Thursday, June 23, 2016

Decena v. Citizens Bank: A woman borrowed $161,000 to attend medical school in Africa and discharged the debt in bankruptcy

Lorelei Decena, an American, attended medical school at St. Christopher's College of Medicine in Senegal, West Africa.  After completing the program in 2004, she returned to the United States only to learn that St. Christopher's was not an accredited medical school and that she was not eligible to take the medical board exams in many states.

Decena financed her medical studies with a series of loans totaling $161,592, which she took out from Citizens Bank, which is headquartered in Rhode Island. She made loan payments from 2006 until 2011, but she quit making payments when she returned to school to obtain a masters' degree.

In 2015, Decena filed a "no asset" Chapter 7 bankruptcy petition and later filed an adversary complaint to discharge her student loans with Citizens Bank. Citizens Bank failed to answer her complaint and the court clerk entered a default.

At a hearing to get a default judgment entered against Citizens, an attorney appeared to represent the bank. Citizens' attorney argued that the default should be set aside on the ground that Decena had sent her lawsuit by regular mail rather than certified mail. The bankruptcy court  rejected this argument, reasonably pointing out that Citizens obviously had notice of Decena's lawsuit because it had sent a lawyer to defend the bank's interests.

The court then considered whether Decena had a legitimate ground for discharging her student-loan debt in bankruptcy. Interestingly, Decena did not argue that it would be an undue hardship for her to pay back the loans--the position taken by most student-loan debtors in bankruptcy. Rather she maintained that the loan was not the kind education loan debt that was covered by the undue hardship exception.

The court agreed with her. In essence, the court ruled that a private loan to attend an unaccredited, unlicensed medical school is not the kind of loan that can be excepted from discharge in bankruptcy under the undue hardship rule. Nor was it a "qualified education loan" that came under the undue hardship exception.

Key to the court's decision was its finding that St. Christopher's College of Medicine was not listed in the Federal Schools Code during the year Decena completed her studies. Thus, the court ruled, Decena "established a prima facie case that St. Christopher's is not an 'eligible educational institution,'" entitled to benefit from the Bankruptcy Code's undue hardship rule.

What can we learn from this quirky case? Three things:

1. Don't enroll in an unlicensed, unaccredited African medical school if you want to practice medicine in the United States. Perhaps Lorelei Decena should have investigated St. Christopher's a little more thoroughly before borrowing money to study there.

2. If you are a bank, don't lend money to someone to study medicine in Africa unless the institution the debtor will attend is on the Federal Schools Code list. Citizens Bank was apparently under the impression that its loans to Decena could not be easily discharged in bankruptcy, but the bank was wrong.

3. If you are an African medical school that seeks to enroll American students, you should make sure your institution is listed in the Federal Schools Code.

In fact, St. Christopher's lapse in this regard is puzzling. Over 500 foreign institutions are listed on the Federal Schools Code, making them eligible to participate in the U.S. student loan program, including more than two dozen foreign medical schools. Why didn't St. Christopher's do whatever it had to do to get its name on that list?

This case illustrates the global expanse of the federal student loan program, which allows Americans to borrow money to attend colleges all over the world (although not St. Christopher's in Senegal). We are a wealthy nation of more than 300 million people. You would think we could manage medical education in such a way that no one would need to borrow money in order to study medicine in a foreign country.


_______________________________________________
Note. St. Christopher's web site contains these statements: 
Graduates of St. Christopher Iba Mar Diop College of Medicine may practice medicine in the United States through the Educational Commission for Foreign Medical Graduates (ECFMG).  
*****
It is important that future students intending on practicing medicine in the United States obtain licensing information direct from the appropriate state agencies. This information can be obtained from the Federal State Medical Boards (FSMB). Students are expected to have a thorough understanding of medical licensure laws in their state or states of intended practice before applying. Many states have specific rules and requirements beyond the medical school curriculum and applicants are urged to make specific inquiries into what these are before making a commitment to the College.

References

Decena v. Citizens Bank, 549 B.R. 11 (Bankr. E.D.N.Y. 2016).

Tuesday, June 21, 2016

Federal student loans for Americans to study overseas: Is this a good use of taxpayer money?

If you've decided to get your degree from a school outside the U.S., congratulations. Now let us help you find out which international schools participate in the federal student aid programs and guide you through the process of getting federal aid to make a dent in that tuition bill.

Here's something I bet you didn't know. Not only can you take out federal loans to attend one of 5000 colleges and schools in the U.S., you can get a federal student loan to study abroad. In fact, the Department of Education lists more than 500 foreign schools that are eligible to receive federal student aid.

Would you like to study religion at the Nazarene Theological College in Manchester, England? Just take out a federal loan. Or perhaps you're interested in getting a psychology degree from the Salvation Army's Booth University College in Winnipeg, Canada. The federal government will loan you the money. Literally, you can use federal student loan money to attend college almost any place in the world: China, England, France, Israel, Australia, Hungary, Bulgaria--even Russia.

The Department of Education is particularly hospitable to foreign medical schools and maintains links on its web sites to 25 medical schools outside the U.S.  DOE reported that American students attending Medical University of Silesia in Katowice, Poland, borrowed an average of $80,000 in federal student loans to attend that medical school, plus private loans averaging $55,000.

Or perhaps you prefer to study medicine in a sunnier clime? You can take out federal loans to attend American University of the Caribbean School of Medicine in St. Maarten, but it's pricier than a Polish medical school.  American students borrowed an average of $315,674 to attend the medical school in St. Maarten, which is owned by DeVry Education Group, a publicly traded corporation on the New York Stock Exchange. 

But most Americans don't take out federal loans to obtain medical degrees overseas; most use student-loan money to study abroad for a semester or a year. Indeed, the growing popularity of Study Abroad programs is one reason an American college education costs so much more than it once did. Americans are taking out student loans to spend a few months in Paris, London, Barcelona, or dozens of other exotic cities.

