Category Archives: Increasing Student Loans

College Administrators And School Board Members Morally Are Obliged to Apologize to American Public

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As it has been reported recently by The Chronicle of Higher Education, some colleges have started to slash their tuition. The following quote are taken from the Chronicle.

[start quote] ”Betsy Fleming, channeling the late management guru Peter Drucker, says there are two crimes in business: Pretending to cost more than you do, and buying customers. “Colleges are in the business of doing both,” says Ms. Fleming, president of Converse College, a women’s institution in South Carolina. “We are not going to do that anymore.”
Last month Converse became one of the latest institutions to announce that it was going to slash its tuition, of $29,124, which no one paid anyway, and “reset” that price down 43 percent to $16,500[end quote].

This self-admitting statement confirms four mistakes: (1).  Yes, colleges have recklessly in their tuition-pricing decision; (2). Yes, colleges are managed based on inefficiency paradigms; (3).  Yes, colleges have committed business crimes in the past; (4).  Yes, colleges are to blame for the whole students loans crises that have happened in the country.

Therefore, it is only fair game if the college administrators PLUS the SCHOOL BOARD members to morally apologize to the American public and their graduates for much of the pains and financial burdens that they have caused.  They need to give the money accumulated from the overpriced tuition back to the taxpayers, students and their family.

Share with us what you guys have in mind.

US Colleges Shutdown?

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US Colleges are in a long wait and anxious if recent and on-going government shutdown will affect the federal student aids such a Pell Grant reimbursement. This is a real world example that shows how fragile the college operation is, especially to those colleges which are more dependent on the federal government. Perhaps, it is time to shift the strategies so that higher institutions are financially more independent. This is only can be done if colleges operate based on a balance budget policy. What is going to happen if this recent shutdown delays the government to channel the federal financial aids? Will there be college employees’ furlough as well at many US colleges?

Our research results show that more than 90 percent of them has higher operating cost than revenue generated from tuition.
Please write below what you guys think? Share your opinion with others.

Could Government Shutdown Happen to Colleges Too?

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The stories about government shutdown dominate the news on October 1, 2013 morning. How will the shutdown affect colleges’ operation? Hopefully nothing now!

Well, at least one learns that shutdown can happen to any institution and not just to the regulator. We have discussed the subject many times in this blog that no US colleges can take for granted that enough “funding” or “money” will always be available to support their operation. It can go and puff away in seconds without early warning.

Hopefully colleges will take lessons from recent government shutdown. And convince themselves that perhaps the shutdown-day will also happen to colleges who are operating beyond their means i.e., more spending than revenue, over-investment or operating under inefficiency mindset. Our research results show that majority of US colleges are operating in excess of their operating revenue generated from tuition. Please click here (public colleges) and here (non-profit higher learning institutions) to see and analyze total revenue generated from tuition compared to total education and general expenses.

Please write your comments below what do you guys think?

Harvard New Fundraising Campaign

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Recently Harvard asked donors to contribute $6.5 billion.  Does this confirm what we have discussed all along in this site i.e:

  1. Colleges’ financial situation is in an odd?
  2. Colleges just cannot keep up with the raising operational cost due to their past unfortunate decisions such as on tenure system, over investment and over spending?
  3. Colleges are not ready to embrace the new paradigms such as IRI which will help them to operate more efficiently?
  4. Colleges just cannot and are not willing to give up and walk out their comfort zone?

Recently we have published salary of selected 50 colleges in the US.  Along with statistical studies to find the causes of college tuition and student loan increases.  Please click here to read the whole article.  The results of the study show that salary of full professor and school administrators positively correlate with student loan increases. Please tell us what you guys think?

 

Let the “Student Debtors” to Declare Bankruptcy

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On September 16, 2013, Yahoo! News reports the need of let the “student debtors” to declare bankruptcy.  To read the whole article, please click here.  Several reasons were cited below as written toward the end of the article.  What do you guys think?

Quote from the article:

According to demographer Cheryl Russell of New Strategist Publications, “debt, coupled with double-digit unemployment, has hobbled millions of young adults who would have bought homes, married, had children and feathered their nests with all the middle-class goodies that keep our economy humming.”

