Monday, September 07, 2009

Students Borrow More Than Ever for College

Heavy Debt Loads Mean Many Young People Can't Live Life They Expected

Students are borrowing dramatically more to pay for college, accelerating a trend that has wide-ranging implications for a generation of young people.

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 amount of money students borrow has long been on the rise. But 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, according to figures used in President Barack Obama's proposed 2010 budget.

The sharp growth is "definitely above expectations," says Robert Shireman, deputy undersecretary of the Education Department. "But we're also in an economic situation that nobody predicted." The eye-opening increase in borrowing is largely due to the dire economic environment, which is causing more people to seek federal loans, he says.

The new numbers highlight how debt has become commonplace in paying for higher education. Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate, according to an analysis of the government's National Postsecondary Student Aid Study, conducted by financial-aid expert Mark Kantrowitz. Only a dozen years earlier, according to the study, 58% of students borrowed to pay for college, and the average amount borrowed was $13,172.

Some options for graduates having trouble making payments on their federal student loans:

* Borrowers can request a deferral or forbearance, which suspends payments temporarily

* The extended-payment option makes monthly payments smaller by increasing the loan term

* Income-based repayment means the borrower pays up to 15% of discretionary income each month

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.

Also, the rising levels of borrowing 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. Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, says this phenomenon is playing a role in why tuition grows at about twice the rate of inflation. "Instead of imposing tougher choices" on college costs, he says, it's "easier to raise prices...because this additional loan amount is made available."

These and other impacts are likely to continue to spiral for future generations of tuition payers, college finance experts say. It is unclear whether we have seen the worst of it. Mr. Kantrowitz predicts the rate of increase will slow to 12% for the 2009-10 school year due mainly to what he expects to be a rebounding economy. On the other hand, Mark Zandi, chief economist for Moody's, says he thinks unemployment rates will be at least as high as they are now, and housing prices will fall further, making it difficult for families to borrow against home equity.

"Growth in student lending can remain very strong, at least through the next school year," Mr. Zandi predicts.

The total borrowing limit for dependent undergraduates who take out federal Stafford loans—the most popular federal aid program—grew to $31,000 this past school year from $23,000. Raised limits in federal loans may have siphoned some borrowing away from riskier—and costlier—private loans, which are now harder to get due to the retrenchment of that business. The move away from these risky loans may be one bright spot in an otherwise frenzied student credit environment, Mr. Kantrowitz says.

Still, students cringe when they think of what they will owe by the time they graduate. Kordi Solo, a senior majoring in journalism at Central Michigan University, expects to owe about $60,000 in student loans by the time she graduates in the spring. She had hoped to owe much less, but her father, a construction worker, has been out of work since last fall. She worries about the ramifications that debt will have on her future—whether it is being able to afford health insurance or qualifying for future loans.

Zack Leshetz, a 30-year-old lawyer in Fort Lauderdale, Fla., has $175,000 in student loans from his seven years in college and law school. Lately he has had his eye on the real-estate market. "Everyone says that it's a great time to buy a house," he says. But that is not an option right now, he says, thanks to $800 a month in payments—and another chunk of student loans in forbearance, which means payments are halted while interest accrues. "I find myself living paycheck to paycheck," he says.

He has also been engaged since March, but has held off on marriage. "There's no way I can pay for a dream wedding, or even just a regular wedding," Mr. Leshetz says. "I feel like I'm putting my entire life on hold."

"There are no guarantees about how easily you'll be able to pay off your student loans," says Lauren Asher, president of the Institute for College Access and Success.

These students' experiences are mirrored in research by Mathew Greenwald & Associates Inc. for investment-management firm AllianceBernstein LP. In a 2006 survey of 1,508 graduates under age 35, 39% of college graduates say it will take them more than 10 years to pay off their household's education-related debt. The survey says that this has caused a delay in certain key "rites of passage" associated with adulthood. Forty-four percent of respondents said they delayed buying a house because of their student loans, while 28% delayed having children.

"Loans have gone from being the exception to being the norm for most students," says Mr. Nassirian. He laments that, rather than fixing the problem of sticker price, policy makers typically tweak student-aid programs to make it easier for students and families to continue to borrow more.

Attacking the problem of cost is thorny because it is politically difficult to get all the interested parties -- which include federal and state governments, foundations and private institutions—to agree. "There are so many stakeholders, different explanations at different schools as to what's happening with cost, that it becomes politically dicey," says Christine Lindstrom, higher-education program director for U.S. Public Interest Research Group, which advocates for consumers. Also, colleges can be big employers in congressional districts, making it challenging for politicians who represent them to also take them on. "You're not going to win friends if you're alienating them," she says.

