Why Doesn't the Federal Government Just Cancel All Student Debt? To Find the Answer, Take a Look at Our National Balance Sheet

 When Joe Biden was running for President, he said he would cancel $10,000 of every college borrower's student debt if Congress consented. But Congress hasn't acted.

Senators Elizabeth Warren and Charles Schumer have urged President Biden to cancel $50,000 of every borrower's federal student loans, saying he has the executive power to do so. But that hasn't happened either.

Why not? Given the hardship that student debtors are experiencing--especially since the COVID crisis began--why not just wipe the slate clean and cancel all $1.7 trillion in federal student debt?

In my opinion, President Biden and most members of Congress would like to cancel all student debt. After all, there are about 45 million student borrowers, and canceling their student loans would make them all very happy. 

But Congress can't do that, and neither can President Biden. And here's why.

Student loans are carried on the nation's balance sheet as assets. As of September 30, 2020, the United States held almost $6 trillion in assets, and about a quarter of that amount is listed as outstanding student loans. 

As of September of last year, total national liabilities amounted to roughly $32 trillion, resulting in a national debt of around $26 trillion (give or take a few trillion).

Thus, if Congress simply wiped out all those student loans or President Biden canceled them through executive action, the nation's balance sheet would look significantly worse than it already does.  Instead of holding total assets of $6 trillion, our government would have only a little more than $4 billion.

Simply put, the federal government pretends that all that student-loan debt--closing in on $2 trillion--will be paid back.  And that fiction cannot be maintained if Congress wipes out all student debt or allows large numbers of distressed debtors to discharge their student loans in bankruptcy 

If you are a student-loan debtor, you have benefited from the moratorium on making monthly loan payments--a moratorium that won't be lifted until May 2022.

But just because you haven't made any student-loan payments over the past two years, don't get your hopes up that Congress will simply forgive all federal student debt.  It won't do it because it can't do it. The Federal government's balance sheet simply can't take the hit.

Biden administration extends student-loan repayment moratorium until May 2022: Loaning money to cousin Rudy

 Don't lend money to a friend, an ancient proverb advises, because you will lose both your friend and your money.

My cousin Rudy taught me that lesson. A couple of years ago, Rudy called me from the Travis County Jail in Austin, TX, asking me to go his bail.

I can't remember why the Texans locked him up. I think he rolled a homeless man on Congress Avenue or took a leak on the State Capitol grounds. Maybe both.  Rudy was a little vague about the charges.

"You gotta get me out of here," Rudy pleaded. "The jailer is threatening to shave my face and my head. I need a good lawyer."

"How much do you need?" I asked, thinking he would ask for a few hundred dollars.

"I need ten grand," Rudy replied. Ten grand! 

But who can say no to a relative in need? I wired the money. "Just pay me back when you can," I told him.

Did Rudy ever pay back the loan? What do you think?

The federal student loan program is sort of like the money I loaned cousin Rudy. More than 40 million people owe Uncle Sam $1.7 trillion, and most of them aren't paying it back.

In fact, I suspect a few million student-loan debtors have concluded that their loans are really gifts--like the money I wired Rudy.

And the government is encouraging that point of view. The Department of Education has put nine million borrowers into long-term, income-based repayment plans (IBRs).  People in those plans make token payments for up to 25 years, but they will never pay off the principal on their loans.

There are millions more who have gotten economic-hardship forbearances, and they ain't paying nothin.'

And yesterday, the Biden administration extended the moratorium on making student-loan payments until May 1, 2022. By the time the moratorium expires, 27 million student borrowers will have avoided making student-loan payments for more than two years.

Let's face reality. Just like my loan to cousin Rudy, the feds will never collect all of that student-loan debt. 

Just pay me back when you can!

Southerners eat black-eyed peas and cabbage on New Year's Day: Do these foods symbolize prosperity or survival?

According to the Farmer's Almanac, Southerners traditionally eat black-eyed peas, cabbage, and pork on New Year's Day. 

The Almanac says these foods symbolize prosperity. Cabbage represents money, black-eyed peas suggest coins, and pork represents forward motion.

On New Year's Day, I will honor this Southern tradition by eating pork, black-eyed peas, and cabbage.  But I wonder if these foods represent something more fundamental than prosperity. 

Perhaps they symbolize survival.

If you are eating cabbage and black-eyed peas in January, that means you planted a fall garden and were able to harvest your crops.  

If you are eating pork in the winter, that means you slaughtered a hog in the fall and are getting some protein in your diet.

In my mind, the humble foods that Southerners eat on New Year's Day are a sign that we will survive until spring because we made prudent preparations in the fall; we planted winter crops and raised a pig.

This year, I planted a fall garden and began harvesting my produce in early December.  I discovered that broccoli, mustard greens, collards, and cabbage are easy to grow and thrive in cool weather.  

 So, I plan to plant a fall garden every year from now on. For me, my fall garden will be a reminder that I can't depend on the government, the national economy, or the global supply chain to keep me alive in my winter years. Ultimately, I alone am responsible for myself and my family.

(Nevertheless, I hope I am never obliged to own a pig. And I'm not crazy about chickens either.)

Urgent message from the real world to college administrators: We are sick of academic politics

 I don't care if you are a cool, young wokester with an AOC t-shirt and a biodegradable water bottle or a 90-year-old grandma who wears a MAGA hat and carries a Glock in her purse. Let's all agree on one thing: America is sick of academic politics.

