Monday, March 28, 2016

Law graduates can discharge bar-exam loans in bankruptcy but not student loans to go to law school

Lesley Campbell graduated from Pace University School of Law in 2009, but she didn't pass the bar exam. According to the Wall Street Journal, her total student-loan debt is now nearly $300,000.

After obtaining her JD degree, Campbell  took a secretarial job that paid $49,000 a year; and she filed for bankruptcy in 2014. Although she did not discharge her student loans, a bankruptcy judge did allow her to discharge a $15,000 loan she obtained from Citibank to pay for her bar review course.

A few brief comments on Ms. Campbell's case. First, people who take on $300,000 in student-loan debt to go to law school and don't pass the bar exam obviously suffer a financial catastrophe. Unless they obtain bankruptcy relief, most will never recover. In other words, for these people, going to law school destroyed their financial future instead of making it brighter.

Second, I was amazed by how much it costs just to take the bar-exam review course--$15,000! When I went to law school (a long time ago, I admit), the bar review course cost only $600, which I paid in installments with money I made working as a part-time law clerk. If I were graduating from law school today, I would be forced to take out a sizable loan just to prepare for my bar exam.

Finally, I was struck by the heartlessness of the online comments that followed the Wall Street Journal article about Ms. Campbell. One person commented that a person who would borrow $300,000 to attend law school obviously isn't smart enough to pass the bar.

As many commentators have written, a bleak job market and the skyrocketing cost of law-school tuition have combined to created a crisis in the legal profession.On average, people leave law school with $140,000 in student-loan debt only to enter an economy that only needs one lawyer for every two law-school graduates.

Greedy law schools and the American Bar Association created this crisis. The law schools set tuition levels far too high, and the ABA allowed law schools to admit far too many students.  As a result, thousands of law-school graduates share Leslie Campbell's predicament-- an onerous level of student-loan debt and no law job.

The ABA and the law schools have a moral obligation to advocate for reforms in the Bankruptcy Code that will allow impoverished law-school graduates to discharge their student loans in bankruptcy. But we haven't heard a peep out of the law schools or the ABA regarding bankruptcy reform for student-loan debtors.

References

Katy Stech. Judge Says Bankrupt Law Grads Can Cancel Bar Loans. Wall Street Journal, March 25, 2016.  Accessible at http://www.wsj.com/articles/judge-says-bankrupt-law-grads-can-cancel-bar-loans-1458941328

Saturday, March 26, 2016

Hillary dines with George Clooney at a California fundraising dinner. I'd rather eat a baloney sandwich with Bernie Sanders

Yeah and I'll have something to brag about
Yeah, something to brag about in you

Something to Brag About 
Lyrics by Bobby Braddock
Sung by George Jones & Tammy Wynette

An email from the Bernie campaign alerted me to Hillary's upcoming fundraising dinner in San Francisco. George Clooney will be the star attraction at a dinner that will cost up to $350,000 a plate!

Funny I wasn't invited. I'm sure it was just an oversight. Or maybe George is still sore that we didn't invite him to our last Knights of Columbus fish fry at Our Lady of Perpetual Help.

This kind of event tells us all we need to know about Hillary Clinton, the racketeer politician who wears frumpy pantsuits and makes speeches to bankers at a quarter million dollars a pop. And she won't release the text of those speeches, even though her sycophantic friend, the New York Times, timidly suggested that she do so.

No, Hillary thinks she is going to be President because she is entitled to it, and it is simply beneath her to even respond to queries about her fundraising activities. She's cozied up to all the right people, gotten money from the likes of Goldman Sachs, and promised the insiders that they'll be taken care of if she takes over the Oval Office. 

Do the Democrats in New Hampshire want her? The Democrats in Utah? The Democrats in Oklahoma, Kansas, or Nebraska? In Michigan, Alaska, Hawaii or Washington? No, they don't; and Hillary doesn't give a damn.

Because the only  people Hillary answers to are arrogant rich oligarchs like George Soros, who donated $8 million to Hillary's Super Pac.

As for me, I am proud to have cast my vote for Bernie Sanders, and I'm still making modest contributions to his campaign. I would rather eat a baloney sandwich from a paper bag with Bernie than dine on caviar and filet mignon with Hillary Clinton and George Clooney.

And whether Bernie ultimately wins or loses, when this election is over, those of us who voted for him can take pride in the fact that we cast our ballots for decency. As George Jones and Tammy Wynette might have put it, "We'll have somethin' to brag about" on inauguration day even if Hillary becomes our next President.

Friday, March 25, 2016

Unemployed Lawyers with Student Loan Debt: The Law Schools Should Be Forced To Bear Part of The Cost of Law School Loans

Recently, I wrote about Anna Alaburda, who sued Thomas Jefferson School of Law, her law school alma mater. Alaburda spent  $150,000 to attend TJSL. After graduating in 2008, she was unable to find a remunerative law job; and her student loan debt grew to $170,000. She claimed she was induced to enroll at Thomas Jefferson by the law school's false assertions that most of its graduates got well-paying legal jobs.

Alaburda's case went to trial, and this week a jury ruled against her.  Alaburda's loss is the latest in a string of defeats by unemployed or underemployed law school graduates who sued their law schools for fraud or misrepresentation.

Some unemployed or underemployed lawyers have filed for bankruptcy to discharge their student loans, but they've had mixed success. Michael Hedlund, a graduate of Willamette Law School, succeeded in getting a partial discharge of his law-school debt, but he endured ten years of litigation before the Ninth Circuit Court of Appeals rendered a decision in his favor in 2013.

More recently, two heavily indebted law-school graduates were denied bankruptcy relief. Mark Tetzlaff, racked up thousands of dollars in debt to pursue post-secondary studies; and he eventually received an MBA and a law degree from Florida Coastal School of Law, a bottom-tier law school. Tetzlaff actually paid off his law school debt, which he was required to do in order to get Florida Coastal to release his transcripts. But he never obtained a good job as an attorney, and he was unable to pay off other student loans. When he filed for bankruptcy in 2012, he owed $260,000 in student-loan debt.

