I am proud to announce our latest scholarship: the 140 Scholarship, which offers students the opportunity to win over $14,000 in Awards by submitting their application via a Tweet.
Full details are available on the official scholarship page.
The recent enactment of H.R.3221 The Student Aid and Fiscal Responsibility Act of 2009 by Congress has many students wondering what impact the new changes will have on them and their student loans.
According to the Seattle Times, “Congress’ overhaul of the college student-loan system offers welcome relief to students at risk of drowning in debt.”
But, while many are applauding the proposed changes, others are taking a more skeptical view. Today we offer readers a Q & A with Tara Payne of the New Hampshire Higher Education Assistance Foundation. Ms. Payne currently serves as the Vice President of Corporate Communications for the NHHEAF Network Organizations.
The New Hampshire Higher Education Assistance Foundation (NHHEAF) was established in 1962 to guarantee student loans. Since 1965, it has been the designated guarantor for the Federal Family Education Loan Program (FFELP) in New Hampshire.
As one major function, NHHEAF is responsible for the initial application, disbursement of funds, default prevention, default collections, and oversight of the federal loan programs. For fiscal year 2008, NHHEAF guaranteed over $213 million in federal loans and the agency continues to rank among guarantors recording the nation’s lowest default rates.
Yet under the proposed legislation, NHHEAF, one of those so-called ‘middlemen’ in the loan process, might no longer exist. Such a scenario led us to the agency to try and gather additional perspective on the legislation.
We were fortunate to have the opportunity to pose a number of very specific questions to a person with more than a decade of experience at the organization. Ms. Payne offers a wealth of perspective having helped construct the organization’s Center for College Planning department. Today, that department reaches almost 30,000 New Hampshire students and parents each year, offering free college planning, financial literacy and financial aid expertise via presentations, materials and websites.
Can you explain in brief terms exactly what Congress is debating and the rationale for the debate? What is meant by the phrase, the new loan process will “cut out the middle man?”
The President’s budget proposal includes the elimination of the Federal Family Education Loan Program (FFELP). As a FFELP provider, the NHHEAF Network Organizations (NHHEAF) is involved in funding, originating, disbursing and servicing student loans for New Hampshire students from our New Hampshire office. The Presidents budget eliminates the local role in the student loan process. The government’s language about “middlemen” implies that agencies like ours are a “cog in the wheel”, not a major source of community support for families, schools and citizens of our state.
New Hampshire’s program is managed by a nonprofit FFELP provider. This means that proceeds from the loan program are reinvested in our community. We reinvest into strong financial literacy programs, early college awareness and financial aid preparation for students and their families at K-12 schools.
We employ 200 New Hampshire residents who are truly dedicated to supporting student loan borrowers. Our success is evident in NHHEAF having among the lowest default rates in the nation. When these local services go away, students suffer.
Our focus is on increasing aspirations, providing funding and best-in-class service. No government program can replace this local resource. As a school counselor who utilizes our programs shared recently, “NHHEAF is the best thing to happen to higher education since I started teaching in 1974.”
In what ways would students and parents be positively impacted by this legislation? Are there any potential negatives?
The legislation includes several positive aspects including increased Pell Grant funding for the lowest income students and increased funding and support for community colleges. Supporting New Hampshire’s low income students is essential to our mission. We fully support any effort to provide additional funding to the neediest students.
However, under current legislation, FFELP would be eliminated and yet Pell would still not be an entitlement. “Eliminating subsidies to lenders” is a politically-charged cry for support. The public hears this and reacts with unbridled support … assuming that those subsidies will go into making the program less expensive for them.
As Bill Spiers, the Financial Aid Director of Tallahassee Community College described, “While the media has focused on the profitability in the FFELP program, little has been said about the fact that the federal government must fund Federal Pell Grant Program increases off the backs of student borrowers.
The government borrows money at very low rates, much lower than those available to lenders, yet the government would continue to charge the same interest rates as FFEL lenders. Under the current proposal the “federal government isn’t providing any breaks to the students and is actually making more off the program than lenders ever could”
While most student borrowers pay a fixed 6.8% interest rate on federal student loans and parent borrowers 8.5%, lenders in the FFELP are required to pay back the difference between what borrowers pay and today’s lower market yield to the federal government.