Here are some examples of gratuitous political posturing coming out of our universities. At San Diego State University, a dean tweeted this totally inappropriate message:

Just so we’re clear on the Right’s agenda: racism good, abortion bad, money good, women bad, capitalism good, sustainability bad, stupidity good, science bad, power good, equality bad, white people good, nonwhite people bad. Stench, indeed.

 At MIT, the administration disinvited a University of Chicago professor to give a prestigious lecture because of his unpopular views about colleges' diversity agenda.

And at Buffalo State College, the administration won't rehire a writing instructor because she wrote that she was "sick of talking about Black Lives Matter."

I'm not speaking from a political perspective. I don't give a damn about anybody's politics--particularly the politics of fatuous university administrators.

I'm thinking about the students who are burying themselves in student loans to attend universities run by fools. 

They didn't sign up for a lifetime of debt just to become a captive audience for a bunch of gasbag administrators who think they are entitled to inflict their political views on the paying customers.

To paraphrase Mark Twain, the Constitution gave Americans the right to free speech. Thank God most people are smart enough not to use it.

Woker than thou

 

 

Columbia University v. Jacobsen: Do Colleges Teach Wisdom, Justice, and Beauty?

In a case decided over 50 years ago, Columbia University sued Roy Jacobsen, a former student, to collect about $1,000 in unpaid tuition.

Jacobsen countersued, demanding $7,000 in damages. He claimed Columbia had not taught him what it promised. Specifically, Jacobsen pointed to language in a brochure that said it would teach students "wisdom, truth, character, enlightenment, understanding, justice, liberty, honesty, courage, beauty and similar virtues and qualities."

Jacobsen also argued that Columbia had not lived up to its Latin motto: In lumine tuo videbimus lumen ("In your light, we shall see light") and a similar inscription over the college chapel: "Wisdom dwelleth in the heart of him that hath understanding."

In essence, as the appellate court noted in its opinion, Jacobsen's essential beef was that Columbia "does not teach wisdom as it claims to do."

Not surprisingly, a New Jersey trial court dismissed Jacobsen's claims, and the appellate court affirmed the lower court's decision.

"[W]isdom is not a subject which can be taught," the court observed,  and "no rational person would accept such a claim by any man or institution."

Obviously, the New Jersey court is correct. Students should not be able to sue a college because they failed to obtain all the intangible benefits that the college breezily promised in its brochures.

Nevertheless, the Jacobsen case reminds us that students need to think about why they signed up for college before writing those tuition checks.

The average cost of attending Columbia is more than $80,000 per year. Nobody lays out that kind of bread to get a deeper understanding of wisdom, justice, and beauty.

No, when students enroll at Columbia, they do so for one primary reason. They hope to benefit enough from their education to obtain a good job--one that justifies their student loans.

In lumino tuo videbimus lumin: What the hell does that mean?

Omicron variant harasses American colleges: "I've enjoyed as much of this as I can stand!"

 Porter Wagoner, singing about a chance encounter with an ex-girlfriend, quickly bade farewell. "I've enjoyed as much of this as I can stand," he tells her.

College students are singing the same song. The COVID pandemic has been with us for almost two years, and Omicron promises to prolong the disruption well into 2022.

This week, several colleges announced that final exams for the fall semester would be online, and classes at some schools were temporarily switched to online formats earlier in the fall term.  

NYU recently banned all "discretionary, nonessential nonacademic gatherings," presumably allowing nonessential academic meetings to proceed. At some schools, students who meet friends over pizza and beer at an off-campus dive run the risk of being suspended from their classes.

Since the campus closings in March 2020, students have sued more than 300 colleges, demanding their money back. Specifically, they want tuition refunds for classes that switched from face-to-face classroom settings to an online format.

They also want their fees refunded--the fees they paid for access to campus recreation centers, varsity sporting events, and collegiate health clinics. You closed all these venues, the students argue, but you kept our goddam money.

As I have said since the beginning of the pandemic, I sympathize with the universities.  College leaders acted reasonably when they closed their campuses in the spring of 2020, cleared out the dorms, and sent students home.

But the students who got booted paid big bucks to take classes during the 2020 spring semester.  At the private schools, tuition bills were north of 25 grand! Many students shelled out $30,000 for the dubious privilege of matriculating at snooty universities for four months when you tack on housing, fees, and books.

Colleges responded reasonably to a public health crisis when they closed down in March of 2020, but they need to understand that it costs too damn much to go to college these days. Students will put up with this banditry when they can stroll through elm-shaded campus quads and listen to gassy professors opining in quaint, wood-paneled classrooms.

But they ain't gonna put up with face-to-face college classes periodically going online or rules that prevent them from meeting their friends off-campus.  Not for long anyway.

College enrollments are already down significantly from pre-pandemic levels.  Men, in particular, are increasingly deciding to sit out of college until the chaos comes to an end.

What can colleges do to entice students to continue taking out loans to pay their tuition bills?  They can start by publicly admitting that online classes are inferior to on-campus learning and lowering their prices accordingly.

Porter Wagoner: "I've enjoyed as much of this as I can stand!"

Paul Campos says that college presidents and varsity coaches "are robbing us blind," and he is right

Paul Campos, a professor at the University of  Colorado Law School, wrote an essay for The Chronicle of Higher Education on the astounding salaries paid to college football and basketball coaches, who are now making far more money than university presidents. 

Campos commented specifically on the salary paid to Louisiana State University's new football coach, Brian Kelly, and Michigan State University's contract with its football coach, Mel Tucker. Tucker and Kelly both got ten-year contracts worth $95 million.

