It isn’t easy for any private institution to survive when it has to compete with government-funded institutions. That’s very much the case when it comes to private schools.
In today’s Martin Center article, Shannon Watkins interviews the president of the North Carolina Independent Colleges and Universities (NCICU), Hope Williams, about the challenges her members face.
One of those challenges is the criticism that private schools take for having high student-default rates. That problem, Williams points out is one where schools take the blame but can’t do anything to solve it. She explains:
So for example, if you are seeking a Federal Loan and you fill out the FAFSA, then the federal government says that you’re eligible for a certain amount of aid and a certain amount of loans. If the college is able to work with you and provide some grants from the college and some other sources that they have, they may say to the student: “you know, you don’t really need to take out that much of a loan.” But, if you are from a family that needs additional funding, and you have access to that funding, there may be an incentive in your family to go ahead and borrow that amount anyway; but the college cannot tell you not to borrow that much money.
So it is it is really a catch-22 in many cases because our colleges are held responsible for the default rate of the students, but we have absolutely no authority to keep a student from borrowing too much. We can only tell them that they may be doing so. That is a real challenge for higher education and it is very frustrating for us: we have the challenge of the default rate issue, but no control over how much students are borrowing.
And that problem relates to the suggestion many higher-education critics have made: that colleges would be more selective and more attuned to student academic progress if they had some “skin in the game.” That is to say, if they had to repay at least some of what a defaulting student had borrowed to attend. It’s unfair to hold colleges accountable when they can’t limit how much debt the student takes on. When crafting a “skin in the game” provision, that needs to be considered.
While some NCICU schools are in financial trouble, so far not one has closed. I think that as the higher-education bubble deflates, it’s almost a certainty that some won’t be able to survive in the face of heavily subsidized competition from the state colleges and universities and the growing realization that a college degree is not necessarily the best choice for students after high school.