Shaan Ali
Professor Goeller
Research in the Disciplines,
01:355:201:10
December 13, 2013
Abstract: This paper will talk about
the change that has taken place in the higher education system and how it has
affected the value of education that students are receiving and also how the
student themselves are affected. The education system is completely different
than it was a few decades ago and I will argue that this transformation to a
highly privatized system has made higher education less valuable. Student loan
companies and universities have profit at their list of top priorities and the
needs of students are neglected in this new system. The education system has
went from making society a better place by having more educated people in it to
a profit driven business. Corruption, unethical behavior, Sallie Mae’s rise to
power, and loan borrower stories will all be discussed to make my argument.
Is College Worth It Anymore?
Millions of students attend college every year with the hopes of getting a high
quality education that will take them closer to their goal of landing the job
of their dreams in whatever they are interested in. Students go into college
with the mindset that everything that they need to achieve their goals will be
provided to them and that they will not have to worry about anything. Students
believe that even if they take out a large number of loans at the start of
college their dream jobs will take care of them after they graduate. This is
where students make their biggest mistake because in today’s world chances of
landing your dream job are getting smaller and smaller each year. For example
there are many students that go into college with the hopes of becoming a
doctor, lawyer, or engineer but the number of those students that actually go
through with it is actually quite small. More and more students believe that
just because they are going to college they will land a good job right after
they graduate and all their financial worries will be taken care of but this is
far from what actually happens to the majority of students after they graduate.
The reason for this is because the higher education that exists today is vastly
different than how it was a few decades ago. Maybe in the higher education
system that existed before it was safe to say that their was a good chance of
landing a job in your field of interest to pay off your loans after you
graduated but in today’s day and age it is very unlikely. Colleges nowadays
don’t operate for the well being of the student but instead their primary
concern is the amount of profit they obtain and how much their pockets get
filled. This is why students in nowadays are ending up in more debt than ever
before because they get trapped into thinking that everything will be okay
after they graduate but they fail to realize that these institutions of higher
education are out to get them.
Colleges didn’t always operate this way though; in fact a few decades ago they
were more about helping the student and taking care of their needs. This is one
of the main reasons why “students loans barely existed forty years ago”
(Collinge, pg1). For example “in 1970, the average amount of a university’s
tuition and fees was about $585 per student per year, and only a small minority
of students required loans to attend” (Collinge, pg4). Back in those days the
cost of tuition and fees was so cheap that almost everyone could afford to pay
it off in full and those who could not were able to repay it very quickly. This
is because back in those days the higher education system that existed was that
of “high publicness” (Johnstone, pg1). The system was geared around the
student and towards making society a better place with more educated people.
Five areas in which the higher education system differed back then were the
mission or purpose, the ownership, the source of revenue, control by
government, and norms of management. In the first area of mission or purpose
the system differed because back a few decades ago higher education
institutions served a public mission that was determined by the faculty or
state (Johnstone, pg1). Again this mission was make the needs of the student
the number one priority and to collectively make society a better place by
having more educated people in it. In the second category of ownership, the
system differed because in a highly public system the ownership is publicly
owned and it can be modified or even closed down by the state (Johnstone, pg1).
This is why barely any student debt existed back then because ownership was not
privatized like it is in today’s system. In the third area of contrast, which
is source of revenue, the source of revenue for a higher education system of
high publicness is all taxpayer and public revenue (Johnstone, pg1). Back in
the day this is how these institutions operated, by taxpayer and public
revenue. In the fourth area of control by government, the institutions back in
the day had high state control and lastly they also had academic norms; they
shared governance and antiauthoritarianism (Johnstone, pg1). All these
differences are what separated the higher education system of back then to the
one that our country has now.
The
higher education system of high publicness that existed in the early 1970’s is
long gone and ever since then has been on steady transition to being more and
more privatized. A few years ago “about two- thirds of college students require
loans to make it through, and the typical undergraduate borrower leaves school
with more than twenty thousand dollars in student loan debt” (Collinge, pg4).
