Is the College Debt Bubble Ready to Explode?

December 6, 2010
Is the College Debt Bubble Ready to Explode? by Laura Rowley Friday, December 3, 2010 Kelli Space, 23, graduated from Northeastern University in 2009 with a bachelor's in sociology — and a whopping $200,000 in student loan debt. Space, who lives with her parents and works full-time, put up a Web site called TwoHundredThou.com soliciting […]

Is the College Debt Bubble Ready to Explode?
by Laura Rowley
Friday, December 3, 2010

Kelli Space, 23, graduated from Northeastern University in 2009 with a bachelor's in sociology — and a whopping $200,000 in student loan debt. Space, who lives with her parents and works full-time, put up a Web site called TwoHundredThou.com soliciting donations to help meet her debt obligation, which is $891 a month. That number jumps to $1,600 next November.

In creating the site, Space, of course is hoping to ease her financial burden, but it's "mainly to inform others on the dangers of how quickly student loans add up," she said. So far she's raised $6,671.56, according to her site.

Space is just one example — albeit an extreme one — of a student loan bubble that may be about to burst. Over the last decade, private lenders, abetted by college financial aid offices, eagerly handed young people hundreds of thousands of dollars to earn bachelor's degrees. As a result of easy credit, declining grants and soaring tuitions, more than two-thirds of students graduated with debt in 2008 — up from 45 percent in 1993. The average debt load is $24,000, according to the Project on Student Debt.

In some respects, the student loan crisis looks remarkably like the subprime mortgage crisis. First, outstanding student loan debt has ballooned: It grew roughly four-fold in the last decade to $833 billion as of June — surpassing outstanding credit-card debt for the first time.

Secondly, defaults have soared amid a difficult job market. In 2008, the most recent year for which data are available, nearly 3.4 million borrowers began repayment, and more than 238,000 defaulted on their loans. The number of loans that went into forbearance or deferment (when borrowers receive temporary relief from payments) rose to 22 percent in 2007, from 10 percent a decade earlier, according to The Chronicle of Higher Education. Over a 15-year period, default rates range from 20 percent for federal loans to 40 percent on loans to students who attend for-profit schools, The Chronicle found.

Just as lenders offered easy no-money-down mortgages to unqualified borrowers during the housing boom, private student loan firms offered instant online approval for up to 100 percent of college costs to students, in some cases for four consecutive years. In early 2007, half of loans made by Sallie Mae, one of the industry's biggest players, were to students with no co-signers, according to Mark Kantrowitz, founder of informational Web site finaid.org.

As tuition costs have outpaced the caps on federal loans, more families have turned to private loans, which carry higher interest rates and stricter repayment rules. Last year private lenders supplied about $10 billion in loans (compared with $100 billion in federal loans). A study by the College Board found about a third of graduates in 2007-2008 had private loans. About two dozen private lenders offer student loans, and their business is growing at 25 percent annually, after a temporary decline amid the recent credit crisis, according to finaid.org.

Space, for instance, took out $12,000 in federal loans and borrowed $189,000 from private lender Sallie Mae. In an email interview, Space said she spent the money on tuition and room and board for four years; two summer semesters; a three-month study abroad program in Ireland; and books for three semesters. Some $20,000 of her debt is accrued interest. (Interest rates on her loans range from 3 percent to 9 percent.)

Space worked throughout high school and college at restaurants, retail stores and a nonprofit firm. But her savings dissipated quickly at Northeastern, where annual costs are $49,452. She's now looking for a second, part-time job. (Northeastern officials did not respond to an interview request.)

You'd think would-be borrowers would understand the impact of borrowing that much for college, but Space says that's not the case. "I think it is essential for young people to have someone sit down and explain how [loans] affect your credit, how much the debt will be with interest, and how this will truly change life later on. Many people say loaded things, like, 'go to the best school you can get into,' or 'student loans are considered good debt.' Solely following this advice led me to the place I'm at today," she said in an email.

A Sallie Mae spokeswoman said she couldn't comment on Space's situation, but called that level of borrowing "extremely rare." Sallie Mae requires its private student loans to be certified by the school's financial aid office to ensure that the amount borrowed is no more than the cost of attendance, less any other financial aid received. She added that Sallie Mae reviews the applicant's and co-signer's financial situation before approving a loan.

