Saturday, June 28, 2014

Not With a Bang But With a Whimper: For-Profit Corinthian Colleges May Close Some Campuses

Yesterday's New York Times carried a story in its Business Section about Corinthian Colleges, a for-profit company that operates under the names of Heald, Everest and WyoTech.  Corinthian has 72,000 students on more than 100 campuses.

Recently, Corinthian announced that it did have enough operating cash to stay in business after the end of this month, and it persuaded the federal government to release some federal student aid money in spite of the fact that it admitted fraud in the reporting of student grades and job placements.  Corinthian has also been sued by the California Attorney General based on allegations that it used high-pressure tactics to recruit vulnerable students--including single mothers.

Like most for-profit colleges, Corinthian relies on the federal student aid program to stay in business. It gets about 90 percent of its revenue from the federal government--about $1.4 billion a year.  DOE's emergency cash infusion (about $16 million, according to the New York Times) may be enough to stave off closing for awhile at least. But that might not be a good thing for students.

As the Times article stated:
If, as critics contend, many Corinthian students are going deeper into debt to gain useless educations, some of those students might have been better off is the Education Department had stuck to its guns and forced Corinthian to close. Federal student loan rules do not require students to repay loans that were canceled while they were enrolled, leaving them unable to graduate.
In most instances, we should not be happy to see a college close, but the for-profit industry is a special case. As Senator Tom Harkin's Committee outlined in its report on for-profit colleges, this sector of higher education only educates about 11 percent of postsecondary students but collects about 25 percent of federal student aid money.  The for-profits have the highest student-loan default rate in the higher education industry; according to DOE, one in five for-profit college students default within three years of beginning repayment. 

And there is ample evidence that for-profit colleges have exploited low-income individuals, encouraging them to take out loans to pay for programs that don't lead to well-paying jobs.  Even if they believe they have been defrauded, these students often have no recourse to the courts, because many of the for-profits require students to sign agreements to arbitrate disputes rather than sue.

Indeed, the Ninth Circuit ruled last year that Corinthian students were compelled to arbitrate their misrepresentation claims against Corinthian--claims that were brought under California's unfair competition law, false advertising law, and California's Consumer Legal Remedies Act. 

To its credit, the Obama administration has been trying to impose regulations on the for-profits, but it suffered a setback in the courts when the for-profits were successful in getting some of the Department of Education's regulations thrown out.  Recently, DOE issued a second set of proposed regulations, but these new regulations will probably just lead to more litigation.

So we should not be sorry to see Corinthian Colleges close--if that event comes to pass. In fact, we should hope this whole unseemly industry collapses.  So far,  the federal government has not been successful in effectively regulating the for-profit college industry.  But perhaps students will gradually wake up to the fact that they would probably be better off enrolling in low-cost community colleges, where they might not need to take out student loans, than to matriculate at high-cost for-profit institutions that have a very poor track record regarding job placement, degree completion, and student-loan defaults.


Ferguson v. Corinthian Colleges, 733 F.3d 928 (9th Cir. 2013).

Floyd Norris. A For-Profit College Falters as Federal Cash Wanes. New York Times, June 27, 2014.

U.S. Senate Committee on Health, Education, Labor and Pensions. For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success. 112 Congress, 2d Session, July 30, 2012.

Thursday, June 26, 2014

The Student Debt Crisis? What Student Debt Crisis? The Brookings Institution Issues A Report Stating That The Problem of Student Debt Has Been Exaggerated

The Brookings Institutopn issued a report a few days ago suggesting that worries about a looming student-loan crisis may not be justified.  The report, entitled "Is a Student Loan Crisis on the Horizon?,"  makes these major points:
  • Roughly a quarter of the increase in overall student debt can be attributed to the fact that more people are obtaining graduate degrees.
  • Increases in average lifetime earnings have more than kept up with increasing student-debt loads.
  • Average monthly student-loan payments have stayed the same or gone down a bit, due in part to longer loan-repayment periods.
In short, the Brookings Institution concludes: "[T]ypical borrowers are no worse off now than they were a generation ago."

The Brookings Report was widely reported in the media, including newspaper pieces in the New York Times and Slate.  The Times quoted one of the Brookings authors as saying, "The evidence does not support the notion that student loan debt is dragging down the economy." The Times article also pointed out that more than half of student-loan debtors owe less than $10,000; and more than three quarters of borrowers owe less than $20,000.

Without quarreling with any of the Brookings report's findings, I will just point out a few indicators that show a much less rosy picture:

First, as several newspaper articles have recently pointed, about one in five college graduates under the age of 35 now live with their parents--a percentage that has grown in recent years. Undoubtedly, student-loan debt is partially responsible for the growing number of college-educated young people who still live with Mom and Dad.

Second, the student-loan default rate is going up, more than doubling over the course of just a few years.  According to the Department of Education's most recent report (issued in October 2013), about 15 percent of student-loan borrowers default within three years of beginning the repayment phase of their loans. For students who attended for-profit institutions, the rate is about 21 percent.

And, as I have pointed out, for-profit colleges have been successful in hiding their default rates by encouraging their former students to sign up for economic hardship deferments that keep borrowers from being counted as defaulters even though they are not making their student-loan payments.