The Eighth Circuit was not sympathetic to Mr. Tetzlaff's plight and refused to discharge his student loans in a decision released last year. And the U.S. Supreme Court refused to hear his appeal.

Likewise, a bankruptcy court in California ruled against Mark Lilly in 2013. Like Mr. Tetzlaff, Mr. Lilly took on a massive amount of student-loan debt, including debt he acquired to obtain an MBA and a law degree from McGeorge School of Law in Sacramento, which is not a top-ranked law school. His request for bankruptcy relief was denied, but he never found work as a lawyer.

This is the tragic reality: the legal job market has imploded, but law schools have not reduced enrollments sufficiently in response to the shrinking demand for lawyers. Law schools continue to pump out far more attorneys than American society needs, and many law schools have lowered their admissions standards just to get students in the door. For people like Mark Tetzlaff and Mark Lilly, who graduated from mediocre law schools, there are virtually no jobs. In California, for example, there are now 2.5 law graduates for every job opening.

Thus far, law graduates have borne most of the suffering created by a shrinking job market, especially graduates who received their degrees from nonprestigious law schools like Florida Coastal, Thomas Jefferson, and McGeorge. On average, law graduates who borrow to finance their studies acquire $140,000 in student-loan debt. Graduates of Thomas Jefferson School of Law, where Anna Alaburda obtained her degree, now graduate with an average debt load of $180,000! Many simply can't find jobs that will allow them to pay off their student loans.

In my view, some of the suffering experienced by unemployed law graduates should be shifted to the law schools, which have charged students exorbitant tuition and are graduating more students than our economy can absorb. These schools purport to maintain the highest ethical standards, but in reality, many of them are making admissions decisions based on their revenue needs and not the welfare of their students.

Whether or not they are guilty of misrepresentation, as Ms. Alaburda asserted  against TJSL, many law schools are certainly guilty of behaving contrary to the public interest. Surely, these schools should help their unemployed graduates pay back massive student-loan debt that was acquired to obtain degrees that are virtually worthless.

References

Hedlund v. Educ. Resources Inst., Inc., 718 F.3d 848 (9th Cir. 2013).

Lilly v. Illinois Student Assistance Comm’n, 538 B.R. 45 (Bankr. S.D. Cal. 2013).

Elizabeth Olsen. Law Student Gets Her Day in Court. New York Times, March 6, 2016. http://www.nytimes.com/2016/03/07/business/dealbook/court-to-hear-suit-accusing-law-school-of-inflating-job-data.html?smid=fb-nytimes&smtyp=cur&_r=1

Tetzlaff v. Educational Credit Management Corporation794 F.3d 756 (7th Cir. 2015). Accessible at http://caselaw.findlaw.com/us-7th-circuit/1708687.html

Thomas M. Cooley Law School v. Kurzon Strauss, LLP, 759 F.3d 522 (6th Cir. 2014). Accessible at http://www.ca6.uscourts.gov/opinions.pdf/14a0139p-06.pdf

Gary Warth. Jury rejects fraud claim against law school. San Diego Union-Tribune, March 24, 2016. Accessible at http://www.sandiegouniontribune.com/news/2016/mar/24/thomas-jefferson-law-school-verdict/

Joshua Wright. The Oversaturated Job Market for Lawyers Continues and On-the-Side Legal Work Grows. EMSI blog, January 10, 2014. Accessible at: http://www.economicmodeling.com/2014/01/10/the-oversatured-job-market-for-lawyers-continues/

Monday, March 21, 2016

Student Loan Bankruptcy and Educational Credit Management Corporation: Who pays the ECMC lawyers?


I know quite a bit about the student loan crisis. After studying both governmental and nongovernmental documents, I know the student-loan default rate is much higher than the government reports. According to the Department of Eduction, the three-year default rate is about 10 percent, but the people who stop paying on their loans is at least 30 percent.  And among people who attended for-profit colleges, the default rate is at least 50 percent.

I also know a lot about college borrowers who try to discharge their student loans in bankruptcy. Shedding student loans through bankruptcy is difficult, but over the past three years or so, a number of bankruptcy courts have ruled in favor of college-loan debtors, showing both compassion and common sense.

But I dont' know who pays the lawyers for the student-debt collection agencies that fight student debtors in the bankruptcy courts or how much those lawyers get paid. 

In particular, who paid the lawyers for Educational Credit Management Corporation, which opposed bankruptcy relief for Janet Roth, an elderly woman with chronic health problems who was living on  Social Security income of only  $774 a month?  And ECMC lawyers didn't just fight Ms. Roth in the bankruptcy court, it fought her all the way to the Bankruptcy Appellate Panel of the Ninth Circuit Court of Appeals. And everybody knew that Jane Roth's income was so low that she would have paid nothing on her student loans even if she lost her case. 

Who paid the ECMC lawyers who appealed a bankruptcy decision in favor of George and Melanie Johnson, a couple with two school-age children who lost their home in a foreclosure proceeding?

And who ultimately paid the tab for ECMC to fight bankruptcy relief for Janice Stevenson, a woman in her 50s with a history of homelessness who was living on only at thousand dollars a month?

A New York Times article reported that ECMC has been accused of ruthless loan-collection tactics, and I would say ruthless is putting it mildly. And take my word for it, ECMC lawyers aren't working for free.

To paraphrase the great Lynyrd Skynyrd, I know a little about student loans and bankruptcy, and baby I can guess the rest. I think the taxpayers are paying  ECMC's lawyers--either directly or indirectly. 

In a letter issued last July, Assistant Deputy Secretary of Education Lynne Mahaffie wrote that student-loan debt collectors should take cost into account when deciding when to oppose bankruptcy discharge for distressed college-loan borrowers. But if ECMC is absorbing the cost of attorney fees to fight Jane Roth, Janice Stevenson, and Mr. and Mrs.Johnson, why would the Department of Education care what ECMC is spending in its collection efforts? 

