Saturday, December 26, 2020

Happy New Year! Your middle-class status has been revoked and a college degree will not get you reinstated

 As 2020 comes to a close, you may think 2021 will be a better year. And if you are among the nation's wealthiest Americans, things look pretty rosy.

But if you are a middle-class person, next year will be worse for you than 2020.

First of all, as Charles Hugh Smith pointed out in a recent online essay, the middle class is an illusion. If you think you are in the middle class, you have been deceived. In fact, you are in a "phantom middle class," a class of permanent debtors.  

Over the past 40 years, earnings for the top one-tenth of one percent of Americans has grown 15 times faster than income for the bottom 90 percent.  Wages as a share of the national economy have been going down for the last half-century. 

You know that because you saw how wages went up for your parents' generation, but are not going up for working people today. 

Or as Mr. Smith put it: 

If the top 10% own 90% of the wealth and has captured virtually all the income gains of the past 20 years, then isn't it obvious America has no middle class? What the traditional middle middle class . . . owns is debt . . . .

Nowhere is this more obvious than when we look at the massive debt that gullible Americans have taken on to get a college degree in the pathetic hope that a diploma would get them into the middle class or keep them from falling out of it.

As Mr. Smith pointed out, Americans are burdened by "$I.7 trillion in student loan debt burdening those who bought the narrative that a college diploma was a passport to the security of the middle class. The debt load carried by those clinging on to aspirations of middle-class security is staggering."

Indeed, "burdening powerless students with uncertain futures with trillions in high-interest debt would have been viewed as criminal two generations ago, but now it's celebrated by those reaping interest from precarious debt-serfs."

The poor saps who have been plunged into poverty by their student loans cannot discharge their debt in bankruptcy courts, and they got nothing but crumbs from Congress's so-called coronavirus relief legislation.

College presidents--most of whom make more than half-million dollars a year, whined to their legislators about how much the pandemic was costing them, and Congress bailed them out. But did even one of these charlatan bozos urge some relief for their ex-students who are groaning under the burden of student loans they can never repay? No, they did not.

If Americans graduated from colleges and graduate schools with useful skills, they would earn enough to pay off their student loans quickly--within 10 years at least. But they are not acquiring practical skills--especially if they majored in the liberal arts or the social sciences.  

Again, Mr. Smith:

As for possessing skills, much of the workforce has few producer skills, as the consumer economy devotes inordinate attention not to producing but to marketing, speculation and complying with counterproductive regulations and bureaucratic file-shuffling.

But our fun-house economy cannot continue indefinitely with the superwealthy exploiting the rest of us while the government prints money and runs up the national debt--now pushing $28 trillion. As Smith observed:

Once the con of printing trillions of dollars out of thin air dissolves and the nation has to balance its books in the real world, these file-shuffling and speculative skills will no longer generate meaningful income.

Those of us in the bottom 90 percent of the nation's earners can do very little to stop the downward spiral in our wealth and income.  But at least we can advise our children not to take out student loans to get worthless college degrees, useless MBAs, obscenely expensive law diplomas, and meaningless doctorates.

Does Harvard President Larry Bacow have anything to say about student debt?









 

Tuesday, December 22, 2020

The $900 Billion COVID-19 relief bill: Did Santa Claus forget you this year?

 Congress passed a $900 billion COVID-19 relief bill yesterday.  It is almost 5,600 pages long, so most of our national legislators weren't even able to read it. 

The bill has the usual benefits we expected, but it contains other goodies that have nothing to do with the coronavirus. Those goodies added another trillion dollars to the bill's cost.

Who got the pork? Schools, colleges, and universities got $82 billion, the airlines got $25 billion, and the entertainment industry got $15 billion.  

And foreign countries got some money too. Ten million dollars went to Pakistan for a gender program. Venezuela is getting $33 million for “democracy programs," and the formerly Soviet Republic of Georgia will receive $132 billion.  

Hey, the Palestinians will get a cool quarter of a billion the nation of Sudan will get a little something as well.

Is there anything in there for you and me? Perhaps, a little, but the non-relief portion of the COVID-19 relief bill is actually larger than the amount that went to distressed Americans.

Did any one of our 535 Congressional representatives think to add a provision to this mammoth bill that would prohibit the Department of Education from garnishing the Social Security checks of elderly student-loan defaulters? Did anyone think about amending the Bankruptcy Code to allow insolvent private student-loan debtors to discharge their college loans in bankruptcy? Did anyone think to pass some legislation to clean up the for-profit college industry?

Apparently not. 

Isn't it Congress's job to take care of suffering Americans and to put their needs over the whims and desires of special interest groups, not to mention foreign governments run by people who hate us?

Sorry, pal. I gave my last Christmas present to the Ukrainians.

Monday, December 21, 2020

Living the good life with Fielden Poolaw: The Merchants Club, two quarts of Coors, and a teen hop

Several teenagers in my hometown struggled with alcohol when I was growing up, but I only knew one: Fielden Poolaw, a classmate of mine at Anadarko High School. 

Fielden was a Kiowa with a copper complexion and elongated earlobes that looked like someone had stretched them. He wore his hair short and went around in a rumpled, grey trench coat, which he rarely took off. The trench coat gave him a vaguely sinister appearance, which is probably the look Fielden was going for.

About one out of five kids at my high school were Natives, but the white kids and the Indian kids lived on different planets. Fielden, however, had a couple of things going for him that bridged the gap between the white world and his Kiowa world. 

For one thing, Fielden had an evening job taking tickets and popping popcorn at the Redskin Theater. Fielden sometimes let a few of his friends slip into the theater without paying, and he occasionally gave out free bags of fresh, hot  popcorn—heavily seasoned with orange popcorn salt.  

And Fielden had another thing going for him. He was the leader of a gang of Indian kids who hung out at the Redskin.  These Indian boys--probably popcorn addicts--swore an unspoken oath of fealty to Fielden. He could dispatch them on a moment’s notice to rescue any friend who was getting harassed or bullied—and there was a lot of harassment and bullying going on in Anadarko when I was young.

So Fielden was a handy guy to know. But he only dispensed his favors (protection and free popcorn) to his friends. So how did someone become Fielden’s friend?  By providing him with something he desperately needed—transportation.

Fielden was too poor to own a vehicle, and he depended on white kids to drive him around in their parents’ cars on the weekends. I was one of Fielden’s chauffeurs, and I often drove him around the drag—the endless loop between the Tastee Freeze Drive-in on the east side of town and the Powwow Drive-in on the west side.  

As I said, Fielden drank way too much. He was generally stewed when I drove him around on the weekends. I don’t think he ever carried a gun, but he pulled a claw hammer out of his trench coat once, telling me cryptically that he was expecting trouble.

I liked Fielden, and I wasn’t afraid of him. When I was with him, I felt like I was on the precipice of a great adventure; and in fact, Fielden and I experienced an adventure together—at least a minor adventure.