Some Republicans made attempts at controlling tuition increases when they held the majority in Congress. Rep. Howard P. "Buck" McKeon of California championed legislation in 2003 that would have penalized colleges for raising tuition too much by taking away federal subsidies. Though the bill died, he plans to continue pursuing the issue in the upcoming Congress, a spokeswoman says.

Some recent graduates say they wish they had known more about the consequences of debt before taking it on. Lillian Russell graduated from law school at the University of Pittsburgh last year with $181,000 in debt from her seven years in school. She has spent much of the past year looking for work. In recent weeks, she found a job clerking at a small law office. While she settles into her job, she has deferred payments on most of her federal loans, though interest continues to accrue.

"I wish I had considered the long-term impacts of what I was getting into," Ms. Russell says. When she entered school, "the idea was I'd take out the loans, get a job, and pay it back," she says.

It seemed straightforward. But as the economy has soured, "I feel like it's shifted a lot of my life goals," says Ms. Russell, from buying a house to starting a family. "I'm really concerned about handling this obligation while taking on new ones."


Indianapolis Tests Out Education Reform

A confluence of factors favors school choice—for now

The classrooms were full and bustling with activity at Valley Mills Elementary School on the city's southwest side one recent rain-soaked morning. Children smiled and raised their hands, eager to answer questions, and to tell me how happy they were to be in school on a summer day. This was not your father's summer school—punitive and mandatory—but a fresh approach to bridging the achievement gap.

Education reform has long been a popular buzz phrase. But too often it's proven to be a hollow call as the education establishment kills off common sense reforms even while we watch districts struggle with failing schools and low graduation rates. Last year, for example, the district that serves the core of Indianapolis had a heartbreakingly low graduation rate of 47% and half of the state of Indiana's schools failed to meet federal improvement standards in English or math.

But now, as the new school year begins, a confluence of events is making Indianapolis a test case for real reform. Reformers here have dared to introduce a modicum of school choice through charters and have tried to focus the system on the quality of instruction (not just dollars spent) through merit pay. Here, reformers are receiving a bipartisan assist from U.S. Education Secretary Arne Duncan, state and local policy leaders, and from a nonprofit organization that's filling the city with education entrepreneurs. The stars are aligned for reform, which means that if it doesn't happen now, and it doesn't happen here, it's hard to image how it could happen.

Take Valley Mills Elementary. I visited the school to see an education entrepreneur in action. Three years ago, David Harris founded a nonprofit called The Mind Trust with former Democratic Indianapolis Mayor Bart Peterson with the goal of luring new education ideas to the city. One of their successes was on display at Valley Mills this summer. It's called Summer Advantage USA—a five-week pilot program funded by a state grant that selects teachers and provides lively instruction to students in low-income areas. The hope is to help these kids advance by keeping them focused on their studies through the summer.

Summer Advantage is run by Harvard and Yale graduate Earl Martin Phalen. He told me his goal is to bridge the achievement gap between students of different socioeconomic groups by reversing an education tradition that "leaves three months on the table each year." Low-income kids often fall further behind over the summer because their parents can't afford to enroll them in summer programs. Thanks to Mr. Phalen, the students at Valley Mills didn't suffer that fate this summer.

Other steps are being taken to increase school performance across the city. In recent years, the mayor's office has sponsored 18 new charter schools, a trend started by Mr. Peterson and carried on by current Republican Mayor Gregory Ballard. The Mind Trust has brought several national education groups to the city, such as Teach for America. And the state's new superintendent of public instruction, Tony Bennett, is trying to break habits that have long guided school policy.

Mr. Bennett recently unveiled a plan to pay bonuses to top teachers willing to work at the city's worst schools, and to tie their pay to student performance in the future. He also wants to require teachers to have more expertise in their subject areas than they are required to have now.

"Our intent is to be the leader on education reform," Mr. Bennett said in launching his initiatives earlier this year. "The question is not, how much can we do? It is, how do we become the leader?"

But change comes hard. Mr. Bennett has come under fire from local superintendents, unions and education-school leaders who fear, among other things, that merit pay will unravel a seniority system that rewards longevity not quality of instruction. Meanwhile, a group of state legislative Democrats, cajoled into action by urban school leaders, earlier this year tried to pass a bill to curtail the future growth of charter schools in the state.

