Saturday, July 31, 2021

Newsweek reports: Parent Plus Loans 'Are Fraught with Peril'

 Years ago, I was strolling along a lakeside hiking trail in a Dallas-area park. As I was walking across a wooden bridge, I looked down to see a ball of wriggling snakes below me.

It was a big cluster--about the size of a beachball. It was a scary sight, and I didn't stick around long enough to determine whether the snakes were poisonous. I just hurried on my way.

The Department of Education's Parent PLUS program is like a big ball of snakes. The program has become so predatory, so large, and so politically charged that we don't want to even try to untangle it.  We just want to hurry along without thinking about it.

Parent PLUS is a federal program that lends money to parents to help them pay for their children's education. Although Congress supposedly intended the program to help affluent families, six out of ten parent borrowers are from low-income households.  And, as Matt Krupnick reported for Newsweek, at 140 schools, 80 percent of parent borrowers are in low-income homes.

Parent PLUS default rates are high. According to a Newsweek analysis, nearly ten percent of parents at 1000 colleges defaulted or were seriously late with payments within just two years of their child left college. At some schools, Parent PLUS default rates ran as high as 30 and even 40 percent.

And borrowing costs are high: "6.28 percent for the 2021-2022 academic year plus an upfront fee of 4.22 percent" (as reported by Newsweek).

In 2019-2020, parents took out Parent PLUS loans on behalf of three-quarters of a million students, and the loan amounts averaged about $16,000. 

But the average Parent PLUS loan at some colleges is much larger. At Spelman College, an HBCU in Atlanta, the median Parent PLUS loan was $85,000 for parents whose children graduated or left school between 2017 and 2019.

Other schools with high Parent PLUS loan amounts include New York University (almost $67,000) and Loyola Marymount in Los Angeles ($60,000). The median loan amount is also high at several art and music schools: Berklee College of Music in Boston, Pratt Institute in Brooklyn, and Savannah College of Art and Design in Georgia.

Newsweek, the Wall Street Journal, and other news media have shown that some colleges are taking advantage of their students' parents by encouraging them to take out loans in addition to the federal loans and Pell grants that students receive on their own.

This is predatory behavior. And parents who take out Parent PLUS loans will find it is almost impossible to discharge these loans in bankruptcy.

Congress needs to shut down the Parent PLUS program. Or at the very least, Congress should amend the Bankruptcy Code to allow financially distressed parents to discharge these loans in bankruptcy.

But Congress will probably take no action. It sees the Parent PLUS program as a big ball of snakes, and no politician has the guts to close down this pernicious scam against low-income parents.

The Parent PLUS program is a ball of snakes.





Thursday, July 29, 2021

Do you feel the love? Universities pay off student debts with your money

 I bought a Subaru in 2019, and the company promised to make a $250 donation to one of four Subaru-selected charities.  Subaru calls this program "Share the Love."

As I recall, I selected Meals on Wheels, and I was glad to have Subaru donate some money to that worthy charity on my behalf.

Nevertheless, I feel sure that Subaru took a tax deduction for that donation, and I suspect that Subaru priced that $250 into the amount I paid for the car. If so, Subaru was taking credit for a charitable contribution that was indirectly being made by me.

Something like that is happening with American universities using federal COVID money to pay off student loans.  That money is not university money--that's your money.

For example, New York Governor Andrew Cuomo announced the CUNY Comeback Program, a state initiative to forgive $125 million in student debt owed by about 50,000 students who attend City University of New York.

But get this. CUNY and the state of New York are not contributing one dime to the CUNY Comeback Program.  All $125 million is coming from federal  COVID relief money.  In other words, American taxpayers from all fifty states will be contributing through their taxes to a relief program that benefits 50,000 students who attended one university located in New York City.

And think about this. CUNY students will not see any of this money. Nor will any of these funds go to help students pay off their federal or private loans. It's all going to CUNY.

Basically, CUNYis writing off $125 million in money owed to the university by its students and paying itself with federal grant funds.

And how did 50,000 CUNY students wind up owing CUNY so much money in the first place? My guess is this money primarily represents fees and penalties CUNY tacked on to students' tuition bills--late payments, parking fees, graduation fees, etc. 

