Often students are sandwiched between two parties interests which have caused tremendous negative impacts on their future income. College high operational cost due to inefficiency has caused a skyrocketed college tuition. After graduation, they, the graduates have to deal with another pressure from the student loans servicing or collection agencies which often operate with maximizing profit mindset—that will apply all possible means to achieve their profit objective. Things are getting worse when the DOE has a minimum way, or no way to control the loan servicing companies’ behavior until the public outcry which then caused the CFPB to step in. The CFPB finally has made recommendations to reform the industry.  This clearly suggests and confirms that the US higher education is broken as has been stated by the Association in the past.  The recent reform recommendations also prove otherwise the claims of no problem with US student loans which only represent special interest groups that defy the reality and the majority of American Public’s interests.  One additional note to the CFPB to also pay attention on the DOE, Accounting Dept or Unit (Atlanta, GA branch as an example) that is responsible to make collection not to charge borrowers’ bank account without their consent.  Often, this unit charges customers’ bank account twice in a certain month without their permission.  This creates problem with bank overdrafts which then make the bank to charge incredible amount of multiple overdraft fees, starting when the account  become red.

Recently US DOE published a report how federal data can be used to improve the performance of US institutions of Higher Education. Finally the regulator takes a baby step in protecting consumers that have limited resources. This is certainly an important progress that the regulator has made to keep college accountability in check. However, it is still a long way to solve the acute student loans issues in the country.

In the past several weeks we have heard how the student loans become a hot topic in the US Presidential race. Winning the college students’ votes could be a crucial point to win the seat. Therefore, promises such as loans forgiveness or free college education were repeatedly mentioned. Sadly, none of these solutions addresses the real reasons behind the student loans problem in the country. So what are the real reasons? Click here to find the answers.

In the wake of weaker student enrollment, US colleges are struggling to fill their seats that is enough to generate revenue to balance their planned annual spending.  The interests are growing to forecast what students enrollment might be which never happened in the past.  Is it possible to forecast student enrollment?  Our short answer is yes, you can!  The next question is how accurate your prediction or forecasting will be.  In the world of econometrics and forecasting, there are two ways to predict any sort of predictions.  (1). Applying time series analyses and (2). Using some sort of econometric models.  There is also effort to combine these two approaches to come up with the lowest Mean Square Error (MSE).  Forecasting of student enrollment was rarely done in the past in decision making process.  The reason is simple.  In the past higher institutions do not need to do it due to strong demand for college education.  However, the condition has changed since then.  Rather than paying a lot of money to pay a consultant firm, an institution can just take the naive model i.e., take the average of enrollment over the period of analyses and available data.  This might be your best predictor for your (t+1) period of student enrollment.  Do not forget to consider the margin of error in your final judgment.  The more data one has, the closer the sample mean to its population average.  At least 30 observations are needed to satisfy the Central Limit Theorem.

On July 4th, the Association has written an article on its blog. This article laid out the negative effects of excessive student loans on the US economy and the well being of young Americans and their family. Today we all learned reports published by the Washington Post that PAYE (Pay As You Earn) on student loans repayment program will be expanded. While this program will surely help the struggled American families and will jolt the economy, it still does not solve the root of the problem. Rather, a remedial policy to fix the damages caused by the fundamental flaws for lack of supervision and accountability on institutions that have received federal aids. AAEA continues to urge the policy makers to restlessly, diligently, tactfully work to root out the college cost problem. If the State of Washington can slash 20% of college tuition by Fall semester 2016, why other states cannot start implementing the same policy? The fact that the tuition can be reduced show:
1. In the past young Americans and their family have been overcharged by at least that amount per year.
2. The reduction may reflect the level of inefficiency and waste of resources that have been occurring at many US colleges per year.
3. Transferred wealth has occurred from the student family and young Americans to somebody else at least at the same rate per year.

Promoting accountability may not solve the entire problem instantly, but it surely will bring players on the right tract to serve the public’s interests and not anyone else’s.

Happy Fourth! Last year we have written an article which argued that skyrocketed college cost and student loans have caused many young Americans lost their financial independence. The logic is this. The amount of $1.2 trillion student loans have prevented borrowers from acquiring a bundle of goods or services which (normally) will optimize their utility function (loosely translated as their happiness/satisfaction level). If on-average, every undergraduate student has to take $50K loans to complete their college degree, then roughly speaking there are 20 million young Americans (has been reported about 40 million) who may have to live with a lower quality of life. This group of fresh graduates has lost their purchasing power because colleges keep increasing the tuition which forces them to take more loans. Many people may not think that taking student loans in time t (current time) is equivalent to transferring their “future wealth” to someone else. Does anyone see that this system has been borrowed and implemented from the “bees’ colony”? Supporting an inefficient system financially is equivalent to pouring salt into the sea.

Given all the mess that is happening in the current US higher education industry, the Association has asked how could this situation even occur in the first place?  Given all kind of supervision agencies around both at the state & federal level, different associations and accrediting agencies how then this problem ever started? The logical question one will have is that have these agencies done their homework well?  The logical answer is “NO“.  If they did, then the American society does not need to wait until the student loans hit $1.2 trillion and that college closures become a daily news reported in the media. The logic tells us that the current problem occurs because these agencies have not done enough.  For example, a recent senate committee hearing shows how poor one of these agencies has done its job. The current mindset and culture of patting-on-the-back are no longer relevant (it never will) and it has proved to have caused financial disasters to average American families.  The mentality of “it-is-not-my-problem” and the attitude of “ignorance” or “I do not care” and “play-it-safe” have no place if people want to serve this country and the American public wholeheartedly. The Association has proposed many months ago to create ESCC (Education Standard and Compliance Commission) that has the integrity to conduct the “real audit roles” on US higher institutions (Title IV) who have received some forms of federal government financial aids or taxpayers’ money such as Pell, SEOG or Stafford Loans (subsidized or unsubsidized), just to name a few of them.  This country will be able to minimize the possibility of making the same mistakes in the future had this agency exists.  That said, without ESCC, there will be a great chance that cheaters and marginal performers will comeback.  Find and elect those individuals who have the quality, integrity, energy, mindset, enthusiasm, sincerity and long-term commitment to the American education which will make this country strives and regains its competitiveness again in the world.

After Corinthian Colleges closure, it was recently reported that another for-profit organization has to deal with an unfavorable situation because of declining student enrollment.  It does not need an Albert Einstein’s brain to analyze what will happen with this type of business model.  On August 30th, 2014 AAEA has published partial analyses on the future outlook of for-profit U.S. colleges.  Consumers are rational.  When their utility function is declining or becoming negative then they surely will discontinue to acquire the services or good.  This is a simple explanation to this seemingly difficult issue facing by the policy makers in this country.

There were many articles written and published on the US higher education on July 1, 2015. One of the shared articles was written by the US Secretary of Education, Mr. Duncan. The regulator seems to seriously work to address the students’ loans & skyrocketed college cost and tuition, for-profit colleges business model, college accountability, gainful employment and college operational efficiency. All of these topics are related and cannot be seen partially if one needs to improve and revitalize the education system in the US. The Association has made a bold prediction on the coming of new regulations and the topics above have also been discussed frequently in the past a couple of years. We are glad to know that finally the regulator has moved forward and more policy makers saw the merits of our research findings as evident from increasing number of traffics and visitors to the Association’s website. We are hoping that this momentum will continue in the future and it is not just an issue of the current administration, but will be carried on as the national agenda regardless of who will lead this country beyond 2016.