Thursday, September 26, 2013

President Obama's "Pay as You Earn" program to stretch out student loan repayment over 20 Years: Scarlett O'Hara would approve

 I can't think about that right now. If I do, I'll go crazy. I'll think about that tomorrow.
Scarlett O'Hara, Gone With the Wind

President Obama has shown a commendable concern about the rising cost of attending college and the rising student-loan default rate.  Unfortunately, the President's proposed solutions don't go to the root of the problem.

Yesterday's New York Times reported that the U.S. Department of Education is going to contact student-loan debtors who are in danger of default and urge them to consider a variety of repayment options--including "Pay as You Earn."

DOE's "Pay as You Earn" program allows student-loan borrowers to make loan payments based on a percentage of their income over a period of 20 years. At the end of the repayment period, the remaining balance on the loan will be forgiven.

Scarlett O'Hara would approve. As she famously said in Gone With the Wind, "I won't think about that right now. . . I'll think about that tomorrow." Pay as You Earn simply "kicks the can down the
I'll think about student loans tomorrow
road," so to speak, postponing the day when the government must face the fact that the federal student loan program is a disaster.

Education Secretary Arne Duncan thinks extended repayment programs will help prevent student-loan defaults, and he may be right. Admittedly, allowing student-loan debtors to make income-based payments over 20 years instead of fixed payments over 10 years will allow borrowers to make smaller monthly loan payments. But here are the problems with the program.

Most Pay as You Earn debtors will never pay off the principal of their loans. By design, the program allows people to make loan payments based solely on their income, and for many debtors--probably most of them--those payments will not be enough to pay down the principal of their promissory notes.  Under the plan, people who are unemployed or who have very low incomes may pay nothing on their loans for several years. Meanwhile interest will continue to accrue, making their debts grow larger.

Right now, 1.6 million student-loan debtors are participating in some kind of income-based repayment plan. I think it is safe to predict that at least a million of those people will still owe on their loans when their 20-year or 25-year repayment plan comes to an end.

In essence, Pay as You Earn debtors are indentured servants to the government. Second, requiring people  who attended college to pay a portion of their income for 20 or 25 years turns those people into 21st century indentured servants. They will be sending a portion of their income to the federal government for a majority of their working lives. Who thinks that is a good idea?

Income-Based Repayment Plans eliminate people's incentive to borrow as little money as possible to attend college.  Obviously, if students' college-loan payments are going to be based on a percentage of income regardless of the amount borrowed, then it makes sense for students to borrow as much money as possible.

Not only will the program eliminate the incentive to minimize student borrowing, it will also reduce the incentive for colleges to keep their costs down.  Who cares how much college costs, if student-loan payments are going to be based solely on an ex-student's income?

Pay as You Earn  will likely  increase red tape and bureaucracy.  Pay as You Earn and other federal income-based repayment programs will likely create a giant bureaucracy that will require the
government to adjust people's loan payments on an annual basis based on changes in income, periods of unemployment, and other factors.

The federal student loan program is already nearly incomprehensible to many student-loan debtors. I fear this program will balloon into the educational equivalent of Obamacare and Social Security and will require mountains of paperwork and bureaucratic red tape to administer.  Is this the future we want for our college graduates?

Conclusion: It's time to face the music.   It is time for the Obama administration, government policy makers and the nation's universities to face the music.  The federal student loan program is a catastrophe.  Like a drug addict, our universities have become hooked on federal student-loan money, which they rely on to survive. Thus, we cannot eliminate the program overnight; or our loan-dependent universities will go into toxic shock.

But we can gradually begin dialing this program down.  First, let's kick the for-profits out of the federal student loan program. That would shrink the cost of the program by about 25 percent and reduce the number of loan defaulters dramatically.  Of course, most for-profit colleges would be forced to close. But that's OK; the United States can get along just fine without the University of Phoenix.

Second, as I've said repeatedly, we have to allow truly distressed student-loan debtors to discharge their loans in  bankruptcy, so they can get a fresh economic start.

Third, we need to encourage more low-cost community colleges to do what some have already done--get out of the student loan program altogether. Wouldn't it be a good thing to offer low-income students low-cost options for attending college--options that would not require them to assume crushing debt just to get an education?

