NYS Budget

Find below some 2019 NYS budget proposals*

  • Create/establish NYS licensing standards for student loan servicers; an estimated 28 million borrowers live in New York and are serviced by 30 student loan companies.
  • Create/establish through the For-Profit College Accountability Act oversight of for-profit schools
  • Mandatory regular reporting to the state on funding sources. Limit school funding to 80 percent of its funding from taxpayers, currently ED caps schools’ taxpayer funding at 90 percent.
  • Mandatory regular reporting to the state on expenditures. Each school would be required to spend at least 50 percent of its budget on instruction and learning.
  • Mandatory reporting on salaries and bonuses for school presidents and senior leadership.
  • A prohibition on school leaders serving on boards for accreditation agencies to which they apply.

*from to the 2019 NYS ‘budget book’

 

Survey of Alumni of For-Profit Career Colleges

Career Education Colleges and Universities on Tuesday released results from a survey the for-profit college trade group conducted with Gallup, the polling organization, of the alumni satisfaction of 3,203 graduates of nine of CECU’s member campuses. The sample sought to be a cross section of the size, region and sector reflected across the group’s roughly 500 member campuses.

The survey found that respondents on average earned about 60 percent more in personal income than they did before attending college. CECU member institution alumni also are more likely to have a job related to their certificate or degree program than their peers from a national comparative sample, according to the survey. Respondents also were more likely to have a full-time job than their peers, and to be employed within six months of graduation.

https://www.insidehighered.com/quicktakes/2019/01/15/survey-alumni-profit-career-colleges

 

PLUS Loan News

Parent PLUS has become a central part of America’s higher-education financing system; parents can borrow freely from the federal government – with no limit – to support their children’s education.

Some recent research* from the Brookings Institution offers illustrations of an out-of-control parental loan program with substantial unintended, negative consequences for parents e.g. rapidly rising parental debt levels, slower repayment rates, increasing delinquency/default rates, all with little benefit from the child’s potential increased earning power.

To add ‘injury to insult’ parent loans actually make money for the government. According to CBO taxpayers net 13 cents for every dollar disbursed, and parent loans are the only category of federal student loans to turn a profit.**   This profitability is because parents pay higher interest rates (currently 7.6 percent) and are ineligible for several loan forgiveness programs that student borrowers can access.

Furthermore, in 2015, 18 percent of families receiving a Parent PLUS loan had an expected family contribution of zero. In other words, the federal government determines that hundreds of thousands of parents can contribute nothing to their children’s college education, and then turns around and gives those same families tens of thousands of dollars in high-interest loans.

In summary:

  • The federal government offers parents unlimited loans, with minimal credit checks and high interest rates, to pay for an asset from which borrowers derive no direct benefit.
  • If parents fall into default, the government has the power to garnish their wages and seize their tax refunds, charging excessive collection fees (up to 20%)
  • Financial aid award letters sometimes do not even make it clear to families that Parent PLUS loans are loans.

If any entity but the federal government were making loans on these terms, it would be labeled a predatory lender and incur the full wrath of regulators at every level of government. But because ED is the lender, supported by Congressional action, these predatory practices get a pass.

As the HEA Reauthorization receives consideration now may be a time for FAAs and others offer a more viable alternative that provides access without burdening parents.

* https://www.brookings.edu/research/parents-are-borrowing-more-and-more-to-send-their-kids-to-college-and-many-are-struggling-to-repay/

** https://www.cbo.gov/system/files?file=2018-06/51310-2018-04-studentloan.pdf

James Gathard, Principal

National Consulting Services, LLC