In fact, according to a recent report by the Consumer Financial Protection Bureau, we now have about 7 million people who have defaulted on their loans and another 15 million borrowers in the repayment phase who have obtained some sort of deferment that allow them not to make payments.

It is true, that millions of people owe only modest amounts on their student loans, and millions of college-loan borrowers are managing to make their monthly loan payments without difficulty.

But to say that monthly payments have not gone up overall because more people are taking 20 or 25 years to pay off their loans instead of 10 years is somewhat disingenuous.  People who are forced into long-term repayment plans because they can't afford to pay off their loans over 10 years will be paying a lot more in interest on their loans and many of them will not be making payments large enough to cover accumulated interest. 

Furthermore, even if most people are not burdened by their college loans, those 7 million defaulters have suffered a financial catastrophe.  Their credit ratings have been ruined, they are subject to wage garnishments, and they are saddled with debt that most of them cannot discharge in bankruptcy.  For these people--the student loan program has been a disaster.

In short, I think the Brookings Institution is wrong to suggest that a student loan crisis is not on the horizon.  On the contrary, the crisis is already here.


Beth Akers & Matthew M. Chingos. Is a Student Loan Crisis on the Horizon? Brookings Institution, June 2014.

David Leonhardt. The Reality of Student Debt is Different From the Cliches. New York Times, June 24, 2014. Available at:

Jordan Weissmann. Are We Overreacting to Student Debt? Slate, June 24, 2014. Available at:

Tuesday, June 24, 2014

Nonsense from Adam Davidson in the New York Times Magazine About the Wisdom of Young Adults Living With Their Parents

Adam Davidson wrote an essay in the Magazine section of the New York Times about young adults who still live with their parents. The percentage of young people who live with Mom an and Dad has been going up--the figure is now 20 percent.  And--according to Davidson-- about 60 percent receive some financial assistance from their parents, much higher than in the past.

Davidson cites Jeffrey Jensen Arnett, a psychologist at Clark University, who coined the phrase "emerging adulthood." According to Arnett, the trend of young people moving back home with their parents is a "rational response to a radically different, confusing postindustrial economy."

For people who graduated from college with a high level of debt and no clear notion of their ultimate vocational goal, it makes sense to move back home with Mom and Dad until they figure things out; at least that's Arnett's reasoning. Davidson cites Arnett saying that "it's the people most actively involved in the struggle, the ones who at times seem totally lost, who are most likely to find their way."

Arnett also cites statistics showing that young people are remarkably optimistic.  According to a poll he conducted, 77 percent of young people still believe they will be better off than their parents!  Thus, in spite of a poor economy, a shortage of good jobs, and (for many) crushing student-loan debt, a lot of young people think things will eventually work out.

Personally, I think this line of reasoning is a lot of horse patootie (a phrase I borrowed from blogger Kathy Schiffer). Adam Davidson and Jeffrey Jensen Arnett can afford to be sanguine about the nation's economic malaise because they have good jobs.  Davidson is writing for the Times and Arnett is a professor and probably tenured.

But young people with college degrees who are forced to live with their parents due to poor job prospects and high levels of student-loan debt are in a scary position. They can't marry, have children, buy a home, or start their careers; in a very real sense they are merely trying to stay afloat financially--they are in survival mode.

I would have liked Davidson's article a lot more if it had displayed a spark of anger about a national economy that is eating the nation's young and about a rapacious higher-education industry that is impoverishing millions of young people with student-loan debt without giving them the skills they need to get well-paying jobs.

And I would have liked the article a lot more if Davidson had had some suggestions for reforming the nation's financial policies and the federal student loan program so that fewer people in their 20s have to live with their parents.  In short--the Davidson article is a puff piece published by a newspaper that pretends to care about people's suffering but is firmly dedicated to the economic status quo. After all, some body's got to buy those expensive watches that the Times Magazine advertises week after week.


Adam Davidson. "Hi, Mom. I'm Home!" New York Times Magazine, June 21, 2014, Magazine section, p. 22.

Friday, June 20, 2014

Senators Lamar Alexander and Michel Bennet Propose a Simpler FAFSA form: What a Good Idea!

"Everything should be made as simple as possible," Albert Einstein observed, "but not simpler."  And indeed, simplicity, is a great virtue.  How many of us have struggled with a problem we thought was complicated, only to have an "ah ha" moment when we realized our problem was not as complicated as we first believed.
"Everything should be made as simple as possible, but not simpler."
Senator Lamar and Senator Bennet Have A Good Idea for Streamlining Federal Student Aid Applications

Senator Lamar Alexander of Tennessee and Senator Michael Bennet of Colorado have struck a blow for simplicity in the federal student aid program, a program that is entirely too complicated.   As they explained in an op ed essay in the New York Times earlier this week, the two senators have introduced a bill to reduce the complexity of the standardized federal student aid form, which every college student must fill out to qualify for federal student aid.

Currently, this form, commonly called the FAFSA form, has 108  questions and is 10 pages long. With its attached instructions, the entire form is 82 pages long!

Senators Lamar and Bennet propose to throw this form out, which is so complicated and time-consuming that many students simply forgo applying for federal student aid. 

They want to substitute a form that only has two questions:  What is your family size? What was your household income two years ago?