The difference between the cost of funds and the borrower rate of interest is even greater in the Direct Loan program, so much that the proposed record increase in Pell Grants would be largely funded from the interest rate spread the Department of Education will enjoy from student and parent borrowers paying a far higher rate of interest on their federal education loans than the federal government is paying on its borrowing costs. Enacted legislation required that loans made on or after July 1, 2006 carry a higher fixed rate for students and parents that is not market driven. Had interest rates remained variable, Stafford loans today would have been an extremely favorable 1.88% (in school and grace) interest rate (2.48% repayment rate), and PLUS loans would be at 3.28% in the current low interest rate environment.
Will these changes have any impact on the FAFSA application process?
The CEO of our agency, Mr. Rene Drouin, actually sits on the Federal Advisory Committee for Financial Assistance and has been an advocate for these changes which simplify the financial aid process for students. By reducing the number of questions and simplifying the FAFSA form, families may not be as intimidated. Still, while shortening the form may help for those already committed to going to college, it will not increase college aspirations.
When our staff visits schools in communities like Colebrook and Nashua and Portsmouth and Keene, we offer consistent support which encourages education beyond high school and personalized assistance filing the forms and understanding the award letters for free. Ninety-three percent of New Hampshire high schools invite our full-time college counselors to their schools to educate their students and families throughout the academic year.
Which types of loans will be impacted: Stafford, Plus Loans, Consolidated Loans?
All federal student loans.
How will the legislation impact colleges and universities?
It is important to note that the Direct Loan program has been around since the Clinton administration. To offer some perspective on the use of Direct Loans in New Hampshire, consider that in fiscal year 2008, FFELP loan volume was at $409 million for 89,000 borrowers. Federal Direct Loan volume was only $13 million for fewer than 3,000 borrowers.
Nationally, 70% of post-secondary schools chose to work with FFELP because of the strong technological, programmatic and financial literacy programs it offers. Now, they will have no choice. And, they will have no local support.
Right now, NHHEAF has a full-time staff which provides a hotline, technical support and regular visits to schools for financial literacy activities for their students. NHHEAF also has a strong Compliance Department which ensures that schools have local support for any regulatory or student-eligibility questions that might arise. Both departments also provide in person training and webinars on a range of professional topics.
Supporting the financial aid professionals goes hand-in-hand with supporting the student borrowers on their campuses. Further, the proposal assumes that the government can effectively and efficiently run a program this large. It is estimated that 4,400 schools will be forced to convert from FFELP, their program of choice, to the Direct Loan program on July 1, 2010.
The U.S. Department of Education will be tasked with converting an average of nearly 500 schools a month over the course of a nine month period. Since the Direct Loan program’s inception in 1993, roughly 1,600 schools have been converted over a 16 year timeframe. For schools currently in the FFEL program, this would mean investing staff, time and money to change systems and processes at a time where budgets have been cut to the core. It’s realistic to imagine that those costs may have to be absorbed through increased tuition and student fees.
Will anyone theoretically be hurt by these changes? If private banks lose this source of revenue, what negative impact might it have on their role as lending institutions within the community?
Minimally, 40,000 jobs are at stake across the nation. For agencies like ours, student loans are the only source of revenue. It would be devastating. And, the impact on the local economies would be brutal. Consider that in NH alone, NHHEAF spent $6.8 million on local vendors and contributed $5.1 million in charitable spending. Multiply that by all of the agencies like ours across the country and it is severe. And, again, at the end of the day, will most college-bound families experience any significant savings? It is unlikely.
The amount that could be saved by the Federal Government is projected to be in the billions of dollars – based on the current legislation as proposed what is the plan for this money? Will it be used to attack the current federal deficit or will the funds be rolled into further funding support for students?
The Office of Management and Budget (OMB) indicates that, under the President’s budget proposals, which include the switch to 100-percent Direct Lending, debt held in the Government’s various Direct Loan accounts is expected to rise from $632 billion in FY 2009 to $1.58 Trillion in FY 2019, an increase of more than $900 billion. Nationalizing the education loan programs will add substantially to the national debt over the next decade and the beneficiaries of student loans will have to pay interest twice: first, the interest they’ll owe on their loan as a student borrower and second on the interest they’ll owe as a taxpayer via the national debt.
Corporations exist to earn and distribute business earnings to shareholders, while nonprofit agencies like NHHEAF exist to provide programs and services that are of public benefit. Often these programs and services are not otherwise provided by local, state, or federal entities. Particularly in a state with low levels of state aid, high public tuition costs and high debt burdens, promotion of college opportunities, financial aid and affordability is even more critical in order to get students to think realistically about higher education.
