Test 2: The Value of Education- The Bookings Insitute

CNBC-Tuituion-Free College is Now a Reality in Nearly 20 States

CNBC-Tuition-Free College is Now a Realit in Nearly 20 States

The Bookings Institute

The Bookings Institute

Student/Soldier Example (GI Bill)

• "My focus was on doing my job and staying alive," Newton says. But no matter what else was going on at the outpost, once a month he says he went to the wooden shack where the unit kept a laptop computer and made his online student loan payment of $100. • He worried that if he didn't pay his loans, his credit would be shot. (Newton says he wasn't aware that the government offers student loan deferments to active soldiers in wartime—his CO should have told him.)

Wall Street Too

• A generation ago, the federal government opened its student loan bank to profit-making corporations. Private-equity companies and Wall Street banks seized on the flow of federal loan dollars, peddling loans students sometimes could not afford and then collecting fees from the government to hound students when they defaulted.

States Don't Pay as Much any More

• After World War II, the states appropriated more and more funds for public higher education, and by 1975, they were contributing 58 percent of the total cost. • But since then they have steadily reduced their share, pressured by, among other things, the rising costs of Medicaid and prisons. • Today, state support is at approximately 37 percent nationally, according to data from the U.S. Bureau of Economic Analysis.

The Drop Out Problem

• Almost half of all college students and much higher proportions of poor and minority students drop out before they complete a degree. • Community colleges, the sector that enrolls the majority of less advantaged and older students, have experienced staggering dropout rates. • About 54% of their students don't complete a degree, receive a certificate, or transfer to a four-year institution within six years

Undermatching

• Although there are far more high achievers from wealthier families than among those who are less well off, this "undermatching" of talent with available resources is another indicator that class matters in the U.S.

Opportunity Gap

• America faces an opportunity gap. Those born in the bottom ranks have difficulty moving up. • Although the United States has long thought of itself as a meritocracy, a place where anyone who gets an education and works hard can make it, the facts tell a somewhat different story.

You Can't Discharge Student Loan Debts

• And in one of the industry's greatest lobbying triumphs, student loans can no longer be discharged in bankruptcy, except in rare cases. • 3 types of debt cannot go away through bankruptcy: • Student loan debt • Taxes debt • Child support debt

States Cut.....Universities Increase

• As the states cut back funding, universities raised tuition. • To cover the increase, more students borrowed, which brought in even more money for the thriving industry. • The next step: collecting all the debt.

Bankruptcy

• Bankruptcy is a court proceeding in which a judge and court trustee examine the assets and liabilities of individuals and businesses who can't pay their bills and decide whether to discharge those debts so they are no longer legally required to pay them.

The Pell Grant_Drop Out Correlation

• But more money for Pell grants, by itself, will not solve the dropout problem. • There is NO evidence that Pell grants have increased graduation rates, as opposed to enrollments.

Few Low Income Households Get Degrees

• But the even bigger problem is that few actually manage to get the degree. Moreover, the link between parental income and college-going has increased in recent decades (Bailey & Dynarski, 2011).

Income Advantages

• Children born into the bottom fifth of the income distribution have a slight chance of becoming middle class or better in their adult years • Those born in the upper levels of income distribution tend to stay there or climb higher.

One Size Doesn't Fit All

• Different segments of the high school population need different postsecondary opportunities. • Some are academically able and should be applying to selective schools. • Others are much less well prepared and might benefit more from a one-year certificate in a high-demand field such as health, computers, or welding. • Some would thrive in technical colleges that use their particular skill set.

Who is On Board Already

• Eleven states — Oregon, Nevada, Arkansas, New Jersey, Maryland, Tennessee, New York, Rhode Island, Delaware, Kentucky, and Indiana — already have these programs in place and nine more are working on legislation to do so.

Your School District Matters

• Given that property taxes support school districts; districts with wealthier home owners pay more in taxes because their house is worth more; thus, the schools are better; thus, the students get a better education; thus, they are better prepared for college; thus, they are able to successfully complete college. • THUS THE CYCLE CONTINUES...........A GOOD EDUCATION = A GOOD JOB = AN EXPENSIVE HOUSE = A GOOD SCHOOL DISTRICT = A GOOD EDUCATION...........And the wheels on the bus go round and round, round and round.

Education For Profit

• Millions of Americans who went to college seeking a better future now face crushing debt from student loans—while the industry makes a handsome profit.

That Student Loan Debt Problem Again

• More fundamentally, for a lower-income family, higher education is simply not affordable without heavy subsidies from the government or scholarship aid. • Faced with messages that a college degree is the ticket to the middle class, and tuition levels that are beyond their reach, borrowing by students and their families has soared.

Scholarships & Free Tuition

• More states are adopting scholarship programs to increase the number of students attending college • For some high school students, the possibility of free tuition is paving the way to a degree.

Remedial Preparation

• Most colleges, especially the less selective schools at the community college level, have poured time and money into providing remedial courses to help underprepared students succeed, but the effort has done little to overcome the dropout problem.

The Solution = Financing Their Education

• Most high school graduates say that they plan on getting a degree, and spending on Pell grants has risen sharply in recent years, even as deficits have constrained other types of spending (U.S. Department of Treasury)

New Programs....

• New regulations introduced after 2013 now limit a student debtor's federal loan payments to as low as 10 percent of discretionary income. • "We need to eliminate the private collection agencies from this process," she says. "They are incentivized just to collect money, not to work out ways that might be better for the borrowers. We need to see what else might work."

The GI Bill is a Double Edged Sword-- You Can Get a College Degree.... If You Survive During Times of War

• Newton says his state's cuts to higher education will force more young people to face the same choices he did. • "You shouldn't have to go to war to get a college education," he says.

