Tiny liberal arts colleges are dead. They just don't know it. 15 small-college presidents meet in New York City.

My father was a fighter pilot in the Army Air Corps in December, 1941, stationed at Clark Field in the Philippines. He often told this story about his introduction to World War II.

About two weeks before the Japanese attacked Pearl Harbor, my father told me, his commander called all the young airmen together for a meeting.

"Make out your wills and get your affairs in order," the commander told the pilots. You are not dead yet, but most of you will be soon."

And the commander was right. My father's P-40 fighter plane was bombed on the ground when the Japanese attacked Clark Field a few hours after the Pearl Harbor attack. Six months later, my father  was captured on the Bataan Peninsula, along with the entire American  army. He experienced the Bataan Death March and spent the rest of the war in a Japanese concentration camp. Two thirds of his fellow prisoners died while in captivity.

I thought of my father's story as I read an article about a recent meeting of 15 presidents of the nation's smallest liberal arts colleges, which took place in New York City last June. All  15 presidents represented institutions with 800 students or fewer.

Rick Seltzer of Inside Higher Ed reported on the meeting, from which I gathered the presidents concluded that their colleges are doing a great job educating young people. The problem, from the presidents' perspective, is poor public relations; the public simply does not realize just how neat and special these colleges are.

Thomas O'Reilly, president of Pine Manor College (about 450 students), said this about his institution: "We're small enough that we can work with a handful of students, and if it works for them, it can be quickly spread across the rest of the programs we're offering.. If it doesn't we can quickly stop--just as importantly--without having made a major investment."

OK, I got it. Small liberal arts colleges are nimble, and that's why they're special.

Mariko Silver, president of Bennington College, another micro institution, said the nation was  focused overmuch on scaling up higher education without appreciating the small colleges. "One of the things that I feel makes American higher education the envy of the world is a real diversification of institution types--an ecosystem."

Nice talking points, Mariko! Everyone in higher education likes to be reassured that American colleges are the envy of the world.

But in fact, the tiny liberal arts colleges are on the verge of extinction. A few small liberal arts colleges will survive and even thrive: those with large endowments or sterling reputations like many of the small liberal arts colleges in New England. And small colleges that excel in nursing or health care will probably be fine.

But tiny colleges with 800 students are fewer cannot long survive, in my opinion. As my father's commander might have put; they are dead and just don't know it.

 I don't say this with any pleasure. The microbrew college presidents are probably right to say there is a distinct value to receiving a liberal arts education at a small college. But the economics of higher education today simply won't allow the small liberal arts colleges to survive. In 2015, Moody's Investor Service predicted that college closings would triple by 2017.

And Moody's prediction is too conservative. Of the 15 colleges represented at the New York City meeting last June, I predict half will close within five years. Shimer College, for example, has fewer than 100 students. Who thinks it will still be open in 2022? Shimer is in Chicago. I'm surprised Shimer's president could afford to travel to New York City.

Apart from all the other challenges small liberal arts college face, they simply can't survive in a world of ever increasing state and federal regulations. And here's an example.

In a case decided by the Second Circuit Court of Appeals last May, Michele Dziedzic sued SUNY Oswego for sexual discrimination under the Civil Rights Act of 1964 because she was transferred from the paint department to the plumbing department. The plumbing department, in her view, was "less prestigious" than the paint department, which she maintained was an elite unit. Dziedzic also said she had suffered from a hostile working environment due to sexual jokes and racy pictures that she was forced to endure when she collected her mail from a mailbox in the men's locker room.

I am not belittling Ms. Dziedzic's grievances. She may very well have been transferred to the plumbing department for nefarious reasons, and being forced to visit the men's locker room to collect her mail may have been humiliating.

But is this a federal case that must travel to the Second Circuit Court of Appeals? The suit may not have cost Ms. Dziedzic much; she represented herself. But SUNY Oswego was represented by four lawyers!

How many suits like that could an institution like Shimer College or Pine Manor College endure? Not many.

At my own institution, I signed a form awhile back certifying that I had read a safety memo informing me that it is dangerous for university students or employees to text on their cell phones while walking on campus. I imagine this memo was spawned by some state or federal safety regulation. How much did my university spend warning students and employees not to walk while texting?