Varsity coaches are paid far more than college presidents, but they too are making out like bandits. As Campos points out:

[T]he outrageous athletic salaries can even seem to justify the administrative overpay. By a kind of perverse psychological effect, paying a college football coach $10 million per year makes paying a university president $1.5 million, a provost $800,000, and various vice provosts and vice chancellors $500,000 each seem positively parsimonious by comparison. 

Campos notes that most universities operate as tax-exempt charitable institutions,  but they have been captured "by the most rapacious forms of contemporary capitalism." Or, as the Campos essay's headline put it, "Coaches and Presidents Are Robbing Us Blind."

Meanwhile, undergraduates are increasingly being taught by graduate students and non-tenured instructors who are paid a mere pittance.  At my former university, some instructors are paid less than $3,000 per course. If they teach five courses per semester (a killing teaching load), they work at the poverty level.

Meanwhile, the football coach makes three-quarters of a million dollars a year.

LSU's new football coach makes $9.5 million a year and gets personal access to private jet

Senator Chuck Schumer Wants to Extend Moratorium on Student-Loan Payments: Is that a Good Idea?

Quite a few country songs are about guys who made a big mistake when they were young and went to prison.

Merle Haggard tells a story about a man who “turned 21 in prison, doin’ life without parole.” George Jones eulogizes a wretch who spent eighteen years in the slammer “and still has life to go.” And Porter Wagner sings about a guy rotting in a cell because he stabbed his wife and her lover in a fit of rage.

Heck, even Wanda Jackson, the queen of rockabilly, wails out a song about a riot in cell block number 9.

Student-loan debtors can empathize with these prison songs. Like the people Merle, George, Porter, and Wanda sang about, they made a big mistake when they were young and spent their adult lives dealing with the consequences.

Indeed, that is the great tragedy of the student-loan crisis. Young people borrow tons of money to pay for their college education when they are clueless about what they want to do with their lives.

Then they graduate from college (or drop out) and can’t pay back their loans. Interest and penalties accrue, causing their original loan balances to double or triple, and ultimately, they realize they’re facing a lifetime of debt, which they can’t discharge in bankruptcy.

College debtors got a break when the COVID pandemic hit in the spring of 2020. The Department of Education allowed them to skip their monthly loan payments without penalty and without interest accruing on their loans. But that reprieve comes to an end next month.

Senator Chuck Schumer and other progressive congressional leaders want President Biden to extend the student-debt moratorium yet again.

I think that’s a mistake, which will only prolong the misery.

No, Congress should face the fact that the federal student loan program is a catastrophe. Our national legislators need to amend the Bankruptcy Code to allow distressed student borrowers to discharge their student-loan debt in bankruptcy.

Also, the feds need to put severe pressure on the colleges and universities to lower their tuition prices.

Finally, we need to shut down the for-profit college sector and shut down dodgy graduate programs—the third-rate law degrees and vacuous MBAs.

Otherwise, we are just enlarging an enormous debtors prison that now holds more than 45 million inmates.

Wanda Jackson: "There's a riot goin' on."

 

LSU Football Coach Brian Kelly: Can a Guy from Notre Dame Sell Raising Cane's Chicken Fingers?

 Brian Kelly hasn't even started work yet as LSU's new football coach, and people are already making fun of him for trying to speak with a southern accent. Even Jeff Foxworthy ("You might be a redneck") got in on the fun. 

Hey, give the guy a break. Until he was in the hunt for the LSU football coach's job, Brian Kelly had never even been to Louisiana. So give him points for trying.  

But here's my advice to Coach Kelly. Louisianians have a multitude of accents, and Kelly needs to carefully choose a particular accent and then stick with it. 

His new contract includes 50 free hours on the LSU private jet. I suggest that he fly around the state and choose an accent that works for him.

First, he should fly up to Shreveport and then drive east to Claiborne Parish--on the Arkansas border. 

Those North Louisianians have an accent all their own.  But here's a warning: Don't poke fun at the way they talk, or they'll kill you.

Then take a leisurely drive through Acadiana.  Talk with people from Pierre Part, Galliano, Bayou Pigeon, or Grosse Tete.  Accents in that part of Louisiana vary from town to town, but they all fall under the broad heading of Cajun. Coach Brian might want to choose one of the Acadian accents.

Or he might explore the Irish Channel in New Orleans. Now that's a distinctive accent.

But Coach Brian shouldn't worry about getting his southern accent right. A southern accent is the easiest thing in the world to pick up. Even Hillary Clinton can do it. No need to sign up for Rosetta Stone. Just pop a couple of quaaludes and wash them down with a 40, and you're on your way.

No, Coach Kelly should worry about losing his southern accent after he acquires it. Six months from now, Coach Kelly may sound like Senator Lindsey Graham. But if he goes back to South Bend, Indiana, to visit old friends, they'll all laugh at him.

So Tiger fans shouldn't fret. Kelly will get the southern accent down within a few months. 

No, my biggest worry is whether Coach Kelly can hawk Raising Cane's chicken fingers with enthusiasm and conviction. Coach O could do it. Coach Miles could do it. Can Coach Kelly do it?

I say we give Coach Kelly a tryout to see if he can credibly do a Raising Cane's chicken fingers commercial. If he can't get that right, let's buy out his contract!

Coach O could sell those chicken fingers!

LSU signs $95 million contract with new football coach: "We must have been our of our minds."

 John Prine and Melba Montgomery recorded a great country song a few years ago: We Must Have Been Out of Our Minds." The song tells the story of a couple who foolishly broke up because they both thought they loved someone else.

