4 Predictions for 2016: Trends to Look for in the Coming Year

Can you believe another year has already gone by? It seems like just yesterday that we were taking down 2014’s holiday decorations and trying to remember to write “2015” when writing down the date. Well, 2015 is now in the books, which means it’s time for us to stick our necks out and make a few predictions for what 2016 will bring in the world of college and graduate school testing and admissions. We don’t always nail all of our predictions, and sometimes we’re way off, but that’s what makes this predictions business kind of fun, right?

Let’s see how we do this year… Here are four things that we expect to see unfold at some point in 2016:

The College Board will announce at least one significant change to the New SAT after it is introduced in March.
Yes, we know that an all-new SAT is coming. And we also know that College Board CEO David Coleman is determined to make his mark and launch a new test that is much more closely aligned with the Common Core standards that Coleman himself helped develop before stepping into the CEO role at the College Board. (The changes also happen to make the New SAT much more similar to the ACT, but we digress.) The College Board’s excitement to introduce a radically redesigned test, though, may very well lead to some changes that need some tweaking after the first several times the new test is administered. We don’t know exactly what the changes will be, but the new test’s use of “Founding Documents” as a source of reading passages is one spot where we won’t be shocked to see tweaks later in 2016.

At least one major business school rankings publication will start to collect GRE scores from MBA programs.
While the GRE is still a long way from catching up to the GMAT as the most commonly submitted test score by MBA applicants, it is gaining ground. In fact, 29 of Bloomberg Businessweek‘s top 30 U.S. business schools now let applicants submit a score from either exam. Right now, no publication includes GRE score data in its ranking criteria, which creates a small but meaningful implication: if you’re not a strong standardized test taker, then submitting a GRE score may mean that an admissions committee will be more willing to take a chance and admit you (assuming the rest of your application is strong), since it won’t have to report your test score and risk lowering its average GMAT score.

Of course, when a school admits hundreds of applicants, the impact of your one single score is very small, but no admissions director wants to have to explain to his or her boss why the school admitted someone with a 640 GMAT score while all other schools’ average scores keep going up. Knowing this incentive is in place, it’s only a matter of time before Businessweek, U.S. News, or someone else starts collecting GRE scores from business schools for their rankings data.

An expansion of student loan forgiveness is coming.
It’s an election year, and not many issues have a bigger financial impact on young voters than student loan debt. The average Class of 2015 college grad was left school owing more than $35,000 in student loans, meaning that these young grads may have to work until the age of 75 until they can reasonably expect to retire. Already this year the government announced the Revised Pay As You Earn (REPAYE) Plan, which lets borrowers cap their monthly loan payments at 10% of their monthly discretionary income. One possible way the program could expand is by loosening the standards of the Public Service Loan Forgiveness (PSLF) Program. Right now a borrower needs to make on-time monthly payments for 10 straight years to be eligible; don’t be surprised if someone proposes shortening it to five or eight years.

The number of business schools using video responses in their applications will triple.
Several prominent business schools such as Kellogg, Yale SOM, and U. of Toronto’s Rotman School of Management (which pioneered the practice) have started using video “essays” in their application process. While the rollout hasn’t been perfectly smooth, and many applicants have told us that video responses make the process even more stressful, we think video is’t going away anytime soon. In fact, we think that closer to 10 schools will use video as part of the application process by this time next year.

If a super-elite MBA program such as Stanford GSB or Harvard Business School starts video responses, then you will probably see a full-blown stampede towards video. But, even without one of those names adopting it, we think the medium’s popularity will climb significantly in the coming year. It’s just such a time saver for admissions officers – one can glean a lot about someone with just a few minutes of video – that this trend will only accelerate in 2016.

Let’s check back in 12 months and see how we did. In the meantime, we wish you a happy, healthy, and successful 2016!

By Scott Shrum

Chicago Booth Announces New International Loan Program

More good news is on the way for international business school applicants. Last week the University of Chicago Booth School of Business announced a new loan program for international students. Launched in partnership with JPMorgan Chase, the new program will give these students access to private educational loans without requiring a co-signer.

The new program will provide loans to international students who are not eligible for federal assistance in the U.S. and cannot qualify for standard private loans because they do not have a U.S.-based co-signer.

Under the terms of the new deal, JPMorgan Chase will provide financing to qualified international students for amounts up to the total cost of attendance, minus any financial aid received. Exact terms will be announced later this spring, when students will receive more information on the program.