In recent years, the U.S. Department of Education has issued "Dear Colleague" letters that dictate how colleges manage their restrooms and their student grievance procedures.  Each of these "Dear Colleague" letters imposes a financial burden on coleges and uniersities.

And the colleges don't push back on the ever tightening noose of federal regulation because they are all addicted to federal student aid money.

I will be sorry to see the small liberal arts fade away like old soldiers. But I feel sorrier still for students who take out student loans to attend these dying institutions--institutions that may well be closed before their graduates pay off their student loans.


References

Dziedzic v. State University of New York at Oswego, 648 Fed.Appx. 125 (2d Cir. 2016).

Rick Seltzer. Leaders consider future of tiny liberal arts colleges. Inside Higher ED, November 11, 2016.

Kellie Woodhouse. Moody's predicts college closures to triple by 2017. Insider Higher ED, September 28, 2015.

The student loan crisis and the first 100 days: Please, President Trump, provide bankruptcy relief for distressed student-loan debtors

Hillary Clinton lost the presidential election, and we can throw her promise of a tuition-free college education in the ashcan. Meanwhile, the student loan crisis grows worse with each passing month.

Eleven million people have either defaulted on their loans or are delinquent in their payments. More than 5 million student-loan debtors are in long-term income based repayment plans that will never lead to loan payoffs.Several million student borrowers have loans in deferment or forbearance while interest continues to accrue on their loan balances.

Soon we will have a new president, and an exciting opportunity to look at the federal student loan program from a fresh perspective. What can President Trump do to bring relief to distressed college-loan debtors. Here are some ideas--respectfully submitted:

FIRST, TREAT THE WOUNDED.

President Trump can do several things quickly to alleviate the suffering.

Stop garnishing Social Security checks of loan defaulters. More than 150,000 elderly student-loan defaulters are seeing their Social Security checks garnished. President Trump could stop that practice on a dime. Admittedly, this would be a very small gesture; the number of garnishees is minuscule compared to the 43 million people who have outstanding student loans. But this symbolic act would signal that our government is not heartless.

Streamline the loan-forgiveness process for people who were defrauded by the for-profit colleges. DOE already has a procedure in place for forgiving student loans taken out by people who were defrauded by a for-profit college, but the administrative process is slow and cumbersome. For example, Corinthian Colleges and ITT both filed for bankruptcy, and many of their former students have valid fraud claims. So far, few of these victims have obtained relief from the Department of Education.

Why not simply forgive the student loans of everyone who took out a federal loan to attend these two institutions and others that closed while under investigation for fraudulent practices?

Force for-profit colleges to delete mandatory arbitration clauses from student enrollment documents. The Obama administration criticized mandatory arbitration clauses, but it didn't eliminate them. President Trump could sign an Executive Order banning all for-profit colleges from putting mandatory arbitration clauses in their student-enrollment documents.

Banning mandatory arbitration clauses would allow fraud victims to sue for-profit colleges and to bring class action suits. And by taking this step, President Trump would only be implementing a policy that President Obama endorsed but didn't get around to implementing.

Abolish unfair penalties and fees. Student borrowers who default on their loans are assessed enormous penalties by the debt collectors--18 percent and even more. President Trump's Department of Education could ban that practice or at least reduce the penalties to a more reasonable amount.

PLEASE PROVIDE REASONABLE BANKRUPTCY RELIEF FOR DISTRESSED STUDENT-LOAN DEBTORS.

The reforms I outlined are minor, although they could be implemented quickly through executive orders or the regulatory process. But the most important reform--reasonable access to the bankruptcy courts--will require a change in the Bankruptcy Code.

Please, President Trump, prevail on Congress to abolish 11 U.S.C. 523(a)(8) from the Bankruptcy Code--the provision that requires student-loan debtors to show undue hardship as a condition for discharging student loans in bankruptcy.

Millions of people borrowed too much money to get a college education, and they can't pay it back. Some were defrauded by for-profit colleges, some chose the wrong academic major, some did not complete their studies, and some paid far too much to get a liberal arts degree from an elite private college. More than a few fell off the economic ladder due to divorce or illness, including mental illness.