Can you briefly explain why the legislation is seen so differently by Republicans (opposed to these changes) and Democrats (support for the changes)?
I couldn’t speculate on this except to offer that many legislators want to support the President’s budget proposal for its supposed savings while many others doubt the savings purported will materialize. Originally, the Congressional Budget Office (CBO) estimated that savings from the President’s proposal would total $94 billion.
In June, the costs savings were estimated at $87 billion. Senator Judd Gregg urged CBO to recalculate its projection to incorporate market risk cost. The CBO then revealed that the proposal to replace new guaranteed loans with direct loans would lead to estimated savings of about $47 billion over the 2010–2019 period. Most recently, the OMB predicted that the savings from the proposed transition to 100-percent Direct Lending will be $41.4 billion over the same time period. And, many legislators question the role of government in taking over a public-private program that has supported students and schools successfully for decades.
Still, it is important to note that some do see that there is a role for nonprofits in the student loan process. In fact, Representative Carol Shea-Porter (D-NH) worked tirelessly to ensure that nonprofit student loan servicers would not be shut out of future Government contracts. Note that Under the Sense of Congress from the FY10 Concurrent Budget Resolution, sec. 605, it reads, “any reform of the federal student loan programs to ensure that students have reliable and efficient access to federal loans should include some future role for the currently involved private and non-profit entities, including state non-profits with 100% FFEL lending in the State, and capitalize on the current infrastructure provided by private and non-profit entities, in order both to provide employment to many Americans during this time of economic distress and to maintain valuable services that make post-secondary education more accessible and attainable for many Americans; and therefore, pursuant to any changes to the student loan programs, loan processing, administration, and servicing should continue to be performed, as needed, by for-profit and non-profit entities.”
A month to the day we recommended that the Class of 2010 begin examining all their future options, that next year’s graduate should begin thinking about what they might do instead of simply entering the workforce. Our rationale was simple, the current unemployment rates and the impact of two poor successive job placement years meant that job opportunities next spring are likely to be no better than those seen last spring.
Lest our readers have any doubt regarding our advice, that particular scenario has been reinforced by data relayed today by the New York Times. According to the Times, Labor Department statistics for the month of July revealed that just “2.4 million full-time permanent jobs were open” yet there were “14.5 million people officially unemployed.”
That represents a six to one ratio, the worst such ratio since the Labor Department began tracking such numbers. The sum total is that workers will continue to be looking for employment for a much longer period than has occurred in prior recessions.
And that means that those graduating in 2010 will be competing with a number of experienced workers for the very few job openings available.
Long Term Impact
While some economists believe the recession is over, this data reveals that the recession could well be a double-dipper, if not a stagnator. The high unemployment rates mean that a large segment of America still has little in the way of disposable income and will remain in such a plight for the near future.
Therefore, the high unemployment rates also will ultimately translate to a continued reduction in consumer spending. Given the dependence of our nation’s economy on consumer spending, this current scenario could well mean that the ugly head of recession may reemerge in the not distant future.
The current situation also represents a major issue for federal and state budgets. Fewer workers translates to fewer taxable dollars coming into the government coffers, both in income and sales based taxes. That likely means more in the way of layoffs at the state and federal levels.
The job losses have also resulted in a large number of early retirement claims from laid-off seniors. Overall, applications for retirement benefits are up 23 percent over a year.
That means that Social Security is about to pay out more in benefits than it collects in taxes over the next two years (the first such occurrence since the 1980s). This will, of course, only make those federal budget deficit numbers for 2010 and 2011 that much worse.
Student Options
Overall, this data indicates that those graduating in 2010 should begin to research options other than the traditional workforce, including the Peace Corps, Americorps, Teach for America and graduate school. Given the state of the economy, the current situation means that these options could all well be out of the question for those who procrastinate.
If you are graduating in 2010, now is the time to begin thinking about all your options.
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The idea of a college major goes back more than one hundred years. With very few exceptions, the list of available options for students today mirrors the very choices available for their parents and grandparents.
The one significant exception has to be the field of technology where a number of new options exist. But while these fields offer great career options, many are so cutting edge that students may not even understand what the major entails.
Such is the case with one of today’s cutting edge options, computational science. As technology continues to evolve, many industries are now using computer simulations to help them plan for a future that is not yet known.
