Yesterday the Association wrote in its BLOG the analyses of Department of Education’s Chief Strategy and Transformation Officer resignation.  His motivation for resignation is not purely show his support for the borrowers.  But to clean his name and to potentially avoid from getting hit himself.  The quote below taken is from Yahoo Finance:

“The judge’s rebuke comes hours after DeVos’s point person on overhauling the student loan system abruptly resigned and publicly called for mass debt forgiveness”

  As reported by Politico, this morning we learn that DOE has been fined by the federal court “for violating an order to stop collecting on the student loans owed by students of a defunct for-profit college”.

From what has been observed, it seems that toward the end of this administration, more of this kind of news will start popping-up.  For the rule is simple, whatever goes against the logic will not survive in the future.  It is only a matter of time.

This has created an anxiety among the loan servicing companies because of loans forgiveness or for increasing the probability that the loans will be wiped-out.  Therefore, some of these collectors have increase their pressure and push the borrowers to accelerate their payment with different tactics such as increasing the minimum  payment or increase fines and others late fees.  These tactics are noting, but to max-out their own interest (read: receiving wealth transfer from the American society to their own pocket).  Weak up America!

This site has consistently presented the facts and shared the impacts of student loan debt based on publicly available and published data.  The Association has used the most rigorous possible analytics to come out with what the data said without adding any organization’s or individual’s interests.  We are independent of any color, blue or red or any other characteristics of which others used to categorized in analyzing the student loans problems.

Two reports on student loans were published today that show how their behaviors, motivation and hidden agenda.  On the same day we also learned how another party, which happens to be the candidate for the 2020 big dance tries to minimize the negative impacts from the systematic errors and moral hazard that have been caused by the other sides of the equation.

US citizens are now have the opportunity to decided which parties that they want to keep in the equation.  Either those who have added financial burdens on their shoulders or the person who are trying to eliminate or ease their burdens.  The choice is yours to make.

There are several others, but at this post let us look at the Wall street.  Clearly, those who has their business related to the loans.  These companies make money based on much interest income that they can accumulate from the debt.  In Accounting, Finance or Business 101 courses, one learns how to calculate the interest income.  The higher the amount that a person takes, the more interest expenses that she or he needs to pay.  Interest expenses for the person, is equivalent to interest income for the other party.

That having said, potentially the lender of the loan or the loan servicing entities will experience a tremendous pressures on their bottom line.  If these organization are selling their stock at Wall Street, then needless to say that whoever own these organizations stock will also experience the pitch.

At this point, the Association would like make thing pretty clear i.e., make a disclaimer of this post.  The analyses posted in this site are purely based on logic and economic theory.  Will it become a reality?  Who knows.  Therefore, no one can make any investment decision based on this post, for this writing is not directed to any investment advice nor do AAEA has any interest to bad mount anyone or any entity such as NNI or NVI.

As of May 3, 2019, NNI stock price has increased about 269%, compared to the price on 12/12/2003.  This implies NNI has met the Wall Street’s expectation well.  But, on the other side of the coin may suggest the success is based on the loan borrowers’ labor and transferred wealth to the Wall Street. When one of the candidates announced her plan to wipe-out the student loan debt on April 22, 2019; the Market does not react at all, for it is still along ways before the plan becomes a reality.

When the Association shared its College Rating studies to the public in 2013, some higher learning institutions may not think that the rating matters at all.  Therefore, they made a conscious decision not to make strategic moves or changed the way to manage their organizations.  Perhaps, some may regret later.  Had their utilized our research findings, changed the strategies, then they might be able to sustain their institutions.

Let us make a quick assessment how many students and their family, Colleges, Universities, American public & communities, and other interested agencies may have received the benefits from AAEA’s studies.  Based on our random internet search, just in the state of TN, we found the following college closures on recent news:

1. Hiwasee College in Madisonville, Tennessee, will close at the end of its spring semester on May 10 =====> AAEA’s Rating: ABA.
2. Fountainhead College of Technology in Knoxville closed in October, 2018===> No rating, for no information is available at NCES data bases.
3. Knoxville’s Virginia College campus closed in December, 2018 ===> No rating, because no information found in NCES data bases.

Perhaps, this site will give the readers a more completed list of college closures.  While we cannot say for sure how accurate, it seems that our hypothesis stated in 2014 has happened.  In 2015, the Association has repeated its concerns on the college closures due to inefficiency, imbalanced and mismatched of total revenue and expenses.  These predictions are made based on the IRI approach that AAEA has proposed to be used to evaluate the strengths of higher ed institutions.  Our predictions were repeated again in 2016, 2017, 2018 and 2019.  Based on this assessment, one might conclude that data never lied, and are the foundation and may help the college administrators to see what is coming their ways such that strategic decisions can be made to avoid such challenges.

Recently, there are many public policy initiatives in efforts by the administrator to response to the US student loan crisis and the US higher ed system in general.  At least there are two plans, what the public heard in the past weeks. The first initiative is to limit the amount of taken student loans.  The second proposed change is called Higher Education Act (HEA) which was announced on March 18, 2019.  HEA will focus to improve education quality, students learning outcomes and to restructure the accreditation agencies away from the current regional setting.  Needless to say, that AAEA has conducted and posted in its Blog studies and analyses on the effectiveness of these agencies with discouraging results.