It was a tough fight that ended in a close victory for reformers and that ultimately highlighted the increasing strength of the reform movement. The measure passed both houses of the legislature but was shelved in late-session negotiations after Mr. Duncan warned that he will be handing out about $5 billion this year to states that show "a deep-seated commitment to education reform," which he partly defines as an embrace of charters.

The fight also underscored the bipartisan push for reform. Mr. Bennett and Gov. Mitch Daniels, both Republicans, routinely praised the Obama administration for challenging teachers unions on merit pay and charters, and for helping shape the debate in Indiana.

And that debate is at a full simmer at Indianapolis Public Schools, which serve the core of the city. Superintendent Eugene White has begun lobbying against collective bargaining policies that prevent merit pay for teachers and make it difficult to fire older, poorly performing teachers. Earlier this year several of the district's "Teacher of the Year" nominees found themselves on a list of teachers who could be laid off if school budgets are cut. The reason top-notch teachers made the list is that it is based strictly on seniority.

"If you are truly going to be fair to urban students you have to provide them with the best teachers they can have," Mr. White told me recently. "You shouldn't have a mandate that says you are untouchable because you have been here longer."

While Indianapolis teachers union President Ann Wilkins promises to fight any attack on seniority rules, Mr. Bennett agreed with Mr. White and told me, "The rules have to be challenged." He isn't alone in that belief. The New Teacher Project, a New York-based nonprofit that has studied Indianapolis Public Schools, recently surveyed district officials and found that 74% of teachers believe the district should consider more than seniority on key staffing decisions.

"That's big stuff," Daniel Weisberg, one the authors of The New Teacher Project's study, told me. It's also encouraging because it suggests support for education reform stretches from the White House to the statehouse to many of the classrooms in this city. That gives Indianapolis a rare moment to build a broad coalition for reform and enact substantial changes. But, Mr. Weisberg warned, the "window of opportunity is a small one." If reformers fail to capitalize on the moment, it will be lost. "Now is the time to think big," he said. "This is a once in a lifetime opportunity."


Britain: Children worse off with classroom assistants

There's no substitute for good teachers and good discipline but I think that this finding should be rather obvious. It is the dummies who get handed to the TAs and it is also of course the dummies who do less well. The study is presented to make teachers look good when it shows nothing of the sort

Children do worse in tests and exams the more time they spend with classroom assistants, according to a major study published today. The report, due to be unveiled at the British Education Research Association conference in Manchester this morning, says the classroom assistants have significantly reduced teachers' stress levels - but had a negative effect on pupils' progress.

The findings are an embarrassment to Labour which has made great play of its achievement in increasing the number of support staff in schools since it came to power. Since Labour came to power in 1997, their numbers have risen from 133,500 to 322, 500 last year.Researchers at the Institute of Education, London University, discount the idea this is because of the low attaining profile of the children teaching assistants work with. They say their survey of 8,000 pupils compared youngsters of similar ability, social class and gender who were with or without classroom assistants.

Professor Peter Blatchford, who headed the research, said one of the key reasons was that less than a quarter of the teachers surveyed had been trained to manage teaching assistants. In addition, only a quarter of the teachers surveyed - and only one in 20 in secondary schools - had allocated any time for feedback on pupils with their teaching assistants.The report also found that - the more time a pupil spent with a classroom assistant - the less contact they had with the teacher.

"While TAs are extremely dedicated - many work extra hours without pay - their routine development to pupils most in need seems to be at the heart of the problem," said Professor Blatchford. "Pupils with the most need can be separated from the teacher and the curriculum.

"The report describes the negative results on academic progress as "troubling", adding: "We found a negative relationship between the amount of additional support provided by support staff and the academic progress in pupils in years one (five and six-year-olds), three (seven and eight-year-olds) and seven (11 and 12-year-olds) in English and mathematics and ten (14 and 15-year-olds) in English."

In national curriculum tests, results showed seven-year-olds given support for between one and 50 per cent of their time at school scored one point less in English (which could be the equivalent of achieving level two - the standard for a pupil of that age - and failing). the difference between those with the most and least support was three points. It was a similar story with maths and in national curriculum tests for 11 and 14-year-olds.

"A consistent view of teachers, when they considered the benefits of support staff for their own teaching and pupils' learning and behaviour, is that the TA's presence allows more teacher attention to the rest of the class and therefore better progress for the rest of the class," the report added.

It went on: "Some support staff are less well qualified than teachers and this might be expected to be related to the educational progress of pupils that are supported..."TAs' subject knowledge did not match that of teachers."

It concludes: "It would seem appropriate to argue that all pupils should get at least the same amount of a teacher's time, and, indeed, that those in most need are most likely to benefit from more, not less."


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