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Windmills on the Lakes? The AP reports the federal government will announce a new plan today to speed up development of offshore wind farms on the Great Lakes. The government has signed agreements with five of the eight Great Lakes states to clear up the regulatory requirements for wind power projects in the Lakes. Proposed projects have faced opposition from groups worried that wind turbines will spoil views on the Lakes. Three states have not signed on to the new plan: Ohio, Indiana and Wisconsin.

Chicago’s debt Yesterday, Chicago Mayor announced a $7.2 billion plan to update the city’s infrastructure, without raising taxes. Reuters reports the city will take on new debt to pay for the plan. Chicago already has a higher debt burden than Los Angeles or New York.

Skeptical city council Detroit City Council members got a look at a new proposal from the state to resolve the city’s financial crisis, and it didn’t go well, according to partner station Michigan Radio. The two sides have five days to reach a deal, before the governor is forced to impose a restructuring plan, which would likely include the appointment of an emergency manager. But as Michigan Radio reports, “it’s clear the two sides are still a long way apart.”

Yay! The Michigan economy is at a six-year high, according to the Detroit News.

NATO … more like “NO-DOUGH,” amiright? The Chicago Tribune reports that the federal government usually covers all of the security costs related to hosting a NATO summit. But in Chicago, the government is only covering half the cost. Corporate donors are picking up the rest of the tab.

Ready to flow Ohio is getting its first liquefied natural gas station.

Chicago suburbs, by flikr user Scorpions and Centaurs

American student loan debt totals nearly one trillion dollars. These loans break down to about $23,300 owed by each borrower. Changing Gears has been reporting on the effects of that debt and what it takes to pay it off.

We want to know how student debt affects big purchasing decisions. Are you ready to buy a house? And if so, can you get a mortgage?

Tell us how student debt affects your housing plans.

Kate Davidson
For $2, this little guy gets a “college boy” cut from barber student Tom Amundson

America’s student loan debt is now bigger than its credit card debt. It’s about a trillion dollars. Student loan default rates are rising. While many families struggle to afford traditional colleges, a lot of student debt comes from attending private, for-profit schools that focus on vocational training. These students default on their loans twice as often as students from public colleges. Today we’re looking at one small school battling big defaults.

“I guess I do what everyone else has been doing, dodging the phone calls.”

Mark Howell is on the verge of defaulting on his student loans. Actually, the school he went to has the highest student loan default rate in Michigan.  (For the moment.)

It’s not the University of Michigan. Not Kalamazoo College.

It’s barber college.

In Ohio and Wisconsin beauty schools top the list. Now, these are small schools so their default rates are volatile; a few defaults make a big difference. But this is a story about why these default rates matter to old-fashioned trade schools like the Flint Institute of Barbering.

So, picture an overgrown barber shop, bright and cheerful. In the morning, a crowd of people gathers for student haircuts — $2.50 for a beginning student, $5 for advanced.

Kate Davidson
The Flint Institute of Barbering doubles as a community barber shop

Tom Amundson is 50 and new to barber school. He was an automotive designer for 30 years but got laid off a few times. Then he caught up with a buddy who owns a barber shop.

“He talked to me about it and he said, ‘Why don’t you get into the business?’” he says. “And I said, ‘Kinda old.’ And he said, ‘No, you’re never too old to cut hair.’”

Kate Davidson
Like most of his classmates, Tom Amundson took out federal loans to attend barber school

So Amundson took out federal loans, just like three quarters of his class.  He’s hoping to make up to $35,000 as a barber — about half what he made as a designer.

Martha Poulos’s family has run the barber school since 1925. Tuition and fees are about $8,000 for a year. But Poulos says most of her students are low-income, from urban Flint; many come to school full-time while supporting children. She says that all plays into the default rates.

“The three year ago rate was 15.5%,” she says. “Our 2008 cohort was 29%. Our 2009 cohort – and these are the official rates – was 30.5%.”

That means almost a third of those who started repaying their loans in fiscal year 2009 had defaulted two years later.

