The Truth About Hiring Practices in Science and Engineering

As Thoreau once said “the biggest mistake people make when attempting to solve a problem is they merely hack at the leaves versus dig at the roots.” In my opinion when it comes to the student loan crisis in the US higher education system, as a society we are doing just that- hacking at the leaves. As an industry and as a nation we are failing our students because we do not provide Financial Education in the core curriculum. We will never truly dig at the roots of the problem until we teach students about personal finance. Until this occurs, I am afraid to say that we in higher ed are committing Educational Malpractice. It’s not too late to do something about this and the time is now.

Respectfully-
Tony D’Angelo
Founder of Collegiate EmPowerment
Developer of The Rich Grad Project (www.RichGrad.org)

Here’s another view that I came across a few weeks ago. http://www.cato.org/pubs/pas/PA678.pdf

Where has personal accountability gone?  The amount of loan debt one wishes to take on for a specific type of education is a personal choice.  There is a huge financial difference between an engineering education at MIT and an engineering education at a public institution with much lower in state tuition.  If the student believes that an MIT education will lead to better business opportunities and higher income across his/her lifespan, that is a PERSONAL choice.  The government should keep its prying hands off of such decisions.  If enough students believe that an MIT education is too expensive, then the pool of highly qualified applicants will decrease.  I have trouble generating any sympathy for a “power couple” incurring $120K of debt along the way to becoming attorneys.  That total investment is covered by just a few months of billings for a successful attorney.  The alternative is to have hard working taxpayers pick up the costs for a power couple to become attorneys, and then turn around and soak those same taxpayers for legal services rendered for their personal legal needs.  Sorry- someone’s choice of professions and educational pursuits is individual and personal, not the government’s responsibility.

This is a similar principle to starting a business.  How much debt should an entrepreneur incur to start a business?  Should they go crying to the government for a handout, or should they decide personally how much skin they need to have in the game.  Try raising capital from venture/angel investors if you have zero personal investment in your company.

The increasing demand for free university education is the next step down the road for free entitlement to virtually everything.  The missing factor that the entitled generations seem to forget is that our nation is BANKRUPT.  We do not have the money for handouts to everyone.  Further confiscation of wealth (excuse me, “sharing the wealth”) will simply lead to even greater stagnation and mediocrity.

I agree that college at any cost is a dubious proposition. However, we do far too little early in the life of a student or their families ( and I mean high school students) to give them the financial literacy tools to be able to think intelligently about making wise choices. When does a student learn cost benefit analysis — pretty much never unless they major in economics in college. Or they learn the hard way by making unwise decisions. We have learned in this recession that we don’t need brand names in detergents or even medicines, but we still buck for them in higher education. A student can gain as much value from a public institution as a private or an Earlham vs a Swarthmore. The stats say that students with a college degree fare better, student with liberal arts degrees fare better but over a life time the issue of which school that degree comes from is less important than the quality of work experience and performance. Students are not (except the wealthy ones who don’t need to know as much) taught about the tax breaks or the value of looking out of state where diversity may be sought or looking in-state for public institution tuition rates. There is scholarship money that goes uncollected because the most needy students need help in finding them and doing creditable applications for them. In college there is not enough support on this last point or in helping students really understand the choices they and their families are making. The new Obama proposals should be on the home page of every college website as part of an effort to help students who are eligible take advantage of them.  Marcia Cantarella, PhD, Author of I CAN Finish College: The Overcome Any Obstacle and Get Your Degree Guide.

“They are, after all, getting something in return. Taking on a student loan seems like a good investment, when placed next to the lower unemployment rate for college grads and the lifetime payoff of a bachelor’s degree.”

Perhaps but that will not long remain true. In graduate studies the balance between benefit to cost on many degrees is becoming much less viable. And even for bachelors in certain fields the potential is getting much less viable. The NEA a few ywars ago published the article “My Debt My Life” which clearly stated that the teachers (who are bach’s generally) could not longer compensate for the educational debts versus income dilemma.

“Where has personal accountability gone?  The amount of loan debt one wishes to take on for a specific type of education is a personal choice.  There is a huge financial difference between an engineering education at MIT and an engineering education at a public institution with much lower in state tuition.”

