Tuesday, June 10, 2014

Would Secured College Loans benefit everyone?

I recently heard that there are more than a trillion dollars in outstanding College Tuition Loans that are increasingly likely to go unpaid.  And the implication was that the federal government would have to step in and take the majority of the loss.

Somebody in charge of this has failed to have the elevator serve the top floor for some time for this to be the case.  A simple review of the risks would suggest that loans for any kind of study program need strict controls to prevent untoward risk.  Just consider the variables: the motivation of the student; the quality of the courses; the appropriateness of the courses to accomplish the goal; and  the likelihood of actually getting the job the student is preparing for and the pay being sufficient to live and also pay off the loan.

Do you know of anyone really looking at those things?  No?  Neither do I, at least not on a required basis.

When we want to buy a home, we need to provide certain qualifying information.  We need to show that our income level is adequate to enable us to pay the proposed monthly charge for the loan; we need to get an appraisal of the value of the house so that, if we should NOT pay, the lender can ultimately expect to get all...or at least most...of his loan value from a sale of the property.

Why can't we do this with college loans?  Consider requiring an application that would do the following:
  1) Indicate the potential student's goal; what is the career that he or she wishes to pursue;
  2) Indicate the number of jobs in the intended area of employment that is expected to be available in 4 (or 6, or 8...whatever the requirements) years when the student would matriculate;
  3) Show the ranking of the intended College in preparing students for that intended job;
  4) Compare the intended College with others that also prepare students for this area of employment, showing costs, both present and predicted for the period of study, percentage of students in each college employed in their area of preparation;
  5) Provide the curriculum..the courses and course load...that the potential student is committing to if the loan(s) are granted;
  6) An attestation by a qualified College Advisor to the accuracy of the analysis provided in 2-4 above;
  7) An agreement that after each semester, prior to release of the next semester's tuition, the Student will provide a certified copy of a transcript showing successful completion for graduation credit of all coursed taken in that semester, plus a certified copy of the course schedule to be taken during the upcoming semester together with a comparison to the obligation of course load committed to prior to the origin of the loan(s).

This would accomplish three (3) things:  it would a) show the quality of preparedness of the student for the College process, proving a sense of direction, together with the ability to provide a personal business plan for his or her life; b) it would provide proof of the value of spending for the degree in showing how likely successful employment could maximized and actually provide for repayment of the loan; and c) it would pressure Colleges to teach for the measurable benefit of their students, showing that there was demonstrable value in the offered degree.

It is true that this would have no effect on those of means...or perhaps more properly, of parents with means...in going to College just to party or "search" for themselves.  But it is their money involved, not the government's...which is to say, "ours", since it is our tax dollars that now fund such loans.

There are thousands of very good paying jobs right now that go begging because of our current over-valuation of a College degree.  My parents worked at whatever job they could find that paid enough to live.  They researched...looked...for better opportunities, figured out how to prepare to do those jobs and moved on, eventually starting their own business.  There was no guarantee of success...and there interim failures...but all served to teach them things that were required to succeed.  And succeed they did.

Would it be so bad for those without the money to pay for college to have to prove to any person or entity that was inclined to consider loaning them the money to go to college to show that proposed lender that they were making a good investment, to prove their readiness to work toward a goal that would provide for repayment to the lender, and a successful career for the applicant?

I would suggest that it would be a benefit almost as great as the degree itself.

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