But Kantrowitz says Sallie Mae forked over a shocking amount of money. "To borrow $50,000 in the first year of college is already excessive. But where was the (lending) rationality in the second year when the student was borrowing another $50,000?" says Kantrowitz, adding that students who must borrow more than $10,000 a year for an undergraduate education should find a cheaper school, or start at community college.

Zac Bissonnette, a senior at the University of Massachusetts and author of the new book "Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships or Mooching Off My Parents," agrees that there's plenty of blame to go around.

"It's profoundly stupid, but at the same time it takes a village to screw up that bad," he says. "I support the personal responsibility argument, but if you're 18 and the first person in your family to go to college, how can people absolve the college or the lender of responsibility?"

While the housing collapse's impact was wide-ranging — wreaking havoc on a multitude of industries and market participants — the primary losers in this debacle are the borrowers. Lenders can't repossess a college degree, and changes to the bankruptcy law in 1984 and 2005 mean borrowers can't charge off their obligations the way they can shed credit-card, mortgage or even gambling debt when they file for bankruptcy. (Just 29 of the 72,000 borrowers in bankruptcy in 2008 were able to prove "undue hardship" and have their student loans discharged, according to Kantrowitz.)

On the upside, federal student loans carry some consumer protections: lower interest rates; payment forbearance or deferment in the event of unemployment; income-based repayment programs; and forgiveness programs for public service careers. But the government will garnish the wages, income tax refunds and social security and disability checks of defaulters. Private loan terms are more treacherous, with fewer options for payment deferral, and fees and penalties for missing payments. Lenders can also get a court order to garnish wages. For its part, Sallie Mae says it has set up customized workouts for thousands of financially distressed customers.

"With this kind of debt on your credit record, you won't be able to get a car loan or a mortgage, and you'll have difficulty renting an apartment," says Kantrowitz. Some borrowers have lost jobs because the collection agencies called them at work illegally. Indebted grads are also less likely to go to graduate school, and delay getting married, having children and saving for retirement.

Kantrowitz says he doesn't think the student loan industry will implode, but its "cascading effect" on household finances and the U.S. economy will become noticeable by the year 2020. That's why he and educators, as well as some lenders, support legislation to reform bankruptcy laws.

In April, the Private Student Loan Bankruptcy Fairness Act of 2010 was introduced in the House of Representatives and The Fairness for Struggling Students Act was introduced in the Senate. Both would modify the bankruptcy law to allow certain educational debts to be eliminated. (Borrowers would still be on the hook for federal loans, which are funded by taxpayer dollars.)

"There are some people who go to school and live a very high lifestyle and graduate with a lot of debt, who could potentially attempt to get the debt discharged right after they get a job," says Kantrowitz. "But the bankruptcy code has enough anti-abuse provisions, and judges have enough discretion, that they could prevent someone from doing that."

The upshot would likely be tighter borrowing standards and higher interest rates to reflect the additional risk, making loans less accessible to low-income households.

Meanwhile, securitization of student loans throws a twist into potential legislation. In May, Standard & Poor's came out with a report suggesting that restoring bankruptcy protection would have a negative impact on the private loan asset-backed securities market, although it called the magnitude of the impact "uncertain."

Kantrowitz, however, says the effect would be minimal: "In aggregate, we're talking about $1 billion a year — but relative to all the lending that goes on, it's not that much."

As for Space, she says she is determined to pay off her debt and regrets the path she took to get her degree: "Everyone from Barack Obama to Bill Gates keeps pushing a college education as the way to secure one's economic future. That is a view that should be heavily qualified."

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New improved ways to get financial aid for college

November 30, 2010
New, improved ways to get financial aid for college By Linda Stern Thu Nov 18, 2010 2:59am EST (Reuters) - Memo to parents of high school seniors: The new year is no time to relax, just because your child might have filed those college applications. It's time for you to fill out the financial aid […]

New, improved ways to get financial aid for college

By Linda Stern

Thu Nov 18, 2010 2:59am EST

(Reuters) - Memo to parents of high school seniors: The new year is no time to relax, just because your child might have filed those college applications. It's time for you to fill out the financial aid request forms right now - even before you do your taxes and figure out exactly how much you made last year.

That's because early birds tend to get more generous aid packages. Though most financial aid filing deadlines extend all the way into the summer for the fall semester, financial aid administrators do often give out more aid early in the season.

With tuition bills rising and more families needing and qualifying for aid, it's good to get your request in early.

Here's what you need to know.