American taxpayers are already subsidizing 5,000 U.S. colleges and schools that participate in the federal student aid program--institutions running the gamut from Harvard University to Toni & Guy Hairdressing Academy.  Do we really want to loan students money to attend schools overseas--especially at a time when so many colleges in the U.S. are on the verge of closing due to declining enrollment?

Image result for study abroad

Saturday, June 18, 2016

Student-Loan Default Rates Go Down As Enrollment in Income-Driven Repayment Plans Goes Up:" It Hurts So Much To Face Reality"

Earlier in the week, the Department of Education issued a press release that contains good news about the student loan program. Or does it?

DOE reported that enrollment is increasing in the Department's various income-driven repayment plans (IDRs), including PAYE, REPAYS and six other income-based student loan repayment programs.  About 5 million are now enrolled in IDRs, up 117 percent from March of 2014.

At the same time, student-loan hardship deferments, loan delinquencies, and new defaults are going down.  According to DOE:
As of March 31, 2016, about 350,000 [Direct Loan] recipients were deferring their payments due to unemployment or economic hardship, a 28.6 percent decrease from the prior year. In that same time period, there was a 36.6 percent decrease in the number of FFEL recipients in a deferment status due to unemployment or economic hardship.
DOE also reported that delinquency rates are down 10.6 percent from last year, and student-loan default rates are also down.

Is this good news? Yes and no.

Obviously, a trend toward fewer economic-hardship deferments, fewer student-loan defaults, and fewer lower delinquencies is a good thing. It is especially heartening to see a decline in the number of people who have loans in deferment, because these people see their loan balances go up due to accruing interest during the time they aren't making loan payments.

But this good news comes at a cost. DOE's report is a clear indication that more and more people are signing up for long-term income-based repayment plans that stretch out their repayment period for as long as 20 to 25 years.  According to DOE, five million people are in IDRs now, and DOE hopes to enroll 2 million more by the end of 2017. Clearly, long-term repayment plans has become DOE's number one strategy for dealing with rising student-debt loads.

What's wrong with IDRs? Four things.

Growing Loan Balances. First, as I have said many times, most people in IDRs are making payments based on a percentage of their income, not the amount of their debt; and most people's payments are not large enough to cover accruing interest on their loan balances. Thus, for almost everyone in a 20- or a 25-year repayment plan, loan balances are going up, not down.

This was starkly illustrated by a recent Brookings Institution report. According to a paper published for Brookings by Looney and Yannelis, a majority of borrowers (57 percent) saw their loan balances go up two years after beginning the repayment period on their loans. For students who borrowed to attend for-profit instiutions, almost three out of four (74 percent) saw their loan balances grow two years after entering the repayment phase

Reduced Incentives for Colleges to Rein in Tuition Costs.  As more and more borrowers elect to join IDRs, the colleges know that tuition prices becomes less important to students.Whether students borrow $25,000 to attend college or $50,000, their payment will be the same.

In fact, some IDRs actually may act as an inverse incentive for students to obtain more postsecondary education than they need.  I have several doctoral students who are collecting multiple graduate degrees. I suspect they are enrolled in the 10-year public-service loan forgiveness plan, the government's most generous IDR. Since monthly loan payments are based on income and not the amount borrowed, I think some people have figured out that it makes economic sense to prolong their studies.

Psychological Costs of Long-Term Repayment Plans. Third, there are psychological costs when people sign up for repayment plans that can stretch over a quarter of a century, a cost that some bankruptcy courts have noted. And these psychological costs are undoubtedly higher for people who sign up for IDRs in mid-life. Brenda Butler, for example, who lost her adversary proceeding in January of this year, signed up for a 25-year income-based repayment plan when she was in her early 40s, after struggling to pay back her student loans for 20 years. As the court noted in Butler's case, her loan obligations will cease in 2037--42 years after she graduated from college. That's got to be depressing.

A Drag on Consumer Spending. Finally, people who are making loan payments for 20 years have less disposable income to buy a home or a car, to marry, to have children, and to save for their retirement.  In fact, in the Abney case decided in late 2015, a bankruptcy court in Missouri rejected DOE's argument that a 44-year old truck driver should enter a long-term repayment plan to service loans he took out years ago for a college education he never completed.

As the court pointed out, Mr. Abney was a truck driver who was not likely to see his income increase markedly. Forcing him into a long-term repayment plan would diminish his ability to save for retirement or even to buy a car.

"It Hurts So Much To Face Reality"

As Robert Duvall sang in the movie Tender Mercies (the best contemporary western movie of all time), "it hurts so much to face reality."

Without a doubt, DOE is refusing to face reality by huckstering college-loan debtors into long-term student-loan repayment plans. DOE has adopted this strategy to keep student-loan defaults down, but IDRs do not relieve the burden of indebtendess for millions of student borrowers. Lowering monthly loan payments by stretching out the repayent period makes rising tuition more palatable, but it does nothing to check the rising cost of a college education--which has spun out of control.

In short, IDRs are creating a modern class of sharecroppers, whereby millions of people pay a percentage of their incomes over the majority of their working lives for the privilege of getting a crummy education from a college or university that has no incentive to keep tuition costs within the bounds of reason.

Image result for tender mercies movie
"It hurts so much to face reality."

References

Abney v. U.S. Department of Education540 B.R. 681 (W.D. Mo. 2015).

Adam Looney & Constantine Yannelis, A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising default ratesWashington, DC: Brookings Institution (2015). Accessible at: http://www.brookings.edu/about/projects/bpea/papers/2015/looney-yannelis-student-loan-defaults

U.S. Department of Education, Education Department Announces New Data Showing FAFSA Completion by District, State. Press release, June 16, 2016. Accessible at http://www.ed.gov/news/press-releases/education-department-announces-new-data-showing-fafsa-completion-district-state

Thursday, June 16, 2016

Small colleges and for-profits are closing at an accelerating rate: Do Not Resuscitate

Resuscitate: to bring (someone who is unconscious, not breathing, or close to death) back to a conscious or active state again.
Merriam-Webster Dictionary 

Two sectors of the higher education are under extreme stress: for-profit institutions and small liberal arts colleges. In both sectors, schools are closing or downsizing at an accelerating rate.