One Friday night I was driving Fielden around in my father’s 1950 Chevrolet pickup—a death trap that constantly leaked brake fluid. The truck had once been black but had turned an orange-gray color. The undercarriage was so rusted that there was a hole in the floor, and I could actually see the road beneath me when I drove. It had a faulty alternator that I had to pound with a pair of pliers to get the engine to crank.  Oh yeah, it was a dreamboat—a real chick magnet!

On this particular night, Fielden collared me to drive him to the teen hop at the Caddo County Fairgrounds. This was an easy assignment because I was going to the teen hop anyway—the King's Men were playing. 

But Fielden had a stop to make before the teen hop. By a series of grunts, he guided me down an alley behind Broadway Street and told me to stop at the back door of  the town’s most notorious bar—the Merchants Club!

Yes, the Merchants Club—the seediest of Anadarko’s seedy bars. The Merchants Club—a bar with an attitude-- which kept its double front doors flung wide open so that all of Protestant Anadarko could peer into its dark and smoky maw in the hope of seeing a neighbor sucking down a Coors, a Jax, or a Stag, accompanied—we hoped--by a woman other than his wife.

But, of course, our neighbors didn’t hang out in the Merchants Club. It was a bar for Indian men, and a middle-class white guy would be nuts to go inside.

Perfect place for Fielden, however. And I knew when we drove up to the Merchants Club’s back door where he had been getting his booze. Fielden mumbled a stern order to wait and then slid silently into the back door of Hell itself. 

I waited and I waited. And then, through the pickup’s rear window, I saw an Anadarko cop walking down the alley, checking for unlocked doors. He was carrying one of those long, heavy flashlights that double as a nightstick. Uh oh!

The officer tapped the window glass with his flashlight. “What are you doing here, kid?”

I was terrified. What in the hell did he think I was doing behind the Merchant Club? Buying booze? Cocaine? Soliciting a prostitute? Planning a burglary?

My mind reeled with the shock of adrenalin, and for once in my otherwise dull-witted life, I did some fast thinking.

“Officer,” I said, “my truck won’t start.”  

Then I explained how beating on the alternator would sometimes get the engine to turn over. The cop said he had seen that problem before and offered to help. I raised the hood on the most dangerous and ugly truck in America and started beating on the alternator with a crescent wrench, while the cop shined his light into the engine compartment.

Then I quickly scrambled back in the truck, turned the key, and the engine cranked right up.  “Thanks for your help, officer!” 

And in fact, he had been helpful, and I felt bad about deceiving him.

But where was Fielden? To hell with Fielden, I thought. I’m getting out of here.

And then, with almost perfect timing, Fielden came out of the backdoor of the Merchants Club with two quarts of Coors Banquet Beer, bottle tops peeking coyly out of brown paper bags. My heart stopped beating

If Fielden was surprised to see the cop, he didn’t show it, and the cop didn’t seem surprised either. The cop didn’t say anything. Fielden didn’t say anything. And I didn’t say anything. Fielden climbed in the truck, and off we went.

About five minutes later, Fielden and I were at the teen hop. I parked the truck, and we bought our admission tickets—a buck apiece.  I had had enough excitement for the night, and I began drifting away from Fielden, hoping to lose myself in a crowd of dancing Oklahomans.

But Fielden followed me—lurching across the dance floor with a quart bottle of Coors squeezed under each armpit and concealed beneath his trench coat. 

Then, when he was only about two feet from me, an enthusiastic girl doing the Twist—I think she was from Fort Cobb—bumped him.

Fielden’s arms flew up and two quarts of Coors crashed on the concrete floor. Flying glass went everywhere. The bottom of Fielden’s trench coat was drenched in beer.

Fielden had been trying to tell me something just before the beer bottles broke. What was it he wanted to say? I’ll never know because a squad of Rotarians, the teen hop’s zealous chaperones, hustled him out into the darkness.

A few months after that memorable evening, I went away to Oklahoma State University, where I wasted four more years of my life. Fielden stayed in Anadarko and slipped deeper and deeper into alcohol.  He died in Florida at the age of 33. I think he was in rehab at the time.

I learned that Fielden was buried in the cemetery next to the Redstone Church, situated below a bluff that overlooks the Washita river.

Did Fielden die a Christian? I do not know, and I do not care. And, at this stage of my life, I feel sure God doesn’t care either.

But what the hell do I know? Fielden and I spent hundreds of hours driving around Anadarko together, and I don’t think I ever asked him a single question.

Nevertheless, if there is a heaven, I’m sure Fielden will be there. After all, paradise would not be paradise without fresh, hot popcorn, seasoned with orange popcorn salt. And nobody popped popcorn better than Fielden.





 

 

 

 

 

 

 

 

 

 


Friday, December 18, 2020

Mosley v. Educational Credit Management Corporation: "It's not personal. It's just business."

The U.S. Department of Education and Educational Credit Management Corporation (ECMC), DOE's ruthless sidekick, don't want anyone to get bankruptcy relief.  This has been DOE's policy for many years.

Let's take a look at Mosley v. Educational  Credit Management Corporation, decided by the Eleventh Circuit back in 2007. As we will see, Mosley was clearly entitled to discharge his student loans in bankruptcy under the undue hardship standard, but ECMC fought him all the way into the Eleventh Circuit Court of Appeals.

Keldric Mosley attended Alcorn State University, an HBCU, from 1989 to 1994, but he never got a degree. While a student, he was enrolled in Army ROTC, and he injured his back and hip when he fell from a tank during summer ROTC exercises.

Mosley left Alcorn State in 1994 to help his mother, whose health was deteriorating. He lived with his mother from 1994 until 1999. He held numerous jobs during that time but was unable to keep any of them due to depression, heavy drinking, and physical limitations due to his ROTC injury. (p. 1323)

In 2000, Mosley's mother committed him to a state-supported mental health facility, where he was diagnosed with depression and anxiety. He sought treatment for his physical and mental disabilities from the Department of Veterans' Affairs, which placed him on prescription medications. These medications left him groggy. The combination of medicines and his physical disabilities made it difficult for Mosley to find stable employment. (p. 1323)

As noted by the Eleventh Circuit, Mosley was homeless from 2000 until his adversary proceeding in bankruptcy court, and he lived off of food stamps and small disability checks. He had no car and frequently slept at his aunt's house. (p. 1323)

Mosley represented himself in his adversary proceeding and sought to get evidence of his medical disabilities before the bankruptcy court. ECMC showed up to oppose bankruptcy relief and objected to the admission of some of Mosley's medical evidence. 

Although Judge Mullins reluctantly declined to accept some of his medical evidence, he discharged Mosely's student loans without that evidence. Judge Mullins reasoned that Mosley's testimony was sufficient to show that "he was in a vicious cycle of illness and homelessness that prevented him from working" and that repaying his student loans would constitute an undue hardship. (p. 1324)

After a trial, Judge Mullins discharged Mosley's student loans in bankruptcy.  ECMC appealed, but U.S. District Court Judge Robert Vining affirmed Judge Mullins' decision.

