The Controversy Over Elizabeth Warren’s Native American Ancestry: Warren and Harvard Should be Embarrassed

I have long admired Elizabeth Warren. As a person who grew up in Oklahoma, I am impressed that Warren rose from humble beginnings in Norman, Oklahoma to become a Harvard Law Professor.  I also admire her work in bankruptcy law and consumer-protection law.

Thus, I was greatly disappointed to read that Warren listed herself as a minority as she was advancing her academic career based on the fact that she is 1/32^nd Native American.

Elizabeth Warren
Source: Harvard Law School
OTnline Directory

Not all the facts of this hullabaloo are known, but we do know that Harvard Law School touted Warren as a Native American law professor in 1996.  And, according to a Boston Herald story, she listed herself as a minority in a law school directory from 1986 until 1995.

If Warren is embarrassed by this controversy, she should be.  And Harvard Law School should be even more embarrassed.  Currently, Harvard Law School claims to have one Native American faculty member but won’t say who it is.  If it is not Elizabeth Warren, then who  is it?  Do you think it might be Alan Dershowitz?
Why is this controversy significant for student-loan borrowers? Students have seen their tuition go up every year while they borrow more and more money to finance their educations. Meanwhile, universities--and particularly,the nation's elite universities--have obsessed on race. Harvard Law School apparently thinks it struck a blow for equity by counting Elizabeth Warren as a Native American because her great great great grandmother was a Cherokee. What would higher education look like in this country if Harvard and other elite universities focused on substantive issues of access and equity instead of fixating on race.

References

Chabot, H. (2012, April 27).Harvard trips on roots of Elizabeth Warrant’s family tree. Boston Herald. http://bostonherald.com/news/regional/view/20220427harvard_trips_on_roots_of_warrens_family_tree_officials_touted_her_native_american_lineage

Chabot, H. (2012, May 4). Harvard won’t say if Liz Warren is listed as minority. Boston Herald. http://bostonherald.com/news/politics/view/20220504harvard_wont_say_if_liz_listed_as_minority

A Crummy Idea: Supplementing University Presidents' Excessive Salaries with Foundation Money

According to the Los Angeles Times, the California State University Board of Trustees will consider a new policy that will freeze state-funded compensation for new university presidents, but allow private foundations to enhance presidents’ salaries with foundation money (Ceasar & Rivera, 2012).

This is a crummy idea for several reasons:

Statue of Nick Saban

· First, it is unseemly. For university presidents to supplement their salaries with foundation money puts them in the same league as SEC football coaches, several of whom get extra compensation from foundations to supplement their public-university pay. Public universities have been severely criticized for letting coaches’ salaries get out of control, and supplemental compensation from college foundations have contributed to the problem. Do we really want university presidents to become the academic equivalent of Nick Saban, the University of Alabama's football coach?

· Second, this proposal fails to address the legitimate criticisms raised by college students that university executives are paid exorbitant salaries while students suffer under the strain of rising tuition costs and growing student-loan indebtedness. Enhancing presidents’ salaries from foundation funds does nothing to put the lid on excessive salaries and benefits for university presidents and senior executives.

· Third, the notion that universities must pay their presidents extravagantly in order to attract top talent is absurd. This is the same argument the finance industry made to justify obscene bonuses and compensation for top bank executives--the very people who put the national economy in the toilet. Does anyone really believe our universities cannot attract able leaders without paying them a half million dollars a year or more?

In Good to Great, Jim Collins pointed out a common characteristic of truly great corporations: modest leaders. Modest university presidents would put the interest of their institutions and their students above their own desire for more money. And modest university presidents would accept some personal financial sacrifice before asking students to pay higher tuition or faculty to accept wage freezes.

I hope the California State University Board of Trustees abandons this ill-advised proposal. The student protesters are right: salaries and perks for university presidents and senior executives are too high and need to be capped until higher education’s financial crisis is past.

References

Stephen Ceasar, S. & and Rivera C. (2012, May 1). Cal State to consider letting foundations augment president’s pay. Los Angeles Times. 

Paul Krugman's Advice for Aiding College Students is a Little Thin

Far be it from me to criticize Paul Krugman’s advice on economic issues. After all, Krugman received the Nobel Prize in economics, and I did not.  (I may have gotten the Boy Scout merit badge in Personal Management.)

Krugman, writing in today’s New York Times, reviewed the dire situation of many college graduates. As Krugman rightly pointed out, many are saddled with huge student loans and can’t find jobs.

Personal Management Merit Badge

“What should we do to help America’s young?” Krugman asked.  “We should be expanding student aid, not slashing it.”

With all due respect, Mr. Krugman’s advice is a little thin.  Expanding student aid will not do American young people any good if it is disbursed in the form of student loans that they are unable to pay back.  And pouring more money into an unreformed higher education system is a waste of resources.

