Both Republicans and Democrats are working hard to fix a flawed Federal student loan system as a July 1 deadline approaches that would see interest rates doubled from 3.4% to 6.8%. The rate was cut in half in 2008 as the recession hit and the increase is a return to its previous level.

But the current interest system is problematic because the rates are fixed and not tied to the market. It’s a difficult balance for legislators to work out a system that’s sensible and cost-effective without being too friendly or too punitive to borrowers, and there’s common ground between Republicans, Democrats and the President on solutions.

As the legislative efforts continue, a bill has been introduced in the Senate to freeze interest rates at 3.4% for 2 years as a solution is forged — but the funding to continue high Federal subsidy for loan interest will come from :

The Student Loan Affordability Act of 2013 (S. 953) would freeze need-based student loan interest rates for two years while Congress works on a long-term solution to slow the rapid accumulation of student-loan debt, and is fully paid for by closing three egregious tax loopholes.  Specifically, the bill would: limit the use of tax-deferred retirement accounts as a complicated estate planning tool; close a corporate offshore tax loophole by restricting “earnings stripping” by expatriated entities; and close an oil and gas industry tax loophole by treating oil from tar sands the same as other petroleum products.

Student loan debt, which has topped $1 trillion in the United States, is behond only mortgages for total consumer debt, having outpaced credit card debt and automotive loan debt. Research by FICO Labs showed that the average student loan debt in 2005 was around $17,000, and in 2013 that number grew to over $27,000 for an increase of nearly 60% in 7 years.

The bill would also draw funding from closing a tax loophole in individual retirement accounts. As Sen. Patty Murphy’s (Democrat, Washington State) office explains:

Under current law, holders of IRAs and 401(k)-type accounts are required to begin taking taxable distributions from those accounts once they reach age 70-1/2.  However, a loophole in the tax law allows taxpayers to stretch those distributions over many years if they leave their account to a very young beneficiary.  When the account holder dies, the taxation of the account is then delayed as it is spread over the life of the beneficiary.  The Student Loan Affordability Act would require the retirement savings accounts to be distributed within five years of the death of the account holder, unless the beneficiary is within ten years of the account holder’s age, an individual with special needs or disabled, a minor, or the account holder’s spouse.  This provision saves taxpayers approximately $4.6 billion over ten years.

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In a political environment that has seen growing conflict between Republican opposition and President Barack Obama — from the September 11, 2012 Benghazi terrorism scandal to last week’s revelation that the IRS targeted Conservative non-profits for special scrutiny — Republicans have signed on to the Obama administration’s plan to keep student loan interest rates from going up.

Philip Elliot writes for the Associated Press that this “rare win” for Obama depends on the GOP-led Education and Workforce Committee’s endorsement of a plan that would tie student loan interest rates to market rates. As student loan rates are set to double on July 1, this will provide significant relief for borrowers.

But there’s more to the plan including an adjustment of subsidized and unsubsidized loan rates as Republican John Kline has brought forth:

Kline’s proposal also would end different interest rates for subsidized and unsubsidized undergraduate loans. Both would pay the same rates, which would be linked to 10-year Treasury notes.

There is popular confusion about student loan interest rates ‘doubling.’ In December, 2007 Congress lowered student loan interest rates to 3.4% in the beginning of the United States’ economic recession. That rate is set to return to its previous level of 6.8% in July, 2013 — which doubles a rate that was halved.

Both Democrats and Republicans have proposed a plan that would tie interest rates to the market rather than setting a hard value independent of the financial sector’s ebbs and flows. It’s a double-edged sword, though; as the US Treasury increases its rates, variable student loan rates would rise, too.

Rep. George Miller, a frequent player in education policy and the ranking Democrat on the Education and Workforce Committee, isn’t sold:

“This is just another classic bait-and-switch scheme: lure you in with a short-term lower rate but then charge you higher rates in the long-term. A lot more,” said Rep. George Miller, the top Democrat on the House Education and Workforce Committee.

According to the US Department of Education, there are ~36 million borrowers with student loans, with individual student debt averaging ~$26,000 and the nation’s combined student loan debt topping $1 trillion — a total that has for the first time overtaken consumer credit card debt.

Proposals will be analyzed and discussed by the Committee some time next week and a vote is expected shortly after.

