Many years have passed since our first article published in this site.  Applying publicly available data, the Association has conducted comprehensive studies on the US Higher Ed.  The results show that the System is broken.  AAEA is conducting a survey, started several years ago which is still accessible now, on the topic directed to the American public.  The survey and results can be accessed here.  These results will help the Lawmakers to know the majority of public opinion on US higher education, and hopefully, they will do something meaningful for the Country.  If you are interested in  expressing your opinion, please do so.

Finally five years after the first article was published, the Congress is trying to fix the broken system, according to this recently published article.  But, it may not easy for the current system has been built for so many years and too many groups have different interests which are entangled tightly.  There will be no quick fix/solution, if any, or maybe there isn’t any.  Hopefully, it is not the seasonal (election time) effort from the Lawmakers to come out with solutions.  One thing that they definitely can do, lower the Fed Loans interest rate!

The answer to the above question is it depends.  Financially, may be yes!  When we started this site, the US student loans were about $1.3 trillion and now it is $1.5 trillion.  Meaning more Americans, especially the younger generation carries more debts these days, compared to those previous generations.  For detail, please click here.

This implies that younger folks in the US are less independent financially these days.  Those who are interested in the subject matters can relate well the student loans increase with many financial variables/factors such as the players, the interest rates, higher ed management and other macro economics factors.  One thing is interesting and worth mentioning is that the federal charges higher student loans interest compared to what the commercial financial institutions are able to offer.  For example, the federal student loans agency charged between 7 to 8% APR, while commercial financial institutions are able to offer below 4%.  As results, refinance student loans businesses are blooming.  It is good for several reasons.  One, the student loans takers can refinance their loans with a cheaper interest rate.  Also, it generate new business/industry/service which may help reducing the US unemployment rate..

On this Independent Day and the upcoming mid-term election, the information above is perhaps, relevant, valuable and useful for the American voters to elect person(s), who will represent their best interests.  Looking at the interest rate alone, a logical person could make a reference if her or his interest has been represented well by the person(s) that they have elected in the past.  Happy 4th!

Though it was not a spectacular, we are happy to see the traffics have constantly increased, since the beginning of the site launch.

This shows that the American public is thirst for reliable, honest and independent source of US higher ed information.  The Association is also the source of new ideas on how to solve the student loans issue and the place where College administrators, corporations, graduate students, lawmakers and others to find in-depth discussions on education analytics, education policy, and public policy on US higher ed.

A Little over five years ago, we started this site.  Our motivation is clear.  As an independent party, we share our research results based on data without any specific agenda.  It is an independent think-tank in education analytics and US higher ed. Historical data are the best representation and the real reflection of what have happened in the US higher ed since NDEA was signed.

The results have been published, and shared to the American public.  Based on these research and comprehensive studies, conclusions were drawn and written in the BLOG.  Half a million visitors are a clear evidence and show that what we have shared and discussed in our BLOG have merits and trustworthy.  Researchers, consultants, software companies and grad students keep on coming back to check what the latest issues as well as new methodologies or mathematical and statistical approaches or ideas which they might be able to capitalize to make new application of analytics or new business, services or products that they can offer to their clienteles.  This site presents unbiased research results along with important innovative ideas.  Different folks and institutions have benefitted from the shared information in many ways and we are happy.  Our predictions are bold.

From the many analyses that we have done, it seems that AAEA is trying to corner the school administrators.  We, therefore, need to confirm again and again that is not the case.  Like a doctor who tell her of his client to get more exercise to lower her or his BP.  The clients may or may not listen to what the expert has said.  As concerned citizens, we see the ships are sinking, and try to honestly remind every players who are in trouble to dry out the water before it is too late.  However, the culture is not there yet.  It may take years to bring some of the players to a level competitive enough and in par with other higher ed institutions in other countries.  In the meantime, there will be more clean-up—college closures or mergers and readers will constantly hear or read that on the national or local news.

A few weeks ago, the Association has written an article to examine the behaviors and motivations of the College administrators.  The conclusions of our analyses point to several interesting results and one of them is that “their interests may not necessarily be inline/consistent to those of the public’s, students’ and their family members’ objectives”.

Recently, there are clear evidences show that lawmakers in each state finally saw (after so many years) the need to listen to their constituents’ outcries.   For example, FL has started to overhaul the whole higher ed system in that state, followed by WI, OK, CT, MO. Today we learned that the state of Arizona has taken similar steps, or even more comprehensive measures to change the course.