ECMC then appealed to the Eleventh Circuit Court of Appeals.  It argued that Judge Mullins erred in admitting Mosley's own testimony about his health. ECMC also argued that Mosley's evidence did not support Judge Mullins' conclusion that Mosley's financial situation was unlikely to improve or his ruling that Mosely handled his student loans in good faith.

But the Eleventh Circuit rejected all of ECMC's arguments and affirmed Judge Mullins' decision to discharge Mosley's student loans.  The appellate court ruled that Judge Mullins properly considered Mosley's testimony about his medical health. The court cited the Sixth Circuit's decision in Barrett v. ECMC, in which that court ruled that requiring an indigent debtor to obtain expensive expert testimony or documentation "imposes an unnecessary and undue burden on the debtor in establishing his burden of proof." (p. 1325)

Regarding the good faith requirement, ECMC argued that Mosley had not managed his student loans in good faith because he had not made a payment on his loans since 1996 and had not enrolled in an income-based repayment plan. 

But the Eleventh Circuit rejected those arguments. 

 [F]ailure to make a payment, standing alone, does not establish a lack of good faith. Good faith is measured by the debtor's efforts to obtain employment, maximize income, and minimize expenses; his default should result, not from his choices, but from factors beyond his reasonable control. (p. 1327)

Nor is a debtor always obligated to sign up for an income-based repayment plan to establish good faith:

While a debtor's effort to negotiate a repayment plan certainly demonstrates good faith, courts have rejected a per se rule that a debtor cannot show good faith where he or she has not enrolled in the Income Contingent Repayment Program. (p. 1327).

In short, Keldric Mosley--who clearly met the undue hardship standard for discharging his student loans in bankruptcy--had to fight for that remedy all the way to the Eleventh Circuit Court of Appeals. Although Mosley had a record of homelessness and chronic health problems, ECMC refused to allow him bankruptcy relief until three levels of federal judges ruled in his favor. 

It was not personal with ECMC. It was just business.

Congress needs to remove the "undue hardship" language from the Bankruptcy Code, and perhaps someday it will. 

But until that day comes, the U.S. Department of Education and ECMC could do a lot to ease the stress on overburdened student-loan debtors if they would merely allow people like Keldric Mosely to discharge their student loans in bankruptcy without having to battle their way into the federal appellate courts.  

References

Mosely v. Educational Credit Management Corporation, 494 F.3d 1320 (1lth Cir. 2007).

"It's not personal. It's just business."


Thursday, December 17, 2020

Mendenhall v. Navient: Idaho bankruptcy judge grants a family man a partial discharge of student loan debt totally more than $400,00.

Mendenhall v. Navient Corporation: A $76,000 student-loan debt grows fivefold

In 2007, Steven Mendenhall obtained a bachelor's degree in film and video production from Brooks Institute of Photography, a for-profit college in California, which later closed.  To finance his studies, Mendenhall took out about $75,000 in federal student loans and $76,000 in private loans from Sallie Mae.

Mendenhall's private student loans gradually spun out of control. By 2013--six years after graduating, Mr. Mendenhall's private student-loan debt had grown from $76,000 to  $260,357.69--more than three times what he borrowed.  By 2018, his private loan debt had grown to $407,912.84--more than five times what he borrowed.

How did that happen? To begin with, Sallie Mae's interest rate was quite high--13.625 percent. Interest on Mr. Mendenhall's unpaid debt accumulated and capitalized, causing his loan balance to spiral upward.  Also, Sallie Mae charged Mendenhall additional fees--nearly $40,000 in fees as of 2013. That's more than half the amount Mr. Mendenhall borrowed.

Added together then--Mr. Mendenhall's private student-loan debt and his federal debt totaled almost half a million dollars.

Mr. Mendenhall diligently sought employment and finally landed a pretty good job working at Brigham Young University's branch campus in Rexburg, Idaho. He attempted to manage his towering debt by filing for bankruptcy three times. Realizing he could not discharge his student loans absent a showing of undue hardship, Mendenhall filed for bankruptcy twice to discharge his other debts, hoping to free up more money to pay on his student loans. Still, he was unable to pay down his private student-loan debt.

Mendenhall filed his third bankruptcy petition in 2018, hoping to discharge his student loans. He settled with the U.S. Department of Education but still owed over $400,000 to Sallie Mae's successor in interest, Navient.

Judge Joseph Meier grants Mr. Mendenhall a partial discharge of his massive student debt

Idaho Bankruptcy Judge Joseph Meier reviewed Mr. Mendhall's financial situation and concluded that Mendenhall and his wife had lived frugally. The judge specifically approved of Mendenhall's expenditures for life insurance and his contributions to a retirement fund and a small savings account.

In fact, Judge Meier found only two unreasonable expenses--Mendenhall's $400 a month charitable contribution to the family church and his $300 monthly payments on his attorney fees.

After reviewing the totality of Mr. Mendenhall’s income and expenses, Judge Meier concluded that Mendenhall only had $150 a month in available income to pay on his student-loan bill---$407,000, which was accruing interest at the rate of 13.625 percent.

Judge Meier then analyzed Mendenhall’ situation under the three-pronged Brunner test to determine whether Mendenhall and his dependents would suffer an “undue hardship” if he were required to repay his private student-loan debt.

In the Judge’s view, Mendenhall met all three prongs of the Brunner test.  First, he was unable to repay his student loans and maintain a minimal standard of living. Second, his current financial situation was unlikely to change substantially.  And third, Mendenhall had handled his loans in good faith.

After completing his extensive analysis, Judge Meier then gave Stephen Mendenhall a partial discharge of his private student loans. The judge discharged all of this debt except $45,000--a little more than 10 percent of the total amount he owed. This debt could be paid without accruing interest, Judge Meier instructed, in payments of $150 a month over 25 years.

Sometimes a partial student-loan discharge is an appropriate remedy

Judge Meier made the right decision, one that other bankruptcy judges should follow. Granting a partial student-loan discharge gives a judge the flexibility to fashion a reasonable and just remedy for an honest but unfortunate debtor burdened by massive student-loan debt. Such a remedy is particularly appropriate for Mr. Mendhenhall, a husband and father with four children, burdened by student debt that had careened out of control due to a high interest rate and unconscionable fees.

References

Mendenhall v. Navient Corporation, JMM Adversary Case No. 19-8010-JMM, 2020 WL 6557964 (Bankr. D. Idaho Oct. 15, 2020).




Monday, December 14, 2020

Small private colleges are going down: Don't get trapped under the rubble

 Inside Higher Education carried a story today about major cuts being made at three higher education institutions. Marquette University, a Jesuit institution, is laying off 225 faculty and staff members. The University of Evansville, a Methodist college, is eliminating 17 majors and three departments. The College of Saint. Rose, a Catholic school, is cutting 16 majors and six master's degrees.

These three colleges are not alone. All over the United States, small, private colleges are suffering from declining enrollments and declining revenues.  Many of them will close over the next couple of years.

The colleges blame demographic trends.  There are simply fewer traditional college-age people in the American population.  Consequently, fewer students are going to college.