Computers Simulating the Physical World
While computational science is the name given to the field, students might have a better sense of the major if the term simulation developer were used instead. Simply stated, computational scientists do not study computers; they use the computer and appropriate software models as tools to advance the study of other fields.
The concept of simulation as a tool has been used for a long time in aviation. As part of their training, pilots use machinery that replicates the key elements of flying a plane. In addition to normal everyday flights, these simulators test advanced skills by presenting challenges to the pilot in the form of technical malfunctions or the effects of severe weather.
Today, high powered computers are used to simulate possible world events such as a terrorist attack. Military leaders use computational science to help develop battlefield plans and the appropriate contingencies that should be considered in specific situations.
Meteorologists use simulations to predict the path of a developing storm such as a hurricane as well as the impact of carbon emissions on a warming planet. Large corporations now train executives using simulations that offer specific business challenges that require executives to effectively use their management skills.
Properly constructed, simulation development models isolate individual factors to determine how any one factor alone or several taken collectively can affect an outcome. The results can be used to train specific professionals so that they are prepared to handle any specific problem when it arises.
Majoring in Computational Science
The key to the field’s importance is simple. Simulations create opportunities for training and allow for the testing of theories without ever putting a patient, an employee or a company at risk.
A career in computation sciences demands extensive knowledge of advanced mathematics, computer science, and simulation and modeling. Because a computational scientist creates an abstract model of the physical world then develops a computer program to mirror that world, these professionals must be able to translate abstract models to the language utilized by computers.
In addition, the particular system being modeled may require specific insight into other fields. For example, to create a weather model, simulators would need at least a rudimentary knowledge of physics and chemistry as well as an in depth understanding of the field of meteorology.
In the case of training business executives, computational scientists would likely need a background in psychology, economics, and business management principles. As for developing simulation training models for doctors, computational scientists must possess a strong background in biology, anatomy and physiology.
By the very nature of the field, students interested in simulation development also have the opportunity to be of great service to any number of important disciplines. For those interested in a technology/engineering career yet worried that their work might be of less value to society as a whole, the field of computational science represents a very rewarding career option to consider.
Three Classic Mistakes to Avoid
Debt is a major issue for literally millions of Americans. However, when you find yourself overextended, the fact that many others are in the same boat offers little in the way of consolation.
As your debt accumulates, there is a strong tendency to make three very common mistakes. While it is easy to understand why people make them, they must be avoided at all costs.
Mistake 1: Making Only the Minimum Payment
This is easily the most common of mistakes but minimum payments are a trap. Because of how cards work, the goal of the credit card company is to enlarge your debt so that interest rates yield more in the profits.
Making only the minimum payments ensures you will be in debt for the longest possible time. Paying the typical minimum level for a $500 debt at current interest rates of 15-20 percent will keep you in debt for more than a decade, even if you never charge another item.
Of course, by paying the minimum amount your are maintaining your credit score. It’s just that your debt will grow instead of decrease.
The folks at Learn Financial Planning recommend that you set your own personal minimum payment level that is at least triple the minimum payment and stick to it.
Mistake 2- Taking a Payday Loan
There is debt that is worse than credit card debt. It is the debt created by payday loans.
A payday loan is short-term loan, generally offered on a two-week basis (from one pay period to the next) and ranging between $100 and $500. The idea of a payday loan is to provide you the cash needed for immediate expenses and is a loan against your next paycheck.
Payday loans feature administration fees, processing fees, broker’s fees and even early repayment fees. Typically, the finance charge per $100 borrowed is $25.
While it is easy to accumulate credit card debt, payday loan debt is considered as much as eight times more punishing. While it easy to think this is a good way to deal with an immediate issue it is one you should never consider.
Mistake 3 – Falling for a Debt Settlement Scam
When your debt reaches the breaking point, debt consolidation and debt settlement can be the right step. The first step to take in such a situation is to admit you have an issue and then contact your creditors to discuss possible mechanisms to work through your issue.
You may be able to make some simple progress with your company, perhaps even negotiate a lower interest rate. Simply stated, credit card companies do not benefit if you default.
However, you have probably heard on television or seen online an ad by some third party company that can help you eliminate your debt. While there are legitimate agencies that do provide such services, many other entities are simply hoping to take advantage of your plight. If you are not careful, you may soon find one of these companies is bleeding you worse than your credit card company.