In the last two weeks alone, Dowling College and St. Catharine College announced they are closing. Grace University, an interdenominational school in Nebraska, is raising tuition and cutting salaries to deal with financial problems; and for-profit Brown Mackie College announced that it is closing 22 of its 26 campuses over the next few years and will not accept any new students.

These failing colleges and universities are the educational equivalent of terminally ill patients. They see death approaching, but they deal with their mortality in different ways. Some failing colleges shut down in an orderly fashion and make arrangements for their current students to complete their programs at other institutions. Others refuse to accept the inevitable and search desperately for a survival strategy.

For example, Sweet Briar College in Virginia announced it was closing more than a year ago, but new leadership and some moneyed alumni rushed in to keep it open. But this year, Sweet Briar only enrolled 24 freshmen.

Likewise, although Dowling College announced its closure, it is now trying to partner with Global University Systems, "an educational investment firm" that has multiple partnerships with universities in England, Canada and the U.S. Personally, I can't see how this new relationship will have any bearing on Dowling's future.

In my view, all these faltering for-profits and struggling private colleges should close their doors with dignity once they have explored all reasonable strategies for remaining viable  Most of them are on life support--existing from month to month on infusions of student-loan money. It is irresponsible for failing institutions to continue recruiting students when trustees and administrators know these students will be going into debt to obtain an education from a college that will be closing in the very near future.

References

Candice Ferette and John Hildebrtand. Dowling, still officially open, can award degrees over summer. Newsday, June 14, 2016. Accessible at http://www.newsday.com/long-island/education/dowling-still-officially-open-can-award-degrees-over-summer-1.11916403

Emily Nohr. Grace University will raise tuition, cut baseball and softball, reduce salaries to cope with financial problems. Omaha World-Herald, June 14, 2016.  Accessble at http://www.omaha.com/news/education/grace-university-will-raise-tuition-cut-baseball-and-softball-reduce/article_499c0d2c-325d-11e6-84e8-17b1280538f5.html

Ashley A. Smith. Decreases in enrollment lead to Brown Mackie closing. Inside Higher Ed, June 15, 2016.  Accessible at https://www.insidehighered.com/news/2016/06/15/decreases-enrollment-lead-brown-mackie-closing

Another Small Private Closes Its DoorsInside Higher Ed, June 1, 2016. Accesible at https://www.insidehighered.com/quicktakes/2016/06/01/another-small-private-closes-its-doors-dowling-college?utm_source=Inside+Higher+Ed&utm_campaign=a0fafeb056-DNU20160601&utm_medium=email&utm_term=0_1fcbc04421-a0fafeb056-198564813

Paul Fain. The Department and St. Catharine.  Inside Higher Ed, June 2, 2016. Accessible at https://www.insidehighered.com/news/2016/06/02/small-private-college-closes-blames-education-department-sanction?utm_source=Inside+Higher+Ed&utm_campaign=3d1c6eed79-DNU20160602&utm_medium=email&utm_term=0_1fcbc04421-3d1c6eed79-198565653

Rick Seltzer. Sweet Briar falls short of initial enrollment target, but leaders remain optimistic. Inside Higher Ed. May 5, 2016. Accessible at https://www.insidehighered.com/news/2016/05/05/sweet-briar-falls-short-initial-enrollment-target-leaders-remain-optimistic

Kellie Woodhouse. Closures to TripleInside Higher Education, September 28, 2015. Accessile at https://www.insidehighered.com/news/2015/09/28/moodys-predicts-college-closures-triple-2017

Lee Gardner. Where Does the Regional State University Go From Here? Partners 4 Affordable Excellence. May 22, 2016http://partners4edu.org/regional-state-university-go/


Wednesday, June 15, 2016

PAYE and REPAYE: Long-term student loan repayment plans are a bad option for older student-loan debtors

You can be young without money, but you can't be old without it.

Tennessee Williams

President Obama's Department of Education is pushing distressed student-loan debtors into long-term income-based repayment plans. Five million people are in them now, and DOE hopes to enroll two million more by the end of next year.  Without a doubt, DOE will reach this goal. In fact, I predict at least 10 million people will be enrolled in long-term repayment plans within four years.

To advance this goal, the Obama administration launched two new income-based repayment programs: PAYE and REPAYE. These are the most generous of the government's eight income-based repayment plans. PAYE and REPAYE allow debtors to make payments equal to ten percent of their adjusted gross income for 20 years. At the end of that time, any unpaid debt is forgiven, although debtors may be forced to pay federal income tax on the forgiven portion of their loans.

As I have argued repeatedly, long-term income-based repayment plans are nothing more than a cynical scheme to hide the magnitude of the student-loan crisis.  By lowering monthly payments, the Feds hope to keep the student-loan default rate down even though most people in these programs are making payments so low that they will never pay off their student loans.

Nevertheless, I understand why debtors are signing up for these plans. If they've had their loans in deferment for any considerable length of time, their loan balances will have ballooned to double the amount they borrowed or more because of accrued interest. Once that happens, they will never be able to pay off their student loans over the conventional 10--year repayment term.  In short, people with large loan balances and low-paying jobs have no choice--they are forced to enter 20- or 25-year repayment plans in order to avoid default.  

But long-term repayment plans are a terrible option for older student-loan debtors. People in their forties, fifties and sixties need to maximize their retirement savings in order to be able to retire with dignity; and most of them of them can't do that if they are making student-loan payments equal to  10 or 15 percent of their annual income.