The coronavirus pandemic didn't help matters. The COVID outbreak caused a lot of young people to postpone their college plans. And it imposed high costs on institutions that were left with empty dorm rooms this fall.

An overall decline in religion has sapped the vitality of schools that were founded by various churches.  The University of Evansville, for example, is affiliated with the United Methodist Church, but how many young people choose a college because it has ties with a religious denomination?

The small private schools have been fighting desperately to reverse their enrollment crops. They've rolled out new programs, spiffed up their study-abroad offerings, hired public relations firms, and slashed tuition. But for many--these survival strategies won't be enough. 

If you are a young person in the process of deciding where to go to college, here is my advice. Do not go to a small, private school with enrollment below 1,000 students.  The smaller colleges are the most vulnerable. 

You do not want to enroll at a college that closes before you obtain your degree or shortly after graduating.  You don't want to take out student loans to pay tuition at a school that is slashing programs and laying off faculty.  You certainly don't want your parents to take out a Parent Plus Loan so you can study at some obscure little school in the Midwest that won't prepare you for a good job.

In short, private liberal arts education is on the verge of collapse. Don't get trapped under the falling rubble.






Saturday, December 12, 2020

"You can go to hell. I'm going to Texas." Hewlett-Packard, Oracle, and Tesla are heeding Davy Crockett's advice

 Davy Crockett went to Texas after he lost his seat in Congress.  "You can go to hell," he told his political enemies. "I'm going to Texas."

That decision didn't work out so well for Davy. He was killed in the Alamo by Santa Anna's army. 

Despite Davy Crockett's bad luck, many Americans are heeding his advice and moving to Texas.  Hewlett-Packard, Oracle, and Tesla are three corporate giants relocating to Texas from California, and thousands of individual Californians are making the same move. 

I think they are making the right decision. Many people have migrated to Texas since the day the Alamo fell, and most of them have prospered. I am one of those people. I went to Texas as a young man and graduated with honors from the University of Texas Law School in 1980. Forty years later, it is still my proudest professional achievement.

Even as a child growing up in Oklahoma, I knew that Texas was different from the rest of the United States. My family occasionally visited my Aunt Ann and Uncle Grady, who lived in Borger, Texas, in the bleak Texas panhandle. As we crossed the Texas border on old Route 66 in our 1958 Chevy, I would see that Lone Star flag snapping in the Texas breeze, and I knew things were better on the Texas side of the border.  

What does Texas have that the rest of America doesn't? I think it is a distinct heritage that Texans remember on at least a subliminal level--a legacy of courage, risk-taking, and supreme self-confidence.  

Texas, after all, is the only state to have once been an independent nation.  For ten years--from 1836 until 1846--Texas was on its own, and it organized its own defense against the marauding Comanches--the world's finest and most ruthless light cavalry. 

Ed Bruce perfectly expresses my sentiments about the Lone Star state:

When I die, I may not go to heaven.
'Cause I don't know if they let cowboys in
If they don't, just let me go to Texas
Texas is as close as I've been

I'm 72 years old now, one year closer to death than I was a year ago. I once comforted myself in the belief that my end would be marked by a Catholic funeral Mass. But that won't be happening.

So now my instructions are these. When I die, just let me go to Texas. I wish to be cremated and my ashes scattered over the upper Colorado River near the historic Regency Bridge in West Texas.

It will comfort me to know that my friends and family will assemble somewhere to eat Texas barbeque after my ashes are scattered. I hope they will commemorate my life by toasting me with cold bottles of Shiner Bock and perhaps listening to some of my favorite songs. 

Maybe the immortal Ernest Tubb will croak out the words of Waltz Across Texas. Perhaps someone will play a recording of the Texas Playboys playing Roly Poly, Big Ball's in Cowtown, and  San Antonio Rose

When my friends gather for my farewell party, I  hope they will listen to Johnny Rodriguez's rendition of We Believe in Happy EndingsIf so, that will certainly be good enough for me.



Shiner: "The beer your mother would want you to drink if she knew you were drinking."







Thursday, December 10, 2020

"My neighbor burns trash in a barrel out back": And why the hell not?

 It is the province of the elderly to lament the good old days when life was sweeter, and it is the province of the young to scoff at such nonsense.

Nevertheless, I recently heard a tune by a band called Southern Culture on the Skids titled "My neighbor burns trash in a barrel out back," and it made me think of my childhood in Anadarko, Oklahoma.  

Our family indeed burned trash in a barrel out back, but as far as I know, we never set anyone's house on fire. Of course, some things don't burn--empty cans of Demonte green beans, milk bottles, etc.  So my father took the noncombustible stuff to the town dump, which was located on the bank of the majestic Washita River.  Hell, everyone did that.

I remember going with my dad on a dump run when I was about four, and he allowed me to play in a gigantic pile of rusty tin cans. I slipped and fell and got a nasty cut on my wrist. Seventy years later, I still see the scar--a reminder of happy times!

When I was a kid, small-town Oklahomans believed in the constitutional right to own guns, but fortunately, most of us were too poor to buy one. We also held a strong belief in our dogs' common-law right to run freely about the neighborhood, pooping where they chose.

Most dogs exercised this right responsibly, but there were a few renegades. My childhood friends will remember Captain, a vicious collie that became a legend in southwestern Oklahoma. Although he looked exactly like the kindly Lassie we saw on television, he was, in fact, a terrorist. He was the anti-Lassie.

Captain struck a primal fear into the hearts of every child in Anadarko. This ruthless sociopath was known to visit Sunset Elementary School for the sole purpose of biting small children during recess.  I'm not making that up. Captain knew when the kids let out for morning playtime, and he traveled eight blocks from his abode on Colorado Street to maim schoolkids.

As a paperboy, Captain would occasionally ambush me on my paper route, but I developed a tactic for dealing with him.

 I carried a few extra newspapers in my canvas newspaper bag, which I rolled up tightly with rubber bands.  When Captain loped out of a ligustrum hedge to bite me, I would tuck my legs up high on my bike and pelt the son of a bitch with old copies of the Anadarko Daily News.

After a couple of encounters, Captain left me alone.

The town fathers (and mothers) were powerless to stop Captain from biting the citizenry. But finally, some high-school kids from the nearby town of Fort Cobb dispensed vigilante justice. They caught the dog, tied him to a chain, and dragged him behind a car through the streets of Anadarko until he died.

 It was sort of an Oklahoma version of The Magnificent Seven. The townsfolk were deeply grateful.

My family was poor when I was a child. I know that now because I remember the food we ate. We made grilled cheese sandwiches out of Velveeta, not cheddar, and we often ate Spam for dinner--scored of course so that it looked a bit like a grilled steak. And we put margarine on our baked potatoes, not butter. 

Then, there were those lunchmeat sandwiches, which we dressed with Miraclewhip instead of mayonnaise because Miraclewhip was cheaper.  Baloney, Oliveloaf, Liverwurst, cold hot dogs pressed between two slices of Wonderbread. If I had a dollar for every lunchmeat sandwich I ate as a kid, I could retire to the Caymans.