And I think it is safe to assume that a significant percentage of this debt was uncollectible. To the extent this is true, CUNY engineered a windfall for itself--$125 million in federal money flowed directly into its coffers to clear debts that students might never have repaid.

Don't get me wrong. As I have said many times, I favor any scheme that offers relief to college borrowers, no matter how poorly the plan is devised.  And CUNY's Comeback program will clear some debt owed by its students.

But let's be honest about what is going on. CUNY and other universities have taken federal COVID relief money and used it to clear debt owed by their students directly to the institutions. Wilberforce University, a private HBCU in Ohio, is another college using federal funds to pay off student debt owed to itself.

I think many colleges are doing what CUNY and Wilberforce are doing--using federal money to pay off student debts that are owed to themselves. And then they pat themselves on the back for being compassionate.

But here is the real tragedy about the billions of COVID relief dollars the feds sent to American colleges over the past year. Many of these schools would have closed had they not gotten massive infusions of federal cash. These institutions weren't attracting enough tuition-paying students to pay their bills.

The U.S. Department of Education propped up many faltering colleges with COVID relief money, postponing the day when they will close. In the meantime, hundreds of thousands of students are taking out federal and private loans to pay tuition to colleges on their death beds--colleges that will croak in the years to come.

Is that a good policy? I don't think so.










Tuesday, July 27, 2021

Jornada del Muerto: People who take out student loans but don't graduate are on "the route of the dead man"

 Jornada del Muerto is a hundred-mile stretch of the Camino Real, which once ran from Mexico City to the northernmost outpost  of the Spanish colonial empire.  

There was no water on this stretch of the Camino, no livestock forage, and no firewood.  Literally, the Jornada del Muerto was the "route of the dead man."

Nevertheless, travelers in the 17th and 18th centuries could survive the Jornada if they prepared by taking plenty of water, watering their horses just before embarking, and traveling quickly over this desert road.

Many young people believe their college years will be an exciting journey that leads to a good job and a middle-class life. But people who leave college with a lot of debt and no diploma may find that they would have been better off financially if they had not gone to college at all.  In fact, their trip through college could turn out to be a modern-day journey of death--at least financial death.

As Professor Phillip Levine put it, college dropouts "ma[ke] an investment that ha[s] no return." They take out student loans but never obtain the credential that enables them to land a good job.

Not surprisingly, non-completers have high student-loan default rates--three times higher than individuals who graduate. 

In my view, too many young people look upon their college years as a golden time of unbridled freedom, casual sex, and binge drinking--all paid for with student-loan dollars.

That could be a big mistake--especially for students who take on too much college debt and never get a diploma.


El Jornada del Muerto: Don't take a dead man's route through college.



Monday, July 26, 2021

In re Standish: Should you be required to use your inheritance to pay off student debt?

 Martha Standish took out student loans when she was in her late 40s to get an undergraduate degree in accounting. Later she took out a Parent Plus Loan to help her daughter with college expenses.

Eleven years after graduating, Standish filed an adversary proceeding in a Kansas bankruptcy court seeking to discharge about $30,000 in student loans. By this time, she was 63 years old. She made $18.36 an hour working at an engineering firm, and her expenses slightly exceeded her income.

Bankruptcy Judge Robert Berger applied the Brunner test in deciding whether Ms. Standish qualified to have her student loans discharged under the Bankruptcy Code's "undue hardship" rule.  To be entitled to a student-loan discharge, Standish was required to make three showings:

1) "[S]he cannot maintain a minimal standard of living for herself and her dependents if forced to repay her student loans."

2)  "[A]dditional circumstances exist indicating that this state of affairs will persist [for] a significant portion of the repayment period . . . ."

3) "[S]he made good faith efforts to repay her loans."

After an extensive analysis, Judge Berger ruled in Standish's favor on two parts of the three-part Brunner test.  

First, he ruled that Standish could not maintain a minimal standard of living and make payments on her student loans. Thus, she met the first part of the Brunner test.