It is always interesting that personal accountability is often applied to those subject to college costs and not to those who cause the problem. For more than a generation our students have been subject to insane tuition escalations, and all too often collegiate glitz which were so closely linked to the development of the debt for education model that incestous is not too strong a word.
The moral failing on the part of academy arose in two conditions. The first was to go along with that debt premised system to the extent that a large portion of college cost derives from glitz (unnecessary trophy buildings and intense marketing). The second was to not pressure the government into a more fair, and much more socially and economically viable system than the debt for ed model.
About state schools being cheaper, yes these often are less in tuition. However the cheaper tolls are proportionally more damaging because the populations which largely attend these schools do not have the initial resources and generally never make the incomes of their more genteel associates. So the debt problem is not resolved by the public institution hosanna, the problems still the same just transferred down the ranks.

the debt/cost as skin-in-the-game trope is a cultural matter…we need to change that…ensure education (aka opportunity) for all whether in college or trades and have one’s one self-regard and a re-cognized sense of personal responsibitiy be “the skin.”

if there is any resource that demands investment its the educabiity of our citizens, young and old – dividends and capital appreciation are incalculable.

I applaud Jeff Selingo for doing what so many people these days fail to do: engaging in a reasonable discussion about complex issues in which moderation is the key to solving problems.  While rhetoric may flourish with the heavy hand, nuance is essential to real solutions.

We see this on both the right and the left.  The Occupiers rain down their thunderous disapprobation upon all institutions of the capitalist economy, virtually demanding that the 1% pay every penny for everybody else’s higher education, whether they deserve it or not.  The Republicans have sworn never to raise taxes a penny till Doomsday comes, even if it bankrupts the country and leaves a large swath of the country in a perpetuating cycle of low education and poverty.

Moderation, compromise, rational debate: that’s what we’ve been missing lately.

Dead on, and as we both probably went to school at about the same time, our own experience demonstrates that college was a forcibly frugal time.  For some it isn’t, but for me and everyone I knew, we were on a ramen and one-gallon-of-gas-at-a-time budget.

I’m a big believer in (and a graduate and long time employee of) public universities.  But college affordability has been re-defined as “you can get loans to cover it.”  In previous decades, affordability was “you can work your way through college.”

Students are making poor decisions, both about the expensive colleges they are attending and in the size of the loans they are taking out.  Some level of debt may be acceptable, but an average of $20,000 is equivalent to buying a new car on your way out the door.

Because of reductions in federal and state support, the bills are going up, and many public universities are in the process of being privatized.  Unless a student is willing to carry a debt burden far greater than the average today, I believe that college will increasingly be the option of the haves, and that the have-nots will have to settle for community college degrees.  This in turn will probably push more community and junior colleges to offer 4-year degrees.

I don’t know when we decided we would no longer pay for public colleges and universities, but it has become a big problem, and it will get worse.

Most of the commenters here are addressing the issue of excessive student loan debt for students who have graduated and, supposedly, are able to get a good-paying job as a result of that degree to make the investment worthwhile.  The elephant in the room that few wish to address is that of completion rates.  Nearly 2/3rds of those who enroll at a community or for-profit college do not earn a degree in *six* years, and about 1/3rd of those at public and private four-year universities do not earn a degree.   And these students are racking up tremendous debt with nothing to show for it and no means to pay it back.  But our institutions are more than happy to take those funds and invest it in new buildings, new academic programs featuring the ‘trend of the day’ (like iPad initiatives), and pay raises.  Those of us in Higher Education should be ashamed of how we’ve taken advantage of students.  Calculating completion rates at 6 years out for a community college (which should be a 2 year degree) and calling them ‘success rates’ is laughable.

And still…who’s buying the new cars?  You’re comparing apples to oranges here.  New grads are not generally the ones not blinking at $25K for a new car because they’re buying $10,000 used cars on 6 year financing.  There’s no outcry about a $25,000 new car because it actually is discretionary.  College is not as discretionary as it used to be.

The analogy about buying a car breaks down, though, when you consider that a very significant number of students drop out of college with huge debt and no degree to show for it.  At least when you walk out of a car dealership you have an asset that, while depreciating, is still worth something.  Imagine if a car dealership said that “students and their families should have some skin in the game”… and took your money without giving anything in return.  We should be disbursing financial aid and providing loans at the end of the semester, not at the beginning, tied to successful completion.  And calling 12 units “full time” for financial aid purposes is just as wrong, as is disbursing pell grants to students with less than half time enrollment.  Our system of paying for higher education is broken.

Don — Agreed. The other issue that I think Kevin Carey pointed out in his piece this week is that your student loan debt is amortized over 10 years. The first 10 years of post-graduate life is probably when recent grads make the least amount of money of their careers. Is there a better way to account for that in student loan payments?

You had me until you said “pay raises.”  Maybe for that top 1%?  My colleagues and I haven’t seen a pay raise in many years.  Not this year either.

Aside from that, though, this is a point I have made many times.  If you don’t finish college, your debt doesn’t just magically disappear.  Not only do you still have to pay it back, with no chance of relief in the form of a bankruptcy declaration, you have to pay it back on whatever income you can earn with no degree in hand.  Trying paying back a $30,000 loan while trying to eke out an existence of any sort on a $15,000 salary!

