Should the Government Rate Colleges?

Discussion in 'General Distance Learning Discussions' started by Kizmet, Apr 22, 2014.

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  1. Kizmet

    Kizmet Moderator

  2. TEKMAN

    TEKMAN Semper Fi!

    For the quality assurance purposes on Title IV financial aids, the Government should start grading US colleges. And possible foreign colleges as well for those participate in financial aids.

    However leaving the vocational schools alone because their purpose mainly for small business educational training.
     
  3. jhp

    jhp Member

    I would be terrified, if I was president of a higher ed institution.

    "The President wants to rate colleges to increase competition and cut student-loan debt."
    "...the Administration hasn’t announced how it’ll go about determining ratings..."

    Is there a competition problem?
    How is rating schools cut student-loan debt?
    What will be the "determining ratings"? Graduation rate? Income of new graduates? Scores on some test? Financial aid distributed? Gender or race distribution? Square footage of class rooms to student population ratio?

    I can see this program going the way of many other 'successful', large government programs that was able to fix 'problems'.
     
  4. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    Agreed. That's even more the case if the feds' goal is to put together yet another useless "one size fits all" ranking. What would actually make sense would be one where students list their needs and preferences, and then receive a personalized list of schools that meet their needs. But no one seems interested in putting that sort of friendly front end onto a large set of higher education data.
     
  5. nyvrem

    nyvrem Active Member

    Have a strong feel that a group of traditional colleges are controlling the tides and the waves.

    I'm still not understanding how a rating will decrease debts.

    Maybe if it works - they could use it to solve all the country's debt problems.
     
  6. Kizmet

    Kizmet Moderator

    I'm guessing that a part of the rating will involve the percentage of people who actually graduate and the percentage of people who obtain employment following graduation.
     
  7. CalDog

    CalDog New Member

    It's actually pretty simple. Note the following facts:

    1. The Federal government provides vast amounts of money to colleges in the form of student loans.
    2. Many of those loans subsequently go into default, which means that taxpayers eat the costs.
    3. Some people feel that the default rates at certain schools are unacceptably high.
    4. Therefore, the Federal government has a plan to restrict lending to schools or programs with high default rates.

    The government already rates schools in this way: you can look up the "Cohort Default Rate" for any school at the US Dept of Education "College Navigator" website. So for example, you can see that:

    - 1.7% of students who left MIT in 2010 have since defaulted on their loans, while
    - 26.0% of students who left the University of Phoenix in 2010 have since defaulted on their loans.

    Right now, the Cohort Default Rate makes no difference: the government loans money on equal terms to students at either school. But does this really make sense? Isn't it a fact that one of these schools is a much better credit risk than the other? And if so, shouldn't government lending programs acknowledge this fact?

    You can bet that it work that way if student loans operated in accordance with free market economics, which include the risk of bankruptcy. In the Real World, it's obvious that lenders would be wary of loaning tens of thousands of dollars to students who might not pay them back.

    By the way, the State of California has already modified its financial aid practices to reflect default rates. California provides student financial aid via the "Cal Grant" program -- but schools with high default rates and/or low graduation rates are ineligible to receive them. And this is not considered politically controversial here in California -- it's considered common sense. The Federal government is considering a similar approach.
     
    Last edited by a moderator: Apr 22, 2014
  8. 03310151

    03310151 Active Member

    Not only should schools be looked at by credit risk when getting a loan, but so should actual degree's. A degree in STEM should be thought of as a lower credit risk for a loan than a degree in Grievance Industry Studies or Microagressions Science.
     
  9. jhp

    jhp Member

    So, to be simple (for simple minds like mine), schools like MIT will be able to garner better rates and possibly more funds than Phoenix?

    I can see this one smacking into serious opposition, right or wrong, for starters from all sorts of protected classes, not just the institutions.

    I have no concern with them publishing a report ranking schools to their liking, as long as they explicitly define how the ranking is made, and there are no subjective elements in the process.