* The most important form to fill out is the Free Application for Federal Student Aid, known as the FAFSA. You can find it at www.fafsa.gov. Other sites that have .com endings may ask you to pay to submit your form, something you shouldn't have to do. As the Department of Education reminds, "Remember, the first F in ‘FAFSA' stands for ‘free' - so use the official government site to submit your application." The FAFSA is the one form that virtually all financial aid offices require. In addition, you will need to fill out this form if your child wants to take out low-interest federal student loans.

* There are other forms, too. Many private colleges and universities also require the college board's PROFILE form, available here profileonline.collegeboard.com. Some schools require their own form, as well. Contact the financial aid office of every school your child is applying to, to find out exactly which forms they require.

* Don't assume you won't qualify. Even families earning well over six-figure incomes can qualify for financial aid from well-heeled and expensive schools, and you have to ask you get it. You can get a rough estimate of how much federal aid you will qualify for at the Department of Education's forecasting www.fafsa4caster.ed.gov

* It's complex, but less than it used to be. The Obama Administration claims to have simplified the FAFSA in a number of ways. Many low-income students will be able to skip dozens of questions about their family assets. Several other questions have been eliminated or streamlined. Roughly one in five students who doesn't submit a FAFSA drops it because the form is too complicated, says Mark Kantrowitz of finaid.org, an information and research site. Persevere.

* Help is available. The YMCA and other organizations sponsor "College Goal Sunday" (collegegoalsundayusa.org/). It's a day when FAFSA-savvy advisors run free clinics for people who need help filling out their forms. Check the web site to see when they'll be in your state. In North Carolina, the state's financial aid officers choose one day a year as "FAFSA Day" and will be providing free advice and assistance on that day.

* You'll have to guesstimate. You can file your FAFSA now, and update it later, after you get all of the detailed information you'll need from the tax documents you'll be receiving over the next month or so.

* Don't short yourself. Items like retirement plan assets and home equity are exempt from consideration in the federal financial aid formula, so don't include them when you are calculating your net worth.

* Position your family for maximum aid. If you've got money sitting around in a savings account and you've got debts, you'll better qualify for aid if you use the cash to pay off the debts. This works if your family is borderline aid-eligible. If you make so much that you won't qualify for aid anyway, you may need that cash to help pay for college, so do a rough estimate of your aid eligibility, before you move money around.

* Be strategic about divorced family income. Colleges like it when divorced parents who have remarried put all of their household incomes on the financial aid form. That would give a student whose parents have remarried and share joint custody as many as four incomes to report, even if all of those parents and step-parents won't help the child pay for college. But you really only have to report the income of the parent with whom the child lives with most, as well as any child support that parent receives from the non-custodial parent. There are strategies available here, notes Kantrowitz. If either household has additional students in college at the same time, you can usually claim those other students on the form, too. For more about how to handle this, read his advice about the finer points of financial aid for divorced parents here

* Share unusual information. The FAFSA depends on data from the previous tax year. But if you looked good on paper for most of the year but recently had a setback, such as a job loss or expensive illness, let the individual schools' financial aid offices know. They do have the leeway to dole out more than the minimum where they see a special need.

Orignal article on Reuters

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Are you a helicopter parent?

November 4, 2010
Helicopter Parents Reconsidered from CollegeBoard.com Take the Quiz Given all the negative attention they receive in the media, you might expect to find swarms of "helicopter parents" at every high school and college campus across the country. These overly involved parents earned that nickname because they hover over their children, swooping in to fight their […]

Helicopter Parents Reconsidered

from CollegeBoard.com

Take the Quiz

Given all the negative attention they receive in the media, you might expect to find swarms of "helicopter parents" at every high school and college campus across the country. These overly involved parents earned that nickname because they hover over their children, swooping in to fight their battles and make their decisions for them.

But such parents may in fact be rare. What's more, a recent study found that a high level of parental involvement correlates with a positive college experience.

The Benefits of Parental Involvement

There is mounting evidence that parents should take more rather than less interest in their children's education. In a review of research studies, the Harvard Family Research Project found that teens whose parents play an active role do better in school and are more likely to enroll in college. Unfortunately, families tend to become less involved as their children progress through middle and high school.

Your teenager might even welcome your participation. The College Board and the Art & Science Group found that almost 30 percent of college-bound seniors surveyed wished their parents did more to help them look for and apply to colleges. Only 6 percent wanted their parents to do less.