Kline, a Republican Representative from Minnesota who has served since 2003, is pleased to find common ground with the Obama administration and Democrats:

“This coming up with a market-based student loan interest rate for the long term, I like it. I am very happy for the president on this one.”

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How responsible are institutions of higher education for making sure that their graduates are job-ready? That is the question being asked by Joshua Wyner, the Executive Director of Aspen Institute College Excellence Program, in an article for the Huffington Post.

He takes for his departure point the statements made by both President Barack Obama and current GOP frontrunner for the 2016 nomination Senator Marco Rubio that the it is the economic recovery that will be the key to the reversal of the decline of the American middle class. And one way that this economic recovery could be pushed forward is with college programs that do a better job of filling employment gaps in the country’s most forward-looking industries.

Research shows that there are about two million jobs in the United States today going begging because Americans don’t have the skills needed to fill those jobs. If domestic and multinational corporations are to fill those jobs here in the U.S. rather than moving them overseas, two things will need to be done.

There have been nascent efforts to fill that gap at the high school and college level. New York City’s successful P-TECH school, which got a mention during the President’s 2013 State of the Union address, and which teaches its students skills necessary to begin an entry-level job at IBM upon gradation, is one move that’s promising success.

Yet most colleges still continue to run their programs as if the realities of the job markets don’t exist. Few make the effort to liaise with industry representatives to find out what they expect from their potential employees.

Last year, a story on NPR provided a good example of the challenge. There are thousands of computer-related jobs in the high-tech Seattle area that are going unfilled despite the fact that qualified students are clamoring to get into computer science and computer engineering programs at the University of Washington. How is this possible? Because while the University of Washington has an undergraduate program designed to train and place students in this field, that program has not been expanded since 1999 even though the number of high-tech jobs has exploded. Good jobs and eligible students make for what might seem like a perfect match, but there is log jam: Students can’t access the training that they need to be prepared for those jobs.

What is preventing the program expansion at the University of Washington and elsewhere is, of course, money. Funding for public universities has been shrinking on both the state and the federal levels, and schools often can’t afford to hire additional faculty and dedicate additional resources to meet student demand.

To fix the problem, Wyner calls on the federal government to find a way to financially reward schools that make an effort to produce more graduates in shortage fields. But the schools must also be willing to make hard choices like “realigning their own resources” from less job-oriented programs to the ones for whose graduates the local businesses clamor.

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Stephanie Owen and Isabel V. Sawhill attempt to answer a deceptively simple question in the latest paper for the Brookings Institution: is college a good path for all American high school graduates? Owen and Sawhill – who is the co-director of the Brookings’ Center on Children and Families, Budgeting for National Priories and a Senior Fellow on Economic Studies — try to determine if the return on investment in a college degree still warrants the expense, the risk and the time in every circumstance.

Owen and Sawhill write that the most straightforward way to perform a cost/benefit analysis on a college degree would be to look at the earning gains made by students for every additional year they invest in their education. Yet using such a direct approach has downsides. Success is not guaranteed and students who are more motivated and driven are both more likely to attend college and are more likely to succeed in their post-graduation careers.

Researchers have attempted to get around this problem of causality by employing a number of clever techniques, including, for example, comparing identical twins with different levels of education. The best studies suggest that the return to an additional year of school is around 10 percent. If we apply this 10 percent rate to the median earnings of about $30,000 for a 25- to 34-year-old high school graduate working full time in 2010, this implies that a year of college increases earnings by $3,000, and four years increases them by $12,000. Notice that this amount is less than the raw differences in earnings between high school graduates and bachelor’s degree holders of $15,000, but it is in the same ballpark.

There’s also the complication that not all college degrees are created equal. Although on average, college graduates substantially outearn peers with only a high school degree, the earning advantage varies substantially based on the major, the school granting the degree, and the post-graduation career.

That doesn’t even take into account the fact that those who attend college without graduating will see this advantage eroded substantially, especially when factoring in their student debt load.

While the average return to obtaining a college degree is clearly positive, we emphasize that it is not universally so. For certain schools, majors, occupations, and individuals, college may not be a smart investment. By telling all young people that they should go to college no matter what, we are actually doing some of them a disservice.

The post Brookings: College Degrees Aren’t a Foolproof Investment appeared first on Education News.