The past school board system, and the way how the members are selected have proved to be failed, big time.  It is, in fact, important contributors to the whole mess.  The Association has raised the question in its BLOG, about six years ago.  It is the pat-on-the-back culture or system.  They, members of the board are selected, not because they are concerned for the country’s competitiveness or have the idea to apply the NDEA.  Rather, they are either have the money, or have the connection to those who will be the big donors or a yes man, and who will support the administrators, regardless, period.  Are they concerned about the graduation rate improvement or making the institution where they are serving to be more cost-efficient? Please click the following link for the answers of that question.  These findings will tell it all.  Readers have to make their own judgment, after reading the research results.  For sure, they also played important role on increasing US student loans which have reached $1.4 trillion?

We are glad to see, that our independent analyses have positive impacts on shaping-up the US higher education public policy for the better.  We always show the data in our study and share the unbiased and honest conclusions to the public.  We have no interest than to see the country increases its competitive edge in the global arena, as stated in the NDEA.

In 2012 we wrote an article of three possible scenarios if US colleges and universities do not adapt to the new competitive environments where they are operating.  Today we learned that our third prediction has happened.

If the readers read the article critically, they will be amazed to learn the AAUP’s (American Association of University Professors) comments.  Even, under the financial stress, AAUP thinks that financial restructuring efforts such as reducing cost strategy is not good ideas.  The institution is lucky to be bought out.  A couple of years from now, its value may be lower than it is now, and no one will take it over.

If this represents the whole picture of AAUP and the US college culture, then one can conclude that improving operational efficiency is not the top priority in the US.  If that is the case, then one will see of more direct investments and college buyouts in the future.

So, what is the spirit of the student loans and why the US Congress enacted the law in 1958?  And how the Act has evolved over time, what kind of changes have happened and if the changes have positive or negative impacts to the American public?

The purpose of NDEA is quoted below:

As stated above, the initial purpose of enacting the law is to increase the US ability to compete in the global arena.  Commemorating its 60 years, let us analyze if the purpose has been achieved?  The answer is definitely YES and it is still progressing!  Many evidences have shown the US has made important innovations in both science and technology.  However, at the same time these fine achievements have been tainted by (1). Decreasing cost effectiveness as a result of increasing college education cost, and (2). The progressing rate or growth may have been slowed down.  One may ask the question, why?

Possible answers would be:

1. Mismanagement.  DOE is supposed to manage all the student loans, but desperately failed.  Over the time, as the American population grew, more family have sent their children to college.  It seems that the DOE as the loans’ manager overwhelmed which created many problems in collecting the repayment.  Employees have not been trained properly.  It is just a mess.
2. Because of point#1, then DOE contracted to the third parties to collect the students loans.  Some of these third parties are for-profit institutions with their stock publicly traded at Wall Street.  Therefore, the soul of NDEA begin to be corrupted.
3. The third party came into play such as for-profit higher ed, where their stock also traded publicly, but a failed business model.  DOE as the public executor tries to get cleaned, but the students suffer from their (DOE) policy.

Now that the current regulator is confused what needs to be doing, flip-and-flopping from one ideas to the others, inconsistency and show no interest to deal with it.  Solving the problem cannot be done by (1). One person and (2). Scrapping, deleting, amending, changing, revising and putting new policies on top of the others.  Policy changes need to be done after intensive studies to see the impacts on the whole society and if the NDEA objective is attainable.  NDEA is the moral guidance for every policy makers, lawmakers, colleges and universities decision makers and any other makers in Wall Street, Main Street or any other Streets.  Away from the moral guidance, there would be no (any) equilibrium or peace., i.e., satisfy the American public needs.

The motivation of investors to buy, and hold the share from a publicly traded company is the return from their investment, in this case profit.  If the company makes profit, the Wall Street will (1). Reward them by buying or holding their share which will increase the value/price of their stock and (2).  Reward the CEO with higher salary, bonus and other perks, but the reverse is also true.  Dumping and selling their holding of the company’s shares, if return on investment is less than the interest rate. Therefore, it is only logical for the for-profit higher ed to make bigger return/profit as it possibly can, i.e., by all means.  The graphs show that in 2004, the COCO’s (parent company for Corinthian College) stock price reached its peak, but since then it has declined.  The same pattern also found with APOL’s (parent company of the Univ of Phoenix).  This is clearly examples of DOE’s mismanagement and subpar policy to let for-profit organizations get into the higher ed business.

We start seeing the pattern that once the investors get involved, thing will get murkier.  The next logical question that one ordinary person will ask is that why the lawmakers fail to see the pattern.  They perfectly see it, but they also need the contributions and financial support from the Wall Street, and big corporations for the campaign fund.  Therefore, they, the lawmakers may be reluctant to work against the corporate America, in the expense of the general population (GP).  What they need from the GP is their votes, but individual contribution will not as big of those of corporation. So, many are their empty promises during the campaign seasons.