More recently though these number have gone up. “The Institute for College
Access and Success estimated that of the students who earned bachelor’s degrees
in the United States in 2011-12, 71 percent had student loans, and the average
borrower had $29,400 in debt” (Pena, pg1). This shows that clearly there has
been a jump from a few years back. Students are borrowing more money now
than ever before to make it through college and these higher profit
institutions are capitalizing on it. It is not about the student anymore to
these institutions instead it is about getting as much money out of the student
as possible even if it comes to the expense of the student. Somewhere along the
transition process greed kicked in and it became all about the money. “Over
time, legislators gave more support to the interests of the student loan
companies and the federal government than to the interests of the students”
(Collinge, pg4). When these institutions saw how much money they could make off
of the students they quickly started giving less and less priority and made profits
their main objective. “Student loan companies now realize extreme profits, not
only because they collect interest on the loans from borrowers and special
allowance (subsidy) payments from the federal government, but also because they
collect penalties and fees on defaulted debt from the students who encountered
financial difficulties repaying the original loans” (Collinge, pg5). These for
profit institutions know that most students will not be able to pay back their
loans and this will lead to a high amount of interest accumulating over time.
This interest can often times make the original amount that the loan was taken
out for much higher and this means more money for the for profit colleges.
For
profit colleges see the advantages in becoming more privatized and that is why
for profit institutions have been growing at a really fast rate. Also
more and more students are enrolling in these institutions each year.
“Enrollment in the country’s nearly 3000 career colleges has grown far faster than
in the rest of higher education by an average of 9 percent per year over the
past 30 years” (Wilson, pg1). More students are enrolling in these schools and
falling into a big trap. The for- profit institutions use marketing schemes to
make themselves look appealing and this is what draws the students in. These
institutions are doing whatever it takes to draw more students in so that they
make more money even if it means neglecting the needs of the student. They do
not care what happens to the student once they enter the institution and it is
of no concern to them if they even graduate or not. In fact it is even better
for the for- profit colleges if the student stays another year because that
means that they will most likely have to take out another loan and that means
more money for the college. Making a profit has become such a priority that
these institutions are doing things that are unethical. For example,
“colleges are regularly admitting students who aren’t ready for college- ready
work” and are lowering the standards of their institution just so they can
accept a wider range of students. “In 2012, for instance, of the 250,000 who
took the ACT, only 52 percent scored as college- ready in reading, English,
math and science. Yet many started school anyway” (Riley, pg1). These colleges
are accepting students that are not ready to handle the college workload and
these students end up struggling in college and many have a hard time
graduating. Not only that, colleges are also not providing students the help
they need and letting students pretty much fend for themselves once they come
into the institution. “Colleges have abandoned any actual structure, so kids
need help figuring out how to put together a serious plan for graduating”
(Riley, pg1). The needs of the student are becoming less and less of a concern
to for- profit colleges and this is benefiting the colleges while hurting
students by drowning them in debt.
One way to show the transition of the higher education system is to discuss the
growth of Sallie Mae. “Initially, Sallie Mae was a government- sponsored entity
(GSE) and was completely dependent on the U.S. Treasury for its operations”
(Collinge, pg1). Most of the funding that Sallie Mae used to purchase the loans
at the time was provided by the U.S. Treasury and it was in charge of Sallie
Mae’s operations. The invention of Sallie was very significant because it
“signaled the continuation and expansion of a trend” which was to shift the
financial burden of attending college from the government to the student
(Collinge, pg9). For profits institutions really started to take charge after
this and the students began to become treated more like students instead of
students.
Actually, this shift that occurred with the expansion of Sallie
Mae’s operations is a primary cause for the spiraling cost of college that we
see today. In 1981 “Sallie Mae began to use its influence with Congress to
expand its operations and it grew significantly in both volume and scope” and
was also bringing in a large amount of profit on the loans that it had
purchased. Sallie started to become so successful that in the year 1991 it
“owned about a third of the forty-nine-billion –dollar market of outstanding
federally guaranteed student loans” (Collinge, pg10). Sallie Mae really started
to become dominant in in 1997 when Lord who was the new CEO of Sallie Mae took
control of privatizing Sallie Mae. Sallie Mae eventually started making loans
directly to students and because of the level of brand recognition that it had
reached it was in an ideal position to do this. University financial aid
offices and the general public became very aware of Sallie Mae and its
dominance.