Regardless of the reason, most people took out student loans in good faith and millions of people can't pay them back. Surely a fair and humane justice system should allow these distressed debtors  reasonable access to the bankruptcy courts.

President Trump can address this problem in two ways:

• First, the President could direct the Department of Education and the loan guaranty agencies (the debt collectors) not to oppose bankruptcy relief for honest but unfortunate debtors--and that's most of the people who took out student loans and can't repay them.

• Second, the President could encourage Congress to repeal the "undue hardship" provision from the Bankruptcy Code.

Critics will say that bankruptcy relief gives deadbeat debtors a free ride, but in fact, most people who defaulted on their loans have suffered enough.from the penalties that have rained down on their heads.

More importantly, our nation's heartless attitude about student-loan default has discouraged millions of Americans and helped drive them out of the economy. President Trump has promised middle-class and working-class Americans an opportunity for a fresh start. Let's make sure that overburdened student-loan debtors get a fresh start too.

References

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

Stephen Burd. Signing Away Rights. Inside Higher Ed, December 17, 2013. Available at https://www.insidehighered.com/views/2013/12/17/essay-questions-mandatory-arbitration-clauses-students-profit-higher-education

Andrew Kreighbaum, Warren: Education Dept. Failing Corinthian Students. Inside Higher Ed, September 30, 2016. Accessible at https://www.insidehighered.com/quicktakes/2016/09/30/warren-education-dept-failing-corinthian-students

Senator Elizabeth Warren to Secretary of Education John B. King, Jr., letter dated September 29, 2016. Accessible at https://www.warren.senate.gov/files/documents/2016-9-29_Letter_to_ED_re_Corinthian_data.pdf

Ashley A. Smith. U.S. Urged to Deny Aid to For-Profits That Force Arbitration. Inside Higher Ed, February 24, 2016. Available at: https://www.insidehighered.com/quicktakes/2016/02/24/us-urged-deny-aid-profits-force-arbitration?utm_source=Inside+Higher+Ed&utm_campaign=183bc9e3a3-DNU20160224&utm_medium=email&utm_term=0_1fcbc04421-183bc9e3a3-198565653

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

U.S. General Accounting Office. Older Americans: Inability to Repay Student Loans May Affect Financial Security of a Small Percentage of Borrowers. GAO-14-866T. Washington, DC: General Accounting Office. http://www.gao.gov/products/GAO-14-866T

Black students and the student loan crisis: African Americans suffer most

Judith Scott-Clayton and Jing Li published a report for the Brookings Institution last month on the disparity in student-debt loads between blacks and whites. Essentially, Scott-Clayton and Li told us us what we should already know, which is this: African Americans are suffering more from student-loan debt than whites.

Scott-Clayton and Li's findings

Here are the report's key findings:

• On average, blacks graduate from college with $23,400 in college loans compared to whites, who graduate with an average debt load of $16,000.

• The disparity in debt loads between blacks and whites nearly triples four years after graduation. By that time, the average debt load for African Americans  is $52,726, compared to $28,006 for white graduates.

• Four years after graduation, black graduates are three times more likely to default on their student loans than whites. For African Americans the rate is 7.6 percent; among whites, only 2.4 percent are in default.

• Four years after graduation, almost half of African American graduate (48 percent) owe more on their undergraduate student loans than they did when they graduated.

• Although African Americans are going to graduate school at higher rates than whites, blacks are three times more likely to be in a for-profit graduate program than whites. Among whites, 9 percent enroll in for-profit graduate programs; for blacks, the rate is 28 percent.

Growing debt loads for black graduates and high numbers of blacks attending for-profit graduate programs: Disturbing

In my mind, Scott-Clayton and Li's most disturbing findings are set forth in the last two bullet points. First, almost half of African American college graduates owe more on their undergraduate loans four years after graduation than they did on graduation day,  What's going on? 