When I was about five, I remember coming home from our neighborhood grocery store, which an elderly woman operated in the front room of her house. Maybe I went there to buy a pack of Kool-Aid, which only cost a nickel.

While I was in the store, an older kid told me I was poor, and I went home crying.

But my mother told me that was nonsense. In fact, nothing could be further from the truth. We lived on the east side of town, it was true, but at least our renthouse was west of the railroad tracks.  The kids who lived on the east side of the tracks--the kids who lived near the stockyards or the peanut mill--now those kids were poor. 

Gradually, imperceptibly in my child's eyes, my mother and father clawed their way into the middle class--where, we believed, we had always belonged. After I went away to college, my parents' status elevated to an even higher level. My parents repudiated their blood-oath loyalty to Chevrolet and began driving Buicks.  They built a house with two full bathrooms--two!

Do I miss my childhood days in Anadarko? Decidedly, I do not. 

But I have a growing respect for all the families who scratched out a living in small towns like Anadarko back in the 1960s. Some were middle class, but most of them were poor--at least by present-day standards. These families shared one bathroom, and dad bought retread tires to keep the family car on the road. Kids picked up soda bottles on the side of the road to claim the 2-cent deposit.

To live like that now would seriously depress me. But, curiously, when I was a child, the way my family lived was enough.

Anadarko: dogs could roam where they pleased, and nobody was poor!







Wednesday, December 9, 2020

A good news/bad news joke: American universities awarded 55,000 doctoral degrees in 2019

 First, the good news. American universities cranked out 55,000 doctoral degrees last year, slightly more than the year before. 

Now the bad news. American universities cranked out 55,000 doctoral degrees last year, slightly more than the year before.

Our nation's tired universities are investing some of their dwindling resources into ginning out more graduate degrees. Why? Because the population of undergraduate students is shrinking and graduate programs command higher tuition rates.  For example, Baylor University has about 400 doctoral students in its Ph.D. program in curriculum studies, and it hopes to enroll more.

But do we need more Ph. D.s? Probably not. And why is that? Because many people will not get the salaries that they will need to justify the cost of their doctoral studies.

Maren Wood, who was interviewed by Inside Higher Ed, is a Ph.D. career advisor and founder of Beyond the Professoriate. She is troubled by the fact that doctorate recipients in fields with the highest median cumulative debt have the lowest median expected salaries. Less than half the recipients of doctoral degrees in education graduate without debt.

Traditionally, people with Ph.D.s could find jobs in academia, but that market is drying up--particularly in the soft disciplines--education, humanities, and social sciences.  Colleges across the country are slashing positions in the liberal arts due to declining interest in those fields.  

Ms. Woods advises doctoral graduates to consider private-sector careers outside the academic sector. But is that realistic?  The University of Texas offers a Ph.D. in African and African Diaspora Studies. But what does that qualify a graduate to do other than get a job teaching African and African Diaspora Studies?

Woods' advice is similar to the reassurances that law-school students sometimes receive as they face the prospect of a crumbling job market.  A law degree is a versatile degree, people say soothingly. I once gave this advice myself.

But Paul Campos, a law professor, poured cold water on this argument in Don't Go To Law School (Unless)

Far from being "versatile," a law degree can turn into a toxic asset for law school graduates who, by choice or necessity, look for work outside the legal profession. If you go to law school and end up not practicing law, there's a real risk that you'll find your law degree is actually worse than worthless, and that you would have been better off not getting it even if you could have gotten your degree for free.

Some law firms have an aversion to hiring J.D. graduates as paralegals, even though those individuals are exceptionally qualified for a paralegal's job. Why pay an attorney who could not get a job in his or her chosen field and take the risk that the lawyer will resent working in a legal support role?

And think about it. If you are applying for a job in the business sector, will your Ph.D. in medieval history help you or hurt you? 

Speaking for myself, I believe my doctorate from Harvard actually had a negative impact in some settings. Some people associate Harvard with a certain snootiness or arrogance.  Who wants to hire a snob when there is a congenial person with a Ph.D. from a respected state university?

Occasionally, I blurted out that my doctorate from Harvard is damned near worthless and that I wish I had never gone there. But that confession hardly helped my employment prospects. Basically, that admission just confirms in an employer's mind what I have long known to be true: I was smart enough to get into Harvard but not smart enough to avoid the damned place.

So, take the advice of an overeducated curmudgeon.  If you don't have a firm idea about what you will do with a Ph.D., don't get one.  And for God's sake, don't take out student loans to obtain a doctorate in gender studies.

On the other hand, if you are already a doctoral student in a field with dismal job prospects, don't delay your completion date to avoid a bad job market. I agree entirely with what Ms. Wood said about that strategy. "[R]un, don't walk, out of academia."






Three professors propose a complicated plan to protect private student-loan debtors: But isn't there a simple solution?

 Leaves of Grass,  director Tim Blake Nelson's cinematic paean to Oklahoma culture, tells a story about  Bill and Brady Kincaid, twin brothers who grew up in Little Dixie (southeastern Oklahoma). Edward Norton brilliantly plays both parts. 

Bill Kincaid escapes his redneck upbringing, improves his diction, and becomes a philosophy professor at Brown University. Brady, his twin brother, remains in Oklahoma, where he retains his Oklahoma accent and grows hydroponic marijuana.

When Professor Bill reluctantly returns to his roots, Brady, the stay-at-home brother, tells Bill that he reads all of Bill's scholarly publications.  Brady observes that Bill and his colleagues never write about a topic; instead, they write about what other scholars have written.  Professor Bill admits this is true.

"Well," Brady says with a perfect Oklahoma twang, "Why don't I write a book for all y'all, and I'll title it What's the F-cking Point?

I thought about this line from Leaves of Grass after perusing a scholarly article written by Professors Prentis Cox, Judith Fox, and Stacey Tutt.  The three wrote about a serious public policy problem: private student-loan borrowers' lack of consumer protection from fraud and abuse.

Cox, Fox, and Tutt are right.  Students have taken out about $150 billion in private student loans, and these loans do not have the consumer protections afforded to federal-loan borrowers.

 Besides, most private lenders require students to get a co-signer on their loans---usually mom or dad. Students and their parents who run into financial trouble can't discharge these loans in bankruptcy unless they can show "undue hardship"--a standard that is almost impossible to meet.

These scholars examined this problem in great detail; their law review article is 59 pages long, comprises 27,000 words, and is buttressed by 323 footnotes.  What do they recommend?

The authors propose the passage of two model statutes by all 50 state legislatures that would correct the evils they identified.  The first statute is titled the Private Student Borrowers Protection Act, and the second law is labeled the Private Student Loan Mediation Act.

I have a couple of questions about the Cox, Fox, and Tutt proposal:

First, what are the chances that even one state legislature will pass either of these laws? I would say zero.