Then they realized their mistake. 

They both turned out to be the wrong kind. Oh, we must have been out of our minds.

That song should be LSU's theme song.  A few days ago, LSU hired Brian Kelly, who currently coaches at Notre Dame, to be LSU's next football coach. 

LSU and Kelly signed a ten-year contract for $95 million. Ninety-five million! And that doesn't include various incentives and endorsements. I predict Kelly will soon be promoting chicken fingers on local television stations--which will earn him even more money.

Kelly is 60 years old. What are the odds that he'll still be coaching for LSU ten years from now?

Not good, I believe. Scott Rabalais, a sports columnist for the Baton Rouge Advocate, pointed out that seven of the last ten LSU football coaches were fired.

LSU bought out its last two coaches' contracts. The university cashed out Les Miles for $10 million. Coach Orgeron, LSU's current football coach, got bought out for $17 million. 

And Miles and Orgeron both brought home national championships!

Stephanie Riegel, writing last year for the Baton Rouge Business Report, said LSU is mired in moral bankruptcy. She referenced a video of the 2019 football championship team dancing to a "bounce" song titled Get the Gat at the White House.

The lyrics of Get the Gat are misogynistic, to put it mildly. Here are some sample lines:

You ain’t nun but a dope man’s bitch . . .

Cuz I’m a [N word] wit a rock hard bone
And I’m takin’ one of these hoes home.

Gat, by the way, is a slang word for a gun. 

LSU must be out of its mind. The university recently renovated the football team's locker room at the cost of $28 million. The revamped facilities include a performance nutrition center and cushy study areas that feature "sleep pods." 

Meanwhile, the LSU library looks like a Dollar Store on the wrong side of town, and the university is muddling through a sexual misconduct scandal by student-athletes.

LSU's communications execs tireless assure the public that all the costs run up by the football program are paid by the athletic foundation, not tuition money.  Maybe that's true.

Nevertheless, all this football hype is not improving LSU's academic standing. The law school dropped 13 places in last year's U.S. News & World Report rankings. The university as a whole ranks 1lth in the U.S. News rankings among the fourteen schools in the Southeast Conference, just above Missippi State, Old Miss, and Arkansas.

But LSU is number one in at least one category. The university is the first SEC school to sign a sports-betting contract with a gaming company.

Go Tigers!

Sleep pod in LSU football locker room: Nighty Night!

How to Choose A College: Advice Originally Posted on WalletHub

Jacob Sanders, a journalist with WalletHub, kindly asked me to share my advice on the various roles of college towns for an upcoming WalletHub article.

Titled 2022's Best College Towns and Cities in America, WalletHub posted the article yesterday, including my commentary. The article was authored by Adam McCann and contains advice from several higher education policy experts, including Mark Haynel, Alexander Jun, Herman Walston, and Joseph Paris.

Here are my answers to five WalletHub questions about college towns:

1. In deciding which university to attend, how important is the surrounding city/town?

A college's surrounding city or town is a crucial element to weigh when choosing a college.

At one time, small liberal arts colleges in rural areas and small towns were very attractive to college students. There are many small private colleges, especially in New England and the mid-Atlantic states. Some are affiliated with religious denominations or were started by philanthropists in the nineteenth century. Sweetbriar in Virginia is an example of such a school. Rural charm and a lovely campus were once very appealing.

These small schools are less attractive now. First, most college students now prefer to attend college in a big city with a more exciting social scene and more opportunities to make connections that lead to jobs.

Second, the small private colleges are pretty expensive. Tuition alone can be north of $50,0000 a year.

Finally, enrollment declines have hit the small private colleges very hard, especially the more obscure schools. Some of these small colleges are having trouble attracting students. Several have closed or are teetering on the brink of closure. No one wants to get a degree from a college that may not exist ten years after the student graduates.

In my opinion, students should not take out student loans to study at an expensive liberal arts college, particularly one with no nationwide visibility. 

On the other hand, colleges and universities in large cities have drawbacks as well. Crime is a growing problem in urban America, and violent crime is on the rise. Many urban schools are located near dangerous neighborhoods. For example, Tigerland, a once-popular area near LSU, with many student-oriented apartments, has become a slum with frequent incidents of violent crime, including murder. It would be a grave mistake for a young person to rent an apartment in a neighborhood like Tigerland. And many urban universities are located near dicey neighborhoods that are similar to Tigerland.

2. Are college cities/towns a good option for retirees? What about families?

College towns are attractive to retirees because they offer many activities for the larger community, like athletics, theater, performing arts events, book fairs, etc. But the cost of living in urban college towns can be pretty high. When I attended law school at the University of Texas, Austin was known as a mellow town with a low cost of living. It was once a great place to live for students, retirees, and families. (I once bought a one-dollar ticket to hear Willie Nelson perform.)

Today, the cost of living in Austin, TX, is out of sight, and traffic is choking the freeways and streets. It is still a lovely place to live, but housing is quite expensive -- took expensive for most retirees.

Some college towns have good public schools that attract families, but some do not have good schools. The public schools in Texas are generally good in the college towns: College Station (Texas A & M), Denton (University of North Texas), etc. But the urban schools in Louisiana are failing, and few people would move to the college town of Baton Rouge for the public schools. 

3. How can parents prepare their children for managing finances in college (student loans, credit cards, etc.)?

Parents need to be vigilant about how their children finance their education. On no account should a parent or grandparent take out a Parent PLUS loan to help a young relative pay for college. Parent PLUS loans are just as hard to discharge in bankruptcy as regular student loans, and a parent who suffers an illness or a job loss and has Parent PLUS loan obligations will face a financial nightmare.