A legitimate debt settlement company will consolidate your loans and negotiate with your creditors on your behalf. The basic structure involves you making one monthly payment based on the total amount owed. As funds are collected, payments are negotiated with each creditor separately, a step that can reduce your debt total by as much as 50%.
There will be a fee associated with the process but legitimate firms will set up a reasonable plan that will help you make modest progress immediately and significant progress long term.
Avoid Compounding Your Mistakes
It is easy to accrue debt in a multitude of formats. If you do not do due diligence, that debt can double or quadruple in the matter of months.
Avoid borrowing and purchasing with plastic. When you do borrow or purchase, pay the amounts off quickly, do not fall into the trap of making only the minimum required payment.
Doing so puts you on a downward spiral into the world of payday loans and debt settlement scammers.
According to Anne Marie Chaker at the Wall Street Journal, “New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion.”
The overall news may not be shocking to most people, after all the amount of money students borrow for school has been rising steadily in recent years. But the key number here is the size of the increase.
To put the 25% increase in perspective, we turn back to the WSJ.
“…last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95.”
In addition to the increase in borrowed funds, the percentage of students taking out loans to pay for school is also on the increase. Today, nearly 70 percent of college students are borrowing funds to help pay for school. Just 12 years ago, the percentage of borrowers totaled 58%.
To get a sense of this distressing trend and its impact on students, the Journal offers a number of frightening examples. First, they discuss the plight of “Kordi Solo, a senior majoring in journalism at Central Michigan University,” who “expects to owe about $60,000 in student loans by the time she graduates in the spring.” Later they tell the tale of “Zack Leshetz, a 30-year-old lawyer in Fort Lauderdale, Fla.,” who “has $175,000 in student loans from his seven years in college and law school.”
Even with a law degree, Leshetz lives paycheck to paycheck. And while Leshetz is struggling, Solo might be in an even worse position at one-third the debt level. Given the extent to which the journalism field has been hammered by the recession and an evolving media model, her accumulated debt could well be insurmountable.
Losing Investment?
The impact of this borrowing on students and their future opportunities is significant. Chaker notes:
“The ripple effects for today’s heavily indebted young people are becoming palpable. A growing body of research suggests that tough loan payments are affecting major life decisions by recent graduates, forcing them to put off traditional milestones—from buying a first home to even marriage and having children.”
While most everyone continues to tout the college degree as a must for future job options, Chaker notes that borrowing such sums to obtain that coveted sheepskin put students into a tough spot when they first enter the world of work.
These numbers and the impact on major life decisions have Karl Denninger of Market-Ticker uttering some almost unthinkable words:
“Students are literally coming out of college with more debt than they can ever reasonably hope to amortize over their working lives, making their education a negative net equity position – that is, a guaranteed losing investment.”
In other words, the debt load accrued by the majority of students is so large that even with the greater pay associated with a job based on earning a degree, that pay is not enough to cover both the costs associated with taking care of oneself and the debt payments that must be made.
Borrowing Begets Higher Costs and an Additional Need for Loans
As but another sign the system is not working, it seems that all the borrowing ultimately is triggering an even greater need to pursue loans.
“The rising levels of borrowing,” writes Chaker, “may ironically be contributing to the accelerating cost of college, say some college-finance experts. Loans can give colleges an artificial sense of a family’s ability to pay tuition.
“To some extent, that false sense of security gets built into the assumptions schools make when setting prices, say experts.
“The idea is that as prices rise, families borrow more and more, spurring prices to rise further, which in turn requires more borrowing.”
The untenable position students are finding themselves in has Seth Godin insisting that higher education may well be at the crossroads.
Godin suggests that higher education is going to have to make basic decisions in three distinct areas moving forward.
Currently, Godin suggests that college tends to be focused on scarce, expensive schooling. The result could be categorized as a monopolistic format.
Students can only obtain a college degree by spending gobs of money to gain access to specific curricula at institutions that have ascertained accreditation. Yet once in an institution, there is little emphasis on what a student has actually learned. Instead, credits are paid for and collected and when enough money is spent and enough credits accumulated the degree is awarded.
Godin instead imagines what higher education might be like if a school were to be built around inexpensive, abundant learning. A place where an unlimited number of materials were made available for a modest fee and the emphasis was not on charging per course or per credit, but for access, with a degree awarded based not on the courses or credits or fees, but on demonstrated knowledge.
