Wednesday, June 28, 2017

A Big Nothing Burger: The FBI should stop investigating Jane Sanders, Bernie's wife and former president of Burlington College

The FBI is investigating Jane Sanders, former president of Burlington College and wife of Senator and former presidential candidate Bernie Sanders.

The heart of the matter, as I understand it, is this: Jane allegedly submitted a loan application on behalf of Burlington College that falsely represented that the College had secured millions of dollars in pledged financial donations. The college obtained the loan but the pledged donations did not materialize. The college then closed in 2016 under a mountain of debt.

This is a big NOTHING BURGER, and the FBI should shut this investigation down.

Let's assume for a moment that the allegation is true and that Jane falsely represented that the college had financial pledges and that the the college obtained a large loan based on that misrepresentation. That would be reprehensible but no more reprehensible than the millions of people who filled out so-called liars loans during the real estate bubble that burst in 2008.

We all remember that episode, accurately dramatized in the movie The Big Short. People were applying for loans to buy homes without proper documentation of their income and assets. Those homes were wildly overvalued; but real estate brokers, real estate appraisers, and the banks all colluded to make sure the loans were approved Corporate financiers then packaged those loans into asset backed securities (ABS), which were peddled to unwary investors, including pension funds. The ratings agencies glibly certified that the ABS were investment grade when in fact they were junk.

And then the real estate market collapsed in a flood of foreclosures, and the American economy nearly collapsed.

Did anyone go to jail for that huge speculative bubble? No, no one went to jail.

Even if we put Jane's conduct in the worst possible light (which I am not inclined to do), she did nothing that wasn't done by millions of Americans, including a lot of fat cats in the global financial industry.  If we aren't going to put the ratings-agency executives, the real estate brokers, and the fat cats from Goldman Sachs in jail, then let's leave Jane Sanders alone.

Apart from whether Jane filed a fraudulent loan application, there is a suggestion that she was an incompetent president of Burlington College and that the college closed last year due at least in part to her poor leadership. But that allegation is bogus as well.

Dozens of small private colleges have closed in the past three or four years, and dozens more are on the brink of closure. Even if Jane Sanders had sterling administrative and financial skills, it is doubtful she could have saved that little college. After all, Burlington only had a couple of hundred students.

Her detractors have collected negative assessments from disgruntled former Burlington faculty members, but let's face it. Colleges all over the country are on the brink of extinction, and the professors generally do nothing but moan, gripe and criticize.

I repeat, this is a big nothing burger. The FBI and the conservative media should get off Jane's back.

In the interest of full disclosure, I admit that I was a big fan of Bernie Sanders as my blog postings attest. I voted for him, and I was deeply disappointed when he wasn't named the Democratic nominee for President.

But I am over Bernie. In my opinion, he was cheated out of the Democratic nomination by Hillary Clinton, John Podesta, Debbie Wasserman Schultz and a gaggle of disreputable journalists. Remember when columnist Froma Harrop called Bernie a racist in an op ed essay? Bernie Sanders, who was arrested in a civil rights demonstration when Hillary was checking footnotes at Yale Law School. What an outrageous accusation!

After the way the Democratic Party treated him, Bernie should have quit the Democrats and started a third political party. I am hugely disappointed to see him working collegially with the people who treated him so disgracefully during the 2016 primary season.

Nevertheless, Jane does not deserve to have aspersions cast against her based on a loan application that might have been puffed up a bit.  The FBI and Fox News should leave her the hell alone.

Leave Jane the hell alone!


References

Alan Dershowitz. Dershowitz: Why the Sanders FBI bank loan investigation is dangerous territory. Fox News, June 28, 2017.


Froma Harrop. Bernie Sanders and Racism LiteSeattle Times, May 19, 2016.

Eli Watkins, Elizabeth Landers, and Will Cadigan. Bernie Sanders says reported investigation into his wife stems from 'pathetic attack. CNN, June 28, 2017.

Another Attorney General Jumps on Department of Education: Essay by Steve Rhode

North Carolina Attorney General Josh Stein has joined to voices of others from around the country who are disappointed the Department of Education has decided to delay the July 1, 2017 regulations that would have helped to protect students with federal student loans from fraudulent schools and colleges. See this.

Stein said, “Education is one of the best reasons I can think of to borrow money. But unfortunately, there are some in our world who take advantage of those who are vulnerable – and that includes student borrowers. As North Carolina’s Attorney General, protecting people, including students is my top priority.”

“That is why I find this news deeply troubling. The rules, which were to take effect on July 1, would protect student borrowers – delaying them is misguided and irresponsible.”

“These delayed rules were hard-fought and sound consumer protection measures born out of the problems that other attorneys general and I have seen plague student borrowers time and time again.”

The delayed protections include: 

  • Prohibiting schools from forcing students to pursue complaints in arbitration rather than in court; 
  • Prohibiting schools from requiring students to waive participation in class action lawsuits; and 
  • Providing automatic relief and group relief for defrauded federal student loan borrowers in certain circumstances, including following legal actions by state attorneys general. 
Delaying the rules is a win for for-profit schools that provide a poor result and a loss for student loan debtors who have their futures financially damaged.

Steve Rhode

Steve Rhode

Get Out of Debt GuyTwitter, G+, Facebook


This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. 

Tuesday, June 27, 2017

Bethune-Cookman University reports $17.8 million operating loss as administrators' salaries go up

Bethune-Cookman University, a Florida HBCU, reported an operating loss of $17.8 million in its most recent tax return. That's a 12-fold increase over the previous year, when it reported a budget deficit of only $1.5 million.  Fitch Ratings downgraded the school's bond rating for the second time in six months. B-CU's bond rating now hovers just above junk status.

Should B-CU tighten its belt and cut expenses to deal with this crisis? Hell no!

According to the Daytona Beach News-Journal, salaries jumped from $41.5 million to $49.2 million in just one year.

Here are the details, quoted verbatim from the Daytona Beach News-Journal article:
  • Salaries at the school jumped nearly $8 million, from $41.5 million to $49.2 million, accounting for a large chunk of the increased expenses.
  • The school's top leadership took away a combined $2.69 million in compensation--an average of $207,000 for each of the 13 [executive] employees. The previous year, its leadership took in $1.4 million, an average of $175,000 for only eight top executives.
  • While his base pay was lowered, [President Edison] Jackson received a raise of $40,000 when additional compensation was factored in, giving him a total salary of nearly $410,000.
  • Fifty employees were paid at least $100,000, up from only eight in the previous year.