Second, Judge Berger ruled that Standish's dismal economic circumstances were unlikely to improve enough for her to pay off her student loans in the future. "As her age advances and her health deteriorates, she will soon reach a point at which her continuing employment is no longer possible," the judge observed. Moreover, Standish was unlikely to see her income go up. Based on these facts, Judge Berger ruled that Standish met the second part of the Brunner test.

Finally, regarding Brunner's "good faith" prong, Judge Brunner noted approvingly that Standish had "diligently minimized her expenses while maximizing the income she could earn with her degree." She also made payments on some of her loans while deferring others.

Nevertheless, Judge Berger ruled that Standish failed the good-faith prong of the Brunner test. 

Why? Because she received an inheritance and did not use the inheritance money to pay off her student loans. Instead, she used her inheritance to help pay for her daughter's education and other expenses. 

As Judge Berger explained:

[Standish's] decision to dedicate her inheritance to her daughter's education and other expenses prohibits the Court from finding that her pursuit of a discharge is in good faith. [Standish] received around $45,000 from her mother's estate. None of that money was used to pay the student loans. It is notable that this money would have been enough to pay off all or almost all her student loans.

Judge Berger clearly sympathized with Ms. Standish. He ruled in her favor on two parts of the Brunner test and only ruled against her on the good-faith standard because of her inheritance. "It is a tragic irony,' Judge Berger wrote, "that [Standish's] very efforts to relieve her daughter of the financial enserfment caused by student loan debt doomed her effort to discharge her own student loans."

Millions of Americans are burdened by student loans that prevent them from buying a home or saving for retirement. Some are probably counting on an inheritance to offset the catastrophe of their student debt.

But Judge Berger's decision--which is in harmony with current law--should be a wake-up call to student debtors who believe an inheritance will allow them to retire with dignity despite crushing student debt. As the Standish decision illustrates, an inheritance might foreclose bankruptcy relief for student borrowers even if they are otherwise qualified for relief under Brunner.

And--even more chilling to think about--the feds might try to garnish inheritance money from people who defaulted on their student loans. To my knowledge, this has not happened yet, but that possibility should not be discounted. 

Just another reason why Congress should amend the Bankruptcy Code and allow honest debtors to discharge their student loans in bankruptcy like any other nonsecured debt.

References

In re Standish, 628 B.R. 692 (Bankr. D. Kan. 2020).



Sunday, July 11, 2021

"Can too many brainy people be a dangerous thing?" Overproduction of graduate degrees may lead to political instability

 Peter Turchin wrote an essay for Nature magazine, in which he predicted growing instability for the United States and Europe. 

Why? Turchin thinks western society has produced too many graduates with advanced degrees. This "overproduction of elites" has created a large class of unhappy people--many of whom are drifting into radical politics.

According to Turchin's thesis (summarized in The Economist), the various would-be elites struggle against each other for wealth and prestige. The conflict becomes particularly intense during a time of growing inequality. 

"The rewards for being at the top are then especially lucrative, both in terms of earning power and political influence, and those who miss out feel the loss more keenly."

Without question, American universities have produced too many people with advanced degrees--degrees that often do not bring enhanced status or wealth. The schools have turned out too many lawyers, too many MBA graduates, too many people with advanced soft-skill degrees in ethnic studies, gender studies, and diversity.

Most people who get these advanced degrees take out student loans to finance their studies--often loans in six figures. As the Wall Street Journal reported a few days ago, a high percentage of people with master's degrees from such elite institutions as Harvard and Columbia don't find jobs that pay enough for them to service their student loan debt.

As our universities create more and more would-be elites, their graduates become angrier and angrier. "Articulate, educated people rebel, producing a scramble for political and economic power."

I think Professor Turchin has analyzed our present malaise quite perceptively. Millions of Americans are living in a condition of barely contained rage.

But, in my view, these would-be elites have not yet focused their anger in the right direction. All those millions of people who took out massive student loans in the hope of improving their social and economic status should be angry at the universities that fleeced them and the politicians that refuse to reform the federal student loan program.

Unfortunately, our colleges have not given their graduates the problem-solving and analytical skills they need to figure out who screwed them over. Nevertheless, I think the rubes will eventually figure it out; when they do, there will be hell to pay.


Yucking it up at Harvard: Such fun to fleece the rubes!








Saturday, July 10, 2021

The