One Option Exists
While most students continue along the traditional path, one that is taking too many down a road of false promises of future prosperity, it is interesting to see that one company today is challenging the status quo.
A new educational entity called StraighterLine is delivering Godin’s suggested option, offering online courses in subjects like accounting, statistics, and math for a flat rate of $99 a month. Instead of a per course or per credit fee, the rate is $99 for the month. In addition, instead of a semester or yearly or four year degree schedule, there are no semesters or defined calendars.
You as a student decide how many courses you want to take at a time and for how long you want to take them. Instead of heading off to some distant location or stopping your schedule to meet that of higher education, you work online, from home.
Students can “access course materials, read text, watch videos, listen to podcasts, work through problem sets, and take exams” all over the internet. In addition, to make the program more consistent with one critical aspect for learning (the need for a sense of community) StraighterLine also features online study groups where students can collaborate with one another via a “listserv and instant messaging.”
Most importantly, tutors are available to help students when they need additional support. These support personnel are available any time, day or night, and there is no extra costs for accessing such services.
A student completing a traditional college semester of 15 weeks and 15 credit hours in the traditional time frame would spend a total of just $400. Compare the cost of one full year under such a format with the numbers bandied about today for America’s elite colleges, as much as $40 and $50 thousand per year if a student chooses to live on campus.
StraighterLine is actually the idea of a man named Burck Smith. The entrepreneur has created an educational model that seems to fit Godin’s inexpensive, abundant learning concept by getting some other established (i.e., accredited) colleges to allow the transfer of credit from Straighter Line to the traditional learning model.
This is ultimately the biggest hurdle as it allows learners to earn that coveted diploma from an accredited institution. In other words, at the end of the line they have that all-important degree.
StraighterLine is indeed a new model, one where students are not tied to some college campus or program. Instead, students can assemble a degree from various course providers from their own computer.
More importantly, they can do so at a cost that is reasonable, a step that protects their long term fiscal future. Perhaps most importantly, it is a step WashingtonMonthly.com sees as a proper one for higher education.
It may be some time before the “Internet bomb explodes in its basement,” writes Kevin Carey. “The fuse was only a couple of years long for the music and travel industries; for newspapers it was ten.
“Colleges may have another decade or two, particularly given their regulatory protections. Imagine if Honda, in order to compete in the American market, had been required by federal law to adopt the preestablished labor practices, management structure, dealer network, and vehicle portfolio of General Motors. Imagine further that Honda could only sell cars through GM dealers. Those are essentially the terms that accreditation forces on potential disruptive innovators in higher education today.”
Time for a Change
We would like to think the fuse has been lit, that the current accumulating debt loads being assumed by college students would be cause for society to demand a new model for higher education.
Yet, because it is so early in the process, StraighterLine is likely to seem a bit too much cutting edge, a little too groundbreaking and novel for a public that tends to prefer tradition. It is also, dare we say it, a little too inexpensive to be considered a viable alternative by a populace that equates higher cost with higher quality.
But with accruing debts making the current model a net negative for students at precisely the same time that society is placing greater emphasis on earning a college degree, more cost-effective methods must be created.
That would indicate that we are at the crossroads as Godin postures, a time when higher education does move from its current scarce, expensive schooling format to one that features a more abundant, cost-effective learning model.
By now you are no doubt familiar with the story of Trina Thompson and her lawsuit against her alma mater, Monroe College. The blogosphere has been abuzz since Kathianne Boniello of the New York Post broke the story.
The Digital Student over at GoCollege offered some support for her plight. They noted that tiny Thomas College in Waterville, Maine, actually makes a promise to its grads, one that Monroe does not: a job or else.
But most were merciless in their criticism of the 27-year-old. Robbie Cooper at UrbanGrounds gave her “The Idiot of the Day Award” while Ryan at RightJuris dissed her even as he stood up for the legal profession noting that Thompson had to file the suit herself, the insinuation being that the case was so frivolous that no one in the legal field would touch it.
Given some of the absurd suits that have been filed we tend to believe her when she simply says she filed it herself because she could not afford a lawyer. Whatever the case, therein lies the rub.
Everyone in the blogosphere has an opinion of the information-technology graduate. Trina Thompson is now a household name on the web.
Today, if one uses any search engine of note and types in the name Trina Thompson, pages and pages emerge. Many with unflattering titles, many more mentioning the anger she feels as a result of her plight and all highlighting the fact that she has chosen to blame her school for her failure to acquire a job.