And there's more. B-CU borrowed $7 million from its endowment funds, about 13 percent of the total. Five million dollars of that amount was to pay--you guessed it--administrative expenses. Meanwhile, its investments suffered a 11 percent loss, even though the stock market was going up.

In short, it appears that B-CU's senior administrators are giving themselves raises while the school's budget deficit spirals out of control.

You may remember that Bethune-Cookman made the news recently when many of its students turned their backs on Secretary of Education Betsy DeVos and booed her when she spoke at the university's spring graduation exercise.

Isn't it remarkable how college students turn their anger on external parties instead of examining the competence of their own institution's leadership? Most of Bethune-Cookman's students have taken out student loans to finance their studies at a university that apparently does not know how to manage its own financial affairs. B-CU's students booed the wrong person at last spring's graduation exercises. They should have been booing President Edison Jackson.


References

Erica L Green. Bethune-Cookman Graduates Greet Betsy DeVos with Turned Backs. New York Times, May 10, 2017.

Scott Jaschick. Large, Growing Losses at Bethune-Cookman. Inside Higher Ed, June 26, 2017.

Seth Robbins. Tax documents show B-CU losses mounting to $17.88 million. Daytona Beach News-Journal, June 24, 2017.

Valerie Straus. Booing students at Betsy DeVos's commencement speech told to shut up or get diplomas sent in mail. Washington Post, May 10, 2017.

California bans government-funded travel to Texas. Frankly, my dear, Texans don't give a damn.

In a fit of governmental lunacy, the California legislature passed a law last year banning government-funded travel to any state that discriminates against LGBT people.  As of this week, eight states are on California's travel-ban list: Alabama, Kansas, Kentucky, Mississippi, North Carolina, South Dakota, Tennessee, and Texas. 

As a former Texas who is proud to have received a law degree from the state's flagship university, I feel quite confident in saying that Texans don't give a damn.  Ken Paxton, the Texas Attorney General, jokingly remarked that California probably imposed the travel ban to reduce the number of Californians who visit Texas and decide to relocate. 

In fact, 600,000 Californians moved to Texas over the last decade, while only 350,000 Texans moved to California. Between 2009 and 2014, California suffered a net population loss of nearly 1 million people; and Texas absorbed more California emigrants than any other state.

California's travel ban is a display of cultural arrogance equal to that displayed by the British Empire toward India during the days of the Raj. Texas, after all, is not a cultural backwater. It has the nation's second largest economy, and its cities are as culturally diverse as Los Angeles. Houston, which will soon pass Chicago to become the nation's third largest city, has a thriving gay community and even elected a lesbian mayor. 

As of now, California's travel ban only applies to eight states; but there will surely be more. Kentucky, for example, was put on the travel-ban list because it passed a religious freedom statute. But 19 other states have adopted similar laws. Why single out Kentucky?

Let's face it. In the eyes of California's progressive politicians, the entire country is benighted compared to the Golden State. Why doesn't California Attorney General Xavier Becerra, who put Texas on the travel-ban list, make a clean sweep and ban state-funded travel anywhere in the United States except Boston and New York City?

No one in California wants to visit flyover country anyway, and people in flyover country will do just fine even if they receive fewer visitors from California.


Frankly, my dear, I don't give a damn if you don't want to visit Texas.


References

John Daniel Davidson. California's travel ban messes with Texas. The Federalist, June 27, 2017.

Phillip Reese. Roughly 5 million people left California in the last decade. See where they went. Sacramento Bee, 2017.


Monday, June 26, 2017

Trump should fire Betsy DeVos as Secretary of Education for gross incompetence. If Trump fails to act, Congress needs to do whatever is necessary to drive her from office

Let us take our minds off Russia for just a moment and focus on a massive economic problem that affects millions of Americans: the collapsing student loan program. Forty-three million Americans now hold about $1.4 trillion in student loan debt, and a lot of that money will never be paid back. 

As the New York Times recently reported, borrowers defaulted at the rate of 3,000 a day last year; and a total of more than 8 million people are in default. Default rates are highest in the for-profit college industry; five-year default rates in this sector are almost 50 percent.

The Department of Education is trying to keep default rates down by pressuring borrowers into income-driven repayment plans, but that tactic isn't working. Nearly half the people who sign up for those plans drop out within three years; and a lot of defaulting borrowers don't even bother to sign up.

In short, the federal student loan program is a train wreck, a catastrophe, an unmitigated disaster. 

As President Trump's Secretary of Education, it is Betsy DeVos's job to address the student-loan crisis; but in a series of wrongheaded decisions, DeVos has demonstrated that she is either grossly incompetent or in bed with the sleazy for-profit college industry. President Trump must fire her immediately, and if he does not, then Congress needs to bring all its forces to bear to drive her from office.

Here is a brief list of DeVos's fumbling misbehavior:

First, she hired consultants from the for-profit industry to give her advice, which is like a hiring a burglar to be a bank guard.

Second, she canceled the Obama administration's order that restrained loan processors from slapping huge fees on student-loan defaulters who quickly brought their loans back into repayment status.

Third, she is overhauling the Department of Education's new regulations for processing borrowers' applications to have their student loans forgiven based on claims of institutional fraud. This bureaucratic delay tactic will leave thousands of defrauded college borrowers in limbo for months and even years.

And finally, DeVos blocked implementation of a Department of Education directive banning for-profit colleges from forcing students to sign mandatory arbitration clauses as a condition of enrollment.

In my view, allowing the for-profit colleges to continue including mandatory arbitration clauses in their student enrollment documents is DeVos's most outrageous decision. Mandatory arbitration clauses bar students from suing their institution for fraud and prevent students from banding together to file class actions suits against colleges that engage in massive fraudulent behavior.

About a year ago, the Century Foundation urged the Department of Education to require the for-profits to stop including mandatory arbitration clauses in their enrollment documents, and two for-profits--University of Phoenix and DeVry University, publicly agreed to abandoned them voluntarily.

Numerous commentators have criticized the use of mandatory arbitration agreements when they are used by corporations to insulate them from lawsuits. Just within the last year, two courts have struck down mandatory arbitration clauses that for-profit education providers tried to enforce. In one case, a university's arbitration agreement required California students to arbitrate their claims in Indiana!

Since taking office, DeVos has shown herself to be a stooge for the for-profit college industry. If she knowingly does the bidding of this shady racket, then she behaving reprehensibly. If she is acting on the industry's behalf out of ignorance, then she's grossly incompetent.

