2011 December 31 Saturday
Cancer Risk Versus Student Loan Bankruptcy Discharge

A reminder to tell anyone thinking about attending a very expensive college: You have to die to escape student loans. Best not to take them on in the first place.

According to the Educational Credit Management Corp., a guarantee agency that manages the student loans of federal borrowers with an active bankruptcy filing, about 72,000 federal student loan borrowers filed for bankruptcy in 2008, but only 29 succeeded in obtaining a full or partial discharge of their loans. Thatís 0.04 percent. Youíre more likely to die of cancer or in a car crash than to have your loans discharged in bankruptcy.

A big student loan burden amounts to debt servitude at the beginning of a working career even before taking on a mortgage. For people who didn't major in anything useful (i.e. for the overwhelming majority of college students) starting out with tens of thousands of dollars of debts starts one on a rather bleak pathway thru life.

Necessity is a mother. Alternatives are beginning to emerge. Check out the courses at the Academic Earth website. Few lead to credit now. But that'll change. MIT's new online learning initiative M.I.T.x will let you learn from MIT courseware and test yourself online to earn certificates. They won't grant you college credit from MIT, let alone a degree. But imagine taking their courses without enrolling in college, getting to know the material really well, and only once you know a couple of years of engineering material go enroll for a couple of quarters or a semester with double or more course load to get the ability to take tests for credit. Pay tuition for less than half the time that a regular college student pays tuition (and going for 5 or 6 years to get a bachelors degree is surprisingly common today).

Imagine colleges letting incoming students take a large assortment of finals tests to test out of the first couple of years of materials. Already the SAT Advanced Placement tests let one do that for a number of topics. One could watch online course, take the MIT tests equivalent to AP subjects (and likely tests from other major schools when more schools follow MIT). Then go take the API tests when you are sure you can pass them. I expect we will see a movement beyond the list of subjects offered for SAT AP tests where colleges will offer the ability of students to prove their knowledge to earn credit without taking courses.

I can imagine prospective employers using MIT's tests as part of a job interview. "Here, sit at this computer and take a few MIT course tests while we watch and we will see if you know enough chemical or mechanical engineering to do the job we need done." Smaller companies in particular don't need the credentials as much as they need people who can do the actual work. So why not basically repurpose online tests to use them to evaluate job candidates?

Update: A reminder on Glenn Reynolds' proposal on student loans: make colleges liable if students default.

For higher education, the solution is more value for less money. Student loans, if they are to continue, should be made dischargeable in bankruptcy after five years -- but with the school that received the money on the hook for all or part of the unpaid balance.

What's key here: Incentivize colleges to have students run up less debt and economically do better on graduation. We need reforms that align incentives of colleges toward producing better economic results for students.

Share |      By Randall Parker at 2011 December 31 09:44 PM  Education Costs


Comments
WJ said at January 2, 2012 12:53 PM:

If you're talking about someone with unavoidable down time - a high school student on summer break or whatever - MIT's OCW is a great suggestion for helping him get ahead, keep his brain fresh, and decide for himself if he has the chops for a science or engineering major, though high schools should be doing this already, of course.

But if you're talking about a college-age student, it's still faster and (for most colleges, believe it or not# ultimately cheaper to attend and learn while paying tuition, because it gets you into the labor market sooner. Physics, DifEQ and even plain jane Integral Calc problems are a time-consuming bitch, even when you know the material. So is the labwork #which can't generally be done at home), writing programs in MATLAB, C++, Java, etc. Homework is generally required to be turned in, so you will have to redo an entirely different set of problems when you're in the real class. It is well nigh impossible to enroll in such a major with "double or more courseload." Sometimes it's literally impossible, as most colleges place limits on the number of credit hours you can take per semester.

Mostly for college-age students the best you can say for OCW is that it might help him catch up on a missed lecture or clarify the important stuff which his lousy grad student instructor with the impossible Chinese accent didn't get across. It also might fill in for overbooked classes he couldn't get into in the right semester, which would delay his graduation.

In said at January 2, 2012 6:29 PM:

For people who didn't major in anything useful (i.e. for the overwhelming majority of college students..

Curious. Is this statistically true or just a hunch? Seems like there are a lot of useful fields people pursue.

In said at January 2, 2012 6:37 PM:

Had another thought when I read this:

What's key here: Incentivize colleges to have students run up less debt and economically do better on graduation. We need reforms that align incentives of colleges toward producing better economic results for students.

We often forget that at least part of the goal of education is to properly socialize individuals into society. I think traditionally the idea was to provide some means of passing down our cultural heritage. I don't disagree with your criticisms of the educational system but the focus (not just from you but almost everyone) on economics is worrying. There seems to be a humanistic void. Institutions that traditionally enculturate are breaking down.



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