How many parents went to extremes? Not as many as you might think. More than 30 percent of students surveyed said their parents were very involved in the college admissions process. But parents almost always stopped short of doing the work on their own. For example, only 1 percent of students reported that their parents wrote their application essays for them.

What about those students whose parents do get overly involved and continue to hover after they start college? According to the National Survey of Student Engagement, they are more engaged in their studies, taking part in more educational activities, and are more satisfied with their college experience. It’s important to note that the survey defined helicopter parents as those who often meet with campus officials to solve their child's problems.

The study also found that the children of helicopter parents earned lower grades. But the report doesn't blame parental intervention. Rather, it theorizes that parents take action because their children struggle in school.

A Healthy Balance

So is there such a thing as too much parental involvement after all? Yes. While participation in a child's education is encouraged, parents should respect the needs of maturing teens. As children grow, they need to practice making their own decisions—with guidance from their parents. The Harvard report advises that teens need to face challenges that will build skills and self-esteem. They should take advantage of opportunities to shape their identity and speak their mind.

As you strive to maintain a healthy balance, try thinking of yourself as a coach. You're there to provide structure, give advice, and serve as a role model, but it's your child who needs to step up to the plate. Instead of keeping track of college application deadlines yourself, for example, work as a team to set up a calendar or weekly planner and let your child take charge of meeting those deadlines. You can also help by sharing your own strategies for staying organized.

The Quiz

Are you playing too big a role in your child's education? You'll need to take a hard look at yourself to answer that question, but you can also ask your child. The response might surprise you.

To gauge your participation in the college admissions process, consider the following questions. They'll help you determine whether you should get more involved, allow your child more independence, or stay the course.

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Department of Education Seeks to Regulate Higher Education

October 26, 2010
Department of Education Seeks to Regulate Higher Education  October 25, 2010 William A. Estrada, Esq. Director of Federal Relations Melanie Palazzo Congressional Action Program Director A recently proposed regulation would give the federal Department of Education unprecedented authority over all colleges and universities—even private ones. The proposed regulation, entitled “Program Integrity Issues,” would create new […]

Department of Education Seeks to Regulate Higher Education

 October 25, 2010

William A. Estrada, Esq.
Director of Federal Relations

Melanie Palazzo
Congressional Action Program Director

A recently proposed regulation would give the federal Department of Education unprecedented authority over all colleges and universities—even private ones. The proposed regulation, entitled “Program Integrity Issues,” would create new accreditation rules for public and private colleges and universities. It would also allow the federal government to determine what constitutes a “credit hour,” and would require colleges and universities to submit to additional regulation and supervision by state and federal officials.

Before the proposal of this new 87-page regulation, colleges were accredited mostly by independent education councils. There has never been an attempt by the federal government to force states to regulate colleges and universities. Likewise, the federal government has never created a definition of a “credit hour.”

However, the proposed regulation will define terms for every college and university, and require individual states to create agencies that regulate colleges and universities. Every college or university will be required to have “a document issued by a state government agency or state entity that affirms and conveys the authority to the institution to operate educational programs beyond secondary education.”

HSLDA is very concerned that the U.S. Department of Education will use this regulation to control and regulate all higher education. Federal control over the very existence of colleges and universities has never been attempted before this regulation. Additionally, having a federal definition of “credit hour” could easily lead to future regulations that mandate what is taught in colleges and universities. Michael Farris, HSLDA chairman and founder of Patrick Henry College in Purcellville, Virginia, stated, “The regulation that forces states to create new regulatory bureaucracies is blatantly unconstitutional.”

The final regulation will be issued on November 1, 2010.

Action Requested

We urge you to write or email your U.S. representative and senators and let them know your opinion on this rule. Since this proposed regulation will affect all students, not just homeschooled graduates, there is no need to identify yourself as a homeschooler.

You can include some or all of the following in your message. We encourage you to put this into your own words, and maybe share some of your personal experiences:

“I am very concerned about the U.S. Department of Education’s proposed rule that was published on Friday, June 18, 2010, regarding 34 CFR Parts 600, 602, et al., ‘Program Integrity Issues.’ This proposed rule will gives the federal government the power to force the states to create new regulatory bureaucracies to regulate colleges and universities. Additionally, the federal government will be empowered to define what constitutes a ‘credit hour,’ and to force colleges and universities to comply with additional regulations. This proposed rule applies even to private and religious colleges and universities.