In fact, the evidence is mounting that the baby boomer generation is not ready for retirement; and millions are facing dire poverty if they lose their jobs. A recent article in the Star Tribune reported that two thirds of households in the 55-64 age group have savings that equal less than their annual income and one third have no savings at all.

According to the National Institute on Retirement Security, the median retirement account savings among households in the 55-64 age range is only $14,500! Due to the recent recession and stagnant wages, millions of Americans have been forced to cash out their retirement accounts just to meet daily living expenses. More than 40 percent of Americans have elected to take Social Security benefits early in recent years because they need the cash, even though early participation reduces annual benefits by 25 percent.

Obviously, the last thing financially strapped Americans need as they grow older is a 20-year obligation to contribute a percentage of their income to pay off student loans.  Although long-term repayment plans can be defended for people who enroll in them when they are young, they are a disaster for people who sign up for PAYE or REPAYE or the six other income-based repayment plans when they are in their forties or even older.

But the government  and the student-loan creditors insist on pushing student-loan debtors into these plans regardless of their age.  For example, in the Halverson case, decided in 2009, Educational Credit Management Corporation argued that Steven Halverson should enter a 25-year income-based retirement plan even though he was 65 years old, had chronic health problems, and had an income of only about $13 an hour.  (Fortunately, a Minnesota bankruptcy judge was sympathetic to Mr. Halverson's plight and discharged his student-loan debt.)

And in the Stevenson case, a Massachusetts bankruptcy judge insisted that a woman in her fifties sign up for a long-term income-based repayment plan even though she had a record of homelessness and was living on only $1,000 a month.

Perhaps most famously, ECMC hounded Janet Roth through the courts all the way to the Ninth Circuit Bankruptcy Appellate Panel, heartlessly arguing that Roth should be on an income-based repayment plan to pay off more than $90,000 in student-loan debt even though she was 68 years old, had  chronic health problems and was living entirely off her Social Security income of $780 a month.

As a matter of public policy, the federal government simply must stop pressuring student-loan debtors who are in their forties or older into long-term repayment plans because this practice is making it impossible for these people to prepare for retirement.

We should occasionally remind ourselves why the federal student-loan program was inaugerated in the first place. The program's sole purpose is to enable people to get postsecondary education that will improve their lives.  

But for millions of Americans, the federal student-loan program has driven them to the brink of indigence. And if they are forced to make loan payments until they are in their sixties, their seventies, or their eighties, we will have created a class of elderly debtors who will spend their final years in poverty and want.  

In short, no one who is 40 years old or older should be forced into a 20- or 25-year student-loan repayment plan,  No one.  Older student-loan debtors who are otherwise eligible for bankruptcy relief should be able to shed their student-loan debt in the bankruptcy courts rather than be saddled with monthly student loan payments that will extend into their retirement years.


References

Bob Brenzing. AP Poll: Many take Social Security before full retirement, May 26, 2016.Fox News 17. Accessible at http://fox17online.com/2016/05/26/ap-poll-many-take-social-security-before-full-retirement/

 Michael Greenstone and Adam Looney. The Uncomfortable Truth About American Wages. Brooking Institution, October 23, 2012. Accessible at http://www.brookings.edu/research/opinions/2012/10/22-wages-greenstone-looney

Katy Read. The real story about retirement: Millions of baby boomers face financial crisis.  Star Tribune, Ocrober 21, 2015.  Accessible at http://www.startribune.com/the-real-story-about-retirement-millions-of-baby-boomers-face-financial-crisis/334718191/

Roth v. Educational Credit Management Corporation, 490 B.R. 908 (9th Cir. BAP  2013). 

Stevenson v. Educational Credit Management Corporation, 463 B.R. 586 (Bankr. D. Mass. 2011).

John F. Wasik. Social Security At 62? Let's Run the Numbers. New York Times, May 14, 2014. http://www.nytimes.com/2014/05/15/business/retirementspecial/social-security-at-62-lets-run-the-numbers.html



Thursday, June 9, 2016

The Student Loan Crisis and the Democratic Party Platform: Key Reform Proposals Would Entice Young Voters to vote for Hillary

Hillary Clinton has a problem with young  voters. They went 3 or 4 to 1 for Bernie Sanders in the various Democratic primaries this spring. Why did young voters go to Bernie, and how can Hillary win them over?

The Democratic Party insiders--dinosaurs like Nancy Pelosi, Harry Reid, Debbie Wasserman Schultz, Charles Schumer, etc--don't realize it but the number one domestic policy issue in the United States today is the student loan crisis.  Approximately 43 million Americans are carrying $1.3 trillion in student-loan debt, and at least half of them can't pay it back.

As the Wall Street Journal reported in April, about 40 percent of college-loan borrowers in the repayment phase aren't making their monthly loan payments.  And five million people are enrolled in various income-based repayment programs. Most debtors in these programs are making payments so low that the payments don't cover accruing interest. In reality then, most people in income-based repayment plans will never pay off their loan balances.

Bernie Sanders signaled that he understands the scope of the problem when he proposed a free college education at a public college for every American.  By making that pledge, he turned millions of young Americans into single-issue voters.

Hillary could attract millions of Bernie supporters by adding these  planks to the Democratic Party platform:
  • Free college education at a public college or university (as Bernie proposed).
  • Eliminating the tax penalty for people who successfully complete long-term repayment plans but who have a loan balance when they've  completed their repayment terms.
  • Stopping the garnishment of Social Security checks for elderly student-loan defaulters.
  • Forcing the for-profits to stop putting mandatory arbitration clauses in student enrollment documents.
  • Repealing the provision of the 2005 Bankruptcy Reform Act that virtually eliminated bankruptcy relief for people who took out student loans from private lenders.
If Hillary and her handlers are smart, they will adopt these ideas. I hope Bernie refuses to endorse Hillary until she endorses at least some of them. If Bernie can pressure Hillary to make a commitment to solve the student-loan crisis, his campaign for the presidency will not have been in vain. But if the presidential race between Trump and Hillary rolls toward election day without any serious discussion of the student-loan crisis, then this country is in huuuge trouble.



