Education For Progress or For-Profit?
about the author
Anastasia Wilson is an Economics Correspondent and a senior economics major at UMass-Amherst. She spends most of her time researching economic issues, writing, blogging, and cycling.
In addressing solutions to America’s economic problems in his State of the Union speech last week, President Obama outlined reforms targeted towards higher education. By setting goals for increasing college graduation rates and supporting technological research and development, the President appeared to recognize that a larger structural situation with our economy may be looming due to lack of educational affordability and availability.
Despite the enthusiasm, many student advocacy groups, like the United States Students Association (USSA), saw Obama’s well-intended promises as blurring into empty rhetoric. Many critics are questioning how investment in education can be achieved, while simultaneously focusing on fiscal austerity and deficit cutting.
Lindsay McCluskey, president of the USSA, wrote recently of how many of the same fiscal austerity measures outlined by Obama in the State of Union will also fetter educational investments. In fact, the recently proposed measure to reign in federal spending to 2008 levels also means decreasing funds available for Pell Grants, one of the most crucial funding sourcing for underprivileged students.
Was the President making more of a sales pitch than a call for government investment? Since few direct investment policies have even been brought forth, it is difficult to tell. It is clear however, as the job outlook remains bleak, that staying in or returning to college remains one of the few viable options for remaining competitive in the labor market.
Many top colleges, like Yale, Harvard, UPenn, and Dartmouth are seeing record breaking application cycles for the Class of 2015, due to globalization and the rise in international applicants, as well as the domestic economic need for more students to earn competitive degrees and skills.
At the same time, however, the renewed interest in higher education has brought about profiteering by private companies. For-profit colleges, especially those specializing in online training programs, have seen ever-increasing enrollments during the Great Recession–though many are now contentiously facing regulations and scrutiny from the Education Department. Some colleges have even taken to originating their own high-risk educational loans in search of added profit and enrollment.
Last month, Sallie Mae, one of the largest private educational lenders in the United States, boasted a record increase in profit of 45% over last year. Though much of this profit is due to debt restructuring, the lender has also substantially increased the amount of student loans from last year’s $381 billion figure to $413 billion even though default rates on student loans continue to increase, creating new worries about a student-debt bust similar to that of the housing crash.
Considering the job numbers, which are expected to remain stagnant for January, and the need for re-skilling and education in the economy, it appears as though student debt and for-profit colleges could very well turn into the next bubble on our economic horizon.