Senators Lamar and Bennet's proposed legislation would also reduce the number of federal student loan programs to three: one program for undergraduates, another for graduate students, and a third for parents who borrow money to pay for their children's college education .  And, perhaps most importantly, they propose just two repayment options: the standard 10-year repayment plan and an income-based repayment plan.  

Lamar and Bennet's op ed essay did not provide any details about what their income-based repayment plan would look like.  Would it be a variation of President Obama's Pay As You Earn plan, requiring borrowers to pay 10 percent of their discretionary income over 20 years or would it would be a less generous variation?  But the simplicity of having a single income-based repayment plan will reduce the confusion many college-loan borrowers experience when they try to convert their 10-year repayment plans to long-term income-basde repayment plans.

Senators Lamar and Bennet acknowledged the input they got for their reform proposals from Susan Dynarski and Judith Scott-Clayton. Ms. Dynarski is co-author of a provocative Brookings Institution study that recommends payroll deductions as the most efficient way for students to make their loan payments if they are enrolled in income-based repayment plans. (I discussed this proposal in my last blog posting.)

Efficiency-Driven Reforms Are Good But Radical Reforms of the Federal Student Loan Program Are Necessary
Senator Lamar and Senator Bennet have made sensible proposals for improving the way the Federal Student Loan Program Operates. And Susan Dynarski and the Brookings Institution have also made reasonable proposals for collecting student-loan payments from borrowers who participate in income-based repayment programs.  

Without a doubt, these proposals will help make the federal student aid program operate more efficiently. But they won't help bring the federal student loan program under control.  These proposals do nothing to stop the runaway cost of higher education. They do nothing to address the abuses in the for-profit college industry, and they do nothing the ease the strain on millions of student-loan debtors who are already in default. 

We won't be getting serious about addressing the student loan crisis until we amend the bankruptcy laws to allow worthy college-loan debtors to obtain bankruptcy relief, publicize the real student-loan default rate, and rein in the for-profit colleges.  Unless we do these things, other reform proposals will do nothing more than put a band-aid on a gaping wound. 


Lamar Alexaner & Michael Bennet. An Answer on a Postcard. New York Times, June 19, 2014, p.  A25.

Wednesday, June 18, 2014

If You Have a Student Loan, You Should Read Susan Dynarski's Proposal for Having Student Loan Payments Automatically Deducted From Debtors' Pay Checks

Susan Dynarski
If you took out a federal student loan to attend college, you should read Susan Dynarski's op ed essay in last Sunday's New York Times entitled "Finding Shock Absorbers for Student Debt."  Ms. Dynarski explains why two proposals for assisting overburdened student-loan debtors will not be very effective.  And she makes her own proposal for deducting borrowers' monthly student-loan payments directly from borrowers' pay checks.

Reducing Interest Rates on College Loans Won't Give Borrowers Much Relief

Recently, Senator Elizabeth Warren introduced legislation to significantly lower  interest rates on student loans, legislation that President Obama supported. Warren's bill would have covered the cost of lower interest rates by raising taxes on the wealthy. Not surprisingly, Republicans opposed the bill, and it did not get enough votes to move forward.

Ms. Dynarski points out that even a large cut to student-loan interest rates won't have much impact on individual students' monthly loan payments.  Borrowers with $30,000 in student loans (which is the average amount that college graduates owe when they finish their studies) would only see a $44 reduction in their monthly loan payments  if the interest rate on their loans was reduced from 6.5 percent to 3.5 percent--which  is a big reduction.

Thus the recent hype about Senator Elizabeth's failed attempt to pass legislation to reduce interest rate on student loans is a tempest in a teapot.  Even if Senator Warren's bill had bee adopted into law, it would not have given the mass of student-loan debtors much relief.

President Obama's Pay As You Earn Plan Is Too Cumbersome to Give Borrowers Much Relief

Dynarski also pointed out that the President Obama's Pay As You Earn program, whereby students make student-loan payments based on a percentage of their income, is so cumbersome that a high percentage of borrowers haven't applied for it even though they are behind on their loans or in default. One problem with Pay As You Earn is that the program does not respond quickly enough to borrowers who lose their jobs. A student-loan borrower's monthly loan payments are based on the borrower's previous year's income, so a borrower who is thrown out of work in mid-year would have to wait many months before seeing a reduction in the size of  monthly loan payments.

Dynarksi and the Brookings Institution Propose Automatic Student-Loan Payroll Deductions

Dynarksi proposes an automatic income-based loan repayment program, whereby employers would simply deduct the appropriate college-loan payment from borrowers' paychecks just like they make deductions for federal income tax, Social Security contributions and health insurance.  The borrower's monthly payment would fluctuate as income goes or up or down; and a borrower who is unemployed would pay nothing during the period of unemployment.

Dynarski's plan is a little more complicated than I've explained but not much.  The proposal is set out in detail in a paper released recently by the Brookings Institution, which recommended that an automatic income-based repayment program be the default option for students who take out federal student loans.

Dynarksi's automatic income-based loan repayment plan has many attractive features. First of all, if fully implemented, it would completely eliminate all student-loan defaults.  Any student-loan borrower who is employed would see a payroll deduction for student loans on every paycheck.

Second, an automatic paycheck deduction plan would virtually eliminate the need for loan collection agencies.  The IRS (or perhaps the Department of Education) would in essence by a giant federal student-loan collection agency.