But her motivations don't matter. Betsy DeVos has got to go. If Trump doesn't fire her soon, then federal legislators should join in a bipartisan call for her removal. Americans deserve a competent Secretary of Education who will act in the public interest, not the interests of the venal for-profit college industry. 

References

Patricia Cohen. Betsy DeVos's Hiring of For-Profit College Official Raises Impartiality Issues, New York Time, March 17, 2017. 

Danielle Douglas-Gabriel. Trump administration rolls back protections in default on student loans. Washington Post, March 17, 2017.

Seth Frothman & Rich Williams. New data documents a disturbing cycle of defaults for struggling student-loan borrowers. Consumer Financial Protection Bureau, May 15, 2017. 

Tariq Habash & Robert Shireman. How College Enrollment Contracts Limit Students' Rights. Century Foundation, April 28, 2016.

Magno v. The College Network, Inc.. (Cal. Ct. App. 2016).

Morgan v. Sanford Brown Institute, 137 A.3d 1168 (N.J. 2016).

News Release. Apollo Education Group to Eliminate Mandatory Arbitration Clauses. May 19, 2016.


Thursday, June 15, 2017

Federal court orders the Department of Education to rule on Everest College student's request for debt cancellation: Sarah Dieffenbacher v. Betsy DeVos

Dieffenbacher v. U.S. Department of Education: A Student Borrower seeks debt relief on grounds of fraud

From 2007 to 2012, Sarah Dieffenbacher attended Everest College-Ontario Metro, a for-profit college located in Ontario, California. She took out $50,000 in federal student loans to fund her studies.

In March 2015, Dieffenbacher filed a "borrower defense" application with the U.S. Department of Education, petitioning to have her loans cancelled on the grounds that Everest had engaged in fraudulent conduct in violation of California law.

In August 2015, Dieffenbacher defaulted on her loans. Educational Credit Management Corporation, her loan servicer, sent her a notice stating that it intended to begin garnishing her wages.

Dieffenbacher filed a timely objection and a request for a hearing. This objection consisted of a 29-page letter accompanied by 254 pages of exhibits. These exhibits included Diefenbacher's sworn statement and records from the California Attorney General's Office showing documented misconduct by Everest and its parent company, Corinthian Colleges.

On January 20, 2017, Dieffenbacher's attorney received a letter from the Department of Education stating that DOE was denying Dieffenbacher's objection to having her wages garnished. DOE said its decision was conclusive and that Dieffenbacher's only recourse was to file a lawsuit in federal court.

This Dieffenbacher did. In her lawsuit, Dieffenbacher claimed that DOE's decision was arbitrary and capricious and violated the Administrative Procedure Act.

Without admitting fault, DOE filed a motion to remand Dieffenbacher's case back to the Department so that its decision could be "reconsidered and re-issued in a way that would not be arbitrary, capricious, or contrary to law."

Judge Virginia Phillips' decision

Last week, Judge Virginia Phillips, a California federal judge, denied DOE's request for a voluntary remand. In Judge Phillips' view, the Department "[had] not established a substantial or legitimate concern guiding its request for a remand."

The judge pointed out that Dieffenbacher's application for loan forgiveness had been pending for more than two years and that the Department had made contradictory arguments about what it intended to do.

Indeed, Judge Phillips' suggested that the Department of Education was attempting to get Dieffenbacher out of court so that it could garnish her wages. "The Department's request for remand appears to be an attempt to evade judicial review so that it can retain the ability to garnish [Dieffenbacher's] wages without a conclusive ruling as to the enforceability of her loans," the judge observed. "Under such circumstances, the remand request appears both frivolous and in bad faith" [emphasis supplied].

Judge Phillips concluded her opinion by ordering DOE to rule on Dieffenbacher's loan cancellation application within 90 days. If the Department fails to comply, the judge added, she would proceed to hear Dieffenbacher's claims on the merits.

The Dieffenbacher case: More Evidence of the Department of Education's Stall Tactics

The Dieffenbacher case is the latest example of the Department of Education's efforts to avoid dealing with student borrowers' legitimate applications for loan forgiveness.

In the Price case, which I wrote about recently, DOE took six years to rule on a University of Phoenix graduate's application for loan forgiveness based on her claim that Phoenix falsely certified that she had a high school diploma when she began her studies. Ultimately, DOE disallowed the claim. A federal court in Texas countermanded DOE's ruling and discharged the debt.

Last January, DOE sent a letter to 23,000 former students at Corinthian Colleges, assuring them that their loans had been approved for cancellation and that the loans would be forgiven within the next 60 to 120 days. Almost six months later, DOE has not kept its promise, which prompted a protest letter from 19 states' attorneys general.
So what's going on?

I think Betsy DeVos's DOE pencil pushers have added up the costs associated with discharging students loans under DOE's own rules and regulations and have found those costs to be enormous. DOE is trying to put the brakes on its administrative loan forgiveness process. The Department announced this week that it is rewriting the "borrow defense" regulations that Dieffenbacher relied on.

BUT IT IS TOO LATE. DeVos's efforts to slow down the loan forgiveness process will not withstand scrutiny in the federal courts, as the Price case and the Dieffenbacher case demonstrate.

The Consumer Financial Protection Bureau said in a recent report that eight million student borrowers are in default, with nearly 1.2 million defaulting in 2016 alone. As CFPB pointed out, people are defaulting at the rate of 2 borrowers every minute!

Two things must be done to bring the federal student loan program under control. First, the federal government must stop sending student aid dollars to for-profit colleges, which have shockingly high student-loan default rates.

Second, Congress must amend the Bankruptcy Code to allow distressed student borrowers to discharge their student loans in bankruptcy like any other unsecured consumer debt.

But Betsy DeVos's Department of Education refuses to face reality while it stalls for time. In the end, this approach is going to enrage millions of student borrowers. These borrowers are also voters, and they will vote for any politician who promises real debt relief to the legions of student borrowers who will never pay back their loans.

References


Dieffenbacher v. U.S. Dep't of Educ., ED CV 17-342-VAP (KK) (C.D. Cal. June 9, 2017).

Seth Frotman & Rich Williams. New data documents a disturbing cycle of defaults for struggling student loan borrowers. Consumer Financial Protection Bureau, May 15, 2017.

Andrea Fuller. Student Debt Payback Far Worse Than BelievedWall Street Journal, January 18, 2017.

Andrew Kreighbaum. Court Orders Education Department to End Delay in Ruling on Loan Discharge. Inside Higher ED, June 9, 2017.