The Wall Street Journal reports that while going to college remains a profitable proposition in the long run, value is steadily shifting from four-year degrees to programs offered in community colleges. Although it has been the received wisdom that any four-year degree is valuable, new research shows that unilaterally investing in a bachelor’s – without consideration for the merits of the school granting the degree – no longer provides the return on investment it once did.

Choosing a school has become a little easier for students and families now that a number of states publish first-year earnings of graduates from state schools. In some cases, the states publish a breakdown by major as well, and those looking at the data can gain some surprising insights.

For example, in Tennessee, graduates from some community college programs – especially those in technology – can outearn holders of bachelor’s degrees in the very same field.

Take graduates in health professions from Dyersburg State Community College. They not only finish two years earlier than their counterparts at the University of Tennessee at Knoxville, but they also earn $5,300 more, on average, in their first year after graduation.

In Virginia, graduates with technical degrees from community colleges make $20,000 more in the first year after college than do graduates in several fields who get bachelor’s degrees. Yet high-school seniors are regularly told that community colleges are for students who can’t hack it on a four-year campus.

And that is without taking cost into account. Considering that community college programs charge a fraction of what a four-year school charges, the difference in value can be immense. In addition, community college graduates enter the workforce two years earlier than their peers who choose to enroll in a four-year school, padding their overall earning advantage.

Earning potential in the first year post-graduation isn’t the only thing to consider when choosing schools. Community colleges also tend to have an advantage when it comes to the amount of student loans graduates carry when they leave. Comparing education choices isn’t a straight-forward proposition, but the U.S. Department of Education recently released two tools to make the job easier for families.

The U.S. Education Department’s College Scorecard website helps you figure out where to get “the most bang for your educational buck” by compiling federal data collected from colleges. Collegerealitycheck.com from the Chronicle of Higher Education allows for quick and easy comparisons between colleges on measures families should weigh during their search. It includes early-career salaries for college graduates from payscale.com, which are self-reported by users of the site.

The post Could the Best Value in Higher Education Be Community College? appeared first on Education News.

Want to save money and time with college costs?  Several free new tools can help high school students and their families.

The first is an interactive map answering questions parents, students and other family members have asked over the last several years.  This Minnesota map allows you to click on each public or private non-profit college or university in the state.  You’ll learn:

·      Which institutions offer Post Secondary Enrollment Options courses

·      Whether the institution offers college credit for Dual High School College Credit courses such as AP, IB,  College in the Schools, or “CLEP,” a test that determines whether students have mastered college level material, or Concurrent Enrollment.

Because credit policies vary, the map also provides links to the colleges’ or universities’ websites.  The websites explain each institution’s policies on various Dual Credit options.  For example, some colleges limit the number of credits they will accept.  Some award credit for Advanced Placement or International Baccalaureate only to students who achieve a certain score on the final examination.  This can help students decide which Dual Credit programs they will enroll in, and where they will apply after high school graduation.

The map was created primarily by Jordan Lim, a sophomore at Macalester College who served as an intern at the Center for School Change (CSC), where I work. CSC staff member Marisa Gustafson also helped. The map is on CSC’s home page at www.centerforschoolchange.org.

The CSC website also hosts 16 90-second to three-minute You-Tube videos, in which students explain the value of various forms of Dual Credit.  These videos are in English, Arabic, Hmong, Karen, Somali and Spanish.   Students at Neighborhood House, Migizi Communications and High School for Recording Arts designed and developed the videos.  PACER did another video showing a young man on the autism spectrum who used PSEO.  Funding for these videos came from you – taxpayers – via the Minnesota Department of Education and the U.S. Department of Education.

The Minnesota Department of Education and CSC will present several free webinars in the next few months, discussing Dual Enrollment and answering questions. Some are for high school and college education faculty. Others will be for families and students.  Registration information is on the website.

The Minnesota Department of Education has created another free resource, providing district by district data about use of various Dual Enrollment options.  Their “Rigorous Course Taking” report is available at http://education.state.mn.us/MDLegisRepE/Welcome/Legis//index.html.

The report also shows how much each district in the state received, of the more than $4 million available, to help train teachers for either AP or IB courses.  MDE also shares good news – the number of students participating in these courses has grown steadily over the last five years.  The number of students taking AP, for example, has increased from 23,164 to 37,363.  PSEO participants increased from 5,852 to 6,353.