“Almost 20 percent of our students are from abroad, and they add a great deal of intellectual vibrancy and cultural richness throughout the University and our community,” said Kimberly Goff-Crews, Vice-President for Campus Life and Dean of Students, in a release on the school’s site. “We have focused our attention on finding loan programs that will meet the needs of this important segment of our student body.”

For more information on applying to Chicago Booth, visit the Veritas Prep Chicago Booth information page.

Wharton Announces New Loans for International Students

Earlier this week Wharton announced a new student loan program for international students that will not require borrowers to have U.S. co-signers. The program, launched in partnership with Digital Federal Credit Union, is the long-awaited replacement that the school has been searching for since Citi canceled its program last October.

The new loan program will cover tuition and living expenses for international students at Wharton. The loan terms are quite attractive given the current lending climate: an interest rate of Prime plus 3% (reduced by 25 basis points if the borrower signs up for an automatic payment plan), plus no origination fee. Wharton will share some of the risk of default with DFCU, which indicates how badly Wharton wanted to make this new loan program happen.

The school’s Student Financial Services (SFS) Office is in the process of reviewing several proposals for new loan programs for domestic students and for international students with U.S.-based co-signers. The school expects to have a list of approved lenders for both federal and private loan programs within the next few weeks. The “international with no U.S. co-signer” group was the most in need of help, so it’s good to see Wharton get that one out of the way first.

For more information on applying to and attending Wharton, visit the Veritas Prep Wharton information page. Also, be sure to follow us on Twitter!

Should the U.S. Government Bail Out Student Loan Holders to Stimulate the Economy?

Move over sub-prime borrowers, irresponsible lenders, and big banks … a new group is on the rise, looking for a bailout. Business Week ran a fascinating article last week about a New York attorney starting a grassroots Facebook movement to change the student loan landscape, highlighted by a push for the U.S. government to forgive student loans as a way to stimulate the economy.

The attorney in question is Robert Applebaum and he has started a Facebook group that now has more than 138,000 members and includes people who are now actively pushing for legislative reform regarding student loans. The name of the Facebook group pretty much spells out what Applebaum is going for: “Cancel Student Loan Debt to Stimulate the Economy.” The BW article goes on to cite examples of people shackled by student loan and then discusses some spin-off arguments, such as larger reform for the way student loans are handled relative to other debt (for instance, student loans can be part of a bankruptcy filing).

The thrust of this blog post is to examine Applebaum’s idea and analyze the merits of such a proposal. Assuming this Facebook group continues to grow and this movement continues to take hold (and maybe it can, especially given how vocal both Barack and Michelle Obama have been about their own student loans), is it a good idea?

First, let’s acknowledge that the bulk of the people within the Veritas Prep community — employees at our headquarters, admissions consultants, GMAT instructors, and clients — have or will have student loan debt. Much of it will be from graduate school and much of it will be for a fairly hefty amount. So this is a community that would benefit from a student loan “bailout.” That, of course, is not reason enough to justify such an action by the government.

There are, however, two substantial questions to ask about this group as a whole that might allow us to better understand whether such a proposal has merit:

1. Is this a group that is more deserving than others of a bailout? Part of the reason that Applebaum launched this Facebook group is that he was frustrated to read stories like the infamous office remodel and other abuses of bailout money. Many others with student loan debt are tired of seeing people walk away from homes they can’t afford, only to get bailed out by the government. There is a feeling of unfairness that cleaves student loan debt from virtually all other forms of debt at this time. You can’t run from it, you can’t get a bailout … you are stuck with it.

And yet from a young age, students are told to think of student loans as an investment. They are indeed encouraged to take out loans to pay for an education. And while some programs (particularly law schools) have loan forgiveness programs for people who take jobs in the public sector or with non-profit organizations, there is no denying that the ROI can be hard to calculate prior to making this “investment.” This is especially true for a 17-year old going to college, but is also true of graduate students who don’t know what their exact career path (and earnings) will look like.

Certainly, a person could look for and find — with relative ease — examples of people who made bad investments in education. Students can make poor choices and attend schools they can’t afford by paying entirely through loans. If they do this twice — with undergraduate and graduate school — the problem is compounded. So the “student loan” population is certainly not without flaws. However, an easy argument could be made that taken as a whole, the entire population of people with student loan debt is a more “deserving” group than the population of people who are underwater on their houses. Or the population of lenders who handed out sub-prime loans to unqualified borrowers. Or the rating agencies. Or the banks. And so on. The student loan population, as a whole, has not made any egregious decisions or done anything that we find reprehensible in retrospect.