Clearly, people who are seeing their total indebtedness grow four years after beginning the repayment phase on their loan are not making loan payments large enough to cover accruing interest.  Those people either defaulted on their loans, have loans in deferment/forbearance, or are making token payments under income-based repayment plans that are not large enough to pay down the principle on their loans.

Surely it is evident that people with growing student-loan balances four years after graduation are more likely to eventually default on their loans than people who are shrinking their loan balances.

Scott-Clayton and Li's finding that a quarter of African American graduates students are enrolled in for-profit colleges is also alarming. We know for-profit colleges charge more than  public institutions and have higher default rates and dropout rates. It should disturb us to learn that blacks are three times more likely than whites to be lured into for-profit graduate programs.

Income-Based Repayment Plans do not alleviate the high level of student indebtedness among African Americans

The Obama administration and the higher education community tout long-term income-based repayment plans (IBRPs) as the way to alleviate the suffering caused by crushing levels of student debt. But as Scott-Clayton and Li correctly point out, new repayment options such as  REPAYE "may alleviate the worst consequences of racial debt disparities," but they fail "to address the underlying causes."

Lowering monthly payments and extending the repayment period from 10 years to 20 or 25 years does not relieve African Americans from crushing levels of student debt. We've got to shut down the for-profit college sector to eliminate the risk that people will enroll in overpriced for-profit graduate programs that are often of low quality..And we've got to fundamentally reform the federal student-loan program so that African Americans and indeed all Americans can graduate from college without being burdened by unreasonably high levels of debt.

References

Judith Scott-Clayton and Jing Li. Black-white disparity in student loan debt more than triples after graduation. Evidence Speaks Reports, Vol. 2, #3, Brookings Institution, October 20, 2016. Available at https://www.brookings.edu/research/black-white-disparity-in-student-loan-debt-more-than-triples-after-graduation/

Consumer Financial Protection Bureau Warns Student Borrowers: Paying Extra on Loans May Not Help You Pay Them Off Early

OK, let's assume for a few moments that you are a super responsible student-loan debtor who wants to pay off your college loans early and get on with your life.

And let's assume you have a few extra bucks at the end of the month and you want to make larger monthly payments on your student loans so you can reduce the principle faster and pay off your loan more quickly. That should work, right?

Maybe not. The Consumer Financial Protection Bureau issued a warning recently that some student borrowers who pay more than the minimum monthly payment on their loans may actually be extending the period of their indebtedness.  

According to the CFPB, some student borrowers have reported that their loan servicers are thwarting borrowers who try to pay off their loans early by making larger payments.. In fact, some servicers have constructed a loan collection system that penalizes people who may more than the minimum monthly payment.

How does this system work? In some cases, loan servicers have unilaterally lowered borrowers' minimum monthly payments, thereby extending these  borrowers' repayment period and the amount of interest that borrowers pay, and they have often done this without the borrowers' knowledge.

This arbitrary practice of resetting borrowers' monthly payment amounts is called "redisclosure," and the CFPB warns borrowers that they could trigger redisclosure by making extra payments to pay their loans off sooner.

As CFPB's Mike Pierce explained:

When borrowers pay more than they owe, they expect to save money on interest charges and get out of debt faster. But the practice we highlighted can hold these borrowers back, making it harder and more expensive for student loan borrowers to pay back their loans and get out of debt.

Of course the practice of impeding college borrowers from paying off their loans early is outrageous and should be illegal. But CFPB places the responsibility on the borrower to avoid being duped. Here is CFPB's advice:

1) "Double check to make sure you're still on track to meet your goals." In other words, check to see if your servicer lowered your monthly loan payment without your knowledge.

 2) "Tell your servicer what to do with your extra money." Make sure the extra money goes to             paying down your loan with the highest interest rate and that extra money goes toward paying down principle.

3) If something doesn't look right, ask for help."

Of course, this is good advice, but wouldn't it be better if the CFPB simply required student-loan servicers to do business honestly and transparently? Shouldn't borrowers be able to pay off their student loans early by making extra payments? And shouldn't servicers be prohibited from changing payment terms without the borrower's permission or knowledge?