Certainly ECMC wasn't taking cost into account when it dragged Janet Roth through the federal courts for several years.  There could have been no monetary gain to the taxpayers in fighting bankruptcy relief for Ms. Roth.

In the months to come, we will see if DOE really meant it when it authorized Mahaffie to say that DOE and its student-loan debt collectors would not fight bankruptcy discharge of student loans when it is not cost effective to do so.

My guess is this. ECMC will continue harassing student-loan debtors in the bankruptcy courts as long as its lawyers get paid for doing so.  So if Lynn Mahaffie really meant what she said in that 2015 letter, DOE needs to change the system whereby ECMC lawyers get rich hounding people like Jane Roth, Janice Stevenson, and George and Melanie Johnson.

References

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014. Acccessible at http://www.nytimes.com/2014/01/02/us/loan-monitor-is-accused-of-ruthless-tactics-on-student-debt.html?_r=0

Lynn Mahaffie. Undue Hardship Discharge of Title IV Loans in Bankruptcy Adversary Proceedings, July 7, 2015, GEN 15-13.  Accesible at https://ifap.ed.gov/dpcletters/attachments/GEN1513.pdf

Roth v. Educational Credit Management Corporation, 490 B.R. 908 (9th Cir. BAP 2013). Accessible at http://cdn.ca9.uscourts.gov/datastore/bap/2013/04/16/RothV%20ECMC%20opinion-FINAL%20AZ-11-1233.pdf




Student Loan Bankruptcy and Educational Credit Management Corporation: Who pays the ECMC lawyers?

    Say I know a little
    I know a little about it
    I know a little
    I know a little 'bout it
    I know a little 'bout love
    And baby I can guess the rest.

Lynyrd Skynyrd
I Know A Little

I know quite a bit about the student loan crisis. After studying both governmental and nongovernmental documents, I know the student-loan default rate is much higher than the government reports. According to the Department of Eduction, the three-year default rate is about 10 percent, but the people who stop paying on their loans is at least 30 percent.  And among people who attended for-profit colleges, the default rate is at least 50 percent.

I also know a lot about college borrowers who try to discharge their student loans in bankruptcy. Shedding student loans through bankruptcy is difficult, but over the past three years or so, a number of bankruptcy courts have ruled in favor of college-loan debtors, showing both compassion and common sense.

But I dont' know who pays the lawyers for the student-debt collection agencies that fight student debtors in the bankruptcy courts or how much those lawyers get paid. 

In particular, who paid the lawyers for Educational Credit Management Corporation, which opposed bankruptcy relief for Janet Roth, an elderly woman with chronic health problems who was living on  Social Security income of only  $774 a month?  And ECMC lawyers didn't just fight Ms. Roth in the bankruptcy court, it fought her all the way to the Bankruptcy Appellate Panel of the Ninth Circuit Court of Appeals. And everybody knew that Jane Roth's income was so low that she would have paid nothing on her student loans even if she lost her case. 

Who paid the ECMC lawyers who appealed a bankruptcy decision in favor of George and Melanie Johnson, a couple with two school-age children who lost their home in a foreclosure proceeding?

And who ultimately paid the tab for ECMC to fight bankruptcy relief for Janice Stevenson, a woman in her 50s with a history of homelessness who was living on only at thousand dollars a month?

A New York Times article reported that ECMC has been accused of ruthless loan-collection tactics, and I would say ruthless is putting it mildly. And take my word for it, ECMC lawyers aren't working for free.

To paraphrase the great Lynyrd Skynyrd, I know a little about student loans and bankruptcy, and baby I can guess the rest. I think the taxpayers are paying the fees of ECMC's lawyers--either directly or indirectly. 

In a letter issued last July, Assistant Deputy Secretary of Education Lynne Mahaffie wrote that student-loan debt collectors should take cost into account when deciding when to oppose bankruptcy discharge for distressed college-loan borrowers. But if ECMC is absorbing the cost of attorney fees to fight Jane Roth, Janice Stevenson, and Mr. and Mrs.Johnson, why would the Department of Education care what ECMC is spending in its collection efforts? 

Certainly ECMC wasn't taking cost into account when it dragged Janet Roth through the federal courts for several years.  There could have been no monetary gain to the taxpayers in fighting bankruptcy relief for Ms. Roth.

In the months to come, we will see if DOE really meant it when it authorized Mahaffie to say that DOE and its student-loan debt collectors would not fight bankruptcy discharge of student loans when it is not cost effective to do so.

My guess is this. ECMC will continue harassing student-loan debtors in the bankruptcy courts as long as its lawyers get paid for doing so.  So if Lynn Mahaffie really meant what she said in that 2015 letter, DOE needs to change the system whereby ECMC lawyers get rich hounding people like Jane Roth, Janice Stevenson, and George and Melanie Johnson.

References

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014. Acccessible at http://www.nytimes.com/2014/01/02/us/loan-monitor-is-accused-of-ruthless-tactics-on-student-debt.html?_r=0

Lynn Mahaffie. Undue Hardship Discharge of Title IV Loans in Bankruptcy Adversary Proceedings, July 7, 2015, GEN 15-13.  Accesible at https://ifap.ed.gov/dpcletters/attachments/GEN1513.pdf

Roth v. Educational Credit Management Corporation, 490 B.R. 908 (9th Cir. BAP 2013). Accessible at http://cdn.ca9.uscourts.gov/datastore/bap/2013/04/16/RothV%20ECMC%20opinion-FINAL%20AZ-11-1233.pdf




Friday, March 18, 2016

Sujit Choudhry, Dean of UC Berkeley Law School, resigns deanship in wake of sexual harassment charge but stays on faculty as tenured professor. Shouldn't he be fired?

Everyone in higher education is a progressive--the new word for liberal. Academics deplore all forms of discrimination: ageism, racism, homophobia, abilityism, etc. But the scholarly community particularly despises sexism in all its forms: sexual harassment, groping, sexist jokes, and the denigration of women in the workplace.  Several universities have harshly disciplined male students for behaving boorishly to their female classmates--sometimes without due process.