The GI Bill

• Officially the Servicemen's Readjustment Act of 1944, the G.I. Bill was created to help veterans of World War II. • It established hospitals, made low-interest mortgages available and granted stipends covering tuition and expenses for veterans attending college or trade schools. • BUT...............it was also a tool for racial discrimination; in that, out of the 67,000 mortgages made available to returning veterans...........LESS THAN 100 WERE MADE AVAILABLE TO BLACK SOLDIERS.

Profit Maker for the Government

• One of the beneficiaries in the profit spree behind this debt is the federal government. • By the Department of Education's own calculations, the government expects to earn an astonishing 20 percent for the loans it made in 2013.

Other Options

• Qualify For A Federal Student Loan Forgiveness Program • Find State Assistance For Your Student Loans • Find Out If Your Employer Offers Tuition Reimbursement • Consolidate Your Federal Student Loans • Find A Repayment Plan That Matches Your Ability To Pay • Setup An Income-Based Repayment Plan With Loan Forgiveness • Refinance Your Student Loans

Contributing Factors

• Rising tuition costs that have only partially been offset by increased government aid and are especially burdensome for the least well off; • a lack of information about what aid is available, particularly at more selective schools; • and the demands of work and family that may make full-time attendance difficult or impossible. • But probably the most important factor explaining lack of completion is inadequate preparation for college in the K-12 years.

Student/Soldier Example

• Saul newton was a student at University of Wisconsin, But after two years of tuition hikes, Newton found himself with about $10,000 in student loans and the prospect of still more borrowing if he stayed in school. • "I couldn't afford it any more," he says. • He dropped out and enlisted, hoping one day to go back to school under the GI bill.

Contributing Factors (Consumer Reports)

• Societal changes conspired to drive up the basic need for these student loans: • Middle-class incomes stagnated across the decades, • college costs soared—including double digit tuition increases • states retreated from their historical investment in public universities. • If states had continued to support public higher education at the rate they had in 1980, they would have invested at least an additional $500 billion in their university systems,

International Perspective

• Some countries, such as Germany, also provide far more opportunities for nonuniversity bound students to acquire valuable skills. • Meaning they fully support tech or manual labor types of education opportunities • For those with the college-bound requisite ability, the cost of higher education is free or highly subsidized. • Meaning, you don't pay for school

Georgia's Hope Scholarship

• The HOPE Scholarship program is for students who have demonstrated academic achievement and are seeking a college degree. ... •Generally, to become eligible, a student must graduate from an eligible high school with a 3.70 GPA and a minimum score on the SAT/ACT. •Unlike the NY program.....HOPE IS TIED TO ACADEMIC PERFORMANCE.

Our System Isn't Working

• The U.S. is falling behind in international rankings of what students know and how many graduate from college, and it is not clear that we can continue to compete using our current "open-access" model. • European countries spend far less per capita on higher education than does the U.S. but get a much greater bang for the buck in terms of college completion rates.

DEPARTMENT OF EDUCATION = BANK

• The federal government holds about 93 percent of the $1.3 trillion in outstanding student loans. That makes the Department of Education, effectively, one of the world's largest banks, but one that rarely deals directly with its customers.

Who Qualifies

• The scholarship applies to all schools at the City University of New York and State University of New York. • New York says more than 940,000 middle-class families and individuals making up to $125,000 per year will qualify when the program completes its three-year phasein in 2020. • So if a student's family makes less than $125K, they would qualify. • Given that the median household income is: $60,336....that is a big benefit for most households

Options

• The workforce of the future will need more education, but some of that education may be more effectively provided in high school, in career and technical education programs customized to provide the skills that employers need, and through inexpensive online learning rather than in traditional college classrooms. • Community colleges are, of course, providing a great deal of career and technical education, and especially where that education leads to a certification or skill with value in the market place (nursing is a good example), they are providing a vitally important service and deserve more resources for this purpose.

Innovation and Education

• There is a burgeoning interest in online learning combined with more personalized approaches in the classroom. • By bringing college-level learning within the reach of the less advantaged and older, nontraditional students looking for ways to retool their skills, innovation can be one solution to America's opportunity gap.

Promise Programs = Two Years

• These so-called promise programs typically offer college students two years of free tuition at participating state community colleges or other associate-degree programs and vocational schools. • Most are what's known as "last dollar" scholarships, meaning the program pays for whatever tuition is left after financial aid and grants.

Student Debt Delinquency

• Today, one in four borrowers are behind in their payments, according to the Consumer Financial Protection Bureau, • Contractors working for the Department of Education at collecting on delinquent student loans are expected to make more than $2 billion in commissions from the government this year, according to the National Consumer Law Center.

Giving Students a Chance

• While promise programs such as these are not perfect, they are giving capable students who otherwise wouldn't be able to afford college the opportunity to pursue a higher education.

42 Million Americans

•Americans bear $1.3 trillion in student debt that's altering lives, relationships and even retirement.

Banks, Credit Unions, Investment Firms Were All Loaning Money to Students

•Growing alongside 42 million indebted students is a formidable private industry that has been enriched by those very loans.

New York Educational Trail Blazers

•In 2017, New York's Excelsior Scholarship became the first in the nation to cover four years of tuition without being tethered to academic performance. • That's a big deal...........not just two; but four years!

A College Degree Makes a Difference

•One way that lower-income children can beat the odds is by getting a college degree. • Those who complete four-year degrees have a much better chance of becoming middle class than those who don't — although still not as good of a chance as their more affluent peers.

Tuition Increases

•Over the last decade, the average tuition and fees at private four-year schools rose 26 percent. •it's even worse at four-year public schools, where it has jumped 35 percent during that period.