References

Tim Grant. Financial protection bureau concerned by some student loan servicers' practices. Pittsburgh Post-Gazette, October 3, 2016. http://www.post-gazette.com/business/money/2016/10/03/Be-cautious-when-repaying-student-loans/stories/201609280032

.Seth Frotman. You have the right to pay off your student loan as fast as you can, without a penalty. Consumer Financial Protection Bureau, September 26, 2016. http://www.consumerfinance.gov/about-us/blog/you-have-right-pay-your-student-loan-fast-you-can-without-penalty/

Psychological Costs of Student-Loan Debt: A Critique of Game of Loans by Beth Akers and Matthew Chingos

As I have pointed out more than once, several policy organizations argue tirelessly that worries about the nation's student-debt crisis are overblown. In particular, scholars at the the Urban Institute and the Brookings Institution have repeatedly published articles that minimize the magnitude of what I have long called a crisis.

It is not surprising then that Beth Akers, a fellow at the Brookings Institution, and Matthew Chingos, a fellow at the Urban Institute, published a book recently called Game of Loans, that essentially argued that the federal student-loan program is basically sound and under control.

In my view, Akers and Chingos widely missed the mark regarding the student loan crisis. They did not misrepresent the data about this problem or say anything that is technically inaccurate. Rather, in my view, they seriously misinterpreted data that warn of a coming catastrophe.

I won't attempt to articulate all my criticisms of Game of Loans in this essay. Rather I will focus on one point that Akers and Chingos made in Chapter 5, where they admit that "education debt is having negative psychological impacts on borrowers" (p. 95).

Of course this is true.  As Kathryn Hancock explained in a 2009 law review article, "Studies have consistently found that socioeconomic status and debt-to-income ratios are strongly associated with poor mental health." Student loans, in particular, Hancock wrote, "can be a chronic strain on an individual's financial and emotional well-being." Indeed, "[t]he mere thought of having thousands upon thousands of dollars worth of debt can severely impact those with already fragile mental health, especially if they will carry that debt for the rest of their lives" (Hancock, 2009, 160-161, internal quotation marks omitted).

But what solutions do Akers and Chingos offer for this problem? Solution number one, they say, is to dial down the rhetoric about the student loan crisis.  We need "to change the tone of the public discourse on this issue," Akers and Chingos counsel. In their mind, the "hysterical treatment" of the student-loan problem has caused some borrowers to worry more about their student loans than they should.

And solution number two? Akers and Chingos suggest that the psychological costs of student indebtedness could be reduced by creative repayment plans, including income-driven repayment plans.

In essence, Akers and Chingos are aligned with the Obama administration when it comes to addressing the student-loan crisis. Let's pretend there is no crisis and shove more students into long-term repayment plans.

Thanks, Ms. Akers and Mr. Chingos. You've been a big help.

References

Beth Akers and Matthew Chingos. Game of Loans: The Rhetoric and Reality of Student Debt. (Princeton, NJ: Princeton University Press, 2016).

Katheryn E. Hancock, "A Certainty of Hopelessness, Depression, and The Discharge of Student Loans Under the Bankruptcy Code," 33 Law & Psychology Review 151, 160-161 (2009) (internal citations and internal quotation marks omitted). psychology 

Huma Abedin: Hillary will throw her under the bus. A Catholic reflection on politics and fame as All Souls Day approaches and we remember our honored dead

Eleven days before the presidential  election, FBI director James Comey announced he is reopening the FBI investigation into Hillary Clinton's email scandal.

Those of us who live in fly-over country will never know all the facts about Hillary's private emails, but this much I believe we can safely conclude:

1) James Comey is a decent and honest man. Mr. Comey was fully aware of the political and legal risks he was taking when he sent a letter to Congressional leaders telling them the FBI had discovered new evidence on Anthony Weiner's computer about Clinton's private email traffic.

Attorney General Loretta Lynch objected to Comey's decision to alert Congress, and Comey sent the letter anyway. Surely he is a man of integrity and courage.

2) Whatever the FBI found on Weiner's computer must be significant. At the very least, I think Weiner's computer will show that Huma Abedin, Weiner's estranged wife and Hillary's closest confidant, lied to the FBI when she testified about Hillary's private server. And the new evidence may show that Hillary lied as well. Otherwise, why would Comey write such an explosive letter?