I urge you to conduct an investigation into this proposed regulation and use all possible means to stop it from being implemented.”

Find the contact information for your elected officials >>

This article was originally published on http://www.hslda.org/docs/news/201010250.asp

J.D.'s Comments: With added regulations, added control will eventually come. Remember to VOTE!

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Suit claims antitrust law violations

October 25, 2010
Suit claims antitrust law violations The NCAA was sued in federal court Monday in a case that seeks to overturn the governing body's policy of putting one-year limits on athletic scholarships. The suit was filed in California on behalf of former Rice football player Joseph Agnew. It claims that Agnew lost his scholarship after he […]

Suit claims antitrust law violations

The NCAA was sued in federal court Monday in a case that seeks to overturn the governing body's policy of putting one-year limits on athletic scholarships.

The suit was filed in California on behalf of former Rice football player Joseph Agnew. It claims that Agnew lost his scholarship after he underwent shoulder and ankle surgeries prior to his junior year in 2008. Rice changed coaching staffs after Agnew's freshman season, when he played in all 13 of the school's games. He appealed and had his scholarship reinstated for his junior year, but he did not play football.

Agnew's suit asks to represent other former players whose scholarships were not renewed.

The suit claims that the prohibition of multi-year scholarships, along with limits on the number of scholarships each school can give out, drives up the cost of an education for student athletes. It claims a violation of federal antitrust laws.

"The NCAA will tell you these limits are necessary to maintain a level playing field in college sports," said Steve Berman, one of Agnew's Seattle-based lawyers, in a release. "However, we believe the monopoly is designed to safeguard the school sports programs' profitability, which spawns multi-million dollar coaching contracts and rich revenue streams for the schools."

"The NCAA is reviewing the allegations," NCAA spokesman Bob Williams wrote in an e-mail to USA Today. "However, it should be noted that the award of athletic scholarships on a one-year, renewable basis is the more typical approach taken within higher education for talent-based and academic scholarships in general."

Since 1973, the NCAA has banned colleges from offering scholarships for longer than one academic year. Scholarships are often renewed annually, but schools can decide not to renew for just about any reason -- including athletic performance.

Information from ESPN investigative reporter Tom Farrey is included in this report.

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JD on the radio – KFNX 1100AM

October 11, 2010
[Audio clip: view full post to listen] A face for the radio! Hi, I just wanted to drop a quick note and let you know that I will be on the radio live! Friday October 8th at 4:45 -5:00 PM - And a second show added Tuesday October 12th at 3:15-3:30PM tune your radio to KFNX […]

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A face for the radio!

Hi, I just wanted to drop a quick note and let you know that I will be on the radio live!

Friday October 8th at 4:45 -5:00 PM -

And a second show added Tuesday October 12th at 3:15-3:30PM

tune your radio to KFNX 1100 AM

Or listen online at http://www.1100kfnx.com/

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AIMS scholarships: the Bad, the Ugly, the Cuts

October 3, 2010
Regents cut AIMS scholarships for Ariz. students By JONATHAN J. COOPER The Associated Press Published: Tuesday, September 28, 2010 11:47 AM MST TEMPE — Students who exceed standards on Arizona’s high school graduation exam will no longer get guaranteed tuition waivers to the three state universities, the Board of Regents voted Thursday. Regents said the […]

Regents cut AIMS scholarships for Ariz. students

By JONATHAN J. COOPER The Associated Press Published: Tuesday, September 28, 2010 11:47 AM MST

TEMPE — Students who exceed standards on Arizona’s high school graduation exam will no longer get guaranteed tuition waivers to the three state universities, the Board of Regents voted Thursday.

Regents said the program is too expensive without funding from the Legislature. They voted 9-1 to scale it back.

The 4-year-old program gives tuition waivers to students who exceed standards on a mandatory high school graduation exam known as Arizona’s Instrument to Measure Standards.

The AIMS scholarships cost about $12 million last year, far more than the nominal costs officials had projected.

Beginning with current high school sophomores, the scholarships will be harder to get and will be worth less money — one quarter of freshman-year tuition instead of the whole bill.

Responding to requests from university administrators, regents said the scholarships are too easy to earn because the AIMS test measures high school success, not college preparedness. The new standards will require students to also score in the 90th percentile on the ACT or SAT college entrance exams.

State schools superintendent Tom Horne, the lone dissenting vote, said the program was an effective motivation for smart teens to stay focused and excel in high school. Cutting the reward to one-quarter of tuition eliminates the incentive to work hard, he said.

