Trump Won’t Solve The Student Debt Crisis. He’s Part of the Problem

Isaiah J. Poole

A new study released by Brookings this week offers new context for the debate on the student loan crisis by shining a light on the outsized role of for-profit colleges in increasing debt and loan defaults.

“The so-called student loan crisis in the U.S. is largely concentrated among non-traditional borrowers attending for-profit schools and other non-selective institutions” rather than four-year public and nonprofit colleges and universities, the study by Adam Looney of the Department of the Treasury and Constantine Yannelis of Stanford University conclude.

Of all of the presidential candidates, none are in a better position to understand the role for-profit colleges play in driving student debt upward than Donald Trump.

Trump is a prime symbol of all that is wrong in the for-profit college sector – and, as reporter Michael Isikoff reminded us recently on Yahoo News, has the lawsuits to prove it.

Outfits like Trump University – its name is misleading since it was really a set of real estate seminars that our Terrance Heath noted were “taught by instructors who didn’t know anything about real estate, using a curriculum developed by a third-party company” – capitalized on the financial stress of millions of people wooed by the promises of easy wealth or access to better jobs. New York’s Attorney General Eric Schneiderman filed a $40 million civil lawsuit against Trump University for defrauding students who were encourage to borrow up to $35,000 for what Schneiderman labeled a “scam.”

Students at schools like the recently closed Corinthian College chain feel similarly scammed. Among other issues, before the schools finally closed their doors earlier this year the Department of Education fined the institution $30 million for misleading students about its job-placement rates. A group of Corinthian College students went so far as to refuse to pay their student loans in protest of its false claims.

The Brookings study says that the key reason student debt has quadrupled over the last three years is the increase in the number of people borrowing money to go to for-profit schools, which marketed themselves heavily during the Great Recession as places where people could get the education needed to compete for scarce, good-paying jobs. But for too many students, the promise was illusory. “The median borrower from a for-profit institution who left school in 2011 and found a job in 2013 earned about $20,900,” the report said, significantly lower than graduates from four-year public and nonprofit universities. And one in five of the students in that class of 2011 were unemployed two years later.

No wonder, then, that while half of the student loan borrowers were students for for-profit colleges, these students are responsible for 70 percent of the loan defaults, according to the study. What’s worse, as the report concludes, “many insolvent, largely non-traditional borrowers are mired in a system where they are unlikely to have the resources to repay their loans in full, and yet generally have no way to have those loans discharged.”

The authors predict that loan delinquency rates will decline over the long term, but they add that many of the factors that led to the loan and default problem in the first place still exist. They include cuts in state funding for community colleges and job training, and the fact that “institutions whose students face weak economic outcomes and poor loan performance are largely insulated from any financial or other consequences.”

And that brings us back to Trump, who in addition to the lawsuit brought by Schneiderman faces two class-action lawsuits in California filed by former students. Trump’s lawyers naturally want the courts and the public to believe that the students who signed up for the trumped-up “university” knew what they were getting into and were solely responsible for what they got out of it. But the debtors who now recognize they were ensnared in a rigged game in a rigged economy are joining a movement to erase the $1 trillion-plus mountain of student loan debt. In the unlikely event that Trump ends up in the White House, he will not only be a foe of this movement; he will likely be personally facing its would-be beneficiaries in a courtroom.

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