But so far, the higher education industry and the federal government want to prop up the status quo.
No one wants to confront the enormity of the problems that were created by the federal student loan program.  Like Scarlett O'Hara, we've decided not to think about that right now.  We'll think about that tomorrow.

References

Tamar Lewin. U.S. to Contact Borrowers With New Options for Repaying Student Loans. New York Times, September 25, 2013, p. A20.




Wednesday, September 25, 2013

Secret Searches for College Presidents: Are They Good for Higher Education? A Call for a Federal Open Records Law That Applies to All Colleges That Receive Federal Funds

Inside Higher Education published an article earlier this week on the controversial career of Evan Dobelle, currently president of Westfield State University in Massachusetts.  According to Inside Higher Education, Dobelle's presidency "is now becoming tainted by a series of revelations about spending habits [at Westfield] and demands for accountability from a growing chorus of public officials, including [Massachusetts's] higher education commissioner."


Evan Dobelle, president at five colleges or universities, has a record of extravagant spending.
Photo credit: Honolulu Star Bulletin


Westfield is Dobelle's fifth college presidency.  Inside Higher Education reported that Dobelle was fired "for cause" at the University of Hawaii amid questions about alleged financial improprieties, although the Hawaii board quickly reversed its decision and reached a settlement with Dobelle that led to his departure.

Apparently, the allegations at both Hawaii and Westfield are similar--involving charges of extravagant and inappropriate spending.  Given the negative publicity around Dobelle's presidency at  the University of Hawaii, how did Dobelle manage to get two more college president's positions?

Maybe executive search firms have something to do with Dobelle's ability to get a succession of good gigs as a college president. Westfield used EFL Associates, an executive search firm, in its presidential search process that ended in the hiring of Dobelle.

Let me ask some pertinent questions. Given what was publicly known about Dobelle from his time at the University of Hawaii, how did he wind up being the top choice at Westfield? Did EFL Associates do a "due diligence" background check on Dobelle?  If so, did it report on Dobelle's time at Hawaii? 

Second, was the Westfield State University search one of those typical secret searches that executive search firms orchestrate for universities in which the candidates for an executive position are allowed to keep their applications secret?

I don't know the answers to these questions.  But if Westfield had publicly announced the names of the applicants for the president's position prior to selecting Dobelle, then anyone interested in the quality of Westfield's next chief executive could have done a Google search and found out what everyone now knows about Dobelle's time in Hawaii.

So let me make a modest suggestion for legislation that would let the sun shine on secret search processes that too many American universities employ when hiring their senior executive officers.  How about a federal law that requires every college or university that participates in the federal student loan program to comply with a Federal open records  law that will require them to publicly release the names of all applicants for any higher education executive position and to do so at least 21 days before the final hiring decision is made. .  Any college or university that refuses to comply with this open record requirement would be kicked out of the Federal student loan program.

The Westfield scandal comes on the heels of a scandal at Louisiana State University in which LSU refuses to release the names of the people who applied for the LSU's president's position.  LSU has been engaged in litigation with The Baton Rouge Advocate since last spring after it refused to comply with the newspaper's open records request.  Apparently, LSU is willing to spend thousands of dollars in attorney fees to keep its presidential search process secret. LSU selected its president, F. King Alexander, through a secret search process orchestrated by William Funk & Associates, an executive search firm located in Dallas.

It is time to clip the wings of executive search firms and force all public universities to hire their presidents and senior executives through a process that is open to public inspection.  Let's face it. The record of America's university leaders is not that good.  Too many college and university presidents make obscene salaries and spend extravagantly on travel and entertainment.  Meanwhile the cost of attending college creeps ever upward.

A secret process of hiring college presidents is not in the public interest.  Openness when hiring college presidents would serve the public much better.


References

Associated Press. State says Westfield State University President Evan Dobelle violated policy. The (Massachusetts) Republican, September 20, 2013. Accessible at: http://www.masslive.com/news/index.ssf/2013/09/state_says_mass_college_presid.html

Bruce Dunford. Spending habits, poor relations soured Dobelle's tenure at UH. Honolulu Star Bulletin, June 20, 2004. Accessible at: http://archives.starbulletin.com/2004/06/20/news/story3.html

Ry Rivard. In fifth presidency, Evan Dobelle faces many allegations that ended his fourth. Inside Higher Education, September 24, 2013.

Tuesday, September 17, 2013

Warning to Yale Students: Raping a Stranger in a Public Bathroom Can Get You Expelled!