Long-Term Automatic Payroll Deductions for College-Loan Borrowers Is a Sharecropper Plan

What's the downside?

As I've said before, income-based student-loan repayment plans  do nothing to stop the spiraling cost of higher education. Putting millions of students on income-based repayment plans might actually reduce the incentive for colleges an universities to get their costs under control.

Second, and far more ominously, in my opinion, putting students on long-term income-based repayment plans, whereby college-loan payments are automatically deducted from borrowers' paychecks over a period of 20 or 25 years, essentially transforms all young people who borrow money to attend college into a class of sharecroppers who fork over a percentage of their income over the majority of their working lives simply for the privilege of getting a college education.

And this is why I don't like the Dynarski/Brookings Institution proposal.  But my best guess is that something like what Dynarksi and the Brookings Institution have proposed will eventually become the default option for most people who pursue postsecondary education.


Susan Dynarski. Finding Shock Absorbers for Student Debt. New York Times, June 15, 2014, Sunday Review Section, p. 8.

Monday, June 16, 2014

Why Humiliate Yourself To Get into an Ivy League College? The Search for a Richer Life

Years ago I had a professor at the University of Texas who hung his college diploma in the guest bathroom of his home--right above the toilet.  As I recall he was a Harvard graduate.

I remember being offended by the gesture, intended I suppose to be ironic. If I had the opportunity to go to Harvard or any Ivy League university, I told myself, I would hang my diploma in a place of honor.

Years later I obtained a doctorate degree from Harvard, one of the stupidest things I ever did. For years I hung my diploma in my office, but today it hangs in a back hallway of my home.  I didn't put my Harvard diploma in an obscure place to be ironic.  I just came to realize how meaningless my Harvard degree really is.

Yesterday, Frank Bruni had an op ed piece in the New York Times about people humiliating themselves in their college admissions essays in order to stand out and perhaps improve their chances of being accepted at an elite college.  One young woman, Bruni wrote, confessed in her essay that she had once urinated on herself rather than interrupt an intellectually stimulating conversation with a teacher. Another young man revealed his disappointment with size of his genitals. Other students enroll in college-application camps, which can cost up to $14,000, where they are taught how to polish their college admissions essays to make them more appealing to Ivy League admissions officers.

Why do young people turn themselves inside out to get into an elite American university--Harvard, Yale, Dartmouth, Brown, Duke, Columbia, etc. I suppose they believe that these institutions hold the key that unlocks the golden door. If only I can get a degree from Harvard, these people tell themselves, I will have a richer life.

But I think many people who hanker to go to an elite college will be disappointed if they actually enroll. For the most part, these institutions are intellectually vapid, surreptitiously  racist, and pathetically provincial in their outlook on the world. They are openly contemptuous of American culture and traditional American values.  The people who run these cesspools of privilege think they embrace diverse philosophies and points of view, yet they harass traditional Christian student groups.  The professors and administrators of these intellectual ghettos think they are guardians of truth and beauty, yet they scorn the very notion that there are universal truths. Indeed, a great many people who inhabit our elitist universities seek nothing more from life than money, power, and public recognition.

If only I could get into Harvard!
Moreover, our elite institutions are not producing people who can analyze and solve problems, as evidenced by the way the Obama administration is running the country. Almost everyone connected withe the present  administration in Washington has a degree from an elite British or American university, and yet it is evident to nearly everyone that these folks do not know what they are doing.

And of course, all these prestigious colleges and universities are outrageously expensive. It will cost you around sixty grand a year to hang out with a bunch of nincompoops.

I was ruminating on Bruni's essay yesterday morning when I walked into my parish church to attend Mass. I saw four nuns of the Missionaries of Charity sitting in the back of the church--sisters of Mother Teresa's order. They are quite distinctive in their white veils with the blue stripes--veils that always remind me of my grandmother's tea towels.

As I looked at these nuns I realized that there is a great gulf between a humiliating life and a life lived in humility. Some people are willing to humiliate themselves in order to get into Harvard or Yale. Others are humble enough to give their lives to God.

And I wondered, as I turned to genuflect before the tabernacle, who has the richer life--the people who dedicate their lives to God or the people who get a degree from Harvard?


Frank Bruni. Naked Confessions of the College Bound. New York Times, June 15, 2015, Sunday Review Section, p. 3.

Friday, June 13, 2014

We Don't Need No Stinkin' College Rating System: President Obama's Plan to Rate Colleges on Value Faces Congressional Opposition

President Obama is determined to impose some sort of college rating system on the nation's higher education institutions, even though the higher education community opposes it. And President Obama is also getting blow back from Congress.

Republican Representative Bob Goodlatte of Virginia and Democrat Representative Michael Capuano of Massachusetts introduced a resolution in the House of Representatives opposing Obama's college rating proposal. The resolution states in part:
[T]he Administration's proposal to rate postsecondary institutions through an oversimplified Federal rating system that is not supported by postsecondary institutions, statute, or by the House of Representatives, will lead to less choice, diversity, and innovation, and should be rejected. 
Senator Lamar Alexander has also stated his opposition to the college-rating plan in a speech on the floor of the U.S. Senate. Senator Alexander expressed skepticism that the Department of Education can come up with a reliable and workable rating plan.