“Rising student debt has been eating into the housing and auto markets,” wrote Brad Plumer inThe Washington Post in April, while many argue that letting students overburdened by student loans go bankrupt would actually invigorate the overall economy.

“This entire system must be overhauled,” wrote Salon contributor David Dayen. “Otherwise, it will continue to damage our economy by indenturing talented students, our greatest renewableresource.”

Full Professors’ Salary May Have Caused Students To Take More Loans

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Based on our studies on 50 US colleges randomly pulled from the IPEDS data base show that faculty members’ salary with a full professor rank has a positive correlation with college tuition.  For full report, please click here.  Should their salary also be capped up to a certain amount?  We love to hear from you guys!  Please write your comments.

The Exit of A Big Lender on Student Loans: What Message Does it Convey?

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Recently, a big lender of student loans (JP Morgan) has exited from the market because of rising student loan defaults.  This is the sign that everyone has to pay a close attention at. Linking this retrieve and the analyses that we have done (click here), it apparently paints a bleak future that the student loans problem can be solved without leaving a trail of wreckage.  The current loan default problems may lead to many US colleges’ closures with potential devastating impacts on the financial market as well as US economy, employment and everything else.  It may trigger financial crises globally as well.  Please let us know what your guys think?

Newly Proposed CAR Will Hurt Lower Income Students!!

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Based on our research (please click here: recent research and analyses), the newly proposed College Affordability Rating (CAR) will have devastating impacts on lower income students who are attending smaller schools.  Our analyses on colleges in Tennessee support the claim.  A wise man said, fixing the education industry is equivalent to repair an old car.  After reading the finding written on the link above, do you guys think any future policy changes will help to solve the complex problems?  What consequences will happen to the country ability to survive financially if a do-nothing-policy is adopted?

Newly Proposed CAR Rating May Hurt Small Colleges

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Based on our, (Please click here: recent research and analyses), the newly proposed College Affordability Rating (CAR) may not have significant impacts on top tier schools because federal funding or federal financial aid may not a big part of their revenue or income. However, for smaller schools, federal funding is about life-and-dead especially for low-income enrolled students. Needless to say that graduation rate (GR) which is one of the components in calculating the CAR is much lower at smaller colleges. On average, GR at the Ivy League institutions is well above 90% while smaller schools may have as low as 10%. It does not need to have a rocket scientist to figure out the reasons why. High achiever students will certainly prefer to attend top-tier schools, especially if they are lured with fat financial package.

Smaller school will have a harder time with the new CAR regulations. However, AAEA will help smaller schools to improve their graduation rate. To read the solution, please click here.

Please let us know What do you guys think? Please write your comments below.

Increasing Student Loan Debts after Loans Got Transferred to New Loan Servicing Company?

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On July 12, 2013, the regulator announced that they have switched or transferred the loans to four profit financial institutions and 4 non-profit organizations as reported by Credit.Com on August 14, 2013. There is a good chance that good borrowers’ outstanding loan balances swell after their loans got transferred to the new servicing companies.

There are two possible reasons for increasing loans:

  1. Though, one does not know the real reasons of the   transferring loans policy to other loan servicing company, it can also be inferred as selling (accounting jargon for it: factoring) the outstanding loans to those mentioned companies.  The buyers of the loans will pick the borrowers with good payment history.  The regulators will get their money back (perhaps including the bad loans from the buyers), and use the in-flow cash for the next cycle in the loans business.  The new owners of the loans will pass any “transaction cost” plus “profit margin” plus the bad loans (if they are included in the agreed purchase price) to the borrowers.
  2. Another possible horrifying story is that when the loan got transferred from Department of Education to the new loans servicing entities; either profit, semi-profit or not-profit organizations then the total original borrowed amount and not the last and current loan balance was transferred.  This means, payments that have been done prior to transferred date will not showed up on the borrowers’ account with the new loan servicing institutions.  Therefore, the borrowers have to pay twice to different entities from the same original loans.  Therefore, the “new loans” that the “good” borrowers have to pay may increase tremendously.  New owners of the loans and the regulator are the apparent winners of this transaction, and the students are the clear losers, which is a tragic and unfortunate.

The Association has completed study on the student loans and find the answer.  Please click here to read the complete results!

Please tell us your story.