Your elephant brought a friend, too, in the form of loan debt for individuals at 5 and 10 years post-graduation.  Loans are sold with the intent that you have them paid off in 10 years.  I wonder how many people still have significant debt 10 years out?  I have several acquaintances whose debt has spiraled to $100,000 or more.  Some of these acquaintances work in fields that require a specific master’s degree, and often a second master’s degree in another field, for work that pays about as much as a teacher’s salary.  They didn’t borrow that much money, but the cost of school simply isn’t cost effective when compared to any salary advantages.

I also no longer agree that students should have a stake in paying for their education because they benefit from it.  On the surface, that is correct, but with the glut of college graduates on the job market, adding a degree to the requirements for certain jobs that did not previously require a degree has become common.  Why hire someone with a specialized education to do what they’re trained to do at a higher salary, when you can simply hire a secretary (remember we call them administrative assistants now?) for a slightly higher salary ($18,000 instead of $15,000) who only occasionally needs to draw on that knowledge for the job.  It makes the workforce look more educated, which increases earnings for the company.  It does nothing for the individuals typing memos and answering telephones with that “required” college education.

Frankly, I can give a long list of names of people who would gladly give back their diplomas and work a $15,000 clerical job, assuming these jobs exist anywhere anymore, for the chance not to have a lifetime of student loan debt hanging over their heads.

They fail to realize that times have changed.  No longer can you pop out of college and into a decent job, especially in some parts of the country.  Over 20 years ago you could pay-as-you-go if you were seeking a bachelors degree.  The costs now are prohibitive for a simple BA, and out of sight for a professional degree such as MD or MBA.  No job equals no way to pay debts and still have something to live on.

I don’t discourage students from borrowing what they need. I try to discourage them from borrowing MORE than they need. I have students who have maxed out the $57,500 in student loans without completing their degree but most of that money was in overpayments to them to the tune of $40k with only $17K going towards tuition and fees. They can’t afford the difference between what they get in Pell grant and the cost of tuition now so they stop going to school (for the most part). In this case the fault is the student’s for frittering away funding meant to help them afford college and using it instead to pay for fancy fingernails, fancy cell phones, fancy vacations. I have no idea how these former students will survive with the double whammy of not getting that overpayment check AND having to start paying back those same student loans.

I’m relieved that there are new financial aid rules in place that will cut back on this type of situation. Unfortunately it also penalizes those students who truly need full funding to cover their costs while in school.

“I hate to sound like an alarmist, but the so-called “College Payoff” theme,
whereby we are advising students that going into debt in order to ultimately
earn a degree can be considered a wise pathway in the long term, looks like a
bad idea. Instead, shouldn’t we be advising students who do not have any
financial support to avoid going into deep debt and to work at whatever job(s)
they can find and enroll in only those courses they can pay for out of their
pockets combined with any aid they may qualify for through federal and/or state
grants?”
From: http://edpath.typepad.com/source_scholars/2011/10/are-we-coming-close-to-an-unprecedented-societal-crisis.html
 

This is very well put.  There is no national standard for financial literacy with very few state mandates for financial literacy in K-12 curriculum across the country.  However, we are supposed to be the world’s guide as master capitalists. 

Very few people address the idea that we need a permanent underclass to keep our economy, profits and system from imploding.  Maybe this is the reason that the field of home economics disappeared about the same time economics departments metastasized in our educational bloodstream.

Bravo to you thececinc!

It isn’t good policy for universities to have advisers and faculty
members urge students to continue with school at whatever the cost by
promising that there will be a job waiting for them when they graduate,
but it happens all the time.  For the student it can be a disaster. For
the university employees it’s just another day on the job.

Jeff,

There would be nothing preventing the federal government from introducing an amortization scheme that would allow students to have smaller payments in the early years of repayment, and then gradually increase in the later years when their incomes would presumably be higher.  You could do this in one of two ways: 1) increase the amount of the subsidy the federal government provides (likely politically infeasible, at least in the current political climate); or 2) increase the total amount students would pay in interest over the ten years.

Zandi could not possibly be more incorrect.  Federal student loan doesn’t take losses the way regular consumer loans do.  Default, far from the end of the road for creditor and debtor, is another beginning.  Bankruptcy discharge is rare in federal student loan, and tools like admin. wage garnishment and Treasury offset of other federal benefits and IRS refunds practically guarantees that all defaulters end up paying eventually unless they choose to live completely off the grid.  Even if gross defaults increase, net defaults over time are much smaller; direct loan is a moneymaker for the taxpayer.

