Dropping Out With Debt

Student loan debt in the U.S. adds up to more than a trillion dollars, putting a major strain on graduates. But the weight of debt is even heavier for those who leave school without receiving a degree. Host Michel Martin speaks with Anthony Carnevale, who heads the Center on Education and the Workforce at Georgetown University.

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MICHEL MARTIN, HOST:

I'm Michel Martin and this is TELL ME MORE from NPR News. Coming up, Jaylyn Brown is about to graduate from Riverhead High School in New York after never missing a single day of school for 13 years, and she was an honor student and a varsity basketball player. How did she do it? We will ask her in just a few minutes.

But, first, to our Money Coach conversation. That's where we talk about personal finance and the economy. And lots of students are heading out for summer vacation now, but for too many college students, that break will become permanent.

For a variety of reasons, a growing number of students are not able to finish college, and increasingly, those students are finding themselves under a pile of debt. There's a lot of talk in Washington about how to ease that debt burden. President Obama recently announced plans to make repaying student loans easier and Congress is grappling over how to avoid a doubling of interest rates on some federal student loans for millions of students.

But there's one group that isn't getting the headlines. A new analysis of government data by the think tank education sector showed that nearly 30 percent of college students who took out loans dropped out of school, and according to that study, these students have higher unemployment rates than their degree-holding peers and are four times more likely to default on the loans they used to finance college.

We wanted to talk more about this, so we called upon Anthony Carnevale. He is the director of the Center on Education and the Workforce at Georgetown University and he's with us now.

Welcome back. Thanks so much for joining us once again.

ANTHONY CARNEVALE: Nice to see you again.

MARTIN: Now, the study, as I understand it, made a distinction between for-profit institutions and nonprofit institutions. Can you explain the difference between the two?

CARNEVALE: In the United States, our nonprofit institutions - what most of us think of as colleges - public colleges and private colleges - Harvard and the University of Virginia versus the kind of colleges you see in the ads on the subway or on late night TV that will charge you to go to school and they make a profit.

MARTIN: We understand that borrowing at both nonprofit and for-profit institutions has increased, so why do students at for-profit institutions borrow at higher rates? Is the tuition higher?

CARNEVALE: The for-profit colleges cost more, in part because they don't get the public subsidies that the not-for-profits do, but also because they spend a good 20 percent of their budget on marketing and because they have to make a profit. So you add 20 to 30 percent on top of the cost for the profit, and another 20 to 30 percent for marketing and you've got a fairly expensive deal.

MARTIN: So what is your take on this? I mean, you can see where you don't have the benefit of the degree and you have the debt to repay, and as I understand it, education debt can't be discharged, unlike other debts that can be discharged in a bankruptcy, so it never goes away. But the earning potential is less.

CARNEVALE: I think there are serious problems here and the government is implicitly involved. We've come to a point where people have to get some kind of post-secondary education or training to join the American middle class and we've yet to find a way to help people make choices to make them savvy about how they invest in their education.

MARTIN: We're talking about the growing number of students who drop out of college who are left with loan debt, but don't have a degree. That's nearly 30 percent of college students who took out loans, dropped out of school. That's up from less than a quarter a decade ago, according to a new analysis. I'm speaking about this with Anthony Carnevale. He's the director of the Center on Education and the Workforce at Georgetown University.

Could you talk a little bit more about how the government is complicit in this?

CARNEVALE: What we're doing, more and more, is waving money in the face of young people in the form of grants and loans. They grab the money and, oftentimes, they use it badly. They enroll in programs that aren't going to get them a job or a job that'll pay for the loan they took out. They default at very high rates. It's a system without transparency and there is a certain amount of entrapment going on here. We wave money at young people and we're surprised when they take it and then don't use it well.

MARTIN: What kinds of students are you talking about? Because, you know, the stereotype is - I mean, the kind of circumstance that becomes fodder for the late night talk show comedian, you know, is the proverbial English major or the proverbial philosophy major who can't readily apply that learning to the job market. But, in your analysis, that's really not true. Are you saying that people are being trained, sort of, very narrowly for professions that may not really exist? Or talk a little bit more about what kind of student you're talking about here.

CARNEVALE: It is a problem that affects all students unless you come from a family with very deep pockets. If you're born into the right bank account in America, you can make lots of mistakes. You can continue going to college through four and five years to get a BA and then, if you don't have anything you can sell in the labor market, you can go to graduate school.

Most young people don't have that option. Seventy percent of them are working. Forty percent of the people in college are working full time. A good 15 percent are married with children.

So we've built a system here that essentially doesn't deal with the fact that this is a necessary investment, not just a good thing to do for your own human development.

MARTIN: On the flip side of it, speaking of a necessary investment, the for-profit institutions say that they are offering a service to people who are not served by these traditional nonprofit institutions, which cater to people who are young, who tend to be unattached and who have the time and the luxury and the means - if you want to call it that - to kind of explore their interests.

And a lot of the for-profit institutions say that they are serving the persons already in the labor force, giving them specific knowledge that they need to improve their lives. Is that just not true in your view or...

CARNEVALE: This is a good news, bad news story and the jury is still out on for-profit institutions. In the end, they do, in fact, serve lower income, less advantaged populations, often downtown, but in the end, they have the highest costs, highest default rates. And, when you default on loans in the American system, you're essentially done.

MARTIN: In the absence of the kind of regulation that you feel is preferable, what should students and parents be thinking about so that they don't find themselves trapped?

CARNEVALE: What you need to do if you're a student or a parent is you should demand to know what happened to the people who were in the program before you. Did they get a job? Did they get a job at decent wages?

It's not that you should choose your curriculum on the basis of what will get you employed, because if you don't like what you do or what you study, you're not going to be any good at it - but there should be enough transparency so that parents and students can see a way to make what it is they love to learn or love to do pay later in their lives so they can continue doing it.

MARTIN: Anthony Carnevale is the director of the Center on Education and the Workforce at Georgetown University. He was kind enough to join us from our Washington, D.C. studios.

Mr. Carnevale, thank you so much for joining us.

CARNEVALE: Thank you. It's good to see you.

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