The Cal State student hunger-strikers have put their finger on the problem.  We need to freeze college tuition and reform the universities.  We can start the reform effort by cutting back on the exorbitant salaries our universities pay senior executives and administrators.

Of course there are lots of other things we can do to straighten out the student-loan mess and help young people obtain college experiences that will help them get good jobs.  But simply saying we should expand student aid, as Mr. Krugman suggested in today’s New York Times, merely endorses the status quo.  That is how we got into this mess, and we now have one trillion dollars of outstanding student-loan indebtedness and 37 million student loan debtors.  

References

Krugman, P. (2012, April 30, 2012). Wasting our minds. New York Times. 

Cal State Students Plan Hunger Strike to Protest Tuition Hikes: Let's Hope They Don't Get Pepper Sprayed

"Let them eat pepper spray"

According to the Los Angeles Times (Rivera, 2012), students at six Cal State campuses vow to go on a hunger strike Wednesday in protest of rising tuition costs.  Their demands are quite reasonable. They want tuition costs frozen for five years and a rollback on excessive administrators’ salaries.

 A Cal State spokesperson, displaying the tone-deaf response so typical of California university administrators, said the hunger strikers don’t understand the issues.  This reminds me of what Marie Antoinette is said to have remarked about the poor people of Paris: “Let them eat cake.” 

We should give these courageous students all our support.  And let us hope university police officers won’t pepper spray them.

References

Rivera, C. (2012, April 29). With tuition hard to swallow, Cal State students to go hungry. Los Angeles Times.  http://www.latimes.com/news/local/la-me-0429-hunger-strike-20120429,0,6584621.story

Are We Rearranging the Deck Chairs on the Titanic? Keeping Interest Rates Down on Student Loans

President Obama has asked Congress to pass legislation that will keep the interest rate on student loans from doubling later this year. Of course, this is a good idea; and I think Congress will act favorably on the President's request.

Unfortunately, keeping interest rates down on student loans is like rearranging the deck chairs on the Titanic. The ship is still going down. 

The core problem is this: millions of Americans have borrowed money for a postsecondary education, and they can't pay it back.  Solving this problem won't be easy, but we can start by doing these three things:

• Congress must pass legislation allowing overburdened student-loan debtors to discharge their loans in bankruptcy in the same way they can discharge other unsecured debts. In other words, Congress must repeal the "undue hardship" provision in the Bankruptcy Code that makes it almost impossible for students to discharge their student loans in a bankruptcy court.
• We must do a better job of regulating the for-profit colleges, which is where the student-loan default rate is the highest.
• We need to defer interest on loan balances for people who have economic hardship deferments or are paying back their loans through an income-contingent loan repayment plan (ICRP). Otherwise, most of the people who are participating in these student-loan hardship plans will never be able to pay back their loans because accruing interest will make their debt loads unmanageable.

Are Professors' Salaries Responsible for Tuition Increases?

Why does college tuition go up every year? According to Vice President Joe Biden, higher faculty salaries provide a partial explanation. “Salaries for college professors have escalated significantly,” Vice President Biden said recently. (June, 2012, p. A1).

But the AAUP disagrees. According to a recent AAUP report, faculty salaries have not kept up with inflation. Professors have only received modest raises in recent years, especially compared to college presidents, who are doing just fine financially.

Don't Blame Me!

I partly agree with the AAUP report.  College professors do not make a lot of money. Although faculty at elite universities like Harvard and Stanford command high salaries, the professors at community colleges and regional state universities like the one where I work are not highly paid.

It would be a mistake, however, to conclude that professors have not contributed to higher tuition rates at our colleges and universities, because in fact they share part of the blame.  Here are some examples of the way professors contribute to out-of-control college costs.

·         When a professor insists on getting a course release to design a new course instead of doing the work as part of the professor’s regular work load, college costs increase.

·         When a professor uses college funds to deliver a mediocre academic paper at a conference in Europe simply to get an expense-paid trip to an exotic locale, that action wastes a college’s money.

·         When professors cap enrollment in their graduate courses at unreasonably low levels in order to teach smaller classes, those decisions increase a college’s costs.

·         When professors unilaterally decide to end their work weeks on Thursday instead of Friday, as many of them do, those individual decisions have a financial impact.

In short, many decisions that professors make to reduce their job responsibilities or serve their own selfish interests have an impact on the cost of doing business at our nation’s colleges and universities. Therefore, it would be misleading to say that the nation’s college professors have not contributed to the spiraling cost of attending college.

And who pays the price for the colleges’ inefficiencies—including inefficiencies in the way professors work?  We know the answer. Students pay the price as they borrow more and more money to pay escalating tuition costs.

References

June, A. W. (2012, April 13). College’s cost isn’t due to jumps in pay, AAUP says. Chronicle of Higher Education, p. A1.