But higher education's intolerance toward sexual harassment only extends to students--not college administrators. When administrators misbehave, universities frequently try to cover up the scandal; and often the offender is asked to do no more than step down from an administrative post and return to the faculty.

And this brings me to the story of Sujit Choudhry, who stepped down as Dean of UC Berkeley Law School after he was sued for sexual harassment by a female subordinate, Tyann Sorrell. The University investigated Sorrell's complaint before she filed her lawsuit and concluded that Choudhry had indeed been guilty of sexual misconduct.

But the University just gave Choudhry a slap on the wrist. He received a 10 percent pay cut for one year--reducing his half-million dollar salary by about $50,000. Meanwhile, Sorrell, the victim in the case, was put on paid leave.

This sorry episode came to public light when Sorrell sued, arguing that the penalty against Choudhry was too light. Choudry stepped down and is now a tenured law professor at Berkeley, making a paltry $284,000 a year.

This is how the modern American university works these days. College administrators howl like Puritans at the Salem witch trials when a student behaves too aggressively toward a date at a frat party. But when an insider gets caught with his hands in the wrong places, he gets treated with kid gloves.

But let's ask this question. How did Sujit Choudhry become Dean of a prestigious law school in the first place? He is a Canadian (born in India) who doesn't even have an American law degree, although he did acquire a master's degree in law (a nine-month program) from Harvard Law School.

Choudhry is described as a renowned expert in comparative international law, and he does have a modest record of publishing law review articles.  His article entitled "Method In Comparative Constitutional Law: A Comment On Law and Versteeg," published in the New York  University Law Review, is a page-turner. And I'm sure you've read his groundbreaking essay entitled "Living Originalism in India," which was published in the Yale Journal of Law and Humanities. It's been on Best Seller lists for months.

But should an American law school pay this guy a half million dollars a year to be a dean or even a quarter million dollars a year to be a professor? And when the university concluded that he harassed a female subordinate, shouldn't he have been fired?

Among those who borrow to pay for their studies, Berkeley law students now graduate with more than $140,000 in student-loan debt. Berkeley law students now know where their money is going--to guys like Sujit Choudhry.

References

Nanette Aimov. UC Berkely law dean Choudhry resigns amid harassment scandal. San Francisco Chronicle, March 20, 2016. Accessible at http://www.sfgate.com/education/article/UC-Berkeley-law-dean-resigns-amid-harassment-6882570.php

Sujit Choudhry. Method In Comparative Constitutional Law: A Comment On Law and Versteeg. 87 New York University Law Review 2078 (2012). Accessible at http://www.nyulawreview.org/issues/volume-87-number-6/method-comparative-constitutional-law-comment-law-and-versteeg

Sujit Choudhry, Living Originalism in India? "Our Law" and Comparative Constitutional Law. 25 Yale Journal of Law & the Humanities (2013).

Jacob Gershman. UC Berkeley Law School Dean resigns Amid Sexual Harassment Complaint. Wall Street Journal, March 10, 2016. Accessible at http://blogs.wsj.com/law/2016/03/10/uc-berkeley-dean-resigns-amid-sexual-harassment-complaint/

Jeff Schmitt. The Leaders in Student Debt. Tipping The Scales, March 31, 2014.  http://tippingthescales.com/2014/03/which-law-schools-lead-in-student-debt/

Wednesday, March 16, 2016

Hucksters preying on student-loan debtors: They should go to jail

In December 2014, the Consumer Financial Protection Bureau filed a federal lawsuit against an outfit called Student Loan Processing.US (SLP) and James Krause, the company's sole owner. CFPB accused Krause and SLP of preying on unsuspecting student-loan borrowers who were looking for help in obtaining relief from oppressive student-loan debt.

According to CFPB, the defendants "charged consumers illegal upfront enrollment fees before providing any services, deceived customers about the cost of their services, and falsely represented an affiliation with the Department of Education." Specifically, the Bureau accused Krause and SLP of charging student-loan debtors an upfront fee for debt-relief services that debtors could have have obtained for themselves for free and then charging a $39 monthly fee every month for the entire repayment period.CFPB claimed in its complaint that SLP received "millions of dollars" from student-loan debtors and that it "misrepresented to consumers, directly or by implication, that they were agents of the U.S. Department of Education or were affiliated with it in some capacity."

Apparently, student borrowers who used SLP's services to refinance their loan in a long-term income-based repayment plan would pay $39 a month to SLP for the entire repayment period, which could be up to 20 or 25 years! And borrowers whose income was so low that they would pay nothing under an income-based repayment plan would still pay SLP $39 a month.

CFB announced this week that the case is about to be settled. The Bureau released a proposed stipulated final judgment whereby SLP will stop its activities but will "neither admit nor deny any allegations in [CFPB's]complaint" except as stated in the court's final order.

So--case closed.

But Student Loan Processing isn't the only huckster preying on distressed student-loan debtors. In a Forbes.com article, Maggie McGrath listed nine other  companies operating in several states that were being sued by state or federal agencies for engaging in similar practices.

So what can we say about Student Loan Processing.US and similar companies? First of all,the government should do more than sue these predators in civil court; people who profit from preying on desperate student debtors should be prosecuted and sent to jail.

And if it is not a crime to do what CFPB accused SLP of doing, then it should be. President Obama should recommend new legislation to criminalize predatory behavior against student debtors, and Congress should take action.

In my view, these sleazy so-called "student debt relief" companies are just another sign that the government's wild scheme of moving college-loan borrowers into long-term income-based repayment plans is a failure. Even if these poor debtors are not fleeced by hucksters, they are forced into repayment plans that can stretch over their entire lives.  As I explained in an earlier blog, Brenda Butler, who graduated from college in 1995, struggled for many years to repay her student loans. Although she repaid more than the amount she borrowed, the total amount she owed doubled due to penalties and accrued interest. Finally, she defaulted and then entered into a 25-year income-based repayment plan. Butler won't be finished paying off her student-loan debt until 2037--42 years after graduating from college! And a heartless bankruptcy judge denied her request for a discharge of her student-loan debt.