“We were very alarmed,” Poulos says. “And not happy, and we’re trying to work as much as we can and do the best we can…”

Kate Davidson
Martha Poulos’s grandfather started Flint’s barber school in 1925

Now, Martha Poulos is dedicated to her students. This woman will dye their jeans black, by hand, if they can’t afford to meet the school’s dress code. But she didn’t have a DIY solution to the default problem.  So she hired a service to track students who are delinquent on their loans. She says she couldn’t risk it.

Schools with high default rates can lose access to federal student aid. While the Flint Institute of Barbering does bring in money through its barber shop, more than half its revenue comes from federal student aid.

Benjamin Blount has been getting his hair cut at the Flint Institute of Barbering for almost a decade

“They are so reliant on federal financial aid dollars,” says David Deming of Harvard’s Graduate School of Education. He’s talking about the wider for-profit sector of higher education, which he says gets almost 75% of its revenue from federal student aid.

Kate Davidson
Big default rates endanger financial aid, so the school hired a servicer to help with loan collection

According to the Department of Education, 15% of students who train at proprietary schools default on their federal loans. That’s compared to a national average of 8.8%, at last count.

(You can see the national trend on this graph. The big dip was due to a tightening of financial aid regulations in the early 90s.)

David Deming thinks for-profit students default more because they tend to pay more than students at public colleges. He adds that default statistics understate the extent to which people struggle to pay back loans.

“If you take out a five figure loan for a relatively short program,” he says, “if you don’t find employment relatively soon after that program it’s going to be very hard to pay back your loan.”

Of course, barber school is a small part of the for-profit training world. Changing Gears is going to look at student debt from bigger technical schools in the weeks ahead.

Kate Davidson
Mark Howell doesn’t want to default on his student loans, but he may be on the road

In the meantime, remember Mark Howell? He’s now a barber in a kindof hard to find corner of a mall in Flint. Cutting hair is his passion. But he says building clientele is slow in a town that’s full of barbers.

“You can’t make the payments,” he says, “but at the same time, you’re trying to find work to make the payments. And if you don’t make the payments, you gotta deal with the consequences behind that, which is your license at stake.”

He’s already gotten a couple loan deferments. He says he’s scratching and hustling to make ends meet. And he’s not the only one.


Casino Jobs in Cleveland: Want to work at the new Horseshoe Casino? They’re hiring again, according to the Cleveland Plain Dealer. The casino, located on four floors of the old Higbee  Department store, will be filling 40 different kinds of jobs, with 750 new positions open. The work ranges from security officers and slot machine supervisors to chefs. It’s the second wave of hiring for the Horseshoe, which hired its first 650 people in September. The casino hopes to open in late March.

High Speed Rail: Consultants have until today to submit their proposals to study how to solve a crucial problem for high speed rail between Detroit and Chicago, reports our partner station Michigan Radio. At issue is a railroad bottleneck between northwest Indiana and Chicago. A high volume of passenger and freight traffic already overwhelms the existing rail lines and threatens to put the brakes on high speed trains. Once a winning consultant is chosen, it will probably take about two years to lay out a solution.

Debtors to Jail: With a slow economy, the number of debtors going to jail in Illinois is on the rise, reports our partner station WBEZ. It’s illegal in Illinois to throw a debtor in jail for not being able to pay, but some creditors are getting around that. A collection agency can file a lawsuit which might require a court appearance. If the debtor doesn’t appear at the hearing, a warrant can be issued for their arrest. Legal aid attorneys have said this is more of an issue in rural parts of the state.

 

 

 

 

 


Retirement, debt, going back to school, and mortgages are all issues that are magnified by the recession. Where can you get Midwest Money advice?

Here. But you’d better hurry up. Through the end of today, CNN anchors and authors Ali Velshi and Christine Romans are taking Midwest Money questions from the Changing Gears audience.

We’ll be posting their answers next week. If Ali and Christine select your question, you’ll win a copy of their new book, “How To Speak Money.”

Send your questions by the end of today for Ali and Christine, then come back for the answers all next week.