“We have a fantastically successful program and we’re looking at destroying it,” Horne said.

After the meeting, Regent Fred DuVal did not dispute that the program has motivated students. But he said his job is to ensure that taxpayer money goes toward those who are equipped to succeed in college, and the AIMS test isn’t designed to pinpoint them.

Regents created the AIMS scholarship program in 2004 after university officials projected it would cost almost nothing. At the time, nearly all the college students whose AIMS scores would have qualified were already receiving other merit-based scholarships.

When the program became effective in 2006, 1,565 new freshmen received the scholarship. By 2009, the number had nearly doubled, according to a regents staff report.

Regents initially considered scaling back the scholarships for current high school juniors, who have already taken AIMS. In a compromise with opponents, they moved the effective date back a year so it applies only to students who have not yet taken the exam.

J.D.'s comments: I have found some very interesting things about the college and university system. Things that the financial aid departments hope you never figure out. (‘Cause they want to hand out as little aid as possible and keep building these enormous Billion Dollar endowment funds as is evident by the AIMS scholarship cuts.) Arizona State University’s endowment fund is a whopping $407,889,000.00 as of 2010 according to the US News and World Report. Yes you read that right; it is nearly $ ½ a Billion Dollars!

Reducing your cost for a higher college education can be accomplished by strategically positioning yourself and your child through proprietary methodology. This is where AZ College Consulting, LLC - AZCollegePlanning.com Arizona's premier college planning firm can help you. Contact us now. 1-888-237-2087 ext. 2 (mention you saw this article.)

Here is a silly question, but I have to ask it. Do you want to pay full sticker price for college regardless of if it is in state, public or a private college? Call us now.

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Big corporations recruit from larger state colleges

September 26, 2010
Employers Favor State Schools for Hires By JENNIFER MERRITT from the Wall Street Journal U.S. companies largely favor graduates of big state universities over Ivy League and other elite liberal-arts schools when hiring to fill entry-level jobs, a Wall Street Journal study found. Jennifer Merritt discusses a new Wall Street Journal survey, which reveals recruiters […]

Employers Favor State Schools for Hires

By JENNIFER MERRITT from the Wall Street Journal

U.S. companies largely favor graduates of big state universities over Ivy League and other elite liberal-arts schools when hiring to fill entry-level jobs, a Wall Street Journal study found.

Jennifer Merritt discusses a new Wall Street Journal survey, which reveals recruiters are shifting their attention away from elite private schools to focus instead on state universities.

In the study—which surveyed 479 of the largest public and private companies, nonprofits and government agencies—Pennsylvania State University, Texas A&M University and University of Illinois at Urbana-Champaign ranked as top picks for graduates best prepared and most able to succeed.

Of the top 25 schools as rated by these employers, 19 were public, one was Ivy League (Cornell University) and the rest were private, including Carnegie Mellon and University of Notre Dame.

The Journal research represents a systematic effort to assess colleges by surveying employers' recruiters—who decide where to seek out new hires—instead of relying primarily on measures such as student test scores, college admission rates or graduates' starting salaries. As a group, the survey participants hired more than 43,000 new graduates in the past year.

The recruiters' perceptions matter all the more given that employers today are visiting fewer schools, partly due to the weak economy. Instead of casting a wide net, the Journal found, big employers are focusing more intently on nearby or strategically located research institutions with whom they can forge deeper partnerships with faculty.

The Journal study didn't examine smaller companies because they generally don't interact with as many colleges. In addition, the survey focused on hiring students with bachelor's as opposed to graduate degrees.

The research highlighted a split in perception about state and private schools. Recruiters who named an Ivy League or elite liberal-arts school as a top pick say they prize their graduates' intellect and cachet among clients, as well as "soft skills" like critical thinking and communication. But many companies said they need people with practical skills to serve as operations managers, product developers, business analysts and engineers. For those employees—the bulk of their work force—they turn to state institutions or other private schools offering that.

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Does a college degree guarantee job security -WSJ

September 23, 2010
College Grads Expand Lead in Job Security By CONOR DOUGHERTY from the Wall Street Journal GARY, Ind.—Fifteen years after high school, the working lives of Tremell Sinclair and Phyllis Sellars have evolved very differently, largely because of a single decision. That decision has always shaped their economic prospects, but never more so than during the […]

College Grads Expand Lead in Job Security

By CONOR DOUGHERTY from the Wall Street Journal

GARY, Ind.—Fifteen years after high school, the working lives of Tremell Sinclair and Phyllis Sellars have evolved very differently, largely because of a single decision.