Most people who sign up for long-term repayment plans will make monthly loan payments that are so low that interest continues to accrue, which means these borrowers will never pay off their loans. Thus, they will be on a treadmill, making token payments for as long as a quarter of a century.

There is only one way out of this quagmire of student-loan debt--now totally $1.3 trillion  People who can't pay back their student loans and still maintain a decent standard of living should be able to discharge their loan obligations in bankruptcy court.

Some day, this simple reality will be apparent to everyone. But until that day comes, millions of Americans are suffering.

References

CFPB Takes Action to Shut Down Illegal Student Debt Relief Scheme. Consumer Financial Protection Bureau, March 15, 2016. Accessible at http://www.consumerfinance.gov/newsroom/cfpb-takes-action-to-shut-down-illegal-student-debt-relief-scheme/

Maggie McGrath. Student Debt Dishonor Roll: Meet the Hucksters Preying on Desperate Student Debtors. Forbes.com, July 29, 2015. Accessible at http://www.forbes.com/sites/maggiemcgrath/2015/07/29/student-debt-dishonor-roll/#2d2957823a34





Monday, March 14, 2016

Ann Weaver Hart, President of University of Arizona, takes money from DeVry Education Group: Why can't our universities find decent leaders?

Keep your life free from love of money, and be content with what you have . . . .

Hebrews 13:5

A couple of weeks ago, Linda Katehi, Chancellor of the University of California at Davis, got caught taking money from two outside corporations, which paid her hundreds of thousands of dollars for serving on their governing boards. Katehi, who makes more than $400,000 as chancellor of UC Davis, got $170,000 in cash and stock from DeVry Education Group, owner of DeVry University; and she got an additional $400,000 for three years' service on the board of Wiley & Sons, a textbook company.

Do you see any conflict of interest here? Katehi doesn't. But at least Katehi had the decency to be embarrassed by these disclosures. She resigned from both boards and donated part of her unseemly profits to a scholarship fund.

Ann Weaver Hart, President of the University of Arizona, also got caught taking money from DeVry; but Hart has decided to brazen it out. She makes $665,000 as head of UA, but apparently she can't make ends meet. She is going to stay on the DeVry board, and rake in the extra 170 K.

Is UA's governing board upset by Hart's double dipping? Absolutely not. Eileen Klein, president of the Arizona Board of Regents, said this: "I do not question Dr. Hart's commitment to the University of Arizona. It is strong and the university's brand or status will hardly be undone by her decision," Klein wrote.

Brand? Regent President Klein is concerned about UA's brand? How about some concern for honesty and decency? How about some concern about President Hart's ability to be a role model for students?

All across America, college students have been forced to borrow more and more money to get a college degree. Meanwhile, the universities--both public and private--insist on hiring venal, self-serving, arrogant presidents like Ann Weaver Hart and Linda Katehi.

It makes absolutely no difference to these universities or their sleazy governing boards whether the public is losing confidence in higher education as a moral enterprise. They don't care if the faculty protest or issue votes of no confidence.  New York University President John Sexton was the target of four votes of no confidence by NYU faculty, but he sailed into retirement with a nice severance package.

Today's American university leaders care about little more than money, power, and prestige. How does our money-mad institution stack up in the U.S News & World Report ranking? How much loot is going into our endowment fund? How many robber barons have given us money to construct buildings which we obligingly name after the oligarch who gave us the cash? How many lucrative patents have we acquired? What kind of scotch will we serve at the next fundraising event? What kind of retirement package am I going to get?

And this whole stinking, corrupt enterprise is propped up by federal student-aid money that the universities cannot live without. So when Bernie Sanders suggested a free college education for everyone, the higher education industry went into hysterics.

Have any of these greedy, self-absorbed political hacks suggested humane debt relief for the millions of people who are shackled by student loans they can't pay back? Have Linda Katehi, Ann Weaver Hart, John Sexton, or Gorden Gee made any serious suggestions for keeping college costs down?

No they haven't.  They are too obsessed with feathering their own nests to show any compassion or sympathy for the students they pretend to serve.

Ann Weaver Hart: Do you really expect me to live on two-thirds of a million dollars a year?



References

Carol Ann Alaimo. University of Arizona's Hart unbowed by criticism over DeVry position. Arizona Daily Star, March 12, 2015. Acessible at http://tucson.com/news/local/education/college/university-of-arizona-s-hart-unbowed-by-criticism-over-devry/article_2217d604-2eea-507a-bba0-08653d00a904.html

Diana Lambert and Alexei Koseff. UC Davis chancellor apologizes, will donate textbook stock to student scholarships. Sacramento Bee, March 4, 2016. Accessible at http://www.sacbee.com/news/investigations/the-public-eye/article64041327.html







Saturday, March 12, 2016

Thomas Jefferson School of Law is being sued for misrepresentation by Anna Alaburda, a TJSL graduate. Let's hope she wins

Thomas Jefferson School of Law in San Diego is a defendant in a lawsuit filed by Anna Alaburda, one its graduates. The case may go to trial this week.

Alaburda, who received her JD from TJSL in 2008, sued the law school in a California state court, claiming the school misrepresented the employment statistics of its graduates. Alaburda argues that she enrolled at Thomas Jefferson based partly on the school's representations about its graduates' job prospects, but that the school dispensed misleading information. Since graduating, Alaburda has not found a full-time attorney's job.

As a New York Times story reported, Alaburda is not the first law school graduate to sue her alma mater, but she is the first to get her case to trial. Judges in Illinois, New York and Michigan have dismissed similar suits based on the grounds that the plaintiffs enrolled in law school "at their own peril," and that they were sophisticated enough to realize that they might not find an attorney's job after they graduated.