Second, how many people will even read the professors' turgid, footnote-studded article?  And by reading, I don't mean skimming over the introduction and conclusion as I did.  How many people will read the whole damn thing--all 59 pages, all 27,000 words, all 323 footnotes?  I would say about two dozen.

I don't mean to denigrate academic endeavors. Some scholarly topics are complicated; I understand that. But--let's not overthink things. 

Private student loans are onerous and predatory for two reasons: 1) the banks require co-signers for these loans, and 2) the student borrower and the co-signer are virtually barred from bankruptcy relief--even if they are insolvent.

I have a proposal for addressing these problems, and it is only nine words long: Delete the "undue hardship" language from the Bankruptcy Code.

Virtually everyone agrees that the federal student loan program and the private student-loan industry have created a shit show for people who just want to get a college degree.  Federal and private student loans have saddled millions of Americans with massive student-loan debt they can't repay. Politicians, professors, and public-policy wonks all have solutions, but most of these solutions protect the status quo. 

Everyone wants to fix the student-loan program, but most reformers don't want to stem the flow of federal and private-loan money into college coffers. Like drug addicts, the universities must get their regular infusions of borrowed cash--even if they ruin their students' lives.

But if Congress would just strike the undue hardship language from the Bankruptcy Code, then student loans would be treated like any other consumer debt.  That single change would allow distressed student debtors to get relief from onerous loans in the bankruptcy courts.  

But nobody wants to do the obvious and straightforward thing. Most reformers just want to add elaborate, bureaucratic trappings to a con game that keeps the student-loan scam alive for a few more years.  

But isn't it time for Americans to ask the question Brady Kincaid asked his philosopher brother: "What's the f-cking point?

Redneck Brady, to his twin brother, Professor Bill: "What's the f-cking point?"

References

Prentiss Cox, Judith Fox, & Stacy Tutt. Forgotten Borrowers: Protecting Private Student Loan Borrowers Through State Law.  11 University of California-Irvine Law Review 43 (2020).

Tuesday, December 8, 2020

Going to college doesn't guarantee a middle-class lifestyle

 When I was a kid, my family would mark the holiday season by driving to Oklahoma City to do our Christmas shopping.

We always made three stops. We would drop by the Sears store, which was a treat for me because it had escalators, and popcorn was always popping on the first floor. Popcorn and escalators! I was in heaven.

Our family would also visit Brown's Department Store, one of those old-fashioned multi-story affairs in the heart of downtown Oklahoma City.  Brown's had elevators--not escalators, and each floor was devoted to one or two retail sectors--menswear, womenswear, appliances, etc.

We usually had lunch at Beverly's restaurant on 23rd Street--one of a family-owned chain of eateries specializing in "Chicken in the Rough," which meant fried chicken in a basket of french fries, accompanied by delicious rolls that I could slather with butter and honey.

The Fosseys were a frugal family, and my parents drove a Chevrolet as an emblem of our sober lifestyle.  If we ordered Chicken-in-the-Rough, my brother and I would split the plate. We each got one piece of chicken and a handful of fries.

I associate all those places with my family's dogged aspiration to be part of the middle-class. But Brown's Department Store is gone now, Sears is gone, and Beverly's is gone.  And perhaps that is appropriate because the American middle class is fading away, just like the department stores and family-owned restaurants.

Jason Del Rey, writing for Vox, wrote that department stores and the middle class are dying together.  According to one prediction, more than half of all mall-based department stores will close by the end of next year. 

And the middle class is shrinking as well.

"Since the Great Depression began in late 2007," De Rey observed, "the vast majority of income growth in the US has gone to high-income households, squeezing middle-class households and altering the way they spend money." In a 2018 study, the Deloitte consulting firm reported that "the middle 40 percent of the country saw its income shrink in the previous decade, while $8 out f every $10 in income growth nationwide went to high-income households" (as reported by Del Rey).

If you considered yourself to be a middle-class person ten years ago, it is a good bet that you don't think of yourself as middle-class today. Our income doesn't go as far as it once did, and we no longer expect our incomes and lifestyles to improve.

Not only is the middle class seeing a decline in income, but it also sees a decline in its status.  Middle-class people once lived in the Heartland. Now they live in flyover country. Middle-class people once took pride in their patriotism.  Now the media elite label that patriotic instinct is as white nationalism.

And if America's middle class is dying--and it is--our nation's colleges and universities have their fingerprints on the dagger that stabbed it in the heart.  Millions of American young people are taking out student loans in the naive hope that a college degree will improve their economic status, but they are being scammed.  

The biggest rubes are the ones who get degrees in the soft majors--liberal arts, humanities, social sciences, ethnic studies, etc. After spending a lifetime in academic settings, I see now that degrees in these fields were always dubious. But at least history majors were forced to write essays and familiarize themselves with some of Western civilization's significant events.

Now, most students get As, and the professors are too lazy to read term papers. The broad themes of our American heritage have been repackaged into ethnic studies taught by card-carrying members of the cancel culture.  

Tragically, young people are taking out student loans to pay for this gibberish. When they graduate, they are saddled with unpayable debt, and they can't get a job that pays a middle-class wage. 

So if you are one of those people who went deep into debt for a degree in Inequality Studies and find yourself working at McDonald's, this is my advice. When your former professor shows up and orders a Big Mac--the one who taught you nothing useful--spit in his burger.






Monday, December 7, 2020

Is massive student-loan forgiveness off the table? The insiders prefer long-term, income-based repayment plans and that's what student debtors are likely to get

Remember the heady days of the 2020 presidential primaries? Democratic nominees proposed massive student-loan forgiveness, and some promised a free college education. 

This is what Vice President Joe Biden promised last April:

The concept I’m announcing today will align my student debt relief proposal with my forward-looking college tuition proposal. Under this plan, I propose to forgive all undergraduate tuition-related federal student debt from two- and four-year public colleges and universities for debt-holders earning up to $125,000. . . . The federal government would pay the monthly payment in lieu of the borrower until the forgivable portion of the loan was paid off. This benefit would also apply to individuals holding federal student loans for tuition from private HBCUs and MSIs.

But the election is over, and the political insiders have had time to reflect on massive loan forgiveness. As the Washington Post editorialized just a few days ago,

[W]wholesale debt relief is actually the antithesis of progressive policy. Most benefits would flow to upper-income households, which, despite the undeniable burden of debt for lower-income families, actually owes a disproportionate share of the total [student-loan] dollars. 

 The Post disapproves of the relief plan put forward by Senators Elizabeth Warren and Charles Schumer.  They want Biden to forgive student-loan debt up to $50,000 per borrower.  Biden himself has trimmed back his April proposal and now only wants Congress to forgive $10,000 in student debt.

I think massive student-loan relief is off the table. Instead, I think the Department of Education--acting with or without Congressional action--is more likely to offer more generous income-based repayment plans.

In fact, that is exactly what the Washington Post is endorsing. Citing a study by Sylvain  Catherine and Constantine Yanellis, the Post says the feds should "mak[e] sure that everyone who qualifies enrolls in an existing plan that links repayment to a borrower's income."