Image result for bernie sanders

References

Josh Mitchell. More Than 40% of Student Borrowers Aren’t Making Payments. Wall Street Journal, April 7 2015. Accessible at http://www.wsj.com/articles/more-than-40-of-student-borrowers-arent-making-payments-1459971348 

Wednesday, June 8, 2016

How many college graduates have jobs that don't require a college degree? You might be surprised.

Last April, the Federal Reserve Bank of New York released an analysis of labor-market conditions for college graduates. Here is what it found:

  • In 2015, almost 45 percent of recent college graduates (graduates aged 22 through 27) were working in jobs that do not require a college degree.
  • Around 35 percent of all graduates (graduates aged 22 through 65) were holding down jobs that don't require a college education.
  • Wages for recent college graduates have remained relatively flat from 1990 to 2015.
So what do these numbers mean for young Americans?

College is not a good bet for everyone. First, although the college industry and their advocates (Brookings Institution, etc.) like to remind us that people who graduate from college make more money over their lifetimes than people who only have high school diplomas, going to college is not a good bet for everyone.

As the New York Fed has shown us, darn near half of recent college graduates are working in jobs they could have gotten without going to college. Of course many recent graduates will eventually find jobs that require a college degree. But even among the college-educated population as a whole, about one third of college graduates are working in jobs that do not require a college education.

 The payoff for getting a college degree is not as good as it once was. Second, wages for college graduates have remained about the same for the past 25 years--about $45,000 in constant 2015 dollars. But the cost of going to college has tripled over the last quarter of a century. That's why about two thirds of college graduates leave school with college-loan debt.

Thus, you may still need to go to college to earn a decent income, but a larger share of that income is going to go to servicing student loans.  In other words, recent college graduates are not as well off financially as their counterparts were 1990 because a majority of them are graduating with a significant amount of debt.

The case for a free college education gets stronger and stronger. People laughed at Bernie Sanders when he argued for a free college education from a public college for anyone who wants one. But, as I have repeatedly pointed out, Bernie's plan would actually cost less than the current federal loan program, because millions of people aren't paying off their loans.

Now Bernie is gone--swept away in the California primary election, and the higher education community can look at this idea afresh without fear of undermining their favorite presidential candidate--Hillary Clinton.

And lo and behold, the Brookings Institution published a paper today by a couple of croakers named Morley Winograd and Michael Hais that suggests free college might be a good thing.

And it would be a good thing. Certainly offering a free college education would be better than Hilary's scheme to pump billions of dollars more into a higher education system that is corrupt, obsolete, inefficient, and horribly overpriced.

References

The Labor Market for Recent College Graduates. Federal Reserve Bank f New York, 2016. Accessible at https://www.newyorkfed.org/research/college-labor-market/index.html

Mathew Boesler. More College Grads Finding Work, But Not in the Best Jobs. Bloomberg.com, April 7, 2016. Accessible at http://www.bloomberg.com/news/articles/2016-04-07/more-college-grads-finding-work-but-not-in-the-best-jobs

Morley Winograd and Michael Hais. The Democrats' Generation Gap. Brookings Institution, Jun 3, 2016. Accessible at http://www.brookings.edu/blogs/fixgov/posts/2016/06/03-millennials-democrats-election-2016-winograd-hais?utm_campaign=Brookings+Brief&utm_source=hs_email&utm_medium=email&utm_content=30380706&_hsenc=p2ANqtz-8kyQSbZyUfxh-t2hnsxhvRRXvUp2j0eORShy09EK-7-HQpeIdEwoZaQ1CXQ3fR5CAxWRHk2cBWPTT6cCkIOO74q4BLUw&_hsmi=30380706

 Morley Winograd and Michael Hais. The Democrats' Generation Gap, Mike and Morley web site, June 6, 2016. http://www.mikeandmorley.com/the_democrats_generation_gap


Morley Winograd and Michael Hais recommend free college in a Brookings paper less than 24 hours after Bernie Sanders lost the California primary


The Brookings Institution is a cowardly, sniffling organization committed to preserving the status quo in higher education. And here is another indication of that.

On June 8, the morning after Hillary beat Bernie in California, Brookings posted an essay by Morley Winograd and Michael Hais about how the Democrats can win back  the young voters who went for Bernie Sanders over Hillary by 3 or 4 to 1. 

In case you haven't heard of them, Morley Winograd and Michael Hais are two old coots who profess to be experts on the millennial generation. Judging by their photos, Winograd and Hais are not millennials themselves, but they have written some books about millennials and that makes them experts.

In their essay for Brookings, Winograd and Hais cooed approvingly about Hillary's stand on the student-loan crisis:  "[Hillary] has already spoken out forcefully on the need to lift the burden of student debt from this generation," the authors wrote. They note that sheendorses the idea of allowing college-loan borrowers to refinance their loans and she favors loan forgiveness for people who were defrauded by "unscrupulous lenders or schools." 

Big friggin' deal. Allowing distressed debtors to refinance their loans will not solve the student loan crisis. There are 43 million people with outstanding college-loan debt, and most have signed multiple promissory notes. There must be at least 200 million individual debt instruments floating around--maybe twice that many.  Is the federal government really going to refinance all those loans at lower interest rates? In your dreams, Mike and Morley.

And as for the notion that defrauded students should have their loans forgiven, I've got news for you, Mike and Morley. The Department of Education already has a debt forgiveness program in place. The problem is that the process is so cumbersome that very few loans have actually been forgiven.

