CompuCredit hires leading NC lobbyist to work with new CFPB: Former North Carolina Attorney General Rufus Edmisten was seen patrolling the hallways at this week’s State AG meeting in Charlotte. Edmisten was among a handful of lobbyists seeking to influence the ongoing work between the new CFPB and the State Attornies General. Interestingly, Edmisten is (more…)

More students attend college, but many are not ready for college coursework. Too many would appear to have been given top grades in spite of not demonstrating equivalent performance on standardized tests. The United States needs to have top schools and top students in order to compete in the economy.

Education is an economic issue. Education is a force in social equity. Education leads to a higher standard of living.

We know that a college degree confers a lot of benefits. There is more job security for people with a college degree. The unemployment rate for people with college degrees is less than 5 percent, even in this recession. 

Education is a proxy for skill. Skilled workers make more money. Still, it is a combination of education and experience that makes the difference. Plenty of graduates are not seeing any value in (more…)

The health care bill included some student loan fixes that attempt to address the high rate of defaults. I understand the imperatives for what they are doing. Defaults raise concern about fiscal cost-efficiency for the federal loan program (s), and they also point to ongoing weakness in employment and income security. I don’t think that these “fixes” are going to be enough, though, and they might only be a band-aid that fails to solve the underlying problems with how we prepare our students to be workers.

Consider three separate but interlocking items that we’ve seen in the news lately:

• The Bureau of Labor Statistics reported that unemployment stood at 9.7 percent in February. Civil labor force participation is only 64.8 percent.
• reading scores are flat.  Student proficiency is higher than it was in 1970 for younger students, but it has not improved at all among 17-year olds. Only 32 percent of students are proficient at reading in the 8th grade.
• Four years later, more of our students enter college than they ever have before.

The stated goal of our new student loan policy is to lower default rates. This is a very good idea. Unfortunately, until the economy improves it will be hard to get much traction on repayment rates. Until students come out of school with better skills, fewer will have the tools they need to graduate from college.

Inflation-adjusted earnings, 2000 to 2009, by level of educational attainment. Source - Bureau of Labor Statistics.

This combination spells trouble. More students are going to leave school before they graduate, and they will be chasing fewer jobs when they arrive on the labor market.  One odd outcome of this recession is that our work force is actually getting older: fewer older workers are leaving jobs and fewer young people are entering the workforce as soon as they have in the past.

This chart should get the point across that we haven’t had much wage growth in the United States in the last decade.  That is in spite of the fact that for much of the decade, the economy was fueled by an explosive housing sector.

This was also a time when the cost of attending college soared.  North Carolina is lucky to have a generous tuition policy. We are the exception. Even state universities are raising their tuition rates. The decision made this year in the University of California system was merely a sparking point for a larger anxiety among students and their parents about paying for (more…)

Plenty of students are defaulting on their student loans, a worrisome problem that should make us reconsider the value of a four-year college degree.

I would like to preface my thoughts on how more skills training might improve returns on education with a short departure into student loans.  Unemployment is probably behind the high rate of student loan defaults and deferrals.  It could also reflect the changing economy.  Either way, we have a problem. We are encouraging students to pursue college degrees, even though many have to borrow to finance that opportunity.  The payoff, for many, never comes. They are left with debt that changes the course of their adult life.

Lenders are ready to turn off the spigot of student loan debt. High default rates on student loans might underscore the need for better underwriting.  Banks are sure to make good on that fact.  Indeed, new data contradicts the idea that student loans are a poor fit for risk-based pricing. Even these loans can be adequately gauged for performance with credit scoring. A new study says that a 670 credit score seems to mark the difference between making good on private student loans or not.  For borrowers with credit scores above 670, only 1.8 percent failed to pay their debt. Below that number, and the default rate soars to 16.8 percent.

That is pretty powerful data, and it contradicts doubts about credit scoring for these products. Many students seek loans at a point in their life when they have little or no credit history.

Accepting that, what does this tell us about how and why we promote college? A government economist thinks it might be worth a million dollars. The College Board concedes that it is somewhat less valuable.  In many instances, all of that school appears to be  worthless.

Banks may make the decision for us. Lenders, particularly private student loan companies, could (more…)

Student loans are on the horizon of people in the education world and in public policy.  While much of the debate has focused on the level of debt and the challenge of making payment on those loans in a recession, it seems that all of these eyeballs have lately come to a new conclusion: that schools vary widely in their ability to make good on their promise to train their pupils.

It is a mistake to ignore the significance of investment in education to the overall functioning of our economy.  Gary S. Becker, writing after the stock market crash in 1987, suggested that more than 70 percent of invested assets in the United States were in human talent.  The stock market’s losses amounted to less than 1 percent of our (more…)