In my opinion, parents should steer their children away from expensive, so-called "luxury" student housing and encourage them to live in a dorm for at least a couple of years. Students should not take out loans to finance an unsustainable luxury lifestyle while they are in college. And parents do their children no favors by giving their kids fancy cars and unlimited access to credit cards. College students need to live on a budget while in school because they will undoubtedly be constrained by a budget after they graduate. Loading a debit card with a fixed monthly spending limit will teach students to manage their budget.

Parents should resist the allure of elite colleges that are expensive and may not benefit their children in the long run. I got a doctorate from Harvard Graduate School of Education because I was dazzled by its reputation. But the graduate education program at Harvard was no better than the programs at many public universities, and Harvard was very expensive. I admit I made a mistake.

4. What are the advantages and disadvantages of going to college in-state vs. out-of-state?

Going to college out of state is often a good idea. Going to another state to study exposes the student to a larger world. For example, kids from small midwestern towns can benefit from living in a more lively urban environment. I grew up in a small town in Oklahoma, but I did my doctorate at Harvard. (But I wish I had gone to school somewhere else besides Harvard.)

Out-of-state tuition is higher than in-state tuition at public universities, which is a drawback. But public colleges across America are recruiting out-of-state students aggressively, and young people with good academic credentials (high ACT scores, good grades, etc.) have a very good chance of getting a scholarship. I know of a Louisiana family who sent a child to the University of Alabama rather than LSU because it was cheaper to go out of state due to the scholarship aid.

5. How can local authorities make their cities/towns more appealing to both new students and potential residents?

Crime, crime, crime. College towns must invest sufficient resources in law enforcement to keep students and residents safe. College professors and their students tend to be more progressive than the general population and may think defunding the police is a good idea. But it is not a good idea. Universities must make sure their campus police forces are trained not to use unnecessary force and to be sensitive to a diverse student population. Still, in my experience, campus police forces are very mindful of the needs of their students and remarkably tolerant of students who do boneheaded things. Protecting students from sexual assaults and alcohol-related injuries depends in part on having a professional local police force.

College towns also need to keep real estate development under control, which many college towns are not doing. Real estate developers have built thousands of apartments in the flood plain south of LSU in my community. Many are touted as luxury student housing. LSU and Baton Rouge do not have the infrastructure to support all this development, and the rental housing is overbuilt. The city does not recognize what is happening, but outside investors are building too much housing that will one day become slums.

After a Long Pause, 30 Million Student Borrowers Will Begin Repaying Their Student Loans in February. Most Say They're Not Ready.

 Last year, in response to the COVID pandemic, the Department of Education pressed the pause button on the federal student-loan program. 

In March 2020, DOE allowed 30 million student borrowers to stop making payments on their student loans with no penalty and no accumulation of interest. DOE also stopped collection actions during this moratorium and stopped garnishing wages of student-loan defaulters.

That was nearly two years ago, and the party's almost over. Beginning on February 1, 2022, all these borrowers will be required to start making monthly payments on their student loans. 

And guess what? Almost 90 percent of fully-employed student debtors who responded to a survey said they are not financially secure enough to resume making loan payments. If they are forced to begin making payments on their student loans, they say, they will not have enough money to pay other bills--like rent, car loans, and medical expenses.

And the loan processors are sending signals that they aren't equipped to reboot the student-loan system for 30 million borrowers all at once. Scott Buchanan, a spokesperson for the loan servicers, said this:

From a resource perspective, from a system perspective and from a staffing perspective, this is going to put a lot of strain on the system.

Poor babies! Somehow I don't think the student-loan servicers are going to miss any meals.

 Nevertheless, three loan servicers are getting out of the business. As reported by Inside Higher Ed, the Pennsylvania Higher Education Assistance Agency, Granite State Management & Resources, and Navient announced that they will not be servicing loans when their federal contract expires.

Navient is turning over its loan servicing business to Maximus, a for-profit company that trades on the New York Stock Exchange.  (The current price is about $76 a share.) 

Maximus! The name sounds like one of the gladiators in that Russell Crow movie. Maximus was already in charge of collecting on defaulted student loans, a business that must be profitable. Bruce Caswell, Maximus's CEO, made $6.14 million in 2020. 

Some commentators say the job of jump-starting the student-loan collection process is so massive that DOE should extend the loan-payment holiday for a few more months. Others say DOE should forgive all student loan debt--now touching on $1.8 trillion. As Cody Hounanian, Executive Director of the Student Loan Crisis Center, put it:

We need to think diligently about what it means to start payments and if we're better off just extending this deadline and canceling student loan debt.

In my view, the federal government will not cancel all student debt, although DOE might extend the repayment holiday for a few more months. 

I think it is more likely that Congress and DOE will create more generous income-based repayment plans and make it easier for student borrowers to qualify for debt relief through the Public Service Loan Forgiveness Program.

Those reforms--if that is what one should call them--won't solve the student loan crisis. Tinkering with the system won't fix it. The only fair way to grant relief for distressed student-loan borrowers is to give them reasonable access to the bankruptcy courts.

Note: Quotations come from an article by Alexis Gravely published in Inside Higher Ed.

Willie Nelson: "Turn Out the Lights, The Party's Over"

Marchus v. Student Loans of North Dakota: Another Victory for Student-Loan Debtors in the Eighth Circuit

In 2020, Debra Jean Marchus filed an adversary proceeding in a North Dakota bankruptcy court, seeking to discharge about $38,000 in student-loan debt. After a trial, Bankruptcy Judge Shon Hastings wiped out the debt.