But here's the money quote.  Mike and Morley recommend a free college education for everybody.
 "[M]illennials and the generations that come after them should be able to get their higher education debt free," Winograd and Hais wrote, "because that’s the level of education they—and America—will need to be successful both in today’s economy and in the years ahead."

Hey, that's exactly what Bernie Sanders said at his first debate with Hillary last fall. If this is such a good idea, why didn't Mike and Morley, the so-called millennial experts, suggest it sooner? Why didn't Hillary endorse this idea? And, more to the point of this commentary, why didn't the Brookings Institution publicize this idea before the California primary rather than after the votes were counted and Bernie was defeated?

I'll tell you why--because Hillary, the Brookings Institution, and the Democratic Party are committed to the status quo in higher education. If Americans could get a free college education from a public college in the same way they get a free high school education, the for-profit colleges would shut down almost overnight and the elite private colleges would be forced to slash their tuition rates.

Hillary is not going to let that happen. She and Bill have made too much money off the higher education industry, and so have Democratic Party insiders like Debbie Wasserman Schultz.  That's why Mike and Morley's whispered suggestion about a free college education didn't surface until after Hillary had defeated Bernie. And my prediction is this: the Brookings Institute will never allow this very good idea to be floated again in any of its publications.

Image result for morley winograd and michael hais
Morley Winograd & Mihael Hais: Experts on millennials

 Note: The Winograd and Hais essay is dated June 3, 2016, but it first appeared for public viewing on the Brookings web site on June 8, 2016. The same essay appeared on the Mike and Morley web site on June 6. 

References

Morley Winograd and Michael Hais. The Democrats' Generation Gap. Brookings Institution, Jun 3, 2016. Accessible at http://www.brookings.edu/blogs/fixgov/posts/2016/06/03-millennials-democrats-election-2016-winograd-hais?utm_campaign=Brookings+Brief&utm_source=hs_email&utm_medium=email&utm_content=30380706&_hsenc=p2ANqtz-8kyQSbZyUfxh-t2hnsxhvRRXvUp2j0eORShy09EK-7-HQpeIdEwoZaQ1CXQ3fR5CAxWRHk2cBWPTT6cCkIOO74q4BLUw&_hsmi=30380706

 Morley Winograd and Michael Hais. The Democrats' Generation Gap, Mike and Morley web site, June 6, 2016. http://www.mikeandmorley.com/the_democrats_generation_gap


Sunday, June 5, 2016

Someone needs to wake George Will and tell him Ronald Reagan is dead

They tell the story in England of a British politician who dreamt he was addressing the House of Lords. When he awakened, he found that indeed he was!

Today I read the Review section in the Sunday Times and the Opinion section of my local newspaper. I had the feeling all the political pundits are asleep or that they're living in the 1980s.  In the Times, Timothy Egan wrote a rambling and largely incoherent essay about Bernie Sanders. Egan said Bernie's plan for a free college education and universal health care "are no more thought out than a bumper sticker."

Egan's observations are so false as to be almost libelous. Sanders' health care plan and his higher-education proposal are quite sound, and both are less expensive and more egalitarian than Obamacare and our federal student-loan nightmare.

In my local paper, George Will dismissed the rise of Trump and Sanders as "political silliness," and lumped them both with the simplistic socialist politicians of Great Britain.  Will  derided supporters of both candidates, calling them Trumpkins and Sandernistas.

I am astonished by the near unanimity among political columnists on both the right and the left regarding the upcoming presidential election. Almost with one voice, they ridicule both Trump and Sanders--basically implying by their arguments that Americans would be better off if Crooked Hillary became President

Some write from a conservative perspective and some call themselves liberals, but almost all of them share one thing in common--their columns appear under photographs of themselves that are about 20 years out of date.

Indeed all these people are from another era--from a time when the oligarchs had Americans convinced that our politicians were aligned into two political parties based on political principles. But of course we all know now that the Democratic-Republican divide was a charade--just a puppet show to amuse the rubes while politicians on both sides of the aisle lined their own pockets.

But the saps woke up. Some threw their support behind Trump, and some went to Sanders. Now the media elites are hysterical, writing mad drivel that cannot be identified by ideology. Froma Harrop insinuates Bernie Sanders is a racist, and Bill O'Reilly ridicules Bernie as doddering Socialist. Or is the other way around?

All these people--Froma Harrop, George Will, Timothy Egan, Frank Bruni, Steve and Cokie Roberts, Paul Krugman, Maureen Dowd, etc.--need to  wake up and join the 21st century. The peasants are rising, and their fury will not be assuaged by stale prose written by people who come across like eccentric  nursing-home inmates writing letters to the local newspaper.

Image result for george will images
I hate to break it to you, George, but Ronald Reagan is dead.

References

Timothy Egan. Bernie's Last Stand. New York Times, June 5, 2016, Review Section, p. 2. Accessible at http://www.nytimes.com/2016/06/05/opinion/sunday/bernies-last-stand.html?_r=0

George Will. Britain, too, is infected with political silliness. Baton Rouge Advocate, June 5, 2016, p. 7B. Also accessible in the Washington Post at https://www.washingtonpost.com/opinions/britain-too-is-infected-with-political-silliness/2016/06/03/77560a20-28e8-11e6-b989-4e5479715b54_story.html







Saturday, June 4, 2016

Nearly 95 million Americans aren't working: The government's unemployment rate is just a bullshit number

During the First World War, it is said. the British military kept three separate casualty lists: one list to deceive the public, a second list to deceive the War Office, and a third list to deceive itself.

We could say much the same thing about the government's official unemployment rate.  The Bureau of Labor Statistics (BLS) claims the nation's unemployment rate is only 4.7 percent, less than half the rate in Europe and about half what it was when Obama came into office.  "We cut unemployment in half, years before a lot of economists thought we could," President Obama boasted recently to a crowd in Indiana.

The BLS unemployment rate is just a bullshit number

But nobody believes that. Everyone knows the government's official unemployment rate is just a bullshit number.