But tinkering with income-based repayment plans (IBRPs) will not solve the student-loan crisis. 

Nine million people are in them now, and virtually none of them are paying down the principal on their loans.  College borrowers who stick it out will eventually get their student loans forgiven, but the canceled debt is considered taxable income by the Internal Revenue Service.

Making IBRPs more generous, which the new administration might do, is just a student-loan forgiveness program in disguise.  It would do nothing to change the status quo, allowing students to borrow too much money to attend college and the universities to charge tuition that is far too high.

As Steve Rhode argued in a recent essay, the solution to the student-loan crisis is to ease restrictions on bankruptcy relief for distressed college-loan borrowers.  All that needs to be done is to remove the "undue hardship" language from the Bankruptcy Code and allow student-loan debtors who are truly insolvent to discharge their loans in bankruptcy.

But perhaps that solution is too simple for the crafty minds of our politicians and our college leaders.  Instead of giving student borrowers a fresh start in bankruptcy,  they will likely concoct another complicated and labyrinthine IBRP.







Saturday, December 5, 2020

Parent Plus Loans at Historically Black Colleges: Should Parents Jeopardize Their Financial Future so their Children Can Go to an HBCU?

Andrea Fuller and Josh Mitchell of the Wall Street Journal have done some excellent reporting over the years on the student-loan crisis. Fuller and Miller recently published a WSJ article about poor and middle-class parents who take on substantial debt to help pay their children's college expenses. Most of these parents signed up for Parent Plus loans offered by the U.S. Department of Education.

You might think that parents whose children are enrolled at elite private colleges would be the ones with the biggest Parent Plus loans, but you would be wrong. According to Fuller and Mitchell,

The schools with the largest parent debt burdens aren't world-famous Ivy League schools . . . Rather, they include art schools, historically Black colleges and small private colleges where parents are borrowing nearly six-figure amounts to fulfill their children's college dreams . . . .

According to the article, the college where parents borrowed the most money for their children's schooling was Spelman College in Georgia, a historically Black institution.  Among parents who took out federal loans for their kids, the average amount was $112,127.  Among low-income families, the average amount was more than $83,000.

Keep in mind that the money parents borrow through the Parent Plus program is in addition to the student loans that their children took out themselves. 

Fuller and Mitchell's article contains a handy feature that allows readers to type in the name of an American college and learn the average amount of parent debt at that institution. I ran the numbers for some prominent HBCUs, and parent debt at several of these institutions is quite high.

Median By School

All Recipients

Low-Income Recipients

Spelman College, GA

$112,127

$83,894

Morehouse College, GA

$79,000

$48,862

Howard University, DC

$66,728

$52,145

Hampton University, VA

$73,244

$47,974

Clark Atlanta University, GA

$66,359

$40,095

Johnson C. Smith University

$28,586

$20,166

These numbers are disturbing. Perhaps even more disturbing is the fact that the Wall Street Journal's school-reporting mechanism had no figures at all for several HBCUs.  For example, the feature reported no data for Jarvis Christian College in northeastern Texas; Huston-Tillotson University in Austin, Texas; and Miles College in Alabama. All three colleges are HBCUs.

As reported by the Wall Street Journal, 20 percent of African American parents who took out  Parent Plus loans in 2003-2004 defaulted on those loans by 2015. In other words, Black parents who take out Parent Plus loans to help their kids pay for college are running a one-in-five chance of being financially ruined.

All progressive-minded people support the historically Black colleges and universities and believe they should be adequately funded. But we should also think about the students who attend HBCUs and their parents as well. 

Perhaps the best thing we could do to protect African American parents from risking their own financial security would be to eliminate the Parent Plus loan program altogether.



Friday, December 4, 2020

Steve Rhode: Here is Why Forgiving Student Loans is an Impossible Issue with an Easy Solution

Written by Steve Rhode

 Originally published at Get Out of Debt Guy

When it comes to a rapidly accelerating financial burden on American families, there is no greater concern than student loans.

The debt is burdensome and unfair on many levels that I’ll explore below.

However, there is a straightforward and simple solution for dealing with all of this outside of struggling to develop a fair forgiveness strategy. I’ll talk about that after we look at common opinions on the subject.

Is Student Loan Forgiveness Fair?

The talk of forgiveness is a difficult topic because how do you reach any level of fairness.

And let me be clear when people talk about forgiving student loans, it only applies to federal student loans. Not private student loans.

As Howard Dvorkin, Chairman of Debt.com said, “Only one-third of the people in this country get a four-year college education. The two-thirds without a college education is expected to subsidize their education when it is very likely that they earn less than the people who are receiving the educational subsidy.”

Dvorkin went on to say, “The issue of forgiving debt is complicated. What about all the people that have already struggled to pay their debts, and now other people get loans forgiven. That’s not fair.”

Student Loans – Another Financial Mistake for Many

A 2019 student by New York Life of 2,200 adults found the average participant reported taking 18.5 years to pay off their student loans, starting at age 26 and ending at 45.

That is a significant portion of life to have to be tied to a student loan payment that should have been directed to saving for retirement and then mushroomed into a giant nest egg. It can take decades to recover from that financial mistake. But that’s not the only financial regret people have.

What is shocking is the number of people that have student loan debt but who never graduated. I’ve seen statics as high as 75 percent of people with any student loans never obtained the degree.

And the wave of for-profit schools that have oversold education to people that never should have purchased their product is another national disaster.

“For-profit schools are not worth the money,” said Dvorkin. “As an employer, I hire people with traditional non-profit college degrees before I would hire someone with a for-profit degree.”

The Federal Reserve Bank of New York said, “Students who attend for-profit institutions take on more educational debt and are more likely to default on their student loans than those attending similarly selective public schools.”

The study went on to say, “Overall, our results indicate that, on average, for-profit enrollment leads to worse student loan outcomes for students than enrolling in a public college or university, which is driven by higher loan takeup and worse labor market outcomes. This is an important set of findings for several reasons. First, a substantial amount of public funds go to for-profit institutions through the financial aid system. Our estimates indicate the return to such expenditures may be quite low. Second, the results suggest that students who attend local for-profit institutions when there is a negative labor demand shock may be making mistakes: they would be better off attending the local public college or university instead.”

But even non-profit schools are ramping up tuition and selling students into seats that maybe should not have been admitted.

Student loan debt is a life sentence in painful debt for many: The Impossibility of Forgiveness

Opinions on forgiveness range all over the place. Betsy DeVos, the current Secretary of Education said recently, “Policies should never entice students into greater debt. Nor should they put taxpayer dollars at greater risk. There are too many politicians today who support policy that does both.”

 

She also labeled student loan forgiveness as an “insidious notion of government gift giving. We’ve heard shrill calls to “cancel,” to “forgive,” to “make it all free.” Any innocuous label out there can’t obfuscate what it really is: wrong.”

Forgiveness is never going to be fair, and it’s not going to a quick and effective way to stimulate the economy in a difficult time from a pandemic, as some claim.