As summarized in Judge Hastings's decision, Ms. Marchus began her journey through higher education in 1975, forty-five years before she filed for bankruptcy. She first enrolled at North Dakota State University, then attended a couple of for-profit institutions, and finally obtained an associate degree in accounting from the University of Phoenix in 2013.

When Marchus appeared in Judge Hastings's courtroom, she only made $11.00 an hour working as a North Dakota grocery store stocker. Moreover, Marchus had never made a lot of money. Her average annual income over the previous fifteen years was only $14,493. 

As Judge Hastings noted, Marcus bought her clothing from second-hand stores, received health care from Medicaid, and supplemented her food budget with financial assistance from the federal government's SNAP program. She drove a 17-year-old car and lived in a one-bedroom apartment.

Ms. Marchus also suffered from serious health problems, which Judge Hastings summarized in some detail:

[Marchus's] physical conditions include arthritis, water retention, relaspes of colitis, chronic sinusitis . . . , no upper arm strength, weight gain, lack of blood flow in her legs, thyroid disease, hiatal hernia and kidney disease

After sifting through all the evidence (including more than 500 pages of medical records), Judge Hastings concluded Ms. Marchus's financial future did not look promising.

[Marchus] is almost 64 years old. She holds no pension or investment accounts and saved no money for retirement. Her employment and income opportunities are limited, and the prospect of [Marchus] increasing her income either through new employment or a promotion at her current job appears bleak.

Summarizing the evidence (which included more than 500 pages of medical records), Justice Hastings concluded that it was unlikely that Ms. Marchus would ever earn more than her current income. He discharged her debt to SLND in its entirety.

What are we to make of Marchus v. SLND? 

First, Debra Machus is one among millions of Americans who took out student loans to attend for-profit colleges but did not benefit financially. For more than forty years, Marchus attempted to improve her lot in life by enrolling at for-profit schools, and yet she wound up working at a job that paid only $11 an hour.

Second, Marchus's case shows how interest and penalties can cause a student-loan debt to balloon out of control. Debra Marchus borrowed $14,000 in 2007 to attend Aakers Business College, and she paid back more than half that amount with money she received from an inheritance. Nevertheless, by the time she filed for bankruptcy, her debt had grown to more than $38,000! 

Finally, Marchus v. SLND is another win for student-loan debtors who reside in the Eighth Circuit Court of Appeals. Like Diane Ashline's victory in Iowa and Michael Abney's success in Missouri, Marchus's victory in North Dakota is a sign that the bankruptcy judges in the Eighth Circuit are becoming more willing to grant student-loan debtors the relief to which they are clearly entitled.    

References

Abney v. U.S. Department of Education, 540 B.R. 681 (Bankr. W.D. Mo. 2015).

Ashline v. U.S. Department of Education, Adversary No. 16-09028 (Bankr. N.D. Iowa, Sept. 28, 2021).

Marchus v. Student Loans of North Dakota, 630 B.R. 91 (Bankr. D.N.D. 2021).

Elizabeth Lally, N.D. of Iowa Judge Collins Leads the Way On Discharge of Student Debt in the Eighth Circuit, Goosmann Law Firm (July 28, 2018).

Ashline v. Department of Education: Dental Assistant with Master's Degree from Kaplan U. discharges $230,000 in student loan debt

 Diane Ashline, a 47-year old single mother, worked for 20 years as a dental assistant. Hoping to increase her income, she took out student loans to get an undergraduate degree and a master’s degree from Kaplan University, a for-profit school. Unfortunately, these degrees did not help her financially.

Ashline never defaulted on her student loans. Instead, she put them in forbearance during the times she was unable to make payments. Nevertheless, by the time she filed for bankruptcy in 2016, she had accumulated  $230,000 in student debt. 

The U.S. Department of Education DOE) insisted that Ashline be put in an income-based repayment plan (IBR), which would only require her to pay $65 a month.  But Judge Thad Collins, who presided over Ashline’s bankruptcy proceedings, rebuffed DOE’s arguments and discharged all of Ashline’s federal student debt.

The judge pointed out that “no evidence [had been] produced to suggest that [Ashline] would ever be able to leverage her unused master’s degree to obtain a higher paying job in the future.” In fact, he ruled, there was “no suggestion that her income would increase in any meaningful way over the remainder of her working life.”

Judge Collins emphatically rejected DOE’s demand that Ms. Ashline sign up for an IBR, partly due to her age. At the time Judge Collins issued his decision last December, Ashline was 50 years old. “Upon completion of a hypothetical IBRplan,” the judge observed, “she would be between 69 and 74 years old.”

Under an  IBR, the judge explained, interest on Ashline’s student loans would outpace her payments, and she would never pay off her debt.  Although the unpaid debt would be forgiven if she completed her IBR, the forgiven debt would be taxable to her. Ashline would then face a “student loan forgiveness tax bomb”--a tax bill for the entire amount of the forgiven debt.

Judge Collins summarized his ruling in favor of Ms. Collins with these words:

[T]he Court finds that [Ashline] has proven, by a preponderance of the evidence, that not discharging her student loans would impose an undue hardship on her and her dependents. She has maximized her earnings potential. Her future financial condition is not likely to improve to any significant degree. . . . Her expenses are not extravagant. Debtor has made the good faith effort to make payments on her student loans . . . and has deferred those payments when she was unable to make them.