That decision has always shaped their economic prospects, but never more so than during the recent recession: Ms. Sellars kept her white-collar job, recently landing a pay raise, while Mr. Sinclair was laid off from his forklift driving job last year and only just found a new one—at a 46% lower salary.

The classmates illustrate a divide between the fortunes of Americans with college degrees and those without. It's not only that the college educated earn more, but that they are far more likely to keep their jobs when times get tough.

By some measures, recession has exacerbated the divide. The unemployment rate for workers 25-and-older with a bachelor's degree or higher was 4.6% in August, for example, compared with 10.3% for those with just a high-school diploma. That's a 5.7-percentage-point gap, compared with a gap of only 2.6 percentage points in December 2007 when the recession began.

Laid-off college graduates are also finding work faster. Their median duration of unemployment was 18.4 weeks as of August, compared with 27.5 weeks for high-school grads. Three years ago, that figure was roughly the same for both groups—9.5 weeks and 9.6, respectively. And among the worst-off 25-and-older workers, the 5.2 million who have been out of work six months or more, only 19% are those who graduated from college, even though that group makes up a third of the work force.

Yet because college is increasingly expensive and doesn't guarantee a good job at a good wage, skepticism about the value of college is rising, even as the government pours more money into helping people get degrees. As part of the health-care legislation passed in March, Congress approved a student-loan overhaul that replaces private lenders with the federal Department of Education and redirects some $60 billion to community colleges and programs such as Pell Grants, which are college loans for the needy.

To economists who look at the numbers, college is a necessary, even if not sufficient, ticket to the middle class. "We are experiencing a period of shared misery, where workers at all education levels are struggling, including those with a college degree," says Lawrence Mishel, president of the Economic Policy Institute, a left-leaning Washington think tank. Still, he says, "It is certainly evident that those with college educations are faring much better than those with less education."

Not that a diploma is the slam-dunk it once was. It no longer guarantees a wage that rises faster than inflation. And while people with four-year college degrees make, on average, 64% more than those with only high-school degrees, that wage premium hasn't climbed much since 2001, after rising sharply for two decades.

Meantime, the unemployment rate for people with a college degree or higher, though lower than others', is the highest it has been since comparable data begin in 1979, according to an analysis of Labor Department data by the Economic Policy Institute. Even in the early 1980s recession, when national unemployment hit 10.8%, the rate for people with college degree or higher never eclipsed 3.9%.

College tuition has also grown faster than the rate of inflation for more than two decades, including a 6% increase in 2009—a period when overall prices fell. Some 64% of Americans thought college was a good investment in July, down from 79% a year earlier, according to a telephone poll of 3,000 individuals conducted in July for Country Financial, a Bloomington, Ill., financial-services company.

In Gary, many still see college as a ticket out of town. The predominantly African-American city sits on the tip of Lake Michigan, just outside Chicago. The city was named for a founder of United States Steel Corp., Elbert Gary, and steel remains the biggest private industry. But over the decades, Gary has hemorrhaged manufacturing jobs.

At a recent reunion picnic for West Side High's class of 1995, the school's orange-and-blue colors were everywhere, coloring tablecloths, balloons and even the shoelaces of Shantel Douglas, the reunion's primary organizer. The recession has hit almost everyone, she says, which is why she made it a "recession friendly" weekend. Instead of in a restaurant or hall, she held the picnic on the worn playing fields behind the school. The school let them gather there for free.

Ms. Sellars, 33, says she still feels tightly connected to her alma mater. Raised by a single mother, she says the industrial decline she saw growing up made her determined to get an education. She studied hard and gravitated toward friends also bound for college. Mr. Sinclair was part of her high school group of friends and on occasion she has gone to dinner with him on visits to Gary.

Lately, though, she says, the two haven't spoken as frequently, in part because she is so busy at work. "I'm busy and have a high-stress job," she says.

After West Side, Ms. Sellars majored in sociology at Indiana University. After graduation she went to work at Covance Inc., which is based in Princeton, N.J., but has facilities in Indianapolis. Her first job with the company, which runs clinical-drug trials, was editing company manuals.