Andrew Kreighbaum. Education Department to hit pause on two primary Obama regulations aimed at for-profitsInside Higher ED, June 15, 2017.

Andrew Kreighbaum. State AGs Want Action on Student Loan DischargeInside Higher Ed, June 6, 2017.

Lisa Madigan, Illinois Attorney General. Letter to Betsy DeVos, US. Secretary of Education, June 5, 2017.

Price v. U.S. Dep't of Educ., 209 Fed. Supp. 3d 925 (S.D. Tex. 2016). [Link is to U.S. Magistrate's opinion, which was affirmed by a U.S. District Judge.]
 


Sunday, June 11, 2017

The for-profit college industry is shrinking: It's time to shut this sleazy sector down

We've known for a long time that the for-profit college industry is a cancer infecting the higher education community. Senator Tom Harkin's committee report, published in 2012, told us that.

The cost of attending a for-profit college is far higher than the cost of enrolling at a public college. Completion rates are low, job prospects for attendees are often bleak. Some for-profits spend more on recruiting than they do on instruction.

 And student-loan default rates at the for-profits are quite high. Forty-seven percent of the 2009 cohort of for-profit college borrowers defaulted on their loans within five years.

Here are the 5-year cohort default rates for selected for-profit colleges, as reported by a 2015 Brookings Institute paper:
  • University of Phoenix-Phoenix campus: 45 percent
  • DeVry University-Illinois: 43 percent
  • Ashford University: 47 percent
  • Kaplan University-Davenport campus: 53 percent
And of course these figures understate the number of for-profit college students who are not repaying their loans because many non-defaulters have their loans in deferment or forbearance and are not making their monthly loan payments.

But the good news is this: the for-profit college industry is shrinking. When the Harkin report came out five years ago, for-profit colleges enrolled 13 percent of all college and university students. In the spring semester of 2017, that figure had dropped to 5 percent. For the industry as a whole, for-profit enrollments dropped 10 percent between spring 2016 and spring 2017.

Part of this drop can be attributed to aggressive enforcement of consumer protection laws by state attorneys general and better regulation by the U.S. Department of Education. In the last two years alone, Corinthian Colleges and ITT Tech closed and went bankrupt. Together these institutions had a half million former students.

Moreover,  potential students are becoming more wary of aggressive for-profit college recruiters. This may explain why enrollments are plummeting at several well-established for-profit colleges, such as University of Phoenix and DeVry.

Now, while the for-profit college sector is shrinking, is the time to shut this sleazy industry down. I think the for-profits are hoping the Trump administration will be friendly to their interests, allowing them to get back on their feet.

But let's  hope the industry is wrong. If President Trump implements policies that reinvigorate the for-profit college industry, it will be the biggest mistake of his administration--far bigger than his goofy dinner conversation with FBI Director James Comey.


The for-profits are shrinking, shrinking!


References

Associated Press. Enrollment is tanking at University of Phoenix, DeVry, and other for-profit colleges, Los Angeles Times, September 22, 2016.

Paul Fain. Enrollments Continue to Slide at For-Profits and Community Colleges. Inside Higher Ed, May 24, 2017.

Tamar Lewin. Senate Committee Report on For-Profit Colleges Condemns Costs and Practices. New York Times, July 29, 2012.

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).

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






"Meet The Three Headed Debt Monster That's Going to Ravage the Economy," writes MN Gordon

A three-headed consumer debt monster is about to ravage our economy, writes MN Gordon in an Acting-Man essay that was republished on zerohedge.com. And what are the three heads?  Auto loans, credit card debt, and student loans.

As Gordon points out, all this massive debt is backed by essentially no collateral. Regarding credit-card debt, Gordon says this:
[C]redit card debt has been run-up purchasing 72-inch flat screen televisions, avocado toast, and combination platters at Applebee's. How does a creditor recover the cost of a meal that was consumed 2 years ago?
Of course, auto loans are secured by the cars that are purchased on credit. But, as Gordon put it, new cars lose value "nearly as fast as fresh tomatoes turn to rot." Thus, a repossessed car is rarely worth as much as the debt it was  meant to secure.

And of course student loans form the third and most vicious head of the three-headed consumer debt monster. As has been often reported, student loans have now outstripped credit card debt and auto loans as the biggest sector of consumer debt (excluding home mortgages).

The federal government issues more than $100 billion in student loans every year, and student loans are backed by absolutely no collateral.  How do you repossess a law degree from Thomas Jefferson Law School or a liberal arts degree from Vassar?

The entire postsecondary education industry--from Harvard University to Bob's Barber College--subsists on federal student-aid money. The for-profit colleges get almost 90 percent of their revenues from the federal government. Most for-profit colleges could not last a month without regular infusions of federal cash.

And although no one wants to admit it, at least half of the outstanding student-loan debt--totally $1.4 trillion--will never be paid back. The Department of Education is hiding the true default rate by putting borrowers into economic hardship deferments, forbearance programs, or long-term income-driven repayment plans. But the reality is this: most of the people in these shell-game programs will never repay their loans.

One might think that all this federal cash is adequate to sustain America's colleges and universities, but they are continually searching for more money. Nationwide, tuition rates have gone up nearly every year for the past 25 years. Tuition costs for graduate programs have reached insane levels because the federal government put no limit on the amount a student can borrow to get an MBA or law degree.

And where has all this student loan money gone? As Gordon observed, "it has been dispersed into oversized professor salaries, oversized lecture auditoriums, and oversized sports complexes."

Most of us would feel better about the runaway cost of higher education if our universities and colleges were providing real value for students' tuition dollars--if a college degree or graduate degree led to a good job and a better life.

But average wages in real terms have gone down over the past 30 years. Although the higher education industry repeatedly points out that the wage differential between high school graduates and college graduates is increasing, most of this growing gap is explained by declining wages for non-college graduates.

Of course, higher education's defenders like to point out the intrinsic value of a university degree--a better appreciation for culture, an enhanced ability for civic involvement, greater tolerance for people with opposing points of view.  The late John Kenneth Gailbraith, some old white guy from Harvard, expressed the intrinsic value of education as follows:
Education is, most of all, for the enlargement and the enjoyment of life. It is education that opens the window for the individual on the pleasures of language, literature, art, music, the diversities and idiosyncrasies of the world scene. The well-educated over the years and centuries have never doubted their superior reward; it  greater educational opportunity that makes general and widespread this reward.
But this is bullshit. It was bullshit when Galbraith wrote it, and it is overripe bullshit today. Our colleges and universities--our elite universities in particular--have become cesspools of racial and sexual-identity politics, Brownshirt-style intolerance for diverse political ideas, and Orwellian breeding grounds for groupthink.