I don't know whether Representatives Goodlatte and Capuano are right to conclude that a college-rating system will lead to less diversity and fewer choices in higher education.  But I do think the plan will have no beneficial impact on the spiraling cost of attending college and will add yet another level of bureaucracy to universities that are already bloated with too many administrators.

Don't form a committee on snakes.
Photo credit: NBC News

In my mind, the Department of Education's focus on a college-rating system is a diversion from the urgent task of reforming the federal student loan program.  As Ross Perot once observed, if you see a snake, kill it. Don't form a committee on snakes.

My prediction is this:  President Obama's college-rating proposal is going nowhere.


Michael Stratford. Obama defends college rating system amid growing backlash from Capitol Hill. Inside Higher Ed, June 11, 2014.

House Resolution Strongly supporting the quality and value of diversity and innovation in the Nation's higher education institutions and strongly disagreeing with the President's proposal to create and administer a Postsecondary Institution Rating System. [Introduced by Reps. Goodlatte and Capuano on June 10, 2014]

Is Senator Elizabeth Warren a Paper Tiger? Her Bill to Lower Interest Rates Was a Non-Starter

A lot of people think Senator Elizabeth Warren is a fierce advocate for college-loan debtors, a feisty bulldog who strives mightily to get some relief for the millions of young Americans who are burdened with crushing student loans. I once thought so myself.

But I've become skeptical.  So far,Warren's basic thrust has been to advocate for lower interest rates on federal student loans. Lower interest rates will give college-loan borrowers some relief, of course; but lower interest rates will do nothing to stop the spiraling cost of higher education--which has forced students to borrow more and more money every year in order to attend college. 

And lowering interest rates will do nothing to clean up the fraud and abuse in the for-profit college industry--a problem that Warren says little about.

Earlier this week, Warren's bill to lower student-loan interest rates failed in the U.S. Senate, killed by the Republicans.  The bill never had a chance of passing because it included a provision to raise taxes on the wealthy--something Republicans would never vote for.

And of course Warren knew that. Basically the bill was a cynical attempt to paint the Democratic Party as the friend of indebted college students while embarrassing the Republicans by portraying them as hardhearted protectors of the rich.

All fine theater of course, but did anything get accomplished? No--not a damn thing.

I realize of course that getting real student-loan reforms through Congress will be difficult. The for-profit industry and its lobbyists are very powerful; and the for-profits make strategic contributions to key legislators like Speaker of the House John Boehner.

But Warren could render real service simply by publicizing just how bad the student-loan mess is.  She should demand, for example, that the Department of Education release information about the true default rate--not the watered-down rate that it publishes every October.

In addition, she could team up with outgoing Senator Tom Harkin and publicize how the for--profit colleges are exploiting low-income and minority students.

She could advocate for a reform of the Bankruptcy Code so that millions of insolvent student-loan debtors could discharge their loans in the bankruptcy courts.

But no--she is content to sponsor legislation that she knows will go nowhere simply to embarrass the Republicans.

I suspect that Senator Warren's core constituency in Massachusetts--all those corpulent, self-satisfied and arrogant colleges like Harvard, Boston University, Brandeis, etc. etc.--are quite happy to see their senator engage in sound and fury regarding the student loan program. They know Senator Warren's bombast will never lead to any legislation that would threaten their interests.

So just keep yakking, Elizabeth; go right on yakking.


Julie Hirschfield Davis. In School Speech, Obama Deplores Blocking of Student Debt Bill. New York Times, June 12, 2014, p. A20.

Wednesday, June 11, 2014

Like a Secret Drunk Who Hides A Bottle of Bourbon in His Office Drawer, The Higher Education Industry is Addicted to Student Loans But Won't Admit It

Almost everyone agrees that Alcoholics Anonymous has the best treatment program for alcoholics. AA's simple 12-step program is followed by alcoholics all over the United States, and AA's method for treating alcoholics has been adapted for other addictions as well--including the addiction to drugs.

Perhaps the higher education industry should adopt an AA-style 12-step program to treat its addiction to the federal student loan program.  After all, higher education's dependence on federal student aid money really is an addiction. For-profit colleges in particular could not survive a week without regular infusions of federal cash.

Drinking problem? What drinking problem?
photo credit:
But the Obama administration and Arne Duncan's Department of Education treat the student-loan mess as if it were just an irritating  problem and not a full-blown crisis.  It's like Aunt Sally's tolerance for Uncle Ed's drinking binges--she just smiles while reassuring herself that Ed maybe drinks just a wee bit too much.

And President Obama's announcement to expand the Pay As You Earn program shows us that he is in denial about the magnitude of the student-loan crisis.  His administration's decision to expand the program, like its decision to continue strengthening the regulation of the for-profit industry, shows that President Obama and Arne Duncan know that the student-loan mess is serious.  But they want to address the problem like Aunt Sally deals with Uncle Ed's drinking--they just want to water down the whiskey.

Let's face it, in spite of the New York Times' sycophantic praise, Pay As You Earn is nothing more than a plan to stretch students' 10-year student-loan repayment obligations to 20 years.  Yes, this will reduce borrowers' monthly payments, which will give college-loan debtors some short-term relief; but borrowers will be paying on their loans for a majority of their working lives. Is that a real solution?