Today, student loan forgiveness would result in people not making loans they are already in default on or making payments that are too low to pay the debt off. At most, it will result in people not having to make some loan payments monthly.

The economic impact will be felt over a long period of time rather than the boost and support the economy needs now.

While DeVos talks about avoiding policies that entice students into greater debt, her own Department of Education is a big part of the problem, with help from Congress.

As the federal student loan program stands now, there is $1.37 trillion of outstanding debt to students, and the Education Department has determined that borrowers will only pay back $935 billion. That leaves the program in the red and holding for $435 billion of bad loans.

The Wall Street Journal said, “The analysis was based on government accounting standards and didn’t include roughly $150 billion in loans originated by private lenders and backed by the government.”

 

To deal with that shortage, “Congress will have to raise taxes, cut services or increase the deficit to cover the losses.” That solution is also not fair to the many that repaid their loans.

So the Battles and Arguments About Student Loan Forgiveness Are Complicated

We can argue and politically position ourselves around the idea of forgiving student loans is either the best thing or the worst thing ever to happen.

It is actually a moot point since the program is in so much trouble already.

Let’s not forget the 42 million student loan borrowers will become due again in January 2020, as a result of the CARES Act forbearance ending.

People that can’t afford their student loans will suddenly be required to begin payments again. Defaults will explode even more.

As it stands now, the Department of Education’s base position is students should feel lucky they can enroll student loan debt in an Income-Driven Repayment program (IDR) that will give them a loan payment based on income. But, as I wrote before, it’s a trap.

As it stands now, while a student loan debtor might enroll in an income-based repayment program, the minimum payment is not enough to cover the interest being charged on the loan, and the balance owed grows. While people say, “certainly Congress will change that.” The reality is they have not, over the many years the programs have been in place.

So the way the “lowest payment” solution works right now is that the government lets you pay less than is due, that grows the balance, and in two decades, when the exploded balance is forgiven, people will owe income tax on that debt unless they are insolvent. It sounds crazy, but it is true.

Here is a case that is a great example of the madness. The student loan debtor could not afford to pay off her $40,000 of student loans over 14 years but is now required to enroll and remain in an IDR that will drive her balance up.

The article by Richard Fossey J.D. says, “How could the judge conclude that Hladly might someday pay off her student loans when the amount she initially borrowed had tripled since the time she graduated from law school? If Hlady could not pay off $40,000 in student loans over 14 years, how will she ever pay $140,000 over the next 25 years, especially since her loan balance grows by $20 a day in accruing interest?

As Judge Scarcella observed, Ms. Hlady is 48 years old. Her 25-year repayment plan will terminate when she is 73. By that time, her loan balance will be more than a quarter of a million dollars. This amount will be forgiven, but the forgiven debt will be taxed as income unless Hlady is insolvent at the time.”

With IDR Plans, the Government Has Already Accepted the Loan Forgiveness Proposition

In my opinion, with federal student loan forgiveness programs already on the books, policymakers have already accepted some form of loan forgiveness. Yet, the current talk of student loan forgiveness ranges from its “socialism” to its “a right.”

As it stands today, the federal government already runs a student loan program that is rapidly increasing in delinquencies, defaults, and repayment plans that will only grow the balance.

The only current winners in the student loan cycle are the schools that can sell students on attending and get easy money from the federal government.

Students enroll, schools get paid and accept almost no responsibility for the outcome. When a student loan debtor was sold education, they could never logically or mathematically afford and later defaults; the school does not have to pay back the loan.

Howard Dvorkin said, “Colleges must start operating as a business and deliver service within income. The days of college expansion paid for from easy government student loan money needs to stop.”

He’s right.

Student Loan Forgiveness is Much-Ado-About-Nothing and Misdirected

I hate to state the obvious here, but rather than worry about the inequities of forgiveness and who wins and loses, the most rational and logical option is to roll back the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).

BAPCPA made private student loans harder to discharge in bankruptcy. And private student loans are growing as well.

The issue is students are drowning in debt. It can be argued that because of student loan debt, they are also having to take out other debt and reduce retirement savings.

When those people are old enough and can no longer work, the lack of retirement savings will create a public safety net drain. No matter how you look at this, the systemic problem of easy money for education has driven up the debt, and we will all pay for it in one way or another.

The Solution Seems So Apparent

Up until 1976, all student loans were dischargeable in bankruptcy. Bankruptcy is a legal right for consumers to get a fresh financial start, and it is even a part of the U.S. Constitution. Those that file for bankruptcy generate an immediate stimulus for the economy and have a second chance to do better, having learned hard lessons from mistakes.

Returning to allowing both federal and private student loans to be discharged in bankruptcy has many features:

1.      It is a current and accepted legal process with clear rules and guidelines.

2.      The debt is forgiven tax-free.

3.      It allows people a chance to get a fresh start from an impossible situation. Oftentimes these issues are the result of accidents, injuries, medical issues, pandemics, etc.

4.      A bankruptcy Trustee and Judge must review and approve the discharge plan. If a consumer has too much income for a full immediate discharge, they will be required to enter a five-year repayment plan in a Chapter 13 bankruptcy.

5.      Forgiveness will be restricted to only those that qualify.

6.      The fact the loans may now be dischargeable should force lenders to make better loan decisions before just handing the money to anybody.

7.      If loans are less abundant or actually just based on repayment ability, then schools would have to ratchet back tuition fees. Less easy money would be available.

8.      This process would be restricted to those who need and meet the accepted legal standards for bankruptcy.

9.      People that can afford to repay their loans will have to do so through their Chapter 13 repayment plan.

10.  We can eliminate this ridiculous game and administration of student loans that will never be repaid and have to be dealt with.

If We Restore Bankruptcy Student Loan Debt Elimination to All Then We Can Focus on Doing Better

There is no argument that education leads to opportunity. I don’t care if that is education at a trade school, some other hands-on education, or a degree in some college subject at the best school in a 200-mile radius.

I heard recently about a “toilet paper” degree program. That’s where plumbers make much more than people to go to college. I do know some very rich electricians and plumbers. I guess that’s a raw subject for me since I’ve spent $3,000 in plumbing bills in the last 30 days.

We have a wonderful system in place to allow people to have affordable access to start their education. The local community college is a fantastic place to start.

It is affordable, and as Dvorkin said, “When thinking of how to get started on the journey of education, community college is a great investment. Think about this: why pay much higher tuition to take classes that use the same books as the community college class uses. Start affordably and then transfer to a more expensive school if you want to continue to finish your college degree.”

The power of community colleges is not new. It is proven. My very own father started his education from a farm in Michigan at the local community college. He then went on to become the very first Ph.D. graduate in Political Science at Michigan State.

So let’s all stop trying to reinvent the wheel here. Just restore the bankruptcy provision for all student loans and require some commonsense and responsibility on future lending.

There will never be any universally accepted plan for past forgiveness of student loans that were flawed from the start.

We are a great country and instead of looking back, let’s do better moving forward.