Ms. Sellars worked her way up through progressively better jobs. In January was promoted to supervisor in a division that receives samples sent in for processing. She bought a condominium in 2004, and shares responsibility for overseeing 52 employees.

"I knew if I didn't go to college, I wouldn't have had a chance," she says.

Mr. Sinclair, 34, says he thought about going to college, too. But his mother couldn't afford to send him. Instead, he got a $12-per-hour job operating heavy equipment after he graduated. Over the years he worked his way up through a series of blue-collar jobs, topping out at $24 per hour driving a forklift.

But then last summer, just before his high-school class began planning its 15-year reunion, he got laid off. He spent a year seeking work as a heavy-equipment operator, and also in retail stores. He says he got a callback from Menards, but didn't pursue it after he learned that job paid less than his unemployment checks.

Mr. Sinclair says he recently found another forklift job. But it doesn't start until October and pays only $13 an hour, about as much as he was making just after he graduated.

To keep costs low during his unemployment, he cut out cable television and restaurant meals. Instead of paying for the reunion barbeque, Mr. Sinclair set up a backyard grill in the parking lot, where he cooked chicken wings he'd brought from home in a plastic bag sealed tight with marinade. "It's rough," he said as he turned the wings over with tongs.

Workers like Mr. Sinclair were losing ground relative to their college-educated counterparts long before the recession. Workers with a college degree or more saw inflation-adjusted hourly earnings grow 20%, on average, between 1979 and 2007, while those with graduate and professional degrees saw a 31% rise, according to an analysis of government data by David Autor, an economist at the Massachusetts Institute of Technology. Earnings for workers with a high-school diploma fell over that period.

That actually understates the case, Prof. Autor adds, because degree-holders generally have jobs with better health-care and retirement benefits.

Despite this, the recession has sharpened a longstanding debate about the value of a college degree. For Brandon Fleming, another 1995 West Side graduate, the burden of college debt loads, coupled with stagnant wages, has made him question whether it was worth getting his diploma.

He attended Kentucky State University and today is a compliance analyst at an insurance company in Indianapolis. He makes just under $40,000 a year, almost as much as he had in loans for college and an MBA degree. "I wouldn't tell someone not to go to college," he said as he ate his reunion lunch behind his old high school. "But they have to go in with the proper expectations, and I didn't understand that."

His classmate, Rick "Big Rick" Castillo, went to a technical college but dropped out after a year to work at a local steel mill. Now he makes $58,000 annually, enough to afford things like the shiny Ninja motorcycle he rode to the reunion. "It's one of the better jobs in the area," he says.

Today, with unemployment at 9.6% and 15 million people looking for work, employers are receiving a flood of resumes from college-educated workers who might not have applied for jobs that require less education when times were better. That's another obstacle to applicants with less education.

Ms. Sellars has seen this up close. The employees she oversees aren't required to have college degrees, though some do. Recently, the company has seen a spike in applications from candidates with bachelor's degrees, says Deborah Tanner, a senior vice president at Covance.

"We have probably hired more degreed people [in Ms. Sellars' unit] that we had in the past," says Ms. Tanner. "What the recession has done is broadened the talent pool."

The Wall Street Journal article here

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College fair Phoenix, Scottsdale, Chandler

September 21, 2010
Phoenix Convention Center is host a college fair on September 26th Sunday. Fair Hours: Sunday, September 26, 2010 11:00 a.m. – 3:30 p.m. (200 colleges will be in attendance.) Also on the same day is the Scottsdale College Fair in the evening, Sunday, September 26, 2010 5:00 - 7:00 p.m. at the Scottsdale Center for […]

Phoenix Convention Center is host a college fair on September 26th Sunday. Fair Hours: Sunday, September 26, 2010 11:00 a.m. – 3:30 p.m. (200 colleges will be in attendance.)

Also on the same day is the Scottsdale College Fair in the evening, Sunday, September 26, 2010 5:00 - 7:00 p.m. at the Scottsdale Center for the Performing Arts. This website is easier to use than the NACAC website. (100 colleges will be in attendance)

Scottsdale Christian Academy SCA 4400 N Tatum Boulevard, Phoenix, is hosting the National Christian College Fair from 6 PM to 8 PM see the website for more information (34 colleges will be in attendance)

And for those of you who live in the east valley, Valley Christian High School, 6900 W. Galveston Street, Chandler is hosting the National Christian College Fair from 6 PM to 8 PM on October 18th.  See the website for more information (34 colleges will be in attendance)

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