Second, although I haven't seen any financial analysis to back me up on this observation, I suspect a lot of people who elect the government's income-based repayment options for paying back their loans  won't be making payments large enough to reduce the principal on their debt.  When their loan obligations are discharged after 20 years, millions of people will still owe as much as they borrowed. How can that be a good thing?

So let's look at that 12-step plan.

Step number one is to admit that you have a problem and are powerless to control it.  The Feds could follow that first step by releasing the real student-loan default rate--not that phony three-year rate it releases every October.  According to DOE's latest report, about 15 percent of  recent debtors defaulted within three years of beginning their loan repayment phase; for students who attended for-profit colleges, the rate is 21 percent.

Those numbers are bad but they dramatically understate the true default rate.  Many for-profits, community colleges and some traditional four-year schools have hired so-called "default prevention" firms to contact distressed student borrowers and encourage them to sign up for economic hardship deferments.  Students who obtain these deferments--which are quite easy to get--are not counted as defaulters even though they are not making loan payments.

Just facing up to the reality of how many millions of people are not paying back their loans would be an admission that the student-loan program is out of control.  That's step number 1 of the AA's 12-step plan.

Another important step in AA's 12-step program is to make amends to the people you have injured. I believe that is step number 9.

And of course the Obama administration, Congress and the nation's colleges and universities haven't made amends to the people who have been hurt by the student-loan program.  And until they make amends they haven't done what is necessary to break the higher education industry's dependence on federal student aid money.

What should be done?  As I have tirelessly advocated, Congress needs to amend the Bankruptcy Code to allow insolvent student-loan debtors to discharge their  student loans in bankruptcy so long as they file in good faith.

Second, the federal government should stop garnishing the Social Security checks of elderly student-loan debtors who defaulted on their loans.

And third, the for-profit college industry needs to be shut down.

Of course none of these things are going to happen.  Our government will continue to hide the true magnitude of the student-loan default rate, and it will continue to let millions of people suffer who have no reasonable hope of ever paying off their student loans.

And just like Uncle Ed, who drinks in secret, our nation's colleges and universities will continue abusing students by forcing them to borrow more and more money.  Eventually, Uncle Ed will kill himself from excessive drinking. And eventually, higher education's addiction to federal student aid will destroy the integrity of our nation's colleges and universities, which were once the envy of the world.

No one knows just how Uncle Ed will die--liver disease or a fatal car accident.  And no one knows just how low American higher education will go in terms of its degradation.  But the future is bleak for both of them.


Student Borrowers and the Economy. New York Times, June 11, 2014, p. A20.

Tuesday, June 10, 2014

Bowdoin College Casts Out a Christian Prayer Group: In the Coming Years, Catholics Will Be Pushed Out of the Universities and Public Life

The New York Times carried a front page story today about a decision by Bowdoin College to withdraw recognition of a Christian prayer group as an official student organization.

And what did the Christians do to cause Bowdoin to cast them into the outer darkness? The group refused to allow non-Christians to be appointed as their organizational leaders.

Bowdoin is one of many so-called elite colleges and universities around the country that are withdrawing recognition to Christian student groups, which generally means these groups will be denied access to facilities and services that are open to other student groups--the local S & M club for example.  Vanderbilt has done the same thing, along with Tufts, State University of New York at Buffalo and Hastings Law School in California.

Edith Stein
Later St. Teresa Benedicta of the Cross
(Did not attend Bowdoin)
What happened to the constitutional right to freedom of religion, you may be asking? Didn't the Supreme Court rule in Widmar v. Vincent that a state university could not deny recognition to a Christian student group if it recognized other student organizations?

Unfortunately, the Supreme Court overturned Widmar v. Vincent as a constitutional  precedent, although the Court did not have the courage or the intellectual honesty to say so.  In Christian Legal Society v. Martinez, as cynical a piece of sophistry as anything the Court ever wrote, Justice Ruth Ginsberg upheld a decision by Hastings Law School to deny recognition to the Christian Legal Society because the CLS limited its members to Christians who agreed to abide by traditional Christian beliefs about sexual morality.

Justice Ginsberg said that Hastings had a compelling governmental interest in enforcing an open-to-all-comers policy for all student groups and could deny recognition to any student group that refused to comply. CLS denied membership to anyone who did not commit to the Christian standard of sexual morality, which prohibits all sexual activity outside the relationship of marriage between a woman and a man.

The bottom line is this: According to the morality that prevails at some of America's most prestigious (and expensive) colleges, Christian groups discriminate against people who do not adhere to Christian sexual values.  Thus they should be kicked off campus. In the postmodern academic mind, Christian students who hold traditional religious beliefs about sexual morality are reprehensible--as reprehensible, I suppose as racists.

The universities' anti-Christian policies are not expressly aimed at Catholics.  So far, from what I can gather, it has been evangelical Protestant groups that have been exiled.  But Catholic student organizations are as vulnerable as Protestant groups to expulsion.  Catholics believe, after all, in Christ's real presence in the Eucharist--a belief not held by Protestants. Catholic will never allow a Protestant or non-Catholic to be a leader of a Catholic student organization.

And--under Justice Ginsberg's wacky reasoning, a Catholic student organization that refused to allow an abortion advocate to be an elected leader would also fall afoul of the CLS v. Martinez ruling.

So Catholic student groups are going to be pushed off college campuses. In fact, I'm sure that has already begun happening.