Judge Collins’s decision joins a growing body of case law that rejects the argument that student debtors should sign up for IBRs instead of seeking bankruptcy relief. Indeed, Judge Collins himself has issued two other important decisions in which he discharged student debt.

Gradually, I believe the tide is turning in favor of distressed student-loan debtors in the bankruptcy courts. Increasingly, federal bankruptcy judges are recognizing that forcing college borrowers into IBRs makes no sense.

I hope the Ashline decision and other bankruptcy court decisions in a similar vein will encourage “honest but unfortunate” student-loan debtors to shed their unpayable student loans in a federal bankruptcy court.

References

Ashline v. U.S. Department of Education, Adversary No. 16-09028 (Bankr. N.D. Iowa, Sept. 28, 2021).

Elizabeth Lally, N.D. of Iowa Judge Collins Leads the Way On Discharge of Student Debt in the Eighth Circuit, Goosmann Law Firm (July 28, 2018).

In re Martin, 16-9052 (Bankr. N.D. Iowa Feb. 16, 2018).

Fern v. FedLoan Servicing, 553 B.R. 362 (Bankr. N.D. Iowa 2016), aff’d 563 B.R. 1 (8th Cir. BAP 2017).

You Can Find Justice in the Bankruptcy Court of the NorthernDistrict of Iowa

Fern v. FedLoan Servicing, 553 B.R. 362 (Bankr. N.D. Iowa 2016), aff’d 563 B.R. 1 (8th Cir. BAP 2017).

 

Detour! Don't Choose a College Major That Won't Help You Get a Good Job

As Junior Brown reminded us in Detour, a class Country song, we can avoid a lot of trouble if we heed the warning signs all around us. "Oh, these bitter things I find," Brown sang. "Should have read that detour sign."

And this brings me to the topic of choosing a college major. Many 18-year-olds, maybe most, have only a foggy idea about what they want to do for a living. 

 In the service of transparency (don't you love that word?), I admit to switching majors twice while in college. I finally settled on a dismal major in sociology--sometimes described as the painful enumeration of the obvious. I learned nothing of any value.

So--how do you choose a major when you go to college? 

First, consider what you are good at and pay attention to what friends and mentors tell you about your skills and dispositions. When I was a first-year student, my freshman English instructor, a reporter at the local newspaper, told me I was a good technical writer, and she read one of my essays to my entire class.

I should have paid more attention to her compliment. It did not occur to me that I should focus on a career that would allow me to use my writing skills.  I should have switched my major to journalism. It wasn't until I got to law school many years later that I discovered that my aptitude for technical writing was valuable and could help me earn my living.

Second,  take note of the academic programs that are being shut down by the universities. For example, Youngstown State University announced this week that it is closing 26 academic programs. Programs being axed include Art History, Music History, Italian, Religious Studies, and Dance Management.

YSU said that only 87 students would be affected. In other words, on average, these 26 programs had only 3.3 students.  I wonder how many Youngstown students were majoring in Dance Management.

All over the United States, colleges and universities are closing academic offerings.  Many majors that are being shit-canned (a sociology term I learned in college) are in the humanities and social sciences. Literature, philosophy, anthropology, art history, and sociology are being thrown under the academic bus.  You should probably not devote your college years to taking classes in these fields. 

I regret having to give this advice. Our lives are enriched by an understanding of history and an appreciation for literature and culture. At the very least, every American should have a basic grasp of the causes of World War II and the catastrophe it unleashed all over the world. If it were up to me, no one could get a college degree without reading William Shirer's Rise and Fall of the Third Reich.

Unfortunately, a college education has become so expensive that the primary consideration in choosing a major should be to get a degree that leads to a good job. Thus, I think it would be best for young people to cultivate an appreciation for history and literature on their own time.

Junior Brown: "Should have read that detour sign."

Private Student-Loan Debt at an All-Time High: TICAS Releases Snoozer Report

 According to a recent report by the Institute for College Access and Success (TICAS), the 2020 class of college graduates has amassed $136 billion in private student debt.  When this amount is added to the total student debt from federal student loans--about $1.8 trillion, Americans are on the hook for almost $2 trillion in student debt.

Interestingly, students in the District of Columbia had the highest average private-debt level: $51,738. Eight states in the Northeast were in the top ten for high private student debt. The average private student debt in Delaware for the class of 2020 was over $50,000.

As Cody Hounanian, Executive Director of the Student Debt Crisis Center, aptly noted, the TICAS report shows that the costs of higher education have "skyrocketed and are out of control."

But are colleges doing anything to control their costs? Not much. Higher Education thinks it should be congratulated because tuition costs rose less than the inflation rate--the first time in decades that tuition increases didn't exceed inflation. I suppose that's good news of a sort, but the critical fact is that tuition costs go up every year.

TICAS's report concluded with a list of policy recommendations, but they're nothing to write home about.

TICAS recommends more federal grant money for low-income students, more oversight of the private student-loan industry, more loan counselors, and better advertising of income-based repayment plans.

Ho, hum!

TICAS did not recommend bankruptcy relief for student-loan debtors who are overwhelmed by the college debt. It said nothing about cracking down on the private-college industry, other than a vague recommendation to "Tighten Institutional Accountability."

I've been writing about the student-loan crisis for 25 years, and I've read dozens of reports and policy papers by think tanks and policy centers.  

Most of them recommend more money, more transparency, and more lenient income-based repayment programs.  TICAS's recommendations added nothing new.

Another snoozer report on the student-loan crisis!