Zandi’s underwriting idea is ridiculous.  Who is going to do all that work?  It would require an enormous loss rate to justify the equally enormous cost of underwriting for direct and perkins loans.  Think of the cost of pulling credit reports and FICO scores alone, across millions of student borrowers.  Those companies won’t provide the data for free out of a sense of patriotism and fiscal responsibility.  Add human labor effort to the underwriting process and you have significant new admin costs that someone will have to pay for.

Two decades ago there was a brief period of a year or so where federal law allowed GSL lenders to perform underwriting/risk-rating to screen Stafford borrowers.  Lenders opted not to do so.  There was nothing in it for them, except for added costs.  The loans were guaranteed 100% at that point.  Why do any research on the borrower?

The biggest thing Zandi misses is that these are social programs.  Neither political party is going to be eager to take credit for crushing the American dream for millions by allowing FICO scoring to determine who goes to college.  This is even less likely than determining who goes to college by using IQ testing alone.

The way the federal government underwrites is by screening colleges.  That has now expanded somewhat to screening actual academic programs within certain colleges, via the gainful employment regulation.  Almost every Congressperson has a postsecondary institution in his/her district.  They also have close ties to governors and state legislators — jobs which many Congresspeople and Senators filled earlier in their careers.  An across-the-board purging of institutions from the loan program as was done in the past is unlikely to happen ever again — but this is the only hope for those like Zandi who hope for underwriting.  A student-by-student risk analysis is not in the cards.

What about those of us who are going into teaching?  Though I have managed to get through my master’s and Ph.D. coursework with no loan debt, I have undergraduate debt over $30k.  I went to a state school and my parents simply wouldn’t pay for college (despite making a combined $200k/year.)  Thus ineligible for student loans, I was forced to get high-interest private loans, and I feel like I will be swimming in debt from them for the next 30 years.  I already pay over $500/month for the loans (even on a graduated repayment plan), and as I’m currently an adjunct teaching 3 classes and making less than $15k/year in addition to paying for graduate school.  I feel like I was somehow tricked into getting the loans– I know they’re my responsibility, but at 18, I was 4 weeks away from the first day of college, was told I had to pay for it myself and that student loans “weren’t a big deal.”  I now feel like they were the worst financial decision of my life.  Even though I have a full-time teaching position in the fall, the less-than $40k a year will make it nearly impossible to pay off the $30k of loans (which are already up to over $45k with compounded interest).  By the time I pay them off, I will have paid nearly 4x the amount that I actually borrowed.  Perhaps you may say that it’s my fault for choosing a profession that doesn’t pay better, but the fact remains that attending college for 7-9 years is expensive, and the average college professor salary doesn’t begin to cover the debt incurred by that amount of school, regardless of how “big” the school’s name is.

I hear you – after more years of salary freezes than raises, on top of an already sub-par annual wage, I left academia to work in an area that doesn’t care about your degree, but what you know and can then do. The bonus? I’m making double what the university was paying me while holding its nose and telling me I was overpaid.

Don’t be afraid to look outside the academy. The emperor doesn’t know it yet, but he’s been naked for quite some time.

Yes, but tell me what a student is supposed to do when their program of study REQUIRES 2 semesters of consecutive FULL TIME enrollment “to prove residency”?

This kind of crap needs to be eliminated as well.

The current educational system eats over 20% of an average US lifespan.  That’s enough skin-in-the-game for me.

Please help out this cause: http://wh.gov/jgl

An effort to combat financial institutions fiscal heist on American graduates private loans.

The ever increasing, unrealistic demands of loan providers are a
leading outstanding debt. Interest rates of 14% or more – and demanded
payments of 1,000+ dollars per month is simply not possible with a
starting wage. Graduates are penalized for inability to pay outrageous
monthly demands to the point where they become financially corrupt. This
crisis is amassed a generation of individuals who aren’t financially
stable enough to even think about reproduction, economic stimuli, home
ownership, or plans to wed. Financial institutions are draining the
economy and diminishing social classes by providing blind funding which
is impossible to repay. Americans who have put forth efforts toward
self-improvement to keep up with educational expectations of employers
everywhere, are being punished.

Nice Article..
Thanks
nachhaltigkeit

Part of the issue we are facing in this country is the disparity between college loan debt, potential earnings, and one’s ability to service said debt.  Students who take out loans at higher end institutions but major in areas where the starting salary will barely reach 30 thousand a year, will have an almost impossible task ahead if they have, say $100,000 in student debt, and forget about graduate school.  Unfortunately, many people majoring in the liberal arts find that they MUST go on to graduate school and that just increases the amount of loan debt they must suffer through.  Most student load debt is higher than what I borrowed for my first home I built in 1984.