What does this mean? Three things I think:

First of all, the decision by Bowdoin, Tufts, Vanderbilt and other elitist institutions to censor Christian student groups demonstrates just how shallow, vacuous and intellectually dishonest our nation's colleges and universities have become. Based on no basis other than the fashions of the day,  colleges and universities that Americans once trusted to preserve and pass on our nation's cultural and religious heritage have declared that Christianity--or at least traditional forms of Christianity--is a shameful cult that does not deserve to even have a presence on an American college campus.

Of course, the new campus groupthink won't have any effect on the mainstream Protestant organizations--the Methodists, Episcopalians, and the Disciples of Christ.  Those folks don't have any firm religious convictions; their doctrine changes with the whims of the New York Times editorial page. As long as they keep their Times subscription current and do what the Times editorial-page writers tell them to do, they will be fine.

But if you are a Catholic, a Mormon, a Muslim, or a Southern Baptist, then you are a bigot in the minds of many campus administrators; and it will be the job of the university to re-educate you--just as China re-educated its dissidents during the Cultural Revolution.

But at least the Chinese didn't require its nonconformists to pay outrageous tuition to brain wash you.  The rural re-education camps were free!

Second,the higher education communities' accelerating trend into mendacity, deceit, and sophistry will push faithful Catholics out of the nation's leading universities and out of the professions, which have shown a distressing trend to censor Christian views.  The day will come when law, medicine, education, counseling, and academia in general will be closed to anyone who professes a belief in the doctrines and tenets of the Catholic faith.

And third, I think Catholics and evangelical Protestants will grow closer as the kulterkampe expands its reach and America's intellectual elites become bolder in their bigotry.  Personally, I have a growing admiration for our Protestant brothers and sisters who have taken their place in the front lines in the fight against abortion. And I believe evangelical Protestants are looking more tolerantly toward Catholicism.

Now may be an opportunity for Catholics to reach out and evangelize the evangelical Protestants. I think we might be surprised by how receptive they are to our Catholic faith.

Certainly, as evangelical Protestants and Catholics go down into the catacombs together, we will have plenty of time to contemplate the Gospel and to ask ourselves what God requires of us as the Postmodern Age sweeps aside the culture, the traditions and the moral principles that are the bedrock of Western Civilization.

And while we are down in those catacombs, let us mediate on the life of St. Edith Stein, who was a great intellectual who held two doctoral degrees and has been named a Doctor of the Catholic Church.  If Edith were alive today, her views would not be welcome at Bowdoin.  I don't think Bowdoin would gas her as the Nazis did at Auschwitz; but  in the coming years, who knows how far the new anti-Christian bigotry will go?


 Michael Paulson. Colleges and Evangelicals Collide on Bias Policy. New York Times, June 10, 2014, p. 1.

Monday, June 9, 2014

For what we have done to you, we are truly sorry: The Baby Boomers should apologize to the Millennial Generation for the student-loan mess

Frank Bruni wrote a long op ed essay in yesterday's Sunday Times about the wrongs the Baby Boomers have committed against the Millennial generation.   According to Bruni, the Baby Boomers are leaving today's youth with towering problems: climate change, a sick economy, and a mounting national debt. Bruni quotes former governor and U.S. Senator Bob Kerrey as saying the nation is spending too much on the last generation (Medicare, Social Security, and Veterans' benefits) and not enough on the next one.

Dear Millennnials: We're Sorry for the Student Loan Crisis (burp)!
Kerrey is right of course, and so is Bruni. The Baby Boomers have bequeathed the young people of our nation with a host of problems--problems that are only going to get worse because this generation doesn't have the courage or integrity to face them.

Bruni's op ed essay was in harmony with an editorial that appeared in the same issue of the Times entitled "Starting Out Behind." The Times points out that young people are graduating from college with massive indebtedness only to face a sickly job market.  Unemployment among people in their early 20s is higher than the national average, and underemployment (those people who are unemployed, employed part-time or who have given up looking for work) is very high--16.8 percent.

The Times editorial quoted statistics showing that 44 percent of today's college graduates hold jobs that do not require a college education.  There was a time, the Times observed, when people working in jobs that did not require a college degree made decent money--tradespeople like plumbers and electricians, union workers, etc. Today, a lot of college-educated young people are working as waitresses, bar tenders and store clerks.

Perhaps the most disturbing bit of data the Times mentioned is the fact that more than half of young adults (55 percent) still live with their parents. Nobody wants to see that number go higher.

The Times editorial did not mention the burgeoning student-loan indebtedness that is crushing this nation's young adults. And this is odd, because  of all the problems this generation passed on to the Millennial generation, the federal student-loan mess is the most egregious and the easiest one to fix.

Addressing climate change,  the national debt, and our sickly national economy are complicated problems with no easy or certain solution. But we could easily do some things to ease the burden of student-loan indebtedness on our nation's young people; and we could do these things today.  Here are a few things we could do that would be helpful:

1) The federal government could remove any higher education institution from the federal student loan program that does not freeze tuition and fees at current levels.   In essence, our government would be telling the nation's porky colleges and universities that the party is over.

2) Congress could amend the Bankruptcy Code to allow insolvent student-loan debtors to discharge their loans in the bankruptcy courts so long as they file for bankruptcy in good faith.

