Elizabeth Warren to Education Department: Protect Student Loan Borrowers
Sen. Elizabeth Warren has been making plenty of headlines over the past few months. Between a grassroots campaign (unsuccessfully) demanding her run for president; a spat with Jamie Dimon, the head of JPMorgan Chase; and the demand for student loan reform, she continues to assert herself as a progressive champion. But is there hard data to vindicate the ideals that have garnered her a cult following?
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The debate over student loans with which Sen. Warren has taken issue has to do with protecting students from predatory loans and for-profit institutions. The idea is that the Education Department is not doing enough to protect students as they feel the pressure to borrow money to go the right school for the right degree.
This isn’t the first or last time that you’ll hear about the issues of college affordability. It’s become a hot topic – with proposals from several democratic candidates to make public colleges more affordable if not free.
So what’s going on here? What is it exactly about college loans that are so ensnaring for aspiring students, and what would it take to actually reform the system? Let’s take a look at some of the prominent issues.
A Budget Based on Student Debt
As the system currently stands, the congressional budget office accounts for revenue from federal student loans as a means of cutting down the federal deficit. The implication being that the government wants to make money off of its borrowing students. A major part of student reform would mean having to compensate for that revenue through other means of taxation – which is not something every American is keen on.
Sen. Bernie Sanders, another progressive champion and current presidential candidate, has proposed that that burden shift to stock traders – charging a 50-cent tax on every $100 of stock trades on stock sales, and smaller taxes on bonds, derivatives, and other such transactions. He calls it the Robin Hood tax.
For-Profit Colleges and Their Less-Than-Profitable Investment
Give a college like the University of Phoenix a quick look and it may seem like the most sensible choice for someone who doesn’t have a lot of time to earn their degree – from students struggling to pay for their schooling or single parents looking to get back in the game. They and other for-profit colleges present a glamorous picture of what could be, but the statistics on how well they deliver on these promises are worrisome.
The problem is that these colleges rely heavily on federal loans and Pell grants – looking at University of Phoenix alone, which boasts a 16 percent graduation rate, 85 percent of students are relying on Pell grants. What’s more, for those that do graduate, is that the vast majority of these institutions’ programs (72 percent) have graduates earning less than a high school dropout (h/t The Atlantic).
So now you’ve also got colleges who are designed to profit off of their students, producing more borrowers, with low-wage results upon an unlikely graduation. If a student you know wants to apply to one of these institutions, you may want to sit them down and talk about the long-term ROI first.
Tell Us What You Think
Do you think Sen. Warren is justified in calling for student loan reform? What do you think is the best approach? We want to hear from you! Leave a comment below or join the discussion on Twitter.