    I would prefer the government to be completely out of loan business.
     
  10. jhp

    jhp Member

    There is a presumption in this that we only need STEM fields filled.
     
  11. CalDog

    CalDog New Member

    Yes.

    Yes. For example, for-profit schools hate the idea (because they tend to rely heavily on government student loans, and they tend to have high default rates). And they are a powerful lobby.

    As indicated, the government already ranks schools by default rate. And it is a reasonably objective process: a lender generally knows whether or not a loan is default. They just don't do much with the ranking (yet).

    I can see that idea smacking into serious opposition, right or wrong, for starters from all sorts of protected classes, not just the institutions. The reality is that the vast majority of college students in the US rely, to some extent, on federal financial aid. So eliminating federal student loans might not be possible. But reforming federal student loans might be.

    Let's say we did eliminate federal student loans. If lending was up to the Free Market, do you think that students attending schools like MIT would be able to garner better rates and possibly more funds than students attending Phoenix? If so, then would it make sense for government student loans to operate in the same way?
     
    Last edited by a moderator: Apr 22, 2014
  12. CalDog

    CalDog New Member

    I see where you're coming from. But remember that it takes years to earn a college degree, so the lending process starts long before the student has an actual degree in hand. Many students go to college uncertain about their future major -- or they start out certain, and then change their mind. Would you loan tens of thousands of dollars to an 18-year old kid just because he thinks computer engineering seems like a cool major?

    If the kid has been accepted to MIT, then he's probably a good credit risk, even if he switches his major down the road. On the other hand, if he wants to attend to Floyd's University of Computer Training, a for-profit school downtown that advertises heavily on late-night TV, but which has a 30% cohort default rate, then maybe it's risky despite being a STEM school.
     
  13. me again

    me again Well-Known Member

  14. CalDog

    CalDog New Member

    The US Dept. of Education provides all the latest default rate data in Microsoft Access format here. But it's not particularly convenient -- you have to download it and sort it yourself.

    Note that there is a separate file that only includes schools with the highest (30%+) default rates. Under current regulations, those schools are required to "establish a default prevention task force that prepares a plan to identify the factors causing cohort default rate to exceed 30 percent and submit to the Department for review."

    So currently, schools with high default rates are required to prepare and submit a plan. The question is whether the government should go further -- like maybe charging higher interest rates, or even cutting off loans entirely, to students who want to attend high-risk schools.

    In the Real World, of course, this would be a non-issue -- lenders always charge more, or refuse to loan, to a potential borrower if there is perceived to be an unusually high risk of default. That would be considered normal.
     
    Last edited by a moderator: Apr 22, 2014
  15. jhp

    jhp Member

    Possibly, but not necessarily.

    Profitability is predictable, governments are not.

    I do not have problem with the rankings. As you stated, they already exist. I have an issue with tying them to the loans, when the government is also the lender.

     
  16. jhp

    jhp Member

    I can see asked in an interview "so what was the rate of your school loan?" . . .

    Interesting stats on the report you provided - public school borrower default rate is climbing (7.2, 8.3, 9.6%) but private seems to have settled (4.6, 5.2, 5.2%).
     
  17. sickburn

    sickburn New Member

    More government is the answer to very few things.

    The government already wastes more money than any for-profit college burns through. The feds are the last people in the world that have any right to rate organizations on fiscal responsibility.

    Terrible idea.
     
  18. BobbyJim

    BobbyJim New Member

    I would be in favor of removing all educational loans and federal aid - until completing a 2 year period of national service! I suspect tuition rates may reset if that happened. :drillsergeant:

     
  19. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    "Service guarantees citizenship"?
     
  20. jhp

    jhp Member

    That is not a bad idea. This is already implemented in various forms through medical schools, military service, etc.

    And, yes Mr. Foerster... "Young people all over the globe are joining up to save the future."
     

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