Wednesday, July 11, 2007

Our dysfunctional student loan system revisited

By Richard Vedder

My greatest contribution to the Spellings Commission Report is getting the Commission to refer to our federal student financial aid system as "dysfunctional" (I used that term and chairman Charles Miller liked it as well, so it was put in the report).

Senior Whiz Kid Emeritus Jonathan Leirer called today and suggested I write a nasty blog, and after hearing his story I am inclined to agree. Then I told sidekick Bryan O'Keefe Jonathan's story, and he related he had a very similar experience.

Jonathan's (and my) beef: Jonathan works hard, pays all the money he owes to his university(Ohio University), gets excellent grades, and marches through a graduation ceremony. Then he goes to get his diploma, send transcripts to his grad school,etc., and he is told "you can't have your diploma" until you do an "Exit Interview' on the computer, where he is asked all sorts of intimate financial information about his parents, etc., that, in my opinion, is absolutely none of the University's or federal government's business at this point. Jonathan owes on a Perkins loan, but he just graduated, and is not scheduled to begin repayments for at least 9 months (and it will be deferred in his case for several years while he earns a Ph.D.) Still, a private company serving as loan collector for Ohio University apparently holds the power to deny this person a diploma that he has earned --until he provides intrusive family information that may have been appropriate to request in granting the loan, but not at this stage.

I think when a person has earned and paid for a degree, a University must give it to him or her period, without imposing non-academic criteria, including personal financial information that universities will have access to. Universities and the government are aggressive in gathering information from student customers, but loathed to provide basic information as to what the graduates learned, whether they obtained a job or went to graduate school, whether they liked the place, etc., etc. What do universities add to a student's moral character, critical thinking skills,knowledge of our historical heritage and culture, etc.? It is time to crack down on what economists would call an information asymetry.

Make it illegal for any university to use the FAFSA form or administer federal loan programs, unless it agrees to be as forthcoming about its teaching and financial operations. Curb their no doubt federally mandated aggressiveness in prying into the lives of their students and their familes. Better yet, the federal government should be ousted from the student loan market and regulation thereof.


Ken D. said...

Currently many publicly-supported institutions not only restrict access to internal data which would help potential students make better decisions; these same institutions also often actively mislead students into false conclusions about what the degrees are really worth.

Much more disclosure should be mandatory for any institution receiving public support or nonprofit tax status.

WizCoder said...

Well I agreed.