One huge way that Sallie Mae grew to power was because it
exploited practices that the administrators and staff of the Direct Loan
Program could not. For example, it began to involve universities into their
school-as-lender programs and by doing the universities made money on their
students’ loans. “They guaranteed a profit to the university--something the
federal government could not do”(Barnett, pg1). Since
they were making money more and more universities put Sallie Mae on their
preferred lender list. This is the point where colleges started to operate more
and more like a business and student priority began to decline significantly. What
happens when a school enters into a school as lender program with a student
loan company is first a bank or student loan company gives the university a
line of credit which the school than uses to make loans to students, after a
few months the school sells the loan back to the company and the school
collects a premium as a profit (Barnett, pg1). Another thing that Sallie Mae
did to make certain that universities put it on the top of their lists is that
it offered different perks to financial aid officials, such as fully paid trips
to exotic locations, golf outings, and parties (Collinge, pg11). Sallie Mae did
whatever it needed to do to take control of the student loan industry and
obtain the largest amount of profit it possibly could. Whenever it saw an
opportunity to capitalize it took advantage of it.
Sallie Mae also was not happy with just being a student lender and
wanted control of all the parts of the student loan industry, which included
loans, guarantees, and collections. It ended up purchasing nonprofit student
loan companies such as Nellie Mae, and “by 2006 Sallie Mae virtually dominated
the student loan industry” (Collinge, pg13). Today, Sallie Mae has become the country’s
biggest provider of private student loans make up twenty percent of all student
loans and with these loans it makes an enormous amount of profit. It also
charges very high amount of interest, which has been found to be as high as
twenty eight percent (Collinge, pg13). Student loan companies like Sallie Mae
and other for profit institutions in the education system today benefit greatly
from these student loans and obtain a large amount of profits but it is the students
who end up suffering because they get trapped into a giant web of debt. These
companies do not care about the student and what they will have to go through
while they are in school and also when they get out all they care about if
making the largest amount of profit possible.
In this education system today students are not receiving the
quality of education that they once use to get in the system of publicness and
are being scammed by these for profit institutions. These institutions want the
most profit that they can get and they have started to use unethical and
corrupt ways to get what they want. This unethical behavior has grown along
with the profits and it seems as the profits have grown larger so has the
unethical ways that these institutions use to obtain these profits. A perfect
example of this is Sallie Mae. Sallie Mae grew to be the most dominant student
loan company in this nation and it saw very large profits along the way to the
top but this was also due to the fact that it extorted millions of people and
used unethical ways to obtain its profits. One way that Sallie Mae did this was
that it had very high interest rates and penalty amounts. They know that when a
student defaults on a loan it is much more profitable for them. So this is why
“an entire industry devoted to collecting penalties and fees over and above the
original debt has sprung up around them” (Collinge, pg37). They want students
to default on their loans so that they can make more money. It is much more
profitable for them when this happens because when a student defaults on a loan
the lender, as well as the guarantors of the loan and the collection companies
they contract with make money as well. Now one might think that large companies
like Sallie Mae would be satisfied with the amount of profit that they were
making by interest and penalties but somewhere along the line a high sense of
greed kicked in and it drove Sallie Mae and similar companies to the extremes
of profitability.
Students have no idea what they are getting themselves into when
they take out loans for college. They do not know that they might be falling
into a trap set up by these large for profit corporations and that it will be
very difficult to escape. No student thinks that they will be lied to or
scammed by for profit institutions and companies but the likelihood of it
happening in today’s current education system is very high. Lets take Sallie
Mae for example, in 2001 it was found to be “defaulting loans and submitting
them for government payments” when they did not even make any efforts to
actually contact the people who borrowed the money (Collinge, pg39). What
occurred was that Sallie Mae employees were making fake records stating that
they had contacted the borrowers or that reasonable attempts had been made when
in reality that did not happen. The thing that is the most shocking is that
Sallie Mae was not the only company that was taking part in such activities. This
type of unethical behavior was found across the industry and who knows how many
undiscovered cases there are out there and how people’s lives are getting
ruined as a result of it (Collinge, pg40). These companies only care about the
amount of money that they make and do not think to realize the effect it will
have on the lives of the borrower and what they will have to go through.
There have also been reports of borrowers making numerous efforts
to work out payment plans with these loan companies but they will not accept a
plan that is reasonable enough for the borrower to afford. Many borrowers also
claim that they have sent forms to the lenders but these companies tell them
that the forms were never received. A former employee who got terminated by
Sallie Mae confirmed the act of fraud that the company was committing. The
employee stated that the borrower contacted her because he was still being
billed for a loan that he paid out in full. When the employee asked her
supervisor about it she was told to give him a “runaround and end the call”,
within a week the employee was fired for having too much knowledge (Collinge,
pg47). This shows how corrupt these for profit companies have become. They
commit fraud and engage in unethical behavior knowing the impact it will have
on the life of the student or borrower. The sad thing about it though is that
these student loan companies are not the only ones engaging in such actions, universities
have also started to do the same thing.