In short, over a period of less than 50 years, our nation has constructed a higher education system that forces millions of Americans to take out student loans they cannot pay back in return for overpriced educational experiences that do not lead to better jobs or to better lives.

References

MN Gordon. Meet the Three-headed Debt Monster That's Going to Ravage Our Economy. Acting-Man.com. Republished at  zerohedge.com, June 10, 2017.










Friday, June 9, 2017

If Trump Will Let CFPB Survive Their Work Will Protect Small Business Loans and Student Loans--essay by Steve Rhode

I can’t imagine a measure of the the amount of effort that has been invested into making sure the Consumer Financial Protection Bureau is wiped off the face of the earth.

Big business and companies wanting consumers to have less power in the financial world are not excited about the CFPB that has been fighting hard to protect consumers from scams and schemes to rip them off.

In the coming years, if the CFPB survives, they are planning on targeting mortgage loan servicing, student loan servicing, and small business lending to make sure consumers are not getting to get screwed by these entities.

Some people want government out of our lives at nearly all costs. But for all those who politically want the CFPB to go away there is one simple issue that should change your mind. Let’s be honest. big business has more money to fight back against consumers and people just do have the resources to make much of a difference when they get screwed over by their financial company.

Sure, there have been some hit and miss victories by the lone consumer but for the most part, the deep pockets win.

Take private student loans for example. Consumers could discharge a lot of private student loan debt in bankruptcy or invalidate it. But people don’t have the resources to wage these battles and fight back against the lenders. So guess what, lives are ruined.

The CFPB represents at least one entity that works hard to fight for consumers. It creates leverage against deceptive and abusive financial practices that take advantage of consumers. But in this atmosphere of America First – Consumers Last, the Trump Administration wants the CFPB to go away. According to USA Today, “the Department of Justice argued in an amicus brief that the structure of the Consumer Financial Protection Bureau (CFPB), the watchdog created after the financial crisis during the Obama administration, is unconstitutional.” Even the federal government wants consumer protections to vanish.

Wanting to make the CFPB go away from defending consumers does not make the underlying problems go away or increase the defense of people just like you when you get scammed and ripped off.

The CFPB has been fighting back to protect consumers by filing suit against Navient for not providing advice to help consumers. Navients response is they don’t have to provide good advice, just collect on loans. And Navient even knew they were peddling loans that were not affordable when they pushed them on students.

So let’s let the CFPB fight back to protect people with student loan issues and small business loans. The only thing you have to lose is a better financial future and more protections for those you love.
Steve Rhode

Get Out of Debt GuyTwitter, G+, Facebook

If you have a credit or debt question you’d like to ask, just click here and ask away.
This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.


******

I am in total agreement with Mr. Rhode regarding the value of the Consumer Financial Protection Bureau. The the Trump administration should  support the CFPB its mission, including the protection of student borrowers from unscrupulous for-profit college and ruthless student-loan debt collectors.

Richard Fossey

Thursday, June 8, 2017

Snapshot of the student loan crisis from a recent New York Federal Reserve Bank report: Surprise, surprise! Debt levels Are rising

Researchers at the New York Federal Reserve Bank issued a press release on April 3 that reported on household borrowing and student debt.  Here are some excerpts from that press release. I have highlighted particularly interesting passages:
Student Loan Update 
Aggregate student loan balances have continued to increase and stood at about $1.3 trillion at the end of 2016, an increase of about 170 percent from 2006. Aggregate student debt is increasing because more students are taking out loans, the loans are for larger amounts, and the speed with which borrowers repay their debts has slowed down. New debt originations continue to increase: 2015 graduates with student loans left school with about $34,000, up from only $20,000 just ten years before. 
While about 36 percent of student debt holders owed less than $10,000, and 65 percent owed less than $25,000, only about 5 percent of student debt holders owed more than $100,000 in debt in 2016. Yet these big-balance borrowers account for nearly 30 percent of the total balances outstanding, so their outcomes and repayment success have a disproportionate influence on the overall picture.

Student loan default and delinquency rates appear to have leveled off, albeit at a relatively high level. Defaults peaked in 2012, and have stabilized since 2013; the 2009-11 cohorts saw the highest default rates, with some improvement among more recent cohorts.

We have noted in the past that delinquency and default rates are lower among higher-balance borrowers; however, the default rates among higher-balance borrowers have worsened notably in recent years. Further, payment progress is slower among those who borrowed more. Ten years later, over 70 percent of the original balance has been repaid among those who had borrowed less than $5,000 when they left college in 2006, compared to a reduction of only 25 percent among students who borrowed more than $100,000.

Higher balances, increasing participation in student loan programs, and slower repayment are pushing up aggregate student loan balances. Although defaults are improving, the pay down progress of recent cohorts continues to decline.
The Fed researchers also commented on the relationship between student-loan indebtedness and homeownership:
Homeownership 
The final portion of the press briefing was on educational attainment, student loans, and homeownership, using education records from the National Student Clearinghouse that were newly matched with credit records from the Consumer Credit Panel. These findings are presented in greater detail in a separate post. New analysis shows that college education is associated with markedly higher homeownership rates regardless of debt status, which increases at each additional level of college attainment. However, having student loans dampens homeownership rates at every level of education, and higher debt balances are associated with even lower homeownership rates.
Takeaways from the Fed researchers' findings

In essence, the Federal Reserve Bank researchers are telling us this:

Loan balances are going up, more people are taking out student loans, and repayment rates are slowing, particularly for borrowers with high loan balances. I imagine a lot of these slow paying borrowers are in the Public Service Loan Forgiveness (PSLF) program or an income-driven (IDR) plan.  

The vast majority of people making payments under  PSLF and IDR are not making payments large enough to pay down their loan balances. And, as the Fed researchers noted, among people who borrowed $100,000 or more, only 25 percent were able to pay off their student loans within 10 years.

Regarding student loans and home buying, the Fed researchers had this to say: Homeownership increases with people's education level, but student loans hamper the ability of people to buy a house, regardless of income level.

References



Wednesday, June 7, 2017

I’m Screwing Myself Out of Retirement With My Wells Fargo Private Student Loans: Letter to Steve Rhode, The Get Out of Debt Guy

Steve Rhode
Steve Rhode, the Get Out of Debt Guy, received a letter from an individual who is swamped by private student loans taken out with Wells Fargo. The letter and Steve Rhode's response are well worth reading. This post originally appeared on Mr. Rhode's web site, The Get Out of Debt Guy. It was also posted on the Personal Finance Syndication Network.