Even the government admits the unemployment rate is higher if we include people who are working part-time involuntarily and the people who have given up looking for work. But including those people in the analysis still understates how bad the employment situation is.

In fact, when we ponder how many American adults are simply not working, we get a clearer understanding of the employment picture.  A few days ago, BLS reported that 94,708,000 American adults are not in the labor force--37 percent of the entire American adult population.

Of course, not all of these people are unemployed. Millions are retired, millions are pursuing post-secondary education, and millions are not working  because they are disabled and receiving disability benefits. Obviously, not all non-working Americans are suffering.

But a lot of non-working Americans are suffering. Millions of Americans are unemployed or underemployed, millions gave up looking for work and elected to take early retirement at reduced benefits. And there are millions who are still in the labor force but are working at substandard wages, including a lot of college graduates who hold jobs that don't require a college degree.

Signs of economic decline are everywhere

Although Obama takes credit for leading the nation out of the 2008 recession, the standard of living for millions of Americans continues to decline.  As the Brooking Institution paper noted in 2012, median wages for male workers have gone down precipitously in recent years.  In constant dollars, median wages for American men have slipped  by 19 percent since 1970.

Although the Obama administration insists that the economy is creating new jobs, that's probably bullshit as well. BLS reported last week that 38,000 new jobs came on line in May, a dramatic decline from an average of 178,000 a month over the first three months of 2016.  But a Brookings analysis, using a different form of measurement, claims the economy actually lost 4,000 jobs last month.

 And more and more people are on food stamps--1 out of 7 Americans are now receiving food-stamp assistance. That's 45 million people--up from around 28 million when Obama took office.  Do these numbers suggest that the economy is in recovery?

And then there's the student-loan crisis

And then there's the student loan crisis.  Approximately 43 million Americans owe 1.3 trillion in student-loan debt.  Although  the Department of Education's three-year default rate is only around 10 percent, that's just more bullshit.  By encouraging people to obtain economic hardship deferments, the government has artificially kept default rates down, because people with deferments aren't counted as defaulters even though they aren't making loan payments.

But of course people who accepted deferments are seeing their loan balances go up because interest continues to accrue. Now the only way they can service their loans is by signing up for 20-year income-base repayment plans.

The true student-loan default rate is probably 25 percent; and its 50 percent for people who took out loans to attend for-profit colleges. And even this estimate may be too low.

Millions of Americans are suffering and they're  foaming with rage

In short, millions of Americans are suffering. They know the economy is deteriorating; they know their standard of living is going down. They know Barack Obama despises ordinary Americans--the poor stiffs who live in fly-over country and still go to church on Sundays.

And ordinary Americans are foaming with rage.

The political and media elites think they can keep a lid on all this anger, that they can persuade a majority of Americans to vote for Hillary and prolong the status quo. They think Americans are listening to Anderson Cooper and Don Lemon when they paint Trump as a racist and a bigot on CNN. They think columnist Froma Harrop will persuade her readers that Bernie Sanders is a racist.

But I've got news for the elites. The people who are angry aren't listening to CNN. They aren't reading Froma Harrop. The elites may succeed in crowning Hillary Clinton as the next queen of post-modern America, but the pundits will never tamp this anger down. It's real, it's ugly, and it's permanent.







References

Alan Bjerga. Food Stamps Still Feed One in Seven Americans Despite RecoveryBloomberg News, February 3, 2016. Accessible at http://www.bloomberg.com/news/articles/2016-02-03/food-stamps-still-feed-one-in-seven-americans-despite-recovery

Christopher Goins, 44.7 Million Americans Now on Food Stamps--More than at Any Time Under Bush, CNS News, February 3, 2012. Accessible at http://cnsnews.com/news/article/447-million-americans-now-food-stamps-more-any-time-under-bush

 Michael Greenstone and Adam Looney. The Uncomfortable Truth About American Wages. Brooking Institution, October 23, 2012. Accessible at http://www.brookings.edu/research/opinions/2012/10/22-wages-greenstone-looney

Susan Jones, Record 94,708,000 Americans Not in Labor Force; Participation Rate Drops in May. CNS News, June 3, 2016. Accessible at http://www.cnsnews.com/news/article/susan-jones/record-94708000-americans-not-labor-force-participation-rate-drops

Matthew Boesler. More College Grads Finding Work, But Not in the Best Jobs. Bloomberg.com, April 7, 2016. Accessible at http://www.bloomberg.com/news/articles/2016-04-07/more-college-grads-finding-work-but-not-in-the-best-jobs

Nicholas Wells and Mark Fahey. What's the REAL unemloyment rate? CNBC.com, January 8, 2016. Accessible at http://www.cnbc.com/2016/01/08/

Jonathan Wright. Amidst unimpressive official jobs report for May, alternative measure make little difference. Brookings Institution, June 3, 2016. Accessible at http://www.brookings.edu/blogs/jobs/posts/2016/06/03-amidst-unimpressive-official-jobs-report-for-may-alternative-measures-wright?utm_campaign=Brookings+Brief&utm_source=hs_email&utm_medium=email&utm_content=30258460&_hsenc=p2ANqtz-8wODcWxeX-Vo8PGswc2439RPH_hV1yCM05S_knJvJmuSfYUbz-xh1mWd76dc0m2GG5fhL55iubJxPERM_sbHc3qH5Hfg&_hsmi=30258460

Thursday, June 2, 2016

Bill Kristol wants David French to run for president against Trump and Hillary: Don't bring a knife to a gun fight

Bill Kristol, Editor of Weekly Standard, is promoting David French, a National Review writer, to run for president as an independent against Donald Trump and Hillary Clinton.

What a terrible thing to do to Mr. French. It's like throwing a puppy into a nest of crocodiles.  And isn't Donald having enough fun already? Do we really need to give him another person to belittle and ridicule?