Thomas M. Cooley Law School was sued under a theory similar to the one put forth by Alaburda, but a Michigan court dismissed the case. Less well known, however, is the fact that Cooley Law School lost a defamation suit against the attorney who brought the misrepresentation suit. The Sixth Circuit Court of Appeals ruled that Thomas M. Cooley was a public figure for the purposes of a defamation claim and could not prevail  unless the school could show the lawyer had communicated his accusations maliciously, which it had not done.

I hope Ms. Alaburda wins her lawsuit. As Paul Campos and others have written, the market for lawyers has imploded. There is now approximately one law job for every two law graduates. Law school admissions are down by about 20 percent, and many law schools have lowered their admission standards just to get tuition-paying students through the door.  Meanwhile, the average newly minted JD graduates with more than $100,000 in student-loan debt.

Many students at the second- and third-tier schools do not pass the bar exam after they graduate and are not able to earn an income that will allow them to pay back their student loans. Some have filed for bankruptcy.

Unfortunately, the bankruptcy courts have not always been sympathetic. A few months ago, the Seventh Circuit Court of Appeals ruled that Mark Tetzlaff, a graduate of  Florida Coastal School of Law, was not eligible for bankruptcy relief, in spite of the fact that Tetzlaff failed the bar exam, had serious health problems, and hadn't found employment as a lawyer.  In a 2013 decision, a California bankruptcy judge ruled against Mark Lilly, another law school graduate who never found employment as an attorney.

Job prospects for graduates of second- and third-tier law schools are terrible; and thousands of law graduates are burdened with six-figure debt.  In fact, in Don't Go to Law School, Unless, Paul Campos advised students attending down-market law schools to drop out after the first year if they don't excel academically rather than borrow money to continue their studies  In Campos' view, it often makes more sense for a law student to drop out rather than double down and acquire more debt to get a JD degree that won't lead to a high-paying job.

In my view, the law schools have acted irresponsibly to the deteriorating job market for attorneys. Many did not cut their enrollments in response to the plummeting demand for lawyers.  Instead, they lowered their admissions standards in order to keep generating tuition. And according to some law school graduates, at least a few law schools lured people to enroll by misrepresenting the job statistics of their graduates.

If Alaburda wins her case, Thomas Jefferson will appeal. But if she ultimately prevails and gets a money judgment, law schools all over the United States will quake with fear. The law schools have had a good run. They jacked up tuition prices unreasonably and raked in millions of dollars. And students went heavily into debt on the bet that they would get a good lawyer's job that would justify their investment.

But the party is over.  Thousands of unemployed and heavily indebted lawyers deserve some relief. If they are victims of fraud or misrepresentation, I hope they find relief in the state courts. And if they are unable to find remunerative employment as attorneys, I hope they find sympathetic bankruptcy judges who will relieve them of their oppressive student loans and give them an opportunity for a fresh start.

References

Elizabeth Olsen. Law Student Gets Her Day in Court. New York Times, March 6, 2016. http://www.nytimes.com/2016/03/07/business/dealbook/court-to-hear-suit-accusing-law-school-of-inflating-job-data.html?smid=fb-nytimes&smtyp=cur&_r=1

Lilly v. Illinois Student Assistance Comm’n, 538 B.R. 45 (Bankr. S.D. Cal. 2013)

Tetzlaff v. Educational Credit Management Corporation794 F.3d 756 (7th Cir. 2015). Accessible at http://caselaw.findlaw.com/us-7th-circuit/1708687.html

Thomas M. Cooley Law School v. Kurzon Strauss, LLP, 759 F.3d 522 (6th Cir. 2014). Accessible at http://www.ca6.uscourts.gov/opinions.pdf/14a0139p-06.pdf











Predatory for-profit colleges and mandatory arbitration clauses in student contracts: Secretary of Education John B. King Jr. wants to stop for-profits from trying to escape accountability for abuse

In a March 11 press release, the Department of Education announced it is taking steps to protect students from predatory colleges. It's about time. The Obama administration has had seven years to clean up the for-profit college industry, and it has accomplished virtually nothing.

According to the press release, Acting Secretary of Education John B. King Jr. wants to stop colleges from forcing students to sign arbitration agreements that effectively insulate the colleges from liability for their wrongdoing. As DOE explained:
Forced arbitration provisions used by many schools in their enrollment agreements – often buried in the fine print – effectively prevent students from seeking redress for harm caused by their school and hide wrongdoing from the Department and the public. Such agreements often bar students from bringing their legal claims in a group, making it financially impossible for individual students to challenge schools. Some agreements require disputes to be filed in secret tribunals where little or no records are kept; some prohibit students from speaking about the claims they file. The Department will discuss with negotiators how to end such outrageous practices.
 DOE also wants to "incorporate crucial elements of state consumer protection laws" in new regulations. This too is a good thing. But why did DOE wait so long?

And why is DOE seeking to enact reforms through a "negotiated rulemaking process"? These reforms should be nonnegotiable.  All for-profit colleges should be subject to state consumer-protection laws, and all for-profits should be barred from forcing students to sign arbitration clauses that protect the colleges from liability for fraud and wrongdoing.

The next presidential election is eight months away. I predict nothing will get done regarding predatory for-profit colleges before Barack Obama leaves office. And we haven't hear a a peep out of Hillary about cracking down on this sleazy industry. No wonder young voters have rejected her.

References

U.S. Department of Education. U.S. Department of Education Takes Further Steps to Protect Students from Predatory Higher Education Institutions. March 11, 2016. Accessible at http://www.ed.gov/news/press-releases/us-department-education-takes-further-steps-protect-students-predatory-higher-education-institutions?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=

Thursday, March 10, 2016

Bernie Sanders and Student Loan Debtors: If you are ovewhelmed by college-loan debt, Bernie is your only hope

Help me, Obi Wan Kenobi. You're my only hope.

Princess Leia
Star Wars

Bernie Sanders beat Hillary Clinton in Michigan--stunning everybody, including Bernie.