Yale: Rapists will be expelled
What does a degree from Yale cost? About a quarter of a million dollars after you tally tuition, fees, books, and living expenses.
And what does a Yale student learn that makes a Yale degree a worthwhile investment?  Well--in addition to history, philosophy and literature, a Yale student will learn the definition of nonconsensual sex. 

That's right. Reacting to charges that Yale has a "hostile sexual environment" on campus, the university recently compiled a list of eight fictional scenarios to describe various kinds of sexual encounters and ranked them with regard to whether they were consensual, nonconsensual, or something in between.

Here is the Yale hypothetical that caught my eye, which I am quoting from the New York Times.
"Jamie and Cameron are at a party," begins one of the hypothetical situations. "It is crowded on the dance floor and they are briefly pressed together. Later Jamie encounters Cameron in the hallway and smiles. Cameron, who is now very drunk, follows Jamie into the bathroom and forces Jamie to have sex."
This would be nonconsensual sex, the Yale narrative tells students, that could lead to expulsion.

So let this be a warning to you, Mr. or Ms. Yale student. If you rape a stranger in a public bathroom, you could be expelled from Yale!  Mommy and Daddy would be so embarrassed.

I have some brief comments to make about this New York Times story, which are not meant to be gratuitously derisive. Yale students are supposedly among the brightest young people on the planet. Wouldn't you expect them to understand the concept of rape without the necessity of a Yale tutorial? In Louisiana, even people of the meanest understanding know that a person who rapes a stranger in a public bathroom will be sent to Angola State Penitentiary for a very long time.

But perhaps Yale is wise to go back to basics with regard to sexual behavior on campus.  Our nation's renowned universities are famous for their politically correct stance on sex and gender issues, but it is amazing how much sexual misconduct takes place on college campuses.

Who would have thought that Pennsylvania State University would turn a blind eye to Jerry Sandusky's predatory behavior, which apparently included raping a child in a university shower room (Curry, 2013)?

Who would have expected that a small Catholic college in New York would be sued for allegedly trying to cover up an accusation of gang rape in a college dormitory (McGrath v. Dominican College, 2009)?

Who could have anticipated that a freshman woman at University of Washington would accuse UW of steering her toward mediation with her alleged rapist after she reported being assaulted by a varsity football player (S.S. v. Alexander, 2008)?

And now we see allegations that Oklahoma State University--"the Princeton of the Prairies"-- offered sexual favors to recruit football players (Hines, 2013).

So--as wacky as it seems, Yale may have found it necessary to instruct Yale students that it would be wrong to rape a stranger in a public bathroom.  Maybe other universities should follow its example and go back to basics about what constitutes sexual misconduct on a college campus.

References

Collen Curry. Penn State Settles 25 Suits in Jerry Sandusky Case. ABC News. August 26, 2013. Accessible at: http://abcnews.go.com/US/penn-state-settles-25-lawsuits-brought-jerry-sandusky/story?id=20069117

Kelly Hines. SI Report: Ex-OSU players claim some hostesses had sex with recruits. Tulsa World, September 13, 2013.

Ariel Kaminer. Yale Tries to Clarify What Sexual Misconduct Is in a New Guide. New York Times, September 14, 2013, p. A14.

McGrath v. Dominican College, 672 F. Supp. 2d 477 (S.D.N.Y. 2009).

S.S. v. Alexander, 177 P.3d 724 (Wash. Ct. App. 2008).



Monday, September 16, 2013

Paul Krugman, President Obama's Head Cheerleader, Finally Wrote Something Useful About Education and the Economy in the NY Times

Paul Krugman finally wrote something useful about education and the economy in the New York Times. In a recent Times essay entitled "Rich Man's Recovery," Krugman began by pointing out what everyone already knows--that the rich live in "a different social and material universe" from the middle class. The enduring American belief that children can grow up to become more prosperous than their parents is dead.
Paul Krugman's Big Idea:
Print More Money
Everywhere, young Americans who grew up in middle class homes are desperately struggling just to stay in the middle class--to avoid falling off the economic ladder and becoming one of the faceless working poor.

And then Mr. Krugman made an interesting point. Rising inequality in the United States has nothing to do with education. As Krugman perceptively observed, "Only a small fraction of college graduates make it into the charmed circle of the 1 percent. Meanwhile, many, even most, highly educated young people are having a very rough time."