Future Employment?
Irrespective of the merits of her lawsuit, Thompson now faces more difficulty than she could have ever imagined.
Anyone involved in the process of hiring someone for a professional position will thoroughly check a candidate’s references. Not only will phone calls made and questions asked of all listed references, many employers will try to determine the inside scoop by contacting someone else that may have knowledge of a candidate but is not listed as a reference.
However, the Internet has brought new meaning to the term reference check. The time has come when virtually all potential employers add one other simple process: Googling a candidate’s name.
The availability to readily access information on the web about a candidate has created a whole new phenomena called personal branding. It is a concept every high school and college student needs to become aware of and breaks down simply: it is extremely important that when your name is Googled, positive information comes up.
The last thing you want to have happen is for that search to yield information that would cause an employer to think twice about offering you a job.
If Ms. Thompson was truly searching hard for work before but was coming up empty, her decision to file the lawsuit has likely become her kiss of death. By virtue of her actions, she has created the ultimate red flag for human resource offices. No employer wants to hire someone that appears willing to sue others in a fit of anger.
Unfortunately, the filing of this lawsuit led Trina Thompson down a path in which she lost control of her personal brand.
And given the nature of the Internet that will follow her the rest of her life.
Borrowing from a popular credit card commercial format, we toss out a longstanding fundamental belief about higher education.
Four years in-state tuition and fees: $17,360.00
Books and Supplies: $3,960.00
Computer Fees: $4,160.00
Room and Board: $31,200.00
Earning a College Diploma: Priceless
The Financial Benefits of a College Education
In general, most insist that you simply cannot put a dollar figure on a college diploma. It is truly a priceless commodity leading to greater future earnings and a better chance to pursue something one truly loves as a career option.
That said, in recent years, eyebrows have been raised. College costs have been soaring and critics have begun questioning the value of a college diploma.
For years, the generally accepted figure associated with earning a college diploma has been $1 million. Those calculated additional earnings a college graduate earns in his lifetime above and beyond of a classmate with just a high school diploma continue to be used as the rationale for earning that coveted diploma.
However, that generally accepted $1 million figure has recently been called into question by a gentleman named Charles Miller. According to his analysis, the value of a college diploma may actually be significantly less than the popular dollar figure generally tossed around.
A Much Lower Return?
Miller, the former head of the Commission on the Future of Higher Education, raises some interesting dialogue with his set of calculations. He, in sum total, insists that higher education just might have gotten too expensive for what it produces and is certainly too costly for the typical student.
To arrive at that conclusion, he first insists that the calculation procedure used to determine the $1 million figure contains too many false assumptions. For example, Miller rails against one fundamental criterion used in creating the million dollar figure.
When computing the $1 million in additional earnings, estimates are based on an assumption that students finish college in four years. Miller correctly notes that other college graduation data utilizes six years as the standard for earning a degree. So the first significant way that Miller’s numbers are adjusted is to take away two years of earnings for the average college graduate.
Miller also notes two other major calculation adjustments. First, current procedures typically report lifetime earnings in the “present value” of the dollar totals, rather than adjusting for inflation over time. Second, most calculations do not isolate the benefit of those who have only a bachelor’s degree.
Using his assumptions, Miller contends that the lifetime earnings differential for a bachelor’s degree over a high school diploma is a much more modest figure: $279,893.
Easy to See Why Concerns Are Being Raised
There are numerous folks who insist that Miller has low-balled the calculations. In their eyes, he has done everything he can to reduce the value.
Still, the difference is a rather significant number. Certainly, $280,000 in additional earnings is nothing to sneeze at.
However, if we do assume that this more modest differential is somewhat accurate, then the current cost of a college degree does raise interesting questions. Four years of in-state tuition at a local university will set a student back at least $60,000, especially if some time is spent living on campus.
As a monetary investment that number still seems reasonable. We certainly can advocate spending $60,000 knowing full well we can one day expect to pocket $280,000 as a result. Add in the ability to better control one’s career choice and the investment seems to be a no-brainer.
But what of those private schools, of those topping $50,000 per year? Four years of expenses will top the $200,000 mark.
Under such a scenario the monetary piece becomes suspect. In such an instance, the rate of return falls to less than 2% return on the money invested if figured on a per year basis.
With those numbers it is easy why folks are concerned with the skyrocketing costs of a college education. If the costs keep rising, the rate of return ultimately diminishes.
