding 23 percent.

    #9 Today, 34.9 percent of all student loan borrowers under the age of 30 are at least 90 days behind on their student loan payments.

    #10 Since 1986, the cost of college tuition has risen by 498 percent.

    #11 The cost of college textbooks has tripled over the past decade.

    #12 The average cost of a four-year college education is projected to soar to $120,000 by the year 2015.

    #13 Back in 1952, a full year of tuition at Harvard was only $600. Today, it is over $35,000.

    #14 According to the Federal Reserve Bank of New York, approximately 167,000 Americans currently have more than $200,000 of student loan debt.

    #15 At most U.S. colleges and universities, the quality of the education that you will receive is very poor. Just check out some numbers about the quality of college education in the United States from an article that appeared in USA Today….

    – After two years in college, 45% of students showed no significant gains in learning; after four years, 36% showed little change.
    – Students also spent 50% less time studying compared with students a few decades ago.
    – 35% of students report spending five or fewer hours per week studying alone.
    – 50% said they never took a class in a typical semester where they wrote more than 20 pages
    – 32% never took a course in a typical semester where they read more than 40 pages per week.

    #16 One survey found that U.S. college students spend 24% of their time sleeping, 51% of their time socializing and 7% of their time studying.

    #17 Federal statistics reveal that only 36 percent of the full-time students who began college in 2001 received a bachelor’s degree within four years.

    #18 27 percent of those with student loan debt said that they moved back in with their parents after college.

    #19 14 percent of those with student loan debt said that they delayed marriage because of their student loans.

    #20 Real earnings for young college graduates have fallen by 15 percent since the year 2000.

    #21 If you think that you will be able to “beat the odds” and land the job of your dreams once you graduate from college, perhaps you should consider these numbers….

    -In the United States today, approximately 365,000 cashiers have college degrees.
    -In the United States today, 317,000 waiters and waitresses have college degrees.
    -In the United States today, there are more than 100,000 janitors that have college degrees.

    #22 The federal government has begun docking the Social Security payments of elderly Americans that are behind on their student loan payments…
    According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees’ Social Security checks on those grounds. That’s nearly double the pace of the department’s enforcement in 2011; it’s up from around 60,000 cases in all of 2007 and just 6 cases in 2000.
    #23 According to a survey of 4,900 recent college graduates, more than half of them regretted choosing their major or their school.

    #24 One poll found that 70% of all college graduates wish that they had spent more time preparing for the “real world” while they were still in school.

    #25 48 percent of all recent college graduates have not been able to find a job in their chosen field.

    #26 During 2011, 53 percent of all Americans with a bachelor’s degree under the age of 25 were either unemployed or underemployed.

    #27 According to the ABA, only 56 percent of all law school graduates in 2012 were able to find a full-time job that requires a law degree.

    #28 The median student loan burden for medical school students that graduated in 2012 was $170,000.

    #29 Close to half of all recent college graduates are working in jobs that do not even require a college degree.

    When you are overwhelmed by nightmarish student loan debt that you can never get away from, it can literally take over your life. A recent Businessweek article shared some real life examples of this…

    If student loans are good debt, how do you account for the reaction of Christina Mills, 30, of Minneapolis, when she found out her payment on college and law school loans would be $1,400 a month? “I just went into the car and started sobbing,” says Mills, who works for a nonprofit. “It was more than my paycheck at the time.” Medical student Thomas Smith, 25, of Hamilton, N.J., is $310,000 in debt and is struggling to make ends meet even before beginning to repay his loans. “I don’t even know what I eat,” he says. “I just go to the supermarket and buy the cheapest thing I can and buy as much of it as I can.” Then there’s Michael DiPietro, 25, of Brooklyn, who accumulated about $100,000 in debt while getting a bachelor’s degree in fashion, sculpture, and performance, and spent the next two years waiting tables. He has since landed a fundraising job in the arts but still has no idea how he will pay back all that money. “I’ve come to the conclusion that it’s an obsolete idea that a college education is like your golden ticket,” DiPietro says.

    29 Shocking Facts That Prove That College Education In America Is A Giant Money Making Scam






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