On the other hand, French is a Presbyterian as is Trump; and Hillary is a Methodist. I would love to see these candidates debate theology.


Image result for don't bring a knife to a gunfight


St. Catharine College and Dowling College are closing: "After us, the deluge."

After us, the deluge.  I care not what happens when I am dead and gone.

Marquise de Pompadour

Just this week, two small colleges announced they are closing: St. Catharine College, a Catholic institution in Kentucky; and Dowling College, a private school in Long Island.  

Clearly, a lot of small private colleges are in trouble. Last autumn, Moody's Investor Service predicted a sharp increase in the number of college closures, forecasting that 15 would close in 2017. I think Moody's is far too optimistic. By 2017, I think we will see three or four colleges shutting down every month.

What's going on? Several things.

Small colleges have priced themselves out of their markets. First, many small non-elite colleges have priced themselves out of their markets. Tuition has been rising every year for the past 20 years, and even obscure little colleges now charge students from $30,000 to $35,000 a year, just for tuition. For years, students and their parents passively submitted to yearly tuition hikes; but no more. Mom and Pop aren't willing to pay $100,000 for Suzie or Johnny to get a bachelor's degree from an undistinguished private college.

It's true that small private colleges are heavily discounting their tuition--almost 50 percent for first-time freshmen. And it is true that students can take out student loans to pay for their college tuition. But families are not sure whether they will get a tuition discount big enough to fit their budgets or whether they are getting as good a discount as another family gets. They've lost trust in the integrity of the admission process.

And young people have finally begun reading the newspapers and are waking up to the fact that student-loan debt can be a financial death sentence for graduates who don't quickly find good jobs. They have become wary about enrolling at a little college named after a saint they've never heard of. Who in the hell is Saint Scholastica  anyway?

Onerous federal regulations have raised operating costs. So price is a factor.  But there is another reason why small colleges are closing. Federal regulation has become too onerous for small schools to manage. They simply cannot afford to comply with ever more burdensome regulations that spew out of the Department of Education.  The Department's 2011 "Dear Colleague" letter on sexual harassment triggered a flurry of new college regulations, policies, and training programs to meet DOE's heightened standards for complying with Title IX. DOE's new transgender restroom rules will cost colleges money, and the rules will be a real headache for the little religious colleges that pride themselves on their traditional moral values.

Here's an example of how colleges are being subject to more and more federal regulation. Virginia Tech suffered a horrible tragedy when a deranged gunman massacred more than thirty students in 2007. The University was sued for negligence after the incident, but the Virginia Supreme Court ruled that Virginia Tech was not liable under Viginia tort law.

But the Department of Education concluded that Virginia Tech violated the Clery Act in the way it alerted students about an ongoing threat and assessed a fine against the University. The fine wasn't large compared to Virginia Tech's overall budget, but the University spent a lot of money defending against DOE's charge, and it will spend even more trying to make sure it does not run afoul of the Clery Act again.

Virginia Tech is big enough and rich enough to deal with DOE's mandates, but hundreds of small colleges don't have the resources for dealing with the ever growing complexity of the federal regulatory environment.

St. Catharine College is a case in point. It got squeezed by DOE, which held up its federal student aid money based on some technical issue. The college sued but apparently didn't get relief. This week it announced its closure, which it said was triggered by DOE sanctions.

Small liberal arts colleges are headed for extinction and there is no way to revive them.  Small colleges have implemented all sorts of strategies to keep their enrollments up and maintain their revenues. Many have tried to reinvent themselves by hiring marketing firms to enhance their images and juice their enrollments.

By and large, this strategy has failed. Let's face it: hiring a marketing firm to design an edgy college logo or a catchy slogan is no remedy for the massive problems facing the nation's small liberal arts colleges.

I don't see any way to revive the small liberal arts college. Their tuition rates are too high, and offering heavy discounts has not lured middle class students to return in large numbers.

Moreover, the Department of Education does not care whether it is regulating small colleges out of business. The DOE minions probably gave each other high fives when they heard St. Catherine is closing its doors.

Nor is there any way for colleges to walk away from their total dependence on federal student aid and the federal regulations that come with it. The colleges drank the Kool Aid of federal student-loan money, and their is no antidote.

If you are a college administrator or a professor and you are nearing retirement, perhaps you don't care about the demise of liberal arts colleges. As Marquise de Pompadour put it: "After us the deluge.  I care not what happens when I am dead and gone." But a young person with a new Ph.D. would be a fool to try to build a career by taking a job at a small liberal arts college. 





References

Another Small Private Closes Its Doors. Inside Higher Ed, June 1, 2016. Accesible at https://www.insidehighered.com/quicktakes/2016/06/01/another-small-private-closes-its-doors-dowling-college?utm_source=Inside+Higher+Ed&utm_campaign=a0fafeb056-DNU20160601&utm_medium=email&utm_term=0_1fcbc04421-a0fafeb056-198564813

Paul Fain. The Department and St. Catharine.  Inside Higher Ed, June 2, 2016. Accessible at https://www.insidehighered.com/news/2016/06/02/small-private-college-closes-blames-education-department-sanction?utm_source=Inside+Higher+Ed&utm_campaign=3d1c6eed79-DNU20160602&utm_medium=email&utm_term=0_1fcbc04421-3d1c6eed79-198565653

Lyndsey Layton. Virginia Tech pays fine for failure to warn campus during 2007 massacre. Washington Post, April 16, 2014. https://www.washingtonpost.com/local/education/virginia-tech-pays-fine-for-failure-to-warn-during-massacre/2014/04/16/45fe051a-c5a6-11e3-8b9a-8e0977a24aeb_story.html

Kellie Woodhouse. Closures to Triple. Inside Higher Education, September 28, 2015. Accessile at https://www.insidehighered.com/news/2015/09/28/moodys-predicts-college-closures-triple-2017