*****

Question:

Dear Steve,

I took out both federal and private student loans to pay for college, and was approved by Wells Fargo for more than I can pay back in reasonable increments each month with my current salary (roughly $565/month).

The federal loan payments I have each month are quite manageable, but the private loan payments through Wells Fargo are at a much higher interest rate, and also make up the bulk of my loan balance, currently at over $47k with interest rates hovering around 8%.

I attempted to consolidate the Wells Fargo loans to lower my monthly payment and hopefully reduce the interest rate as well, but do not have access to a co-signer and my debt-to-income ratio is too high (mainly because of my student loans), so I haven’t had the option to consolidate.

I make a decent salary at approximately $41k per year and hope to see an increase in the next year or so, but with living expenses at a bare minimum I am still living paycheck-to-paycheck in order to do the responsible thing and follow through on my loan payments.
Although I try to be as financially responsible as I can, I am now in my early thirties and am unable to put any money towards savings for retirement or emergencies. I have heard of graduates abandoning their private loan payments, and I am starting to feel that may be my only option if I want to save for my future.

In fact, I read your article on the Huffington Post about this very topic, but am so scared of the repercussions that I just continue to make my payments and regret my willingness to sign my life away to loans. I’m curious to find out if you think the risk would be worth the reward? What would you recommend to a person in my situation? Thanks so much in advance for the help!

Paige

Answer:

Dear Paige,

I can completely empathize with your situation and plight. As you’ve painfully learned, just because a lender will give you a loan it does not mean you can afford it.

Your worry about the future and the inability to save for retirement is a logical concern. Each day you can’t stash away money now is a bit hit on your retirement later.

As an example. If you invested $300 a month starting now and didn’t retire for 40 years you’d have about $1,897,223 in retirement. That doesn’t even include the additional benefit of employer matching or tax benefits.

So the real question now is how much pain you are willing to deal with in the short run to deal with the private student loans versus how much you will throw away by not doing something.
I think you might have read my article Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan. In that article the discussion is about the pain you will have to face when you default on your student loans and the options it gives you.

Look, I’m not suggesting the defaulting is either easy or doesn’t have consequences. It’s a frightening strategy that is not for the ill advised or faint of heart. If you did decide to investigate this path I would strongly urge you to talk to a competent debt coach like Damon Day to evaluate your entire situation and provide a plan based on your specific situation and goals. You need someone you can bounce these ideas off of and have regular conversations.
However, the idea of a strategic default of your private student loans is not entirely without merit. It does carry risks and will damage your credit from the defaulted payments.

The best strategy would be if Wells Fargo worked with you to create a repayment plan that allowed you to meet your obligations and begin to build an emergency savings account and save for retirement.

Alternatively, if you won the lottery and could pay off your student loans at once, that would be a lucky option as well.

Given that both a reasonable Wells Fargo payment and lottery win are not likely then you have to think carefully about the advice I’ve given you here.

Sometimes in the face of no good solution you just have to choose from the least objectionable and stick to it.

Steve Rhode

Tuesday, June 6, 2017

Department of Education is slow to forgive loans of student borrowers defrauded by Corinthian Colleges: State Attorneys General urge DOE to move more quickly

Yesterday, nineteen state attorneys general and the Director of the Hawaii Office of Consumer Protection delivered a letter to Betsy DeVos, U.S. Education Secretary, urging the Department of Education to quickly process fraud claims brought by former students of Corinthian Colleges.

The state AGs asked DeVos to approve "swift automatic group discharge" to students in Corinthian cohorts where fraud has been found. Alternatively, the AGs asked DeVos to process individual fraud claims faster.

Corinthian Colleges closed and filed for bankruptcy in 2015, leaving behind more than 350,000 former students who took out loans to pay Corinthian's tuition. Many of these student borrowers were induced to attend Corinthian through fraud, and the nineteen AGs claim there are defrauded Corinthian students in all 50 states.

So far, DOE has discharged 27,000 borrowers from their federal loan debt, but that number is a small fraction of the former students who are entitled to debt relief. Thousands have filed "borrower defense" claims, asking DOE for loan forgiveness, but DOE is not processing these claims quickly. Meanwhile, many Corinthians students are still paying on their loans or defaulted and are subject to having their wages garnished and their credit ruined.

According to the state AGs, DOE notified 23,000 Corinthian student borrowers in January that their loan forgiveness applications had been approved and that "forgiveness should be completed within the next 60-120 days." It's been nearly 180 days since that announcement, and these loans have still not been discharged.

What's going on?

I think the Department of Education is simply overwhelmed by the meltdown of the student loan program. Almost half the people in a recent cohort of students who attended for-profit colleges defaulted within five years. According to a recent article in the Wall Street Journal, half the students who attended more than 1,000 colleges and schools have not paid down one dime of their student loans seven years after their repayment obligations began.

In addition, the first beneficiaries of the Public Service Loan Forgiveness Program will be eligible for debt relief before the end of this year, and DOE has no idea how many people are eligible to have their loans discharged under that program.

Personally, I think Secretary DeVos should adopt the AGs' suggestion and grant swift automatic group discharges to all Corinthian students who were in DOE's "Designated Fraud Cohorts." Or better yet, I think DOE should forgive the loans of all 350,000 former students.

Admittedly, there are probably some people who completed a Corinthian program and actually got a good job, but I'll bet there aren't many. Undoubtedly, the default rate for Corinthian students is extraordinarily high largely due to the fact that Corinthian's students did not get well-paying jobs at the conclusion of their studies.

I recognize there are risks associated with a mass loan forgiveness program. If all 300,000 of Corinthian's former students are granted a discharge, then ITT Tech's former students will ask for blanket loan forgiveness. ITT Tech also closed and filed for bankruptcy, and it has 200,000 former students.

It is shocking to contemplate, but millions of Americans will never pay back their student loans. In addition to the for-profit college students, there are the law graduates who accumulated mountains of debt and can't find law jobs. And then there are the poor saps who got liberal arts degrees from expensive liberal arts colleges; many of them will never pay back their loans.

The 19 state AGs are right to urge Secretary DeVos to grant automatic group discharges for thousands of former Corinthian students. But Corinthian Colleges is the tip of the iceberg. Millions of student borrowers will never pay back their loans, and the ultimate loss to taxpayers will be in the billions.



References

Andrea Fuller. Student Debt Payback Far Worse Than Believed. Wall Street Journal, January 18, 2017.