Bill O'Reilly scoffed, and pundits dismissed Bernie's victory as a blip; but change is in the wind. Bernie has the support of young people, and Hillary will never win them away. They are attracted to Bernie's clarity and straightforward message.

In particular, Bernie's call for a free college education at a state college is very appealing. And--as I've written before--his free college plan is not wacky. It would actually be cheaper than the cumbersome student aid program we now have in place..

Now I encourage Bernie to reach out specifically to overburdened student-loan debtors--and there are 20 million of them.  If he will make four simple promises to this weary and oppressed multitude, I think he will win over millions of voters to the Bernie Crusade.

And these are the promises:

1) If I am elected President, the federal government will stop garnishing Social Security checks of elderly student-loan defaulters.

2) If I am elected President, I will forbid the government and its debt collectors from slapping unreasonable fees and penalties on student-loan balances.

3) If I become president, student borrowers who complete long-term income-based repayment programs will not be taxed on any forgiven student-loan debt (a policy recommended by President Obama).

4) If I become your President, I will draft regulations forbidding for-profit colleges from requiring students to sign arbitration agreements that cut of their right to sue their college for fraud.

None of these promises are radical, and none are expensive. And in fact, if all four of these promises were fulfilled by the next President, the impact on student-loan debtors would be minimal.

But these promises would be a signal to oppressed student-loan borrowers that Bernie understands their suffering and will do what he can to give them some relief.

But whether or not Bernie makes these particular promises, he has my unwavering support right through the election process. Of all the candidates vying for the Presidency, Bernie is the only one who will do something substantive to address the student-loan crisis.  Indeed, as Princess Leia might have put it, Bernie is our only hope.



Image result for princess leia help me obi wan
Help me, Obi Wan Ka-Bernie. You're my only hope.

Monday, March 7, 2016

UC Davis Chancellor Linda Katehi accepted compensation from a textbook publisher: She should be fired

Both hands in the cookie jar . . .

Linda Katehi, Chancellor of UC Davis, received $70,000 for serving on the corporate Board of DeVry Education Group, the owner of a for-profit college being scrutinized by the U.S. Federal Trade Commission. In addition, her DeVry position entitled to her to $100,000 in stock, according to the Sacramento Bee.  Not bad for part-time work.

Since then, the public has learned that Katehi received $420,000 in income and stock for serving on the board of John Wiley & Sons, a textbook publisher.  All of this is in addition to her Chancellor's salary of more than $400,000 a year.

What an outrage! And what is Chancellor Katehi's response to the uproar? She resigned from both her DeVry position and her Wiley position, and she promises to donate her Wiley stock to a student scholarship fund.

Katehi: "sincerely regret . . ."

And then of course Katehi released the standard mea culpa press release in which she said this:
I take my responsibilities as Chancellor of UC Davis, and the entire University of California, very seriously and sincerely regret having accepted service on boards that create appearances of conflict with my deep commitment to serve UC Davis and its students.
Note that she admits to accepting service on corporate boards--not that she accepted money.  And she expresses regret, which is far different from apologizing. And she acknowledges the appearance of a conflict--not an actual one. Yeah, I'd say a university president who takes four hundred grand from a textbook publisher has an appearance of conflict.

This lady needs to be fired. In fact, she should have been fired after the UC Davis pepper spray incident of 2011, when university police officers pepper sprayed a group of seated and nonthreatening student protesters. Katehi said she didn't know police were going to use pepper spray on the students, which is something of an excuse, I suppose.

But UC Davis police officers were sued  for firing pepperballs at student bystanders at an outdoor drinking bash that took place in 2004. One victim lost the use of an eye. The Ninth Circuit ultimately ruled that the police had used an unconstitutional level of force against the students.

So if there is anything this overcompensated clown should have gotten right while serving as UC Davis's chancellor it was control of the campus police. Yet an independent report found that UC Davis police were not authorized to use the specific type of pepper spray that they inflicted on students in the 2011 incident and were not trained to use it correctly.

Blah, blah, blah from UC President Napolitano

Incredibly, Katehi's venality is not exceptional. According to a fine article  written by Diana Lambert and Alexei Koseff for the Sacramento Bee, nine UC chancellors accepted $1.5 million in cash compensation from outside corporations during the  years 2012-2014--and that doesn't include stock options or deferred  compensation!

What does UC President Janet Napolitano have to say about Katehi's behavior? "I deeply value Linda's strong record in helping to make UC Davis a world-class center of scholarship and research, and continue to believe in  the value of her contributions to the University."  Blah, blah, blah.

What Napolitano is really saying is this: The University of California protects its insiders.

It is a pity that UC chancellors are not treated like UC students. If there were any justice in the world, all nine moonlighting UC chancellors would be put before a hand-picked squad of untrained UC Davis police officers and assaulted with pepper spray.

Image result for uc davis pepper spray image

References

Diana Lambert and Alexei Koseff. UC Davis chancellor apologizes, will donate textbook stock to student scholarships. Sacramento Bee, March 4, 2016. Accessible at http://www.sacbee.com/news/investigations/the-public-eye/article64041327.html

Nelson v. City of Davis, 685 F.3d 867 (9th Cir. 2012).  Accessible at http://cdn.ca9.uscourts.gov/datastore/opinions/2012/07/11/10-16256.pdf

Teresa Watanabe. UC Davis chancellor apologizes for controversial moonlighting activities. Los Angeles Tims, March 5, 2016. Accessible at http://www.latimes.com/local/lanow/la-me-ln-uc-davis-chancellor-20160304-story.html

Christopher Edley & C. F. Robinson 2012). Response to Protests on UC Campuses. University of California. http://campusprotestreport.universityofcalifornia.edu/documents/protest-report-091312.pdf
 Richard Fossey. Nelson v. City of Davis: Campus Police Officers Who Injure Nonthreatening Student with Pepper Spray May be Committing a Constitutional Offense. Teachers College Record Online, October 5, 2012. Accessible at: http://www.tcrecord.org/content.asp?contentid=16894