Many people--myself once included--pathetically believe they will catapult themselves into a new more glamorous milieu if only they can acquire a prestigious graduate degree from an elite university. And so they borrow money--sometimes a lot of money--to get a degree from Harvard, Yale, Columbia, etc.  Often they learn that even if they get into the prestigious graduate school of their choice that class lines are already drawn.  Even at Harvard Business School, the NY Times reported, the  ultra rich students are separated from other students along lines drawn by status and money.

How can we stop the growing division between the ultra rich and the rest of the United States? How can we restore the prospects of the middle class along with the middle class belief that talent and hard work will lead us to a better life?

Unfortunately, Mr. Krugman has no good answers to these questions.  Like so many NY Times writers, he is very good at identifying problems but not so good at offering real solutions. His essay ends with the lame suggestion that we should tax the rich a bit more.

Thanks a lot, Paul.  Is that the best idea a Nobel Prize winning economist can think of?

No, to restore equality of opportunity in the United States, the wealthy plutocracy that runs this country must be destroyed. Devastating financial regulations are called for--regulations so draconian that the corporate banks will disappear and be replaced by financial institutions on a more human scale.

Taxes on the rich need to be much higher. We will know we are taxing people enough when Tom Cruz and Donald Trump fly commercial and no one has the cash to buy a $250,000 automobile.

And our imperious and arrogant elite universities need to be demythologized.  We need to stop choosing our national leaders from among people who went to Harvard and Yale.  And imperial college presidents need to be sent back to the classroom to teach freshman composition.

But is anyone in the media talking about radical reforms of our economy or our educational system? No. Paul Krugman, the nation's most ardent cheerleader for President Obama's economic policy, wrote an essay in today's NY Times essentially saying Ben Bernanke should continue printing money, a policy designed to do nothing more than delay our nation's economic collapse until President Obama has finished his term of office.

Where is all of this heading--this accelerating disparity in wealth that Mr. Krugman wrote about?

I don't know.  I do know that Germany's economic policy in the 1930s--its reckless printing of money--is very similar to President Obama's economic policy.  And we know what happened to Germany.

One thing is clear. Our nation is now run by an arrogant and selfish plutocracy that manipulates our civic and political life in order to elevate compliant politicians like Barack Obama who will perpetuate the status quo of economic inequality.  And the training grounds for these compliant politicians are our nation's elite universities.

After me--the deluge
The young people of the shrinking middle class won't change this putrid landscape by borrowing money to attend prestigious colleges and elite graduate schools. They have essentially three options: They can fight politically to elect leaders who are truly progressive and not just blatherers who take their marching orders from Goldman Sachs. They can emigrate to a society that offers more opportunities to people of talent. Or they can accept their slow decline into a new kind of servitude--spending their lives paying off student loans they took out to obtain an education that did not improve their economic condition and perhaps made it worse.


References

Jodu Kantor. Class Is Seen Dividing Harvard Business School. New York Times, September 9, 2013.

Paul Krugman. Give Jobs a Chance. New York Times, September 16, 2013, p. A19.

Paul Krugman. Rich Man's Recovery. New York Times, September 13, 2013. P. A19.


Private Liberal Arts Colleges Are Dying and They Won't Be Resurrected

If something can't go on forever, the old bromide goes, it won't. America's small, private liberal arts colleges can't go on forever. Even now, they are in a long slow decline, like elderly widows in small Southern towns, sitting placidly on their verandas and drinking mint juleps while they wait for the disease that will finally kill them.

And this is a great shame.  America's small liberal arts colleges emerged in the late nineteenth and early twentieth century to provide a college education to young people who previously had had no opportunity to attend college.  Started by Catholic religious orders, Protestant denominations, and sometimes just by
liberal-minded philanthropists, they sprang up in industrial cities, small Midwestern towns, and even the plains of West Texas to offer a product most people believed in--a liberal arts education.  Some were started specifically for women and all were started to advance the life prospects of plain ordinary young people.

Looking back on the golden era of the private liberal arts colleges, it is remarkable how physically beautiful many of them were.  The founders seemed to have an innate sense of architectural taste.  Many of the buildings on these small campuses were designed along classical lines and are truly beautiful.