As President Obama has stated on multiple occasions, we must find ways to make college more affordable.
So Where Do We Stand?
Interestingly, Miller’s strong push has at least one agency acknowledging that the $1 million figure may not be entirely accurate. In responding to Miller’s criticisms, the College Board acknowledged that $1 million in additional earnings is misleading.
At the same time, the College Board noted a thought many concur with: there is a very high individual return from a higher education.
According to the Board, a public college graduate will break even by the age of 33. At the higher priced schools, the private colleges, the Board offers a break even point at age 40.
Given those assertions, it is easy to see why education does in fact pay off. Of course, if costs do continue to rise, those pay back ages would rise as well. Pushing them back another ten years would make the dollar return a far more questionable discussion point than as it currently stands.
Without a doubt, students must be mindful of the debt they are incurring as they earn that diploma. They must also have an excellent understanding of potential future earnings: a career in social work or a job as a teacher will not necessarily produce additional earnings towards the $1 million mark.
Great Experience
Ultimately, college can be a great place to spend four years. Students often get their first chance at learning to be on their own. At the same time, you still have a safety net, a “shelter where you can develop yourself.”
At the university level, you will also meet many interesting people and have access to adults who are willing to help you learn new things. Once in the world of work, there will be far fewer people willing to help you become successful.
So independent of the financial figures, college can be a great place to learn about you and about society. College is a place where students get a safe chance to mature even as they pursue a degree and a potential career.
And if you manage the financial piece appropriately, you can expect the opportunity to earn additional funds even as you work in your preferred field. Just don’t go around thinking that a bachelor’s degree is going to make you a millionaire.
How about this for a change to that painful FAFSA application form?
According to reports, Secretary of Education Arnie Duncan has indicated plans to add a new button to the online FAFSA application. That one single button would authorize the IRS to fill in all the FAFSA required financial data directly from all relevant, filed tax returns.
That’s right, a button that would authorize the IRS to collect, summarize and drop the pertinent data already submitted during prior tax seasons into the form in the appropriate places. And with that step, the form we all have to do to be eligible for federal financial aid, the form that everyone, sooner or later comes to despise might actually be on the way towards being reasonable and dare we say it, user-friendly.
Now that would represent change we can believe in!
Promises of Fewer Questions and Quicker Response Times
It seems that at long last the U.S. Department of Education is about to streamline the indeterminate FAFSA form. Under President Barack Obama’s continued pledge to increase access to college, the DOE is about to eliminate 22 questions and some 20 different Web screens that used to appear when students filled out the FAFSA application online.
Perhaps even better news for students and their families, instead of waiting weeks and months to get the results, the new application will be able to provide an estimate on the amount of aid students would be eligible for in the matter of seconds.
All of the changes are seen by the Obama administration as increasing college enrollment. The steps come in direct response to data that indicates that one out of every five students that borrows for college does not fill out the FAFSA form.
Many contend that the reason so many students skip the application has been the sheer volume of information asked for on the form. For everyone the form has been a massive headache, but for some, it has been seen as a barrier.
According to the U.S. Department of Education, the FAFSA included 153 questions, some of which were not asked for when parents or the student filed their income taxes. The sum total for the DOE is that the form has ultimately been more difficult than filing income taxes.
The result, an estimated 1.5 million students who currently are enrolled in college likely qualify for Pell grants yet they never applied for them.
The Button by January
While work is under way to streamline and simplify the form, the magic button noted by Duncan still is not ready. The goal for the direct upload of information to the FAFSA from the IRS is scheduled to be in place by January.
So those of you about to enter your senior year in high school, and all those further out from applying, the new financial upload button should be in place by the time your turn comes.
Perhaps just as importantly, Obama wants more streamlining for students. Reports indicate he is asking Congress to eliminate another 26 financial questions, all deemed to have minimal effect on how much aid a student is eligible for.
Of course, while these steps will make it much tougher for us to dump on the FAFSA form down the road, we still wonder why it might not be possible to eliminate the application process altogether. Imagine if the government would, as a matter of course, determine a student’s eligibility based on a family’s tax return alone.
Perhaps the government could even take the step of notifying students directly of their potential eligibility and do so as soon as the child enters public school. Now that would be real progress.
Still, we will take the efforts of the Obama administration. Every single one related to the FAFSA is a step in the right direction.