3) Regardless of who wins the election, this latest revelation will destroy Hillary Clinton's political career. Hillary may still win the election next week, regardless of what the FBI found on Anthony Weiner's computer, but this scandal won't go away until Hillary Clinton's political career is over.

4) Hillary will throw Huma Abedin under the bus. Hillary makes all her decisions out of expediency, and she has no sense of personal loyalty. If necessary, Hillary will throw Huma under the bus to save herself. I predict that will happen before election day.

5) Journalists and politicians who sold their integrity to support Hillary Clinton will never regain the public's trust. Bill Richardson, former governor of New Mexico and a Democrat, chastised Mr. Comey on Fox News this morning for sending a bombshell letter to Congressional Republicans just a few days before the election. But as the Fox News commentator quickly reminded Richardson, Comey sent the letter to both Republicans and Democrats. Richardson's characterization of the letter, like Hillary's, was a deliberate misrepresentation.

In my mind, Richardson's pathetic dissembling destroyed his credibility forever. And the same can be said for dozens of other obsequious Clinton supporters. For example, Froma Harrop, insinuated in an op ed column that Bernie Sanders is a racist when Bernie was running against Hillary in the Democratic primaries last spring. Bernie Sanders--a racist?

Will Froma Harrop ever recover her integrity after writing that sleazy essay? No, she won't.

The Cemetery at St. Francis Cabrini Catholic Church in Livonia, Louisiana

Yesterday, while Hillary's latest email scandal simmered and boiled, I drove to Livonia LA to visit the Catholic cemetery at St. Francis Cabrini Catholic Church near Bayou Grosse Tete. This is the weekend before All Souls Day; and in South Louisiana, every Catholic family has a duty  to place flowers on the graves of departed loved ones. I was determined to honor this tradition by placing bouquets of flowers on the graves of Ivy Alford, Sr. and his wife Mary Alice, my wife's grandparents.

To my surprise, fresh flowers had been placed on about  two thirds of the graves in Cabrini cemetery. The Cajuns were honoring their dead,  knowing the parish priest would sprinkle holy water on the grave sites on All Souls Day. No one wanted to appear indifferent to their ancestors as this Holy Day of Obligation approached.

Before leaving the cemetery, I noticed two men standing at Mr. Alford's grave; they were obviously paying respect to his memory. I introduced myself and the men told me a little about Mr. Alford, who had died 30 years ago. They testified to his kindness, his willingness to help anybody who needed aid. They recalled his humility and his sense of humor. A teardrop appeared on one man's face as he testified to Mr. Alford's extraordinary goodness.

Ivy Alford, Sr. was not a wealthy man; he left this world without leaving much of anything other than a good duck-hunting shotgun. But he was loved, and he is still remembered 30 years after his death.

Hillary Clinton will go down in history as America's most prominent woman politician. If she is elected President, she will have a presidential library; and win or lose,  scholars will write books about her for centuries to come. And when she dies, she will lie beneath a stately monument.

But no one will stand before Hillary's grave 30 years after her death and shed a tear for her remembered kindness. And so who lived the greater life--Hillary Clinton or Ivy Alford, Sr?

References

Froma Harrop. Bernie Sanders and Racism Lite. Seattle Times, May 19, 2016. Accessible at http://www.seattletimes.com/author/froma-harrop/

Educational Credit Management Corporation and the U.S. Department of Education: Are They Co-Conspirators in Accounting Fraud?

Last March, an Arizona bankruptcy court discharged $245,000 in student loan debt owed by  Rita Gail Edwards, a 56-year-old single woman earning a tenuous living as a counselor. Educational Credit Management Corporation (ECMC), her student-loan creditor, fought the discharge. ECMC wanted Edwards placed in a 25-year income-based repayment plan. Under such a plan, Edwards would only pay $84 a month on her loans for 25 years.

ECMC's position was absurd, of course. A woman in her late 50s  will never pay off a $245,000 loan by making monthly payments of $84. The only possible purpose that is served by jamming Ms. Edwards into a 25-year repayment plan is to carry her student-loan debt on the Department of Education's books as a performing loan.