Many young people are ready for additional challenge while in high school.  Whether it’s an academic class or an applied career-tech course, Minnesota is among the nation’s leaders in recognizing this, and allowing high school students to earn college credit.   Students can save thousands, even tens of thousands, of dollars and be better prepared for college and career, by taking these courses.

Joe Nathan, formerly a public school teacher and administrator, directs the Center for School Change. Reactions are welcome, and he can be reached at joe@centerforschoolchange.org.

The post Joe Nathan: New, Free Tools Help Families Save Thousands on College appeared first on Education News.

Americans carry more than $1 trillion of student debt, and the impact from the this kind of debt hits people from every walk of life. However, according to two new studies, minorities and women suffer greater repercussions from the loans they pile on to get through college – chiefly because they’re the victims of a pay gap that has them earning less than their white male peers.

According to a report, of those who gradated with a bachelor’s degree in 2008 and were employed in 2009, men outearned women by as much as $7,000 a year even when they were working in the same field and had graduated with the same major – business in this case. That pay gap means that a larger portion of the women’s income went towards debt service than did her male coworkers’.

Women aren’t the only ones who face larger barriers to repaying student debt. Statistics released by Campus Progress and the Center for American Progress in a 2012 report, ”The Student Debt Crisis,”demonstrate how much heavier the student debt burden is for minorities.

The report states that 27 percent of black bachelor’s degree holders had more than $30,500 in loans, compared with 16 percent of white bachelor’s degree holders. More black students who left school without finishing a degree cited student debt as the reason than their white peers – 69 percent versus 43 percent – and 74 percent of Latinos who opted out of attending college cited finances as the reason, the report states.

The reasons behind the minority debt gap aren’t nearly as straightforward. Minority students already graduate with a higher debt load than their white peers and, as a double whammy, also suffer higher rates of post-graduation unemployment, which greatly limits their ability to pay back the loan.

There are numerous other steps the Student Loan Ranger believes federal agencies and Congress should take. All institutions of higher education should have to adopt the Financial Aid Shopping Sheet so prospective students can easily understand the true cost of college and compare institutions. In many instances, low-income students may find that schools with higher tuition actually cost less when their eligibility for financial aid is factored in than nominally cheaper schools.

There are a number of measures in front of lawmakers to make the student loan landscape more equitable. Among them is the Know Before you Owe Act, which will give borrowers tools to make it easier for them to max out subsidized and unsubsidized federal loans before turning to more expensive private lenders to make up the rest.

And, as the National Consumer Law Center has repeatedly noted, there is a real need to provide relief for past victims of predatory lending and to ensure these practices will not continue.

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How is the higher education sector coping with lower levels of funding since 2008? A new report published by the Instructional Technology Council attempts to illuminate strategies adopted by both schools and their students to exist in a new financial reality in the wake of the recession.

According to a report titled “2012 Distance Education Survey”, although enrollment in colleges and universities across the country has stabilized, the reductions in funding imposed by state and federal governments in the wake of the 2008 financial collapse appear to be permanent. Community colleges were particularly hard hit by the combination of less funding and higher enrollment numbers in the years following as students sought to enroll in classes that would burnish their resumes.

Since then, although the number and the level of urgency of the applicants has been reduced somewhat, community colleges are still struggling to cover their operating expenses which oftentimes exceed the amount they collect in tuition.

Participants in this ITC survey reported that distance education enrollments grew by 6.52 percent from fall 2011 to fall 2012. This pace was slower than in previous years (fall 2007 to 2008 saw a 22 percent increase), but the increase distance education saw surpassed the overall 2.64 percent decline in student enrollment that the entire student population (including those enrolled in face-to-face classes) at colleges experienced.

There has been increased scrutiny of distance learning programs among state and federal lawmakers to examine their money-saving potential. The federal funding for such programs is disbursed according to the Higher Education Act of 1965, which comes up for reauthorization every four to six years. The report’s authors warn that this could mean substantial funding changes as early as 2014, including new requirements placed on state governments when it comes to schools providing distance learning courses.

Fred Lokken, member of the ITC Board of Directors, WebCollege, Truckee Meadows Community College draws the attention of higher education stakeholders to several visible trends:

Student demand for distance education courses at community colleges continues to grow—at a rate that is much greater than the demand for on-campus, face-to-face courses. However, the unprecedented growth of the past decade has slowed on many campuses, as overall student enrollment at many community colleges has declined due to the resurgent economy.