And apparently, these colleges were relatively easy to found.  In the days before onerous federal regulations and bureaucratic accrediting associations, it seems that just about anyone could start a college.  And the nation owes a debt to the many civic minded individuals and organizations that created these lovely little institutions that dot the American landscape.

But their days are numbered and many won't survive another twenty years.  Most have slashed their tuition rates and many have experimented with online offerings, or other innovations to stop their enrollment declines.  But in the end, most private liberal arts colleges are doomed to close.

Why are the private liberal arts colleges in decline?

They have gotten too expensivee.  First of all, liberal arts colleges have gotten too expensive.  Many undistinguished little colleges charge as much to attend as the elite private institutions.  Families have done the math and have come to the conclusion that it doesn't make sense to pay $50,000 a year in tuition, room and board for their children to attend colleges that have nothing special to offer in today's modern economy.

It is true that the real cost of attending one of these colleges is often far less than the sticker price.  As a recent Inside Higher Education story explained, most students pay far less than the advertised price to attend a private college.  But even if the $30,000 tuition is reduced to $15,000, the total cost to attend these schools is around $30,000 per year, when room, board, and books are figured in.  That's a lot of money for a middle class or working class family.

The idea of a liberal arts education is dead. Second, the notion that a liberal arts education is a good in itself is dead. There was a time when most people agreed that the study of history, literature,
Seinfeld reruns
Postmodern education for free
philosophy and the social sciences produced good citizens prepared to make their way in life.  But now the emphasis is on the bottom line.  Far more students major in business today than history or English.

Furthermore, even if students want a classical liberal arts education, they are increasingly unlikely to find an institution that will provide it.  Many of today's liberal arts professors are postmodernists, neo-Marxist cranks, moral cynics, or outright nihilists. For many liberal arts professors, stamping out the ideals of the young is their life's mission.

And many young people have figured out that they can become disillusioned about life for a lot less than $30,000 a year.  After all, if they want a lesson in postmodern nihilism, they can watch reruns of Seinfeld.

 Residential education is dead.  Finally, American young people no longer see the value in residential education. In another time, students willingly lived in dormitories where they shared a room with at least one other student and showered in a communal bathroom.  Students ate in university-run cafeterias and participated in a host of campus activities--student clubs, drama society, student government, etc.  Dorm mothers and hall monitors kept order and made sure students made it back to their dorms every evening before the doors were locked for the night.

Today, many young people simply won't put up with living in a dormitory. They would rather live in off-campus apartments where they can cohabit with their significant (or insignificant) others, eat at fast food restaurants, and only come on campus for their classes.  In fact, a lot of students prefer online classes so they need not come on campus at all.

Where are we headed? In short, liberal arts colleges are in a downward spiral for variety of reasons. And I don't see a revival.  The future of higher education is still not clear, but I think it is headed into three main segments.

 First, the elite colleges will always survive, selling prestige, political connections, and smooth access into elite graduate schools.  The future of Harvard, Yale, Emory, Georgetown, Stanford, and 30 or 40 other elite universities is assured.

Second, most middle class students will attend public institutions, both flagship institutions like the University of Michigan and Louisiana State University, but also a host of regional and satellite institutions like University of Texas at San Antonio and the University of Western Michigan.  Increasingly, these public universities will turn into mega institutions with thousands of students, soulless leadership, and robotic bureaucracies.

Third, working class students with college aspirations will go to community colleges with commuter cultures or will get sucked into the predatory for-profit institutions that will offer them lackluster educational experiences and leave them with high levels of student-loan debt.

But the lovely little liberal arts colleges with their elm-lined pathways and neo-Grecian halls are fading into the past.  I think we will miss them.

References

Ry Rivard. Paper (Tuition) Cuts. Inside Higher Education, September 16, 2013. Accessible at: http://www.insidehighered.com/news/2013/09/16/small-private-colleges-steeply-cut-their-sticker-price-will-it-drive-down-college


Thursday, September 12, 2013

In Massachusetts, Land of Kookie Ideas, the Humanists Want to Abolish the Pledge of Allegiance in Schools

Years ago, I walked into Good's Barbecue Restaurant in Houston and noticed a message scrolled  in large letters above the door. "Texas, our Texas! All Hail the Mighty State," the sign proclaimed.
The official flag of Postmodern Nihilism
I remember thinking I would never see a sign like that in Massachusetts.  Indeed, no two states could be more different in terms of cultural and regional pride than Massachusetts and Texas.  Texas even has a pledge to its state flag, which willing Texas children are required by law to recite on each and every school day. The people of Massachusetts would never think of doing such a thing. 