With the system of high privateness that has taken over
the higher education system in the past decade it has left students in a very
vulnerable position. “By 2000, it became apparent that some schools had all but
abandoned even the pretense of concern for students’ financial well-being and
were entering into agreements with lenders for the purpose of making additional
money from students” (Collinge, pg79). They now that by getting into these
agreements with lenders that they will get their fair share of profit and with
profit being their biggest concern students needs have become neglected. On top
of that these universities are now going even one step further in their attempt
to gain more profit and that is by using unethical and corrupt ways to get
students to pay more money. One way that they are doing this is by telling
students lies and giving them false hope just so they will enter into the
university.
One story that helps show this is about Bobby Ruffin Jr., a 14 boy
from Birmingham, Michigan who got a call one day from a recruiter from Ashford
University. When asked he told the recruiter that he wanted to become a doctor
and the recruiter in return told the boy that by joining their institution he
will be working toward a degree as a doctor so that when he graduates high
school he will be on his way there. The recruiter also told him not to tell his
parents about anything so that they can be surprised. This was obviously done
to not let the parents come in the way of the trapping Bobby into their trap.
They also told Bobby to claim that he had already graduated high school when it
came time to fill out the financial-aid forms. In the end administrators found
out that he was under age so he was ineligible to receive any aid but the
institution sent him a bill for $13,000 (Parker, pg2). It is absolutely
shocking how these institutions have started lying and scamming young kids into
entering their school just for profit. Universities have also been accused of
preying on students that come from poor backgrounds (Ford, pg1). They know that
these kids will not be able to afford the cost of attending the university and
will have to take out loans, which will benefit the school.
Another thing universities have started doing is they accept more
students so that they can bring in more profit. By doing this it has more
students than it can handle which results in less attention given to the
students (Parker, pg3). What is happening now in this current system is that
the value of education that students are receiving is being greatly affected by
the unethical and corrupt ways of student loan companies and universities. The
students in most of these schools are not getting their money’s worth and “in
the end, most kids wind up walking away with a questionable degree bought at
top dollar- and a mountain of debt to accompany it” (Parker, pg2). Students
really have to start thinking hard about the decisions they make about the
college they want to attend and the loans that they take out because it can end
up affecting their lives far after they have graduated. An example of this is
Sara Graves, a married thirty- year old woman who has three children and has
about $25,000 in student loan debt. She cannot start saving money for her kids
yet because of her debt and this will have an impact her children’s lives as
well (Ross, pg1). So when deciding what school to go to you have to make sure
you lay out everything perfectly because these loan companies and universities
can end up ruining your life.
It has become extremely important for students entering into
college to really know exactly what they are signing or what loan they are
taking out. The problem with people who are struggling to pay off their debt
right now is that they “cannot even recall actually making a choice of lenders
while they were in college” (Collinge, pg80). They probably just thought it did
not matter what lender they chose and ended up being surrounded by a pool of
debt. The thing is that “nobody sits down and explains to you what it all
means” and when these students graduate they realize that they have obtained “a
degree in bullshit” (Taibbi, pg1). It is up to the student to go through all
the options and discuss them with their parents so that they end up making the
right decision that will not end up hurting them in the future. Even though
education in some universities is becoming less valuable and student loan
companies and universities in these lender programs are out to get students
there are things the student can do to save some money and avoid being scammed.
The
first thing to keep in mind when trying to find the right loan is that there
are two federally backed programs that help make loans available. “The
direct-loan program is simple enough: At colleges that participate, students
borrow straight from the government” (Barnett, pg1). At other schools, students
borrow from a lender (Barnett, pg1). The second thing is that the student
should read the interest-rate deals very carefully. Most lenders will offer to
waive origination fees or provide a lower interest rate and this means you save
money. The last thing is that you should explore your repayment options, there
are good ones out there such as direct loans which have repayment plans that
are tied to one’s income and “after a set time the remainder of the loan will
be forgiven” (Barnett, pg1). So there are things that students can do to avoid
being scammed or put in a wrong situation. The higher education system has
taken a turn for the worse and with profit being the main concern for student
loan companies and universities it has become important to students to increase
their awareness when they enter college and think over every decision they make
so that their higher education experience valuable.
Works
Cited
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<http://nypost.com/2013/04/29/how-colleges-scam-the-working-class/>.
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