Thornton, S., & Curtis, J. W. (2012). A very slow recovery. Washington, DC: American Association of University Professors. Accessible at http://www.aaup.org/AAUP/comm/rep/Z/ecstatereport11-12/

Albert Lord Says Student Loan Program is Not in a Bubble: Should We Believe Him?

Albert Lord
CEO, Sallie Mae

According to recent news stories, Albert Lord, CEO of Sallie Mae (SLM Corp.)  rejected any claim that student loan debt has reached dangerous levels.  “We don’t see anything of any evidence close to a bubble,” Lord said in a conference call to financial analysts. “This country underwent a significant financial crisis in our very recent past. It’s not really a surprise that many see bubbles around every corner” (Mulholland, 2012). 

So Mr. Lord assures us the student loan program is not in a bubble. Should we believe him?

No, we should not. First of all, as everyone knows, the percentage of students who borrow money to attend college is going up and students' average indebtedness is going up as well.   Moreover, annual student-loan default rates have almost doubled between 2003 and 2009—going from 4.5 percent to 8.8 percent.  And these numbers only reflect the numbers of students who default within two years after beginning repayment.  When the default rate is expanded to measure defaults during the first three years after repayment begins, the rate goes up substantially—especially for students who borrowed money to attend for-profit colleges.  According to one projection, the three-year default rate for the 2009 cohort is 29 percent for students who attended for-profit schools.  (Lederman, 2011). Surely this is a sign of serious trouble ahead for the student loan program.

We should also look at some recent reports by outside analysts when we assess Mr. Lord’s assurances about the student loan program. The Federal Reserve Bank of San Francisco, in a 2011 publication, reported that private lending increased dramatically from 2000 to 2007, reaching 26 percent of all student loans during the 2006-2007 academic year. Private loan volume then retreated from a high of $22.6 billion in 2006-2007 to only $7.9 billion in 2010-2011.  (Choi, 2011). This may be an indication that the private banking industry has concluded that student loans are becoming riskier for banks, in spite of the fact that these loans—like federally guaranteed loans—are almost impossible to discharge in bankruptcy.

In a 2012 publication, the Federal Reserve Bank of New York reported that total outstanding student-loan indebtedness has reached $870 billion, surpassing the nation’s entire outstanding credit-card balances and its outstanding car-loan balances. According to the New York Reserve Bank, there are about 37million people with student-loan balances, Sixty percent of these borrowers are 30 years old or older, and about 27 percent of all borrowers have at least one past-due student-loan account.  Seventy-five percent of individuals with past-due student-loan accounts are 30 years old or older, and 40 percent are 40 years older or older.  These numbers tell us that a lot of people are struggling with student-loan debt well into midlife. 

In addition, Moody’s issued a report in July 2011, which is sharply different in tone from Mr. Lord’s optimistic reassurances. “The long-run outlook for student lending and borrowers remains worrisome,” the Moody report stated. “[T]here is increasing concern that many students may be getting their loans for the wrong reasons, or that borrowers—and lenders—have unrealistic expectations about borrowers’ future earnings.” Moody’s warned that “[u]nless students limit their debt burdens, choose fields of study that are in demand, and successfully complete their degrees on time, they will find themselves in worse financial positions and unable to earn the projected income that justified taking out their loans in the first place” (Moody’s Analytics, 2011).

In my opinion, Mr. Lord is wrong to say the student loan program is not in a bubble. Independent analysts see trouble ahead.  As I have written earlier, there are many things we can do to ease the burdens that weigh down overstressed student-loan borrowers.  But the first thing we must do is face reality and admit that the student loan program is out of control.

References

Choi, L. (2011, December). Student debt and default in the 12^th District. San Francisco: Federal Reserve Bank of San Francisco. http://www.frbsf.org/publications/community/research-briefs/Student-Debt-and-Default-in-the-12th-District.html (last visited April 23, 2012).

Brown, M., Haughwout, A., Lee, Donghoon, Mabutas, M., & van der Klaauw, W.(2012). Grading students loans. New York: Federal Reserve Bank of New York.  http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html (last visited April 23, 2012).

Deritis, C. (2011, July). Moody’s Analytics: Student Lending’s Failing Grade.


Lederman, D. (2011, May 23). Trouble ahead on student loan defaults. Inside Higher Education. http://www.insidehighered.com/news/2011/05/23/student_loan_default_rates_rise_sharply_especially_for_for_profit_colleges (last visited April 23, 2011). 

Mulholland, S. (2012, April 19). Sallie Mae CEO Albert Lord Rejects Education Loan Bubble Claims. Huffington Post. http://www.huffingtonpost.com/2012/04/19/sallie-mae-ceo-albert-lor_n_1438595.html (last visited April 23, 2012).