Tamar Lewin. Government to Forgive Student Loans at CorinthianNew York Times, June 9, 2015, p. A11.

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).


Andrew Kreighbaum. State AGs Want Action on Student Loan Discharge. Inside Higher Ed, June 6, 2017.

Lisa Madigan, Illinois Attorney General. Letter to Betsy DeVos, US. Secretary of Education, June 5, 2017.

Saturday, June 3, 2017

Betsy DeVos should resign as Education Secretary and Trump should replace her with a junkyard dog

Betsy DeVos should resign as Secretary of Education in the Trump administration. I say this for two reasons:

First, Ms. DeVos is too nice a person to be President Trump's Secretary of Education.


No matter what you think of her politics or her education philosophy Betsy DeVos is not a toxic person. She did not deserve to be shut out of a public school, as District of Columbia protesters tried to do shortly after she took office.

And she did not deserve to have students boo her and turn their backs on her when she spoke at a college graduation exercise this spring. If I were her, I would tell the whole wide world to stick the Secretary of Education's position where the sun doesn't shine and go home to Michigan and spend time with my grandchildren.

Second. Betsy DeVos knows next to nothing about higher education policy.

The federal student loan program is in meltdown, destroying the lives of millions of people and undermining the integrity of higher education. Numerous small private liberal arts colleges are on the verge of closing; law schools are admitting students of a lower and lower quality, and huge swaths of the for-profit college industry are defrauding their students--or, at the very least, they are gouging their customers. The federal student loan program bears a big share of the blame for this dismal state of affairs.

Betsy DeVos knows next to nothing about the student loan crisis. She has shown no capacity to deal with this enormous problem, and she has already made a number of missteps. For example, she hired some empty suits from the for-profit sector to advise her--the wrong move, in my opinion.

Trump needs to hire a junkyard dog to run the Department of Education

President Trump needs to gracefully accept DeVos' resignation, praise her extravagantly in a tweet message, and then appoint a junkyard dog to replace her.

By junkyard dog, I don't mean a vicious person or an unethical person; I mean a tough person.  The next Education Secretary needs to be tough enough to confront the for-profit college industry, tough enough to handle higher education's legions of lobbyists, and tough enough to get rid of the student loan guaranty agencies that have amassed billions of dollars in cash hounding distressed student loan debtors.

The next Secretary of Education needs to be tough enough to tell the public the truth about the student loan crisis, which is this: Millions of people have taken out student loans they will never pay back.

What a junkyard dog do if  appointed Education Secretary?


  • First, the Consumer Financial Protection Bureau's 2013 report, A Closer Look at the Trillion, needs to be updated. How many people have defaulted on their loans, and how many are delinquent? How many are not making payments because their loans are in deferment or forbearance? How many are in income-driven repayment plans (IDRs) and making monthly payments so low that their payments don't cover accruing interest?
  • Second, the new Secretary should endorse the Democrats' bill to protect student loan defaulters from having their Social Security checks garnished.  This is a small matter in terms of the overall student loan crisis, but symbolically, such a move would signal that the Trump administration is not completely heartless.
  • Third, the Education Secretary should cancel the performance bonus program for DOE's student-loan bureaucrats. James Runcie, Chief Operating Officer for the student loan program, received $430,000 in bonuses--an outrage. The new Secretary of Education should fire everyone who got a performance bonus.
  • Fourth, the DOE Secretary needs to streamline the process whereby students who file administrative claims based on the closed-school rule or the so-called borrower defense can have their claims resolved quickly.
  • Fifth, DOE's junkyard dog should dismantle all the student loan guaranty agencies, starting with Educational Credit Management Corporation. While the termination process is taking place, DOE should stop paying the agencies' attorney fees to hound suffering student borrowers in the bankruptcy courts.
  • Sixth, the Secretary of Education, as junkyard dog, should revise Lynn Mahaffie's 2015 letter outlining when DOE will not oppose bankruptcy discharge of student loans to clarify to the federal courts that DOE supports a bankruptcy discharge of student loans under the same terms that apply to other unsecured consumer debt.
Obviously, any Secretary of Education who attempts to carry out the agenda I outlined will need to be tough as a junkyard dog. Betsy DeVos is not a junkyard dog, and I mean that as a compliment to her.


The next Secretary of Education should be a junkyard dog.
References

Lauren Camera. Protesters Disrupt DeVos School Visit. U.S. News & World Report, February 10, 2017.


Rohit Chopra. A closer look at the trillion. Consumer Financial Protection Bureau, August 5, 2013.

Erica L. Green. Bethune-Cookman Graduates Greet Betsy DeVos With Turned Backs. New York Times, May 10, 2017.




Hofstra Law School Graduate incurs nearly one million dollars in debt: Dufrane v. Navient Solutions

Who holds the record for accumulating the most debt while going to college and law school? I don't know, but it might be Scott Dufrane.

Mr. Dufrane attended Thomas Jefferson Law School and graduated from the Maurice A. Deane School of Law at Hofstra University in 2009. He financed his undergraduate and legal education with student loans, and by the time he received his law degree, he had incurred debt of nearly a million dollars--or more specifically, $900,000.

Dufrane filed for bankruptcy in 2015. At that time  he owed the U.S. Department of Education approximately $400,000; and he owed various private creditors about $500,000. 

A short time after filing his bankruptcy petition, Dufrane filed an adversary complaint in an effort to discharge his private loans. In his complaint, he argued that the private loans fell outside the protection of the "undue hardship" rule and were dischargeable.

Dufrane owed SunTrust Bank about $90,000, and SunTrust moved to dismiss Dufrane's adversary complaint on the grounds that the SunTrust loans were protected by 11 U.S.C. sec. 523(a)(8) and could not be discharged unless Dufrane met the "undue hardship" standard.

But Dufrane had an answer to SunTrust's argument.

He argued that the private loans were not "qualified student loans" under 11 U.S.C. sec. 528(a) (8) and could be discharged like any other nonsecured debt.  Dufrane said that the private lenders had solicited him to borrow money while he was in school without any inquiry "regarding need, cost of tuition, or cost of any other education-related expense." In addition, the private lenders' solicitations "generally stated that the money could be used for anything, and that it would be disbursed directly to [Dufrane]" and not through any school.

Moreover, Dufrane alleged, all the private loan money was disbursed directly to him "without any input, knowledge or approval of the Financial Aid Office . . ."