As online instruction continues to mature, distance education administrators see a pressing need to address course quality and design, faculty training and preparation, course assessment, and improvements in student readiness and retention.

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Among the voices raised in panic at growing college tuition that threatens to price half the country out of a college education, there remains at least one that’s calm and optimistic. Vance H. Fried, who wrote a paper outlining how by the year 2020 colleges could run entire residential programs all without charging more than $8,000 in tuition, sees hope.

Fried is far from a crank. He’s a professor of entrepreneurship at Oklahoma State University and his newest paper – College 2020 – is only the latest salvo in a fight to convince people that matter that attending college need not be ruinously expense.

He feels that the higher education system in this country is ossified due the fact that it has not had to deal with any kind of competitive pressure in decades. Such competitive pressure has now come, he believes, in the form of online education.

Some commentators worry that tuition-dependent colleges will have to go out of business because they can’t control their costs and low-priced suppliers are going to take away their students. But Fried thinks that colleges and universities can survive, if they act soon.

Education will become “radically cheaper in stages,” says Fried, with the result that “existing colleges and universities will have to change or risk losing large numbers of students.”

Those colleges and universities can survive because many people want “the college experience”—that is, living on campus, making friends, interacting personally with professors, and enjoying campus activities such as football games.

The real kick in the pants to colleges won’t be the stupendously popular massive online open courses. Instead, it is the excitement over MOOCs that’s obscuring the real agents of change – the adoption of online education that works in tandem with the traditional means of delivering knowledge. He calls this Online version 1.3.

Technology now is improving on these features, beginning to create what Fried calls Online 2.0. Not only are these courses full of varied content, they are adaptive—that is, they can test the student while he or she is working and, depending on the student’s responses, provide customized material to enhance learning. This enables the student to master the fundamentals before moving to higher-level work.

This adaptive technology opens up vast possibilities, including a curriculum based on a “coordinated set of competencies” rather than a “hodge-podge of courses,” says Fried.

This approach is best seen in College for America, a program that’s part of the University Southern New Hampshire. In a move that has just received the approval of the USDOE, it plans to eliminate credits for courses and replace them with competencies that each student must master before they are awarded an associates and eventually a bachelor’s degree.

The post Fried Outlines Hope for Cheap, High-Quality College Degree appeared first on Education News.

One way of tackling the increasing cost of college education would be to reverse the trend of declining teaching loads as described in a recent report from the American Council of Trustees and Alumni and Education Sector. Titled Selling Students Short: Declining Teaching Loads at Colleges and Universities, the report argues that while faculty salaries compromise the biggest part of college spending, their workload has consistently gone down for decades.

It’s difficult to get accurate information about teaching loads since the only recent survey conducted on the issue by the Department of Education provides no detail and only has aggregate data available to the public via its Data Analysis System. Not only is the information for a particular university impossible to obtain, there’s also a simple paucity of data since the survey has only been conducted four times since 1987 and not once since 2004.

The DAS figures reveal that across all tenured and tenure-track faculty, the average number of classes taught per term declined from 3.6 in 1987-1988 to 2.7 in 2003-2004, a 25 percent decline. The national averages obscure significant differences among various types of universities, but as Figure 1 shows, teaching loads (defined as the average number of courses taught in the fall term [semester or quarter]) have fallen substantially across the board. Indeed, the decline has been so widespread that, on average, professors at liberal arts colleges, which traditionally prioritized teaching, taught less in 2003-2004 than professors at research universities did in 1987-1988.

The authors speculate that the decline is due in part to colleges and universities prioritizing research and publication over teaching. This assertion is borne out by the data released by the Modern Language Association, which found that the number of departments that rank scholarship as a primary motivator in hiring decisions has more than doubled between 1968 and 2007.

Tenured and tenure-track faculty doing less teaching than they used to has an impact on the school’s bottom line. Lectures, after all, still have to be delivered, and schools spend additional money hiring adjuncts or increasing section sizes to accommodate all the students.

Without better data, we cannot tell how often colleges and universities choose these different options, nor can we tell what the total effect of a decline in teaching loads is on the institution’s budget. But using DAS and IPEDS data, we can examine one aspect of the total effect: option (d), hiring a full-time professor to teach the course. This is likely to be a reasonable and conservative estimate of the total increase in costs since options (a) and (b) do not increase costs at all, and option (c) increases costs only marginally because adjuncts are generally paid a low salary.

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