If the lawmakers vote for HEA and capping the student loans become a reality, then what are the impacts of these proposed changes on the US higher ed institutions? One thing for sure, demand for private student loans will increase and it may negatively affect college enrollment, especially for small-private, Liberal Arts institutions.  Both proposals will put new pressures on college decisionmakers at the US higher learning institutions to innovate.  Without it, survival will be put on the line.  Again education analytics will be called to defend many institutions, big or small, state-owned or private, profit or non-profit.  That having said, demand for professionals with the IRI expertise will never be filled in the near future. The dire needs for an IRI or education analytics background are real. Currently many organizations cannot fill the positions easily beyond research analyst.  The reason is simple because ∃ only a finite  number of professionals that have the core competence and majority of the IRI elements.

In the beginning of the 2019, the Association has addressed the US failed to follow the souls of the NDEA.  Since then, there were many articles written on this issues echoed the same concern with specific examples.  The bottom line of the student loan issues is due to failure on public policy because the vision of NDEA was ignored.  Everyone now jumped into the conclusion, including a think tank who flipped in their research conclusions.  Originally this institution said, there is no problem with student loans in the US a couple of years ago, then changed what they said.  Even the DOE and the US Congress said, that the Uncle SAM’s higher ed system is broken and that the country is facing the student loans crises.  When research is directed toward the sponsors’ interests, then it becomes bias and mislead the American public.
The impacts of the student loans on young Americans are obvious and significant.  We have discussed this issue about 4 years ago, which confirmed by the Fed recently.  It took this institution years to say it.  It does not need an Einstein’s brain to know that, not even a Fed.  But to understand the cause is more important than to know the consequences.  Knowing the impacts without doing any policy changes are, may be, useless.  AAEA has tried to go down to the root, but so far, Uncle Sam’s hand is tight by the special interest group.  This is a truly amazing fact that in this country where logical thought is highly praised, but in this case logic is defied and ignored.  So, would there be any solutions?  May be not, so long the actors think that 1 plus 1 is equal to anything other than 2.  Kids you better think it over before signing the promissory notes.

We recently learned that according to the National Student Legal Defense Network there were about 3,600 higher ed institutions have terminated their operation or gone away since November 2013. While the current administrator, by the order of the court has cancelled the student loans taken by about 15 thousand students who have attended one of those 3,600 organizations. This is clearly an example of a special case, where the government bailed-out students’ debt. One may have the following question, then what happen to the management who operated those 3,600 institutions? So far, it seems nothing is happening. This leads us to believe that “no consequences” of mismanagement that have been imposed to mismanage any schools. Therefore, it attracted many “businessman” to enter the industry.

Million readers of this site may, by now, realize how the many short writings, and analyses posted in this BLOG have helped them in different ways.  Again, our analyses are based on publicly available data, where statistical inferences are based upon.  Results, strategies and policy implications then shared to the American public as a free good with one purpose—making the US to be more competitive in the global competition through excellent education quality at an affordable price.  Unfortunately, there is a real challenge to maintain the quality.  Click here for answer.

We are independent and self-funded.  Therefore, instead of representing certain interest groups, we based our analyses on common sense, in-line with theories that have been discussed in many college level textbooks in different areas, from Managerial Accounting to Classical Theory of Measurements, and from Mathematical concepts to Physics.

So, what is the 2019 and beyond higher ed industry will look like?  Revealed information has shown that the regulator does not have strategies to manage the US student loans. In fact, it does have, which is a do-nothing policy or strategy.  Therefore, student debts will continue to grow in accelerated rate.  When the American public realizes, or more knowledgeable and educated about the probability of failure of taking loans, then the risk will be weighted-in more heavily in the equation.  So, making the right pricing strategies is becoming vital than ever.  Consequently, the future will be less sunny for tuition-dependent institutions and for those who are not taking serious steps to control their operational cost, i.e, less efficient institutions.  More closures in 2019?  May be!

The regulator’s recent speech also mentioned that US Higher Ed Institutions are one of the important actors that have added systematic errors into the system.  Tuition increases have impacted the US student loans positively.  Five years ago the Association conducted a research by applying Econometric and applied statistics on NCES publicly available data to study if there is a positive correlation between the two variables.  The results have been published and positive correlations between tuition and student loans is confirmed.  This finding failed to reject Bannett’s hypothesis.

The Association just learned that the regulator finally admitted that the US student loans have created a crisis.  Cited in this article, the administrator mentioned three sources that have caused the student loan debt problems.

1. US higher ed institutions.
2. The borrowers irresponsible acts.
3. Past administrator’s policy.

AAEA has written many articles in the past on the first point–that the US higher ed institutions have to control their operational cost. Please click here to read more.  The regulator’s remark has directly or indirectly confirmed the research finding.

It is pretty interesting to note that while admitting about the crises are happening, there are no suggestions or future policy will be applied to curb or solve the crises.  This shows that even the regulator does not know what to do.  But, as the Association has shared to the American public that the inability to solve the problem is due to (1). There is no any policy instruments; (2).  It is not the branch of Executive to solve the issue; (3). There is no will or interest from all the three branches of government to solve the problem or (4).  Instead of solving the issues, the policies have indirectly let other parties to create or infused more systematic errors into the system.