ITT Technical Institute has been shut down by the U.S. Education Department at the beginning of the autumn semester. When it was done, some people thought for-profit college will only benefit from it. The actions of the U.S. government seem to be justified in rejecting to fund loans to ITT students.
The reason was a dubious use of delusive job placement numbers, low graduation rates, and high numbers of loan delinquencies and defaults.
Results of This Decision
However, this governmental decision has had both advantages and disadvantages. For instance, more than 30,000 students are left without a school and about 8,000 staff and faculty became unemployed.
The government stays fixed on problems in the for-profit area. At the same time, it virtually ignores that it’s the whole U.S. higher education system, which has long been guilty of this price gouging. Such a deep problem needs a lot of changes and can’t be eliminated by shutting down one given college.
Increasing Student Debts
A lot of Americans do understand that college tuition has risen at twice the rate of inflation for the past 25 years. This situation has made student borrowers involved in increasingly big debts, which in its turn has made default and delinquency rates grow as well.
The biggest problem is that a huge portion of any college’s funds is taken from federal student loans. It means that if students fail to pay off their loan, taxpayers are those who will take the loss. Universities and colleges themselves have no skin in it.
More of student loan-related in our financial blog:
- 101 student loan aid from the government.
- Common mistakes students make with their student loan refund checks.
- Top ways to get rid of the student loan debt.
Is There a Way Out?
So how can we solve this problem? A great way out is to require colleges and universities take some of the loss on defaults and delinquencies by their dropouts and graduates: say, the first 5 or 10 percent of the losses. And 1 or 2 percent of loan amount should be considered as collateral and be at origination deposited with the Education Department.
Colleges Should Be Accountable
We are those who must make colleges and universities accountable so they perform their duties much better than in recent decades. So what are their responsibilities? Only colleges and universities control tuition fees, room and board cost, and other student expenses.
Only colleges and universities can determine which students are more likely to gain the benefits they provide. Only they can design school curriculum so that students will be prepared to become productive members of society and, as a result, will be able to repay their loans.
Possible Changes and Outcomes
What could colleges do after they have skin in the game? At first, they can decrease the number of their flabby administrations, which have grown by 60 percent since 1993. Also, they will have to take into consideration certain admissions.
For example, most institutions will be forced to concentrate on applicants who are more promising. As a result, this may decline moderately or slow overall enrollment, which has increased by 40 percent over the period of 20 years.
Only colleges and universities can determine which students are more likely to gain the benefits they provide.
Does Everyone Need a Degree?
Lots of Americans consider a good thing that so many kids go to college these days. However, research made by McKinsey shows that almost half of the graduates tend to accept jobs that don’t need a college degree.
And the number of such students grows rapidly.
That’s why maybe going to college is not the best choice for those less-qualified students.
We understand that colleges are not accountable for the declining availability and quality of jobs, but they will also have to react to this reality.
Another potential change may concern the college curriculum. Remedial courses will be eliminated, while coursework will become utilitarian. There is no need for majoring in 12th-century Persian poetry.
Student debts can pile up very quickly into six figures, and taxpayers can’t be forced to backstop losses on student loans for graduates with such abstruse subjects. A greater emphasis should also be placed on career prospects. This may lead to deeper collaborations between colleges and companies.