In ruling for Ms. Edwards, the bankruptcy judge questioned the wisdom of a system that allowed Edwards to borrow so much money. "In hindsight, it is a shame that [Edwards] ever incurred these student loan debts," the court observed.

While her Ottawa University education may have given her the tools and credentials to work in an emotionally satisfying role [as a counselor] and may have provided a well needed skilled counselor in her rural community, the predictable economic burden was never likely to justify the massive economic burden she incurred.

The Edwards case demonstrates the insanity of the federal student-loan program. Our government allows people to borrow extravagant amounts of money for educational programs that will never pay off, and then it engages debt collectors to push borrowers into long-term income-based repayment plans that stretch out over 25 years and will almost never result in the loans being repaid.

And the Edwards case is not an anomaly. In the Roth case, ECMC opposed a bankruptcy discharge for an elderly woman with chronic health problems who was living on less than $800 a month. In fact, Roth's income was so low that ECMC acknowledged that Roth's monthly payments under an income-based repayment plan would be zero!

In the Halverson case, ECMC opposed a discharge for a man in his sixties making less than $14 an hour as a substitute teacher and who owed almost $300,000 in student loan debt. Mr. Halverson borrowed less than half the amount he owed when he filed bankruptcy and was never in default. His debt ballooned mostly due to accruing interest while his loans were in deferment.

The Department of Education itself has taken the same irrational stance regarding bankruptcy discharge for student debtors. In the Myhre case, DOE opposed a discharge for a quadriplegic, and in the Abney case, it opposed a discharge for  a single father of two children who was living on less than $1200 a month and could not even afford to own a car.

Why?

 I can think of only one reason. ECMC and DOE are engaged in a massive accounting fraud, trying to convince the public that the federal student loan program is solvent and fiscally sound. But in fact the student loan program is a disaster. Eight million people are in default and and one out of four debtors are either in default or behind on their loan payments.

ECMC benefits from the status quo--that is clear. According to a Century Foundation report, it has $1 billion in unrestricted assets, most of it obtained from its loan-collection activities. The Westlaw database shows that ECMC has  appeared as a named party in over 500 federal court rulings; it has spent literally millions of dollars in attorney fees chasing after people like Gail Edwards and Janet Roth.

And who pays those fees?  According to a law review article written by Rafael Pardo, ECMC draws money from a Federal Reserve Fund to finance its loan-collection activities and has access to "significant [federal] resources when litigating against student-loan debtors" (p. 2145).  Pardo cites a document showing that DOE allowed ECMC to keep a quarter of a billion dollars that it drew from DOE's Federal Reserve Fund to finance its activities in 2008 (p. 2145).

So you, Mr. & Ms American taxpayer, are paying ECMC to engage in unproductive litigation against impoverished debtors--litigation intended to keep the student-loan crisis under wraps.

And ECMC is a nonprofit organization--supposedly devoted to the public good.

But ECMC is not acting for the public good. On the contrary, ECMC is DOE's hit man--the entity DOE sends to beat down bankrupt student debtors and prevent them from getting the bankruptcy relief they deserve.

 ECMC's senior executives are getting well paid to be DOE's "Mac the Knife."  Its CEO makes at least a million dollars a year.

References

Annual Report of the CFPB Student Loan Ombudsman. Consumer Financial Protection Bureau, September 2016. Available at http://files.consumerfinance.gov/f/documents/102016_cfpb_Transmittal_DFA_1035_Student_Loan_Ombudsman_Report.pdf

Edwards v. Educational Credit Management Corporation, Adversary No.. 3:15-ap-26-PS, 2016 WL 1317421 (Bankr. D. Ariz. March 31, 2016). Available at http://www.azb.uscourts.gov/sites/default/files/opinions/024139558300_dmd.pdf

In re: Halverson, 401 B.R. 378 (Bankr. D. Minn. 2009).

Rafael Pardo. The Undue Hardship Thicket: On Access to Justice, Procedural Noncompliance and Pollutive Litigation in Bankruptcy. 66 Florida Law Review 2101-2178. Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2426744

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