Judge Peter Carroll, a California bankruptcy judge, agreed with Dufrane and ruled that the private loans were not the type of loan that Congress intended to exclude from bankruptcy relief.   Judge Carroll acknowledged that federal courts were divided on this issue, but he agreed with courts that interpreted the law in harmony with Dufrane's position. Therefore, the judge denied SunTrust's motion to dismiss. Under the rationale of Judge Carroll's ruling, it seems possible that all $500,000 of Carroll's private loan debt will ultimately discharged.

What is the significance of the Dufrane decision?

First, as Judge Carroll pointed out, the federal courts are in disagreement about whether some private student loans are subject to the "undue hardship" rule, and this controversy may ultimately go to the Supreme Court. For now, however, student borrowers who responded to bank solicitations by taking out private loans and who received the money directly have an argument that those loans are dischargeable in bankruptcy like any other consumer loan.

Second, the Dufrane case illustrates the recklessness of student-loan creditors--both the federal government and private banks.  It was insane for the Department of Education to loan Dufrane $400,000 for college and lawschool studies.  And of course it was insane for private lenders to loan Dufrane $500,000 while he was in law school.

Almost no one who accumulates nearly a million dollars in debt to get a college degree and a law degree will ever be able to pay back that amount of money.  Hofstra's law school is ranked 118 on the list of best law schools published by U.S. News & World Report. But even if Hofstra had graduated from Yale Law School at the top of his class, it is unlikely he would have obtained a job that would allow him to pay back $900,000.

Millions of Americans are struggling with  student-loan debt. Last year, student borrowers were defaulting at an average rate of 3,000 a day

The Department of Education is urging borrowers to enroll in income driven repayment plans (IDRs), but the Government Accountability Office reported last December that about half of a sample of people who signed up for IDRs failed to recertify their income as the program requires (p. 36). It seems obvious that IDRs are no magic bullet for the student-loan crisis.

Bankruptcy relief is the only viable option for people whose student loans are out of control. Last month, Congressmen John Delaney (D-Maryland) and John Katko (R-New York) filed a bill to make student-loan debt dischargeable in bankruptcy like any other nonsecured loan.  This bill is unlikely to become law in this Congressional session; but someday, Congress will be forced by reality to pass some form of the Delaney-Katko bill.

References

Dufrane v. Navient Solutions, Inc. (In re Dufrane), 566 B.R. 28 (Bankr. C.D. Cal. 2017).

Representative John Delaney press releaseDelaney and Katko File Legislation to Help Americans Struggling with Student Loan Debt, May 5, 2017.

Representative John Katko press release. Reps. Katko and Delaney File Legislation to Help Americans Struggling with Student Loan Debt. May 8, 2017.


The Wrong Move on Student LoansNew York Times, April 6, 2017.

US. Government Accounting Office. Federal Student Loans: Education Needs to Improve Its Income-Driven Repayment Plan Budget Estimates. Washington, DC: U.S. Government Accountability Office, November, 2016.





Thursday, June 1, 2017

Mills College struggles to survive: When is it time to say "Do Not Resuscitate"?

Mills College is one of several dozen private liberal arts colleges that are struggling to survive. Rick Seltzer's excellent story on Mills, which appeared yesterday in Inside Higher Ed, reported that the college faced a $9 million budget gap in 2016 but was able to reduce the deficit to $4.3 million by making stringent cuts.

Mills once filled a niche as an elite West Coast women's college, but apparently that identity isn't working anymore. Mills has less than 1,000 undergraduates and about 400 graduate students. It is struggling to find the revenue to fund a $57 million budget.

So what's the solution? Mills' new president, Elizabeth Hillman, announced that Mills' top recruitment priority will be LGBTQ students--students who are lesbian, gay, bisexual, transgender or questioning.

But how will a LGBTQ focus work at a women's college? Will it accept only bisexual women or can male bisexuals apply?  In the Q for questioning category, will it accept biological males who are considering a female identity or just biological females who are pondering a male identity?

Sounds complicated and confusing. Actually, it sounds desperate.

And there's more. Mills' financial stabilization plan calls for a tuition reset. Currently, tuition is pegged at about $45,000 a year, but the college's discount rate is 57 percent. Clearly that pricing structure is not sustainable.

 Mills has a financial stabilization plan, but the details are hazy. "Whether it is a lower price or a more direct and straightforward price, we anticipate that we will also market the new curriculum and a tuition reset together much more heavily than in the past," the college says opaquely.

 What does Mills mean when it says it is considering "a more direct and straightforward price"?  Is that an admission that its current pricing structure is dishonest?

The college also hopes to enroll more women who are focused on science, technology. engineering, and mathematics (STEM). But the college's STEM focus will be hard to sustain when the college is cutting faculty positions and slashing employment benefits. Seltzer's article reports that Mills cut retirement contributions from 9 percent of a faculty member's salary to 6 percent and plans to reduce it further to 2 percent.  Not a great benefits package. So how will Mills attract and retain the professors it needs to sharpen its focus on STEM?

Finally, Mills plans to roll out a "signature experience" for undergraduates "in  an attempt to stand out and attract students." What will that look like? It's not clear, and Seltzer's article asks a pertinent question: "[I]f many colleges have signature experiences, can any of them truly stand out?"

I wish Mills College well, but the hodgepodge of strategies President Hillman sketched out does not impress me. More LGBTQ students, more STEM students, more straightforward pricing, a signature experience, slashing employment benefits---in my mind it all adds up to "quiet desperation" (Thoreau's phrase).

At some point, liberal arts college leaders need to face facts: dozens  of small colleges will close within the next ten years. They are the organizational equivalent of a terminally ill hospital patient.

And when college trustees and administrators know that their institution is on life support, are they acting ethically when they continue to enroll new students? After all, there is a distinct possibility that the LGBTQ freshman (or freshperson) who enrolls at Mills in the fall of 2017 will be an alumna of a college that no longer exists in 2027.

And is it ethical for college deans to hire junior faculty members who will start their careers at an institution that may not be around when they retire?

All across the United States, private liberal arts colleges are on the ropes. Many are grasping for revenue-generating strategies like a dying person searching for a miracle drug. But there comes a time--and that time is fast approaching for many small liberal arts colleges--when a college should simply close.




References

Scott Jaschik. 'Financial Emergency' at Mills. Inside Higher Ed, May 17, 2017.

Rick Seltzer. Mills tries to balance cuts and efforts to grow revenue as it seeks to dig out from financial hole. Inside Higher Ed, May 31, 2017.

Kellie Woodhouse. Trying to Survive. Inside Higher Ed, May 12, 2015.