3) The Obama Administration could instruct the Internal Revenue Service to stop garnishing the Social Security checks of elderly people who defaulted on their college loans.

4) Congress could easily shut down the private student-loan industry by making it easier for distressed debtors to discharge their private student loans in bankruptcy.

5) Congress could shut down the for-profit college industry, which has the highest student-loan default rates and which is riddled with fraud and abuse,  simply by making all for-profit colleges ineligible to participate in the federal student aid program.

Of course none of these things are going to happen.  So far, the Obama administration, which is fully aware of the magnitude of the student-loan crisis, can think of nothing better to do than extend students' loan repayment period from 10 years to 20 or 25 years.  Not very bold or creative in my opinion.

But Frank Bruni is right: the Baby Boomers generation owes the Millennial generation an apology.  But it should apologize for more than global warning and the national debt; it should say it is sorry for corrupting higher education with a corpulent and abusive federal student loan program that has put this nation's young people in debt to the tune of $1.2 trillion.


Frank Bruni. Dear Millennials, We're Sorry. New York Times, June 8, 2014, Sunday Review Section, p. 3.

Editorial. Starting Out Behind. New York Times, June 8, 2014, Sunday Review Section, p. 10.

Sunday, June 8, 2014

Workin' for the Man: President Obama's Disasterous Plan to Expand Income-Based Repayment Programs for Student Loan Debtors

Tomorrow, President Obama is expected to announce an expansion of his "Pay as You Earn" income-based repayment program for student loan debtors. This program,  which Obama initiated by executive action in 2011, allows student-loan debtors to pay roughly 10 percent of their income on their loans for a period of 20 years.  (The exact formula is a bit more complicated that.)  At the end of the 20-year repayment period, any unpaid loan balance will be forgiven.

Passing the student-loan mess on to the next president
Pay as You Earn is popular with student debtors because it is more generous than the other income-based repayment (IBRP) options. One major program requires debtors to pay 15 percent of their income over a period of 25 years.

But a lot of student debtors don't qualify for Pay As You Earn under present regulations. According to the New York Times, Obama plans to extend eligibility to an additional 5 million student-loan borrowers, including those who took out loans before October 2007. 

Is Pay As You Earn a good thing for the nation's distressed student-loan debtors. Yes it is--at least in the short term. For people struggling to pay mountains of debt under the standard 10-year repayment plan, Pas As You Earn will lower monthly payments substantially.  People who are currently paying 15 percent of their income under a 25-year IBRP will be delighted to switch to Obama's more generous Pay As-You Earn program.  People who are unemployed or underemployed will be particularly grateful, because if their income falls below the official poverty level, they won't have to make any monthly payments at all.

Is there a down side to Pay As You Earn? You bet.

First of all, all the income-base repayment plans remove all incentives for student borrowers to limit the amount of money they borrow. If their loan payments are based on their income and not the amount they borrow, then there is no reason not to borrow as much money as you can.

Second, Pay As You Earn and other IBRPs do nothing to slow the burgeoning cost of going to college.  Colleges have no incentive to keep their costs down, because they know students will simply borrow more money to cover tuition hikes.  What do colleges care if their graduates are making student-loan payments for 20 years?

Third--and most significantly, these long-term repayment plans are going to fundamentally change the way Americans view postsecondary education and the world of work. There was a time when low-income individuals worked their way through college, graduated with no debt, and entered the workforce determined to buy homes, start families, and begin the confident climb up the economic ladder.

Now, 18- and 19-year olds are going to begin college knowing that they will pay for their postsecondary education by donating some percentage of their income to the federal government over the majority of their working lives.  In essence, they will become indentured servants for the government--sharecroppers if you will.

I think this arrangement will foster cynicism among the young, because they will realize on some level that they have been forced into unreasonable levels of indebtedness because colleges refuse to control their costs. They will see university presidents like NYU's John Sexton make outrageous amounts of money while they sign up for long-term college-loan repayment plans that they will not pay off until they are in their 40s and 50s.

And, since they won't have to pay anything under Pay As You Earn if they are unemployed or live below the poverty level, I think many of them will postpone going to work. Many will figure that it makes sense to travel or take low-wage jobs in exotic locales rather than seek more remunerative employment. And the incentive to work "off the books" will increase, because people in IBRPS who enter the cash economy will not only avoid paying taxes and making Social Security contributions, they will avoid making student-loan payments as well.

Moreover, once these college-going young people figure out that their payments will be based on their incomes and not the amount they borrow, they will borrow as much as they can.

I appreciate the President's efforts to provide overburdened college-loan debtors some immediate relief by offering plans to lower monthly loan payments while extending the loan repayment period. Unfortunately, in the long run, the results will be catastrophic.

In reality, President Obama is simply passing the student-loan mess on to the next president to deal with.  Millions of people may see their student-loan payments go down in the short-term, but they will be significantly extending the length of their loan repayment period. Most Pay-As-You-Earn participants --I predict--won't be making loan payments large enough to cover accruing interest  or pay down the principal on their notes--which means they won't really be paying their loans back at all. 

And meantime--total student-loan indebtedness--now more than $1 trillion dollars--will continue to grow and grow.


Jackie Calmes. Obama Plans Steps to Ease Student Debt. New York Times, June 8, 2014, p. 17.