States Need to Follow Harvard: End Loans Completely

Harvard's announcement on Dec. 10th that it will provide financial aid to families making as much as $180,000 per year, echoed today by Yale, has been greeted with nearly universal acclaim. (The only detractors seem to be those who didn't get in.) The move sets a new standard for all private universities to include students of all economic backgrounds.

But while private colleges pile on to the idea of expanded scholarships and grants, state schools increasingly exclude students in the middle class who they were intended to support.

They do so through student loans. Across the country, states provide state loans to students through non-profit corporations that are accountable to no one and increasingly corrupt. In Iowa, the Iowa Student Loan Liquidity Corp. is one of the worst offenders, under investigation by the attorney general for pursuing aggressive loan tactics and giving colleges incentives to steer business their way.

Meanwhile, students attending the private University of Iowa graduate with an average of $20,234 in debt, below both the national and state averages. The idea that public colleges leave middle-income graduates better off financially than public ones is simply wrong.

The solution is to do away with government student loans completely. What makes Harvard's plan so lauded is that it is a "no loan" policy, like Princeton's, Amherst's, and Williams'. It relies on straight grants and scholarships. A student from a household earning $120,000 to $180,000 will pay 10 percent of their income per year. A student from a household earning $60,000 per year will pay nothing at all.

Of course, Harvard has a $35 billion endowment. State governments can't be expected to tap into similar funds to provide free rides for students who deserve them. Or can they? If the corrupt state lenders in Iowa, Missouri, Pennsylvania, and Florida -- all under investigation -- were eliminated, the government would be able to give deserving students free rides and private loan corporations would pick up the slack for those with incomes too high to qualify.

Comments

[FullMontyHall]

First of all, the University of Iowa is as public as they come. The fact that Iowa students have high federal loan debt proves NOTHING. It could mean many things. It could mean the state does a better job than most in getting students to use federal loans over private loans. It could mean that the Iowa legislature underfunds its colleges.
The student loan scandal will go down in history as the biggest scandal -- so big it made the front page of The New York Times and The Washington Post and so big that liberal bloggers got their shorts all up in a bunch -- that had NO victims who suffered financial harm.
I would almost bet a $1,000 that these state programs offer some of the lowest interest rates and fees on loans anywhere --lower than other lenders and lower than what the government Direct Loan program charges.
"Corrupt" is a loaded word that ought not be used casually, even on a blog! No one has proven any pattern of conduct that rises to that level. A stupid email or two do not the crook make.

[briloker]

Screw grants and scholarships, just guarantee student loans for enough for a student to get by. Guess what, I got loans and Im now out of money for the next month because the FAFSA calculation can't really be personal enough to really factor in correct expenses. So instead of being able to borrow enough (I didn't cap out my loans either, I have alot of free tuition, but that counts against my total borrowing capacity) I either have to get a bank to give me a personal line of credit or use credit cards with astronomical rates that will acrue for the next three years until I graduate and get a job.

SO Im looking at over 100k in debt at rates between 6% and 20% (if I have to use credit) and we wonder why a ton of college students end up having to move back in with parents when condos are reaching 1 million a piece and rent is around a thousand a month for your half of that two bedroom apartment with peeling paint and crappy heat.

[realitytrumpsbull]

MIT has a cool thing where they're basically
putting courseware online for people with no
$$$$$....

[jdm58]

Very interesting. Thanks for the insight.