Or maybe they're just ashamed of the Massachusetts flag. After all, the flag portrays an American Indian, a reminder that the good people of Massachusetts killed all  the Native Americans in their state (except Elizabeth Warren, whom they elected to the Senate.)

And now the American Humanist Association has filed suit in Massachusetts, seeking to invalidate the recitation of the Pledge of Allegiance to the Flag on the grounds that it violates the equal rights provision of the Massachusetts Constitution.

An AHA spokesperson argued that recitation of the flag is indoctrinating and alienating to atheists. “It validates believers as good patriots and it invalidates atheists as non-believers at best and unpatriotic at worst,” he said.

The Massachusetts Supreme  Judicial Court (too snooty just to call itself the supreme court) is taking the matter seriously and has asked for amicus briefs from interested parties.  Who knows? This goofy body might  root around in the state constitution and find a way to invalidate the Pledge of Allegiance in the state's public schools.  After all, they wouldn't want to offend the sensibilities of Bay State atheists

In fact, Massahusetts' highest court might strike down the pledge in state schools just for fun. I'm sure the judges would get a kick out of the fulminations of Bill O'Reilly on Fox News if the court ruled  the Pledge could not be said in Massachusetts schools. 

This petty lawsuit, brought by New England elitists, is an exercise in postmodern nihilism, which is the philosophy of the day among Massachusetts jurists, academics and politicians.  In their self-centered world, there are no ultimate values, no truths which can claim our allegiance, no  transcendent ideas.  And so they descend into whining trivialities.

And that would be fine if those folks would confine their nihilism to their own neighborhood. Unfortunately, our nation's leaders are mostly trained up there; and these people are running the country.

And we can see where it has gotten us.  Even now, we see the President of Russia smoothly outmaneuvering and humiliating our president.  And what should we expect? While Barack Obama was polishing footnotes on the Harvard Law Review, Vladimir Putin was running the KGB.



 References

Atheist Acton couple takes Pledge of Allegiance challenge to Supreme Judicial Court. Boston.com. Acccesible at: http://www.boston.com/yourtown/news/acton/2013/09/acton_family_takes_pledge_of_allegiance_challenge_to_supreme.html

Doe v. Acton-Boxborough Regional School District. Trial court decision accessible at: http://www.americanhumanist.org/system/storage/63/ee/7/3171/SJ_Decision_Partial.pdf


Tuesday, September 10, 2013

Memo to LSU: Fire Your Lawyers, Fire Your Executive Search Firm, and Apologize to Judge Clark

When I practiced law years ago, my senior partner gave me three good pieces of advice.

1. Always comply with a court order.
2. Never hide relevant documents that are the subject of a legitimate request in civil litigation.
3. Admit your mistakes and do everything you can to repair the damage.

LSU has acted contrary to all this good advice, and it will pay the price.

Bill Funk
LSU should fire him
This morning, Judge Clark ordered the Sheriff of East Baton Rouge Parish to go to LSU and retrieve documents pertaining to LSU's search for a new president.  Judge Clark ordered LSU to make the documents available to the Baton Rouge Advocate last April. According to Judge Clark, those documents are subject to Louisiana's open records law and LSU cannot lawfully conceal them.  LSU refused to comply and has been in contempt of Judge Clark's order for about four months.

This afternoon, two sheriff's deputies went on campus to get the documents and came away empty handed. LSU claims it has no documents to turn over and that all relevant documents pertaining to its presidential search are in the hands of William Funk and Associates, an executive search firm located in Dallas.

In short, LSU has contemptuously defied Judge Clark's order, acting no doubt on the advice of its
Say you''re sorry, Bobby
attorney, Jimmy Faircloth.  And who is LSU protecting by hiding its presidential search documents?  Bill Funk and his executive search firm, whose business runs more smoothly if candidates for executive jobs can keep their identities confidential.  And you can bet your last dollar that Mr. Funk was paid handsomely to produce LSU's new president, King Alexander.

This is going to end badly for LSU. It made a huge mistake toying with Judge Clark.  What can it do to begin repairing the damage?

First, it should fire Jimmy Faircloth, who gave LSU such bad advice.