Here are several points that the readers can take and think about:

1. Who your representatives that you put in the office are actually working for?
2. Will Uncle Sam ever solve the $1.4 trillion (with 9 zeros) student loans problem?
3. Will education cost ever stop to increase under the current reward system?
4. Has anyone realized that DOE (determine by the US Congress) charges higher interest rate for some of the loans than the commercial banks’ or the Fed’s prime rate?
5. Is this an example how the US current state of economy has declined, compared to that of 60 years ago?

This article is written to find the viable solutions for the US student loans, through scientific and honest analyses based on past publicly available data, published facts and information by other parties such as the Brookings Institute (previously has denied that Uncle Sam is facing a student loans problem) or Wall Street publications.  The purpose of writing this article is not against anyone, any group in the society, or any company, but to remind the readers that the final outcome of stretching too far a rubber band will, at one point, to break it.  About a week ago, the Association has written an article on the wealth transfers designed by tampering or meddling the purpose of the (NDEA) student loans.  Indeed, an article has shown us all, how one company made their way to profit out-of the misery of the students.  Needless to say, that this company is a public entity.  That means, the investors who own its stock are also enjoy such a profit.  Perhaps, this is a clear example that shows why many people may love to see the education cost keeps going up.  The higher the price tag, the more people will take loans, which, in turn, will help to fulfil their interest such as making profit.

It is truly amazing to see how the economic system has developed since Adam Smith wrote the Theory of Moral Sentiments.  This loan servicing company own about $25 billion student loans, and it collects interest out of those loans.  Suppose the interest rate per year is 1%; then it potentially will make $250 millions per year.  We have never seen the interest rate charged to any loan is 1%.  If, 5% then it will make $1.25 billion interest revenue per year.  According to the article, in 2016 this company net profit was $200 million.  In the future, however, the company said, it is going to manage $397 billion loans with 13.4 million borrowers.  With 5% interest rate, each borrower will transfer about $1,500.00 per year from their wealth to the company for paying the interest only.

The report above presented data, which again confirm the hypothesis that the student loans (NDEA) which first created for a noble goal has become the means to make the borrowers worse-off.  Sure, one may argue that the society also receives the benefit through owning the company’s stock.  The question is, which segment of the society enjoys such a benefit?  How many of the working class has extra money which they can invest in the stock market, while most of them live from paycheck-to-paycheck.  Little left for buying any kind of company stocks.

How many of the readers are still thinking that taking student loans nowadays is such a great ideas?

A couple days ago, we have discussed and shared the idea of college drop-out insurance (CI), as our response and contribution to reduce the negative impacts that may cause to the economy as a result of a never-declining growth of US student loans.  When more people taking the loans, then the probability that some of them will be defaulted will also increase.  Recent study shows that the rate of student loan defaults have shown a trend that makes some of the economics actors to equate it as the “Housing Bubble”.  Scary?, may be so.  AAEA has predicted this is going to happen not last year, or two years ago, but longer than that.  Based on the actual data, the Association has makes a prediction, that if the source of tuition increase does not get controlled then consequently something could happen.  To read the article, please click here.

So, what is the viable solutions, among many possible ways that policy makers or market players can do?  Some in Wall Street will bet either way, right?  The student loans bubble (SLB),  may have devastating impacts in the market considering that the Bull has run about ten years, because of the money supply and low interest rate policy.  SLB may or may not happen, depending on:

1. If majority of the loans are issued by the government, instead of the private lenders.
2. How strong the labor market is?  If it keeps absorbing the new batch of graduates, then pay-back streams may not get disrupted.
3. What is the composition of those graduates in hard and soft science?
4. If inflation rate picks up, it may affect borrowers’ ability to make repayment.

However, if SLB happens, it may trigger chain reactions in the market, and the accumulation of the multiplier effects due to market corrections will be significant enough to repeat the housing bubble?

Uncle Sam can easily add a provision on the loan agreement where the Institutions or/and the borrowers have to buy an insurance to cover the possible events when the students drop-out school.  Of course this will increase the burden to the students.  Perhaps, a better idea is to shift part of the burden to Title IV institutions, colleges or universities where the students are enrolling to cover unfortunate events which may cause the student to drop-out school.  This will motivate them, the institutions, to manage such a chronic problem facing Uncle Sam.  It has a good chance that the school drop-out rate can be reduced, either by real efforts, or by lowering or watering down the courses passing requirements.