The College Bookstore: Where Are the Friggin' Books?

 An LSU student, Kathryn Craddock, wrote a scathing critique of LSU's book store--operated, of course, by Barnes & Noble. 

"The colors are bland, the lighting is nauseating, and the inventory is full of tacky, overpriced LSU-themed junk," Craddock wrote in Reveille, the student newspaper. 

She said the bookstore's atmosphere shares more in common with a Walmart than an academic building. "I would even go far as to say that the building and its contents are creepy." 

Ms. Craddock's assessment of LSU's bookstore is absolutely correct. In fact, LSU's Barnes &Noble outlet doesn't even call itself a bookstore. The sign in front of the building simply says "Barnes & Noble at LSU."

Of course, the bookstore has a coffee shop where it sells Starbucks coffee--vile, overpriced stuff. But the store is really a souvenir and t-shirt shop. You can get an LSU t-shirt there for only $35 plus tax.  Or you can buy an LSU cap that will run you close to thirty bucks.

But books? Where are the friggin' books? As Ms.Craddock accurately described:

The LSU bookstore host shelves upon shelves of nightmares. There are the cheesy self-help books and celebrity memoirs with terrible attempts at relating to younger crowds.

I don't live far from LSU's Barnes & Noble, and I occasionally browse around the place. The store's textbook section is squeezed into a corner on the second floor--kinda hard to find.

The first floor is devoted to LSU-themed clothing, bric-a-brac, and--as Ms.Craddock attested, celebrity memoirs and self-help books. I recall seeing a self-help volume titled Taller, Slimmer, Younger--marked down to only a dollar.

I still remember the campus bookstore from my college days. Most of the store was devoted to textbooks, the ostensible purpose for being a college bookstore.

But the store also had a respectably-sized section devoted to fiction and literature. As a first-year college student from rural Oklahoma, I didn't know nothin' bout no literature, but I was attracted to a line of books with similar covers published by Scribner. I bought The Masters, a novel by C.P. Snow; Hemingway's Farewell to Arms; and F. Scott Fitzgerald's Tender is the Night.

I chose these books on my own; they were not assigned to me for a college class. And I read them uncritically. 

But I only knew about these books because I stumbled upon them at Oklahoma State University's campus book store. 

LSU's Barnes & Noble has a small stock of fiction, and you might find something by Hemingway or Steinbeck. But if you buy an LSU-branded water bottle first, you probably can't afford to buy a good novel.

And who needs to read works of fiction anyway when you can buy a self-help book that will make you look taller, slimmer, and younger for only a buck?

 

Luxury Student Housing and the Slumification of American College Towns

 In the nineteenth and early twentieth centuries, cotton production was a staple of America's Southern economy.  Even today, the United States is one of the world's largest exporters of cotton.

But cotton has some problems. Grown year after year, cotton depletes the soil.  Before commercial fertilizers became available, cotton growers simply grew cotton on a plot of land until the ground was exhausted and then moved on to places where the land was still fertile.

Something similar is happening in the luxury student-housing market. All over the country, college towns are seeing a boom in student-oriented apartment developments.  Developers buy relatively cheap land near college campuses, build so-called luxury apartments, rent them to college students and then sell the units to new investors--often pension funds and private-equity funds.

Is this a good thing? From an investor's standpoint, luxury student housing is profitable. According to one source, students pay a higher rate per square foot of space than other tenants, and students can take out student loans to pay the rent.

Even better, there is a never-ending supply of new students to keep the apartment buildings full.

But, just as cotton exhausts farmland, student housing gets run down over time, causing maintenance costs to go up. Moreover, college students are famously fickle renters, and they tend to search out newer apartments and offer more amenities than their old digs.

As newer and more luxurious apartment complexes come on the market, older apartment buildings become harder to fill. Rent prices go down, maintenance gets deferred, and then the luxury student apartment complexes of yesteryear become the slum districts of today.

We see this happening in the college town where I live. As the Baton Rouge Advocate noted in a recent news story, the Tigerland neighborhood south of Louisiana State University is "the storied college bar district and surrounding housing options once considered some of the most luxurious for LSU students. . . ."

But most of the Tigerland student apartments were built in the 1960s and 1970s, and they have seriously deteriorated. Several have been converted into so-called "Section 8 housing," housing for low-income households who receive public assistance.

This is no problem for the present generation of college students. They have their pick among hundreds of newer apartments that offer more amenities--fitness centers, swimming pools, recreation rooms, etc. 

Meanwhile, Tigerland has become notorious for crime, including murder. The Sandpiper Apartments on Tigerland Avenue are so infamous that Hillar Moore, the local district attorney, attempted to shut the place down as a "legal nuisance."

According to a 2021 newspaper article, Moore said the police had received 195 calls at the Sandpiper since 2016, an apartment complex with only 14 units!

The Sandpiper's owner asked the judge and prosecutors to be more sympathetic:

"If they shut me down, they should shut down the whole place," he said after the hearing. "The entire neighborhood needs to be condemned, to be honest. You would be appalled to know some of the crimes that are happening there." [As quoted in the Baton Rouge Advocate]

On the bright side, Tigerland is only a short walk to the LSU campus, and the rents are reasonable.  

Why should I care whether the neighborhoods around LSU are becoming slums? After all, I'm a retired professor, not a college student.

But I live in College Town, an old subdivision near the LSU campus. The Sandpiper, which the district attorney tried to shut down, is located only 1.3 miles from my home. 

Tigerland--only a short walk to the LSU campus