Therefore, it can probably be safely argued that this indeed a more deserving group of people to receive debt forgiveness and if the government is going to bail anyone out, it should be holders of student loan debt (we’ll leave the arguments related to amounts or classifications for another day).

2. Would forgiving student loans actually stimulate the economy? Of course, even if we deem the student loan population more worthy of a bailout, there is a second aspect to consider, which is whether loan forgiveness would work. On the surface, the answer would seem to be yes. By freeing a large group of people from the burden of paying off loans, there would suddenly be more disposable income in the hands of all kinds of individuals, from varying classes and locations. A simple hypothesis would go like this: free people from student loan debt and now they can afford their mortgage payments. Or: free them from student loan debt and now they can spend more money on goods and services. There is no doubt that lifting a debt obligation from such a large group of people would free up cash that work as an infusion into the economy.

That said, there are problems with this simple approach. The first is whether the student loan population — and the amount of debt held by each individual within that group — is significant enough. Is there a big enough cross-section of student loan holders that can’t afford their mortgages, but suddenly would be able to? If so, you can bailout student loan holders and still help homeowners. Do student loan holders pay so much each month that their lives would become radically different if that burden was lifted? Certainly, in some cases. But there are other cases were individuals purposefully continue paying off their student loans for years, even after they are wealthy. So a universal bailout might not stimulate much activity from a portion of that group. Finally, are there even more deserving groups out there? Are there better ideas? Would a proposal to give home owners a tax deduction for any losses they take on selling homes be a much better accelerator for the buying and selling of homes? The answers to these questions are unclear and make what seems like a perfectly great idea fraught with complications.

All told, a decision to bailout student loans would certainly help a lot of people (this author included). It would feel “fair and just” to many. And there is no doubt that it would stimulate the economy at least to some degree. However, it is unclear whether it would make a big enough dent and solve enough corollary problems, or even if this the right approach. It is a fascinating idea and if nothing else, Robert Applebaum’s proposal is getting people talking about student loans and how they work in the big picture, which is necessary. But would it really work, in the way that we need it to? That’s hardly clear.

To get more news and opinion from Veritas Prep, be sure to follow us on Twitter.

Photo courtesy of borman818, under a Creative Commons License.

HBS on International Student Loans

Amid all of the grim news lately regarding the availability of student loans, Dee Leopold posted an update on the HBS admissions blog to let international applicants know that they will still have access to need-based loans without a U.S.-based cosigner.

Writes Leopold:

While at this time we do not have further details about specific loan programs with private lenders, we are able to make this important – and reassuring – statement about continued accessibility.

She went on to say that all students will still be eligible for HBS fellowships, which don’t need to be repaid. The average need-based fellowship is about $25,000 per year, making them critical in keeping down HBS students’ total costs.

If you’re applying to Harvard, visit the Veritas Prep HBS information page for more application advice and resources.

Veritas Prep Featured in The Wall Street Journal

An article in today’s Wall Street Journal (“Escape Route: Seeking Refuge in an M.B.A. Program”) looked more deeply into the trend of people turning to graduate school as the economy slows. Veritas Prep was mentioned as one of the GMAT prep and admissions consulting firms that has recently seen tremendous growth because of the softening economy and Wall Street turmoil.

While this trend has been covered a great deal lately, this piece raises an interesting question: If more people pursue their MBAs now but the Wall Street landscape looks dramatically different in three years, where will those grads go? According to the article:

But the severity of the financial crisis and the demise and consolidation of financial powerhouses that in previous years have nabbed top talent at schools across the country make this year’s flight to business school different. When this year’s M.B.A. applicants graduate, they will enter a dramatically different Wall Street and potentially smaller job market that has been altered by the ripple effects of the credit crunch.

“The demand for managing money and the demand for banking skills, that’s going to be here,” says Stacey Kole, deputy dean for the full-time M.B.A. program at the University of Chicago Graduate School of Business. But “it may migrate to different firms.” Ms. Kole says the school is seeing more boutique firms recruit on campus, as well as employers in other sectors recruiting for finance jobs. “People who may have gone to Wall Street will go to Main Street in a finance role,” she says.

Business schools aren’t the only ones that may see an increase in application because of the economy. According to the Law School Admission Council, this past June there were 28,939 LSATs administered in June, representing a 15.3% increase from a year ago.

Perhaps most concerning is the effect that the current market may have on student loans. Some lenders (such as Citi) have already suspended loan programs, while others are tightening their lending standards. It remains to be seen how much of an impact this trend will have on the overall graduate school admissions landscape.

If you’re just now thinking about applying to business school or law school this year, take a look at Veritas Prep’s industry-leading admissions consulting team.