There is no shortage of issues when it comes to education in the US. Primary school is subject to a vast difference in the quality of education, including what subjects are even taught. Even so, at least the primary school for kids, from kindergarten to high school, is government-funded and guaranteed for any student who wants to attend.
College, however, is a different story. Students either have to pay the cost out-of-pocket — which is usually impossible — or take out government-backed loans to cover the cost. If you’re taking out loans, it would make sense that something, somewhere, would alert students if what you're potentially not going to get what you're paying for. Unfortunately, that isn't ever the case, is it?
The Next Bubble
Everyone remembers how shocking it was when the housing bubble burst. Practically no one saw it coming, even though all the signs were there for anyone who cared to look. The same is happening for student loans. More and more people are going into insurmountable debt and have no real way to pay it off.
The big kicker here is that the recession from the housing bubble helped inflate the student debt bubble.
When the recession started in 2008, it took a bit for people to feel it. When they did, people lost their homes and their jobs. A significant portion of those people made a decision that they thought would help them — they went back to school.
These people going back to school weren’t your typical 18 to 25-year-old students — instead, they were people in their 60s and 70s trying to find a way to rebuild their lives after the banks rick-rolled them. However, the only way for most people to do that is with loans.
In 2017, more than 44 million Americans had a little under $40,000 in student loan debt each, a number that comes out to a whopping $1.3 trillion. Of those, more than 11% will become delinquent or go into default. For the number of people who have these loans, that seems like an awfully high figure.
Loans and Schools
You would think that since the government backs some of these student loans, they would have stringent lending requirements and wouldn’t let you spend the money on just anything. After all, if the current administration wants to regulate food stamps, they should certainly be keeping an eye on people acquiring $40,000 in debt, right? But it doesn’t work that way.
Student loans often go to people who have no business getting loans of any kind — 18-year-olds with no credit history and no cosigner can rack up tens of thousands of dollars and never even see the numbers. The company that makes most student loans possible is Sallie Mae, a private institution that started out backed and regulated by the government but was released to the free market in the 90s.
Sallie Mae has had some slightly shady dealings when it comes to getting students to take out their loans. They’ve propositioned schools, Congress, and directly lied to prospective students. This would fall under the False Claims Act for most corporations. Sallie Mae, however, has created so many loopholes specifically for student loans that it’s nearly impossible to prosecute them. And of course, since they’re now a private corporation and not government controlled, they aren’t subject to the same laws other loans are.
Are Schools Holding Up Their End of the Bargain?
These practices, despite people knowing about them, are still mostly going on. Students are not protected when they take out loans and are left on the hook for them after school. So the question comes up — what responsibility do schools have here?
Most people attend college with one thing in mind: advancing their career. But college degrees are so commonplace now that many positions you shouldn’t need a degree to do are beginning to require it. The difference has started to come in the kind of degrees people are getting. College is so outrageously expensive now that federal grants and loans don’t cover the majority of the cost, so private loans are a necessity.
College has long claimed to prepare you to get a job, not to get you a job. The problem comes when they refuse to help protect students from predatory lending practices or, even worse, join the ranks of a for-profit school with no accreditation.
Colleges that lack the appropriate accreditation are guilty of fraud. They go into business with the sole intent of getting money by having students acquire debt that they're on the hook for, with no intention of ever genuinely helping students get jobs.
Fraud and Failure
The problem is that very few schools will start off with no accreditation. Instead, they’ll lose their status, won’t be able to find another accreditor, and then close. So, the students who earned a degree from that university while they were a legitimate school will no longer have a usable degree, but they’ll still have all the debt.
Many of the new debt falls into the category of those schools — two-year degrees that are supposed to be comparable to a four-year degree, even though it requires half the schooling, and for-profit schools that are set up to make money instead of prepare students for college.
Our current president stands accused of this, having paid off a settlement of $25 million to former students for defrauding them. But the students still didn’t get off scot-free — they still had to pay back some of the money they took out for school.
In fact, many colleges put money into misleading marketing, making it sound like their degrees are worth the same as other colleges — even Ivy Leagues. These for-profit colleges have been called out for deceptive and illegal moves, but students are often still left on the hook.
That means that, for many of these colleges, they aren’t guilty of failure — they are guilty of actual fraud. They’re misleading students, preying on low-income families, veterans and those on social security. Without those students or federal funding, these colleges must close their doors and cut their losses.
Colleges need more oversight, and we need to be preemptive about our approach to fixing the issue of the cost of college. The current situation is creating an unsustainable debt that will, eventually, burst and end up damaging the economy. If the housing bubble were any indication, it wouldn’t just be the US economy that suffers.