Does Mark Cuban Have A Point About Capping Student Loans?

Career College Central Summary:

  • Recently, Cuban opined about student debt at Inc.’s GrowCo Conference. Against the backdrop of rising student loan default, he made a compelling case that, in the interest of economic growth, the federal government should set a per-student ceiling on the amount of student loan money it gives out every year.
  • At first blush, this mandate will strike many poor students as patently unfair. When I looked deeper, however, I came to believe that a federal student aid limit — especially at Cuban’s $10,00 per student per year threshold –could unleash dramatic change in higher education costs and spending.
  • First, lowering student aid would immediately lessen the financial load on college graduates (freeing up capital for economy-boosting purchases like new homes and appliances, plus cutting edge startups).
  • Secondly, it would weed out dozens of for-profit colleges — many with questionable methodologies, weak graduation rates and pathetic entrance standards — that prey on poor and minority teens and returning adult students. Seizing on the Federally goosed canard that “everyone must have a bachelor’s degree,” for-profits have been able to thrive — even with tougher federal oversight — because 86% of all for-profit college funding comes from federal taxpayers. Moreover, 96% of for-profit college students receive federal college loans. Though only roughly 1/10th of American students are enrolled in for-profit colleges, for-profit students receive one-quarter of all federal student aid. Most telling, 22.7% of for-profit college students default on their loans within three years of starting repayment.
  • Clearly, for-profits have been on the taxpayer gravy train for too long, which has encouraged hard-sell tactics that inflate the value of a for-profit degree, as well as zealous attempts to push students into loan forbearance or deferment, instead of brand-damaging default.
  • Naturally, one should not paint all for-profits with a broad brush. There are exceptions, such as West-Virginia-based APUS, that fulfill online education’s original promise of training service personnel in the field or those, by dint of physical, psychological or cultural barriers, who are unable to attend college in person. Nevertheless, student loan limits would force for-profits to improve admission standards and graduation rates, lest they fail altogher.

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