Gordon, L. (2012, September 13).
UC to pay settlement in Davis pepper spray case. Los Angeles Times (online edition). http://articles.latimes.com/2012/sep/13/local/la-me-uc-pepper-spray-20120914

Steve Gorman. University of California cop who pepper sprayed student protesters awarded $38,000. Reuters, October 23. Accessible at: http://usnews.nbcnews.com/_news/2013/10/23/21105239-university-of-california-cop-who-pepper-sprayed-student-protesters-awarded-38000
Judy Lin. Linda Katehi, UC Davis Chancellor, Apologizes for Pepper Spray Incident. Huffington Post, November 22,2013.  Accessible at: http://www.huffingtonpost.com/2011/11/22/linda-katehi-uc-davis-cha_n_1107303.html

Jennifer Medina. Campus Task Forces Criticizes Pepper Srpaying of Protesters. New York Times, April 11, 2012. Accessible at http://www.nytimes.com/2012/04/12/us/task-force-criticizes-pepper-spraying-of-protesters-at-uc-davis.html?_r=0

Cruz Reynoso. UC Davis Taskforce Report, March 12, 2012.  Accessible athttp://ahed.assembly.ca.gov/sites/ahed.assembly.ca.gov/files/hearings/1.%20Reynoso%20Task%20Force%20Report.pdf

Smith, D. (2012, September 20). Yolo DA won’t file charges in UCD pepper-spraying. Sacramento Bee (online edition).  http://www.sacbee.com/2012/09/20/4836866/yolo-da-wont-file-charges-in-ucd.html#mi_rss=Our%20Region


Stripling, J. (2012, April 11). Scathing report on UC-Davis pepper-spray incident faults chancellor and police.Chronicle of Higher Education (online edition). http://chronicle.com/article/UC-Davis-Pepper-Spray-Report/131496/

Sunday, March 6, 2016

Rising Student-Loan Default Rates and Ridiculously High Tuition Costs: The Big Short

We live in an era of fraud in America. Not just in banking, but in government, education, religion, food, even baseball... What bothers me isn't that fraud is not nice. Or that fraud is mean. For fifteen thousand years, fraud and short sighted thinking have never, ever worked. Not once. Eventually you get caught, things go south. When the hell did we forget all that? I thought we were better than this, I really did
Mark Baum (played by Steve Carell)
The Big Short 

The Big Short, the Academy-Award winning movie on the home-mortgage crisis of 2008, shows movie goers how greedy banking institutions created a housing bubble that burst in a shower of home foreclosures and trillions of dollars in financial losses.

A similar bubble has emerged in the federal student-loan program. And although the housing bubble is more complicated than the student-loan bubble, there are some eerie similarities between the collapse of the housing market a few years ago and the student-loan crisis. For example:

Hiding risk. The Big Short includes a scene in which  Mark Baum, a skeptical investment banker played by Steve Carell, quizzes a representative of one the bond rating agencies--Moody's or Standard & Poor. The rating-agency representative admits that  the agency gives mortgage-backed securities  the highest rating--AAA--even  though the agency knows that many of the instruments are packed with risky home mortgages that are headed for foreclosure.

Something similar is happening in the federal student-loan program. Although the Department of Education recently announced that student-loan default rates went down last year--especially in the for-profit sector, that's not really true.  The for-profits have been aggressively signing up their former students in economic-hardship deferment programs that excuse borrowers from making loan payments without being counted as defaulters.

When we look at the five-year default rates in the for-profit sector, the numbers are scary. Almost half the people who took out student loans to attend a for-profit institution default within 5 years of beginning the repayment phase on their loans. And two years after beginning the repayment phase, 3 out of 4 of these students are seeing their loan balances go up--not down--due to accruing interest that is not being paid down.

In short, about half the people who take out student loans to attend for-profit colleges don't pay back their loans. Clearly, this sector of the student-loan program is a train wreck.

Unsustainable rising costs.  As many people still remember, the cost of housing went up rapidly during the early 2000s, with people buying homes and flipping them for huge profits over a matter of months or even weeks. Everybody was making money in real estate--until the housing market collapsed.

Similarly, America has seen college tuition costs rise faster than the inflation rate for many years. The cost of attending law school, obtaining an MBA, or studying at an elite private college has gone through the roof.  I graduated from University of Texas Law School in 1980 and only paid $1,000 a year in tuition. If I enrolled at UT Law School today, it would cost me 36 times as much--$36,000 a year for Texas residents!

Of course, these tuition hikes can't be justified any more than the dizzying cost of a split-level home in Coral Gables, Florida in 2005.  And of course, those costs must eventually come down.  Already, law school enrollments have plummeted and the schools have lowered admissions standards to attract students.  And the elite private colleges are now giving huge discounts on their posted tuition rates; the average freshman now pays about half the college's sticker price.

Hidden costs and fees. Finally, the home mortgage bubble was fueled by greed and fraud. The bankers who packaged mortgage-backed securities were not taking any risks--they took their fees from the transaction costs.  The banking industry was selling toxic financial instruments to gullible investors, including pension funds and people invested in mutual funds.

Similarly, the college industry is charging a gullible public more than a liberal arts degree is worth, and the suckers enroll because, hey, going to Barnard or Brown or Amherst must be a good investment. And the colleges aren't assuming any risks. Their pliant students are borrowing from the federal student loan program, and the government guarantees the loan. Ivy League U doesn't care if its graduates default on their loans any more than Goldman Sachs cared what happened to the investors who bought their mortgage-backed securities.

And the fees! People who default on their loans get assessed huge collection fees and penalties. People are routinely going into the bankruptcy courts trying to discharge student-loan debt that is two or even three times the amount they borrowed due to accrued interest, penalties, and fees.

So if you haven't seen the Big Short, go see it. And as you watch this riveting drama, think about the student-loan program. A bubble is about to burst at a college near you.


Image result for the big short movie

"I thought we were better than this."