We need to replace loans with more grants
IN RESPONSE TO the sudden closure of Mount Ida College last year, legislation requiring public and private non-profit colleges to report on their long-term financial stability is now moving forward on Beacon Hill. While the bill is a positive first step, much more could certainly be done for students who are directly and substantially harmed when colleges close.
Mount Ida administrators’ catastrophic failure to protect the students they admitted under false pretenses generated national news for its callousness. Regrettably, the bill that passed the Massachusetts House of Representatives this month does not attempt to improve protections for displaced students. Nor does the bill go far enough to improve college transparency. While it would be an improvement from the status quo, it still relies too much on the same college accreditation agencies that stood by while Mount Ida collapsed.
Make no mistake, additional small, non-profit colleges will certainly shut their doors. Let’s hope that amendments in the Senate will make this bill much stronger. But even the best college closure legislation will just be fiddling around the edges of the problem.
The ever-rising tide of non-profit college closures pales in comparison to the national tsunami of for-profit college shutdowns, where fly-by-night schemers are committing fraud in the name of education on a grand scale.
In the last five years, among the more than 1,230 campuses that closed, 88 percent were operated by for-profit colleges. Among those students whose colleges closed, 85 percent were enrolled in the for-profit sector.
While 60 percent of all college students receive a bachelor’s degree within six years, only 21 percent of students at for-profit colleges graduate within that time frame. For-profit colleges have weaponized student loans, using them to lure students from traditional colleges with easy online degrees. Often, students are left with increased debt, but no college degree and no increased earning potential.
Here in Massachusetts, Attorney General Maura Healey has been aggressive in fighting for the rights of students defrauded by for-profit colleges. But what is the response from the administration led by the founder of discredited and defunct Trump University, who paid $25 million to settle fraud claims from students? More restrictions and stripping protections from students whose colleges close.
Under Obama administration borrower defense rules, students from a closed college who do not re-enroll in another school within three years had their loans automatically discharged, without the need for an application. Now, new Trump administration regulations proposed in September do not allow for an automatic closed-school discharge. Instead, the borrower would be required to formally apply for a closed-school loan discharge.
And, if a failed school convinced a stranded student borrower to even begin to participate in a teach-out program – continuing to work toward a degree as the school winds down operations — the student would become ineligible for release from a closed-school loan.
The Trump administration’s gutting of student borrower protections goes even further. Court judgments against schools for breach of contract will no long be sufficient for a borrower to automatically receive a loan discharge. Under the old rules, groups of borrowers were eligible to receive loan discharges without having to apply individually. Now each borrower will need to individually apply and prove their claim, even when there is ample evidence of widespread and systemic mistreatment.
The sad reality is that college closures disproportionately affect disadvantaged student populations, as they tend to attend for-profit institutions at higher concentrations. While African-American and Latino students make up 34 percent of all postsecondary enrollments, they represent 51 percent of students at for-profit institutions. In fact, among undergraduates at closed campuses, nearly 70 percent received need-based Pell Grants and 57 percent were students of color.
These students saddled with student debt face a difficult choice after their schools shut their doors. They can abandon their dream of a college degree. Or, they can double-down on the debt they’re carrying, and enroll at a public or private non-profit college with the hope of achieving a higher paying career that might enable them to pay off even more loans.
Public and non-profit private colleges are trapped in this debt spiral too. Reliant on the steady stream of federal student loan dollars, they become active participants by burdening students with an ever-growing amount of debt.
Efforts to protect students within the current broken system can only go so far. The only way out is to reform our college financing system and stop passing the cost of college to students and families by replacing college loans with grants and scholarships.
Bob Hildreth is the founder of the Hildreth Institute, Inversant, and La Vida Scholars, three non-profit organizations with complementary missions to get low-income students to college.