Second, it should fire Bill Funk and never again use an executive search firm that insists on secrecy in an LSU executive search.

Third, Bobby Yarborough, the chairman of the LSU Board of Supervisors, should go to Judge Clark's court without an attorney and turn over the documents Judge Clark demanded.  Then Mr. Yarborough
Oh yeah. Fire this guy too.
should personally apologize to Judge Clark, to the students of LSU and to the people of Louisiana.



Imperious, Arrogant and Defiant: LSU Plays the Scofflaw and Refuses to Compy with a Court Order

I sat in Judge Janice Clark's courtroom this morning, curious to see how she would deal with Louisiana State University's continued defiance of her court order. 

The Baton Rouge Advocate and the Times-Picayune sued LSU several months ago under Louisiana's open records law, seeking to obtain the records of LSU's search for a new president. The search ended last March when the LSU Board of Supervisors selected F. King Alexander as LSU's new chief executive.  At least 35 other people applied for the job, but LSU refuses to release these applicants' names.

Last April, Judge Janice Clark issued an order directing LSU to turn over the records of its search, including the names of the other applicants, but LSU refused to comply.



Judge Janice Clark
Instead it tried to get the Louisiana Supreme Court to issue a stay of Judge Clark's order while LSU pursues a leisurely appeal.  The Supreme Court declined to issue a stay, but LSU still won't turn over the records.  LSU accrues a fine of $500 per day for each day it refuses to comply with Judge Clark's order and currently owes about $60,000.

This morning, Judge Clark increased the pressure on LSU to turn over the records. In an order issued from the bench, she directed the Sheriff  of East Baton Rouge Parish to seize the presidential search records and indicated she would issue the appropriate writs and warrants necessary for the sheriff to carry out her order. 

LSU would like Judge Clark to issue a final judgement in the case so it can start the long process of appealing it, a process that could take years.  It wants to continue withholding the records while the appeal is pending.  By the time the appeal process is over, President King Alexander will probably be gone--having left LSU for an even more lucrative job.  LSU could then argue that the whole dispute over its presidential search is moot.

But Judge Clark said today that there will be no further proceedings in the case until the disputed records are turned over.  Meanwhile, LSU continues in contempt of Judge Clark's April order and risks even heavier sanctions being imposed on it--including jail time for recalcitrant members of the LSU Board of Supervisors.

So what's LSU's next move? With the sheriff poised to search LSU's administrative offices (and perhaps even the offices of LSU's attorneys), I think LSU has run out of options. Surely it will turn over the records sometime this week.

LSU Prez King Alexander
Hey, I'm just a bystander
Or maybe not.  But if LSU continues to defy Judge Clark's order, it will only enhance its image as an imperious, arrogant scofflaw.  What a message to send to LSU's students and the people of Louisiana.

As for LSU President King Alexander, he is sitting on the sidelines. He did not appear in court this morning with LSU's attorney. President Alexander could show real leadership if he would tell the LSU Board of Supervisors to obey the law like everyone else in Louisiana is required to do and comply with Judge Clark's order.



References

 Joe Gyan, Jr. Judge: LSU board could face jail time in records case. The (Baton Rouge) Advocate, September 10, 2013, p. 1.







Saturday, September 7, 2013

The Rats Are Deserting A Sinking Ship: Banks Are Getting Out of the Private Student Loan Business

JP Morgan Chase Bank recently announced that it is getting out of the student loan business.  The bank said it was responding to a trend by students toward taking out federally back student loans, but in fact it has been scaling back its student loan program for several years.  This year the JP Morgan Chase only loaned about $200 million, down dramatically from 2008, when the bank loaned an astonishing
I'm getting out of the student loan biz
$6.9 billion to student borrowers (according to USA Today).

There was a time when the banks considered student loans to be very profitable. In 2008, they loaned a total of $20 billion. The student-loan market must have looked very lucrative at the time.  After all, a majority of these loans have a co-signer--usually a student's parent; so mom and pop are on the hook for them.  And the banks got legislation through Congress in 2005 that made private student loans almost impossible to discharge in bankruptcy.

In fact, for several years prior to 2008, private loan volume increased every year such that one commentator predicted that private student loans would exceed the federal student loan program by 2030.

But the banks are backing out of the private student loan business. After 2008, loan volume began dropping precipitously and only amounted to $6 billion in 2011.

Private student loans generally have higher interest rates and less favorable terms than loans offered through the federal student loan program. So who took out these loans?  The usual suspects. According to a report to the Senate Banking Committee, 46 percent of undergraduate students in four-year programs at for-profit colleges took out private loans in 2008 compared to only 14 percent of comparable undergraduates at public colleges.

The Project on Student Debt also found that students attending for-profit colleges were most likely to take out private loans and that African American students were more likely to take out a private bank loan than other students.

Why are the private banks reducing their student loan portfolios?  My guess is that the banks are bailing out of the student loan business because it has become unprofitable. In spite of the fact that these loans are almost impossible to discharge in bankruptcy and a majority of them are co-signed, the banks are still seeing a high default rate in their private loans.

In short, the rats are leaving a sinking ship. They are retreating from a sector that is no longer profitable.


References

JP Morgan Chase to stop making student loans. USA Today, September 5, 2013. Accessible at:
http://www.usatoday.com/story/money/personalfinance/2013/09/05/jpmorgan-chase-student-loans/2772509/

Private Student Loans. Finaid web site. Accessible at:  http://www.finaid.org/loans/privatestudentloans.phtml

Private Student Loans. Report to Report to the Senate Committee on Banking, Housing, and Urban Affairs, the Senate Committee on Health, Education, Labor, and Pensions, the House of Representatives Committee on Financial Services, and the House of Representatives Committee on
Education and the Workforce. August 29, 2012. Accessible at: http://files.consumerfinance.gov/f/201207_cfpb_Reports_Private-Student-Loans.pdf

Private Loans: Facts and Trends. Report updated in July 2011. Project on Student Debt. Accesible at: http://projectonstudentdebt.org/files/pub/private_loan_facts_trends.pdf


Sunday, September 1, 2013

Playing For Time: Who Benefits When A University Keeps Its Executive Searches Secret?

As of today, Louisiana State University has been in contempt of a court order for 115 days, incurring a fine of $500 a day for each day it is in contempt.

As I wrote in an earlier blog, The (Baton Rouge)Advocate sued LSU, seeking to get the university to comply with the Louisiana open records law and turn over the names of people who applied for the LSU president's job. Judge Janice Clark directed LSU to turn over the records almost four months ago.  LSU refused and appealed Judge Clark's order to the Louisiana Supreme Court.  The state's highest court refused to review the order.

But the litigation is not yet over. Apparently, the university is going to pursue a lengthy appeal process, hoping that a Louisiana appellate court will eventually reverse Judge Clark's order. I think this is a forlorn hope.  Ultimately, LSU will have to turn over the records

Why does LSU insist on keeping its presidential search secret?  And more importantly, who benefits from this secrecy?

Executive search firms. First, executive search firms charge tens of thousands of dollars to administer university searches for executive leaders. These firms keep a stable of potential job applicants who are happy to throw their names in the hat for a university executive job so long as their current employers don't find out.  Keeping names secret helps the search firm keep a tidy pool of job candidates on hand for the many searches they coordinate.

University executives. Second, many university presidents and senior executives--provosts, deans, etc.---are constantly on the prowl for new jobs, and they don't want their current employers to know that they are ready to jump ship if a better opportunity appears.  Undoubtedly, some of the 35 semifinalists in the LSU presidential search will be embarrassed when their names are eventually released.

Lawyers. Finally, attorneys make their fees by helping universities skirt the letter of state open records laws.  In LSU's current dispute with The Advocate, the accumulated legal fees will certainly be much larger than the fine that LSU ultimately pays.

LSU plays musical chairs with its chancellors and provosts. LSU maintains that secret executive searches are essential in order to attract the best talent. But how has that worked out for it? LSU has been plagued by a constant turnover of top leadership for the last 15 years.  The university has changed chancellors and provosts so many times that it appears like the Board of Supervisors is playing musical chairs with its executive leadership.

And of course it is the secrecy of the executive searches that enables a little gang of mobile administrators to hop, skip and jump around the United Staes, getting ever higher salaries with every move.

Yes, LSU's secrecy benefits an executive search firm; it benefits a small group of suitcase administrators; and it benefits the attorneys.  But who are the losers?  The people of Louisiana, who are paying for this charade through their taxes.

References

Editorial. 109 days in contempt. The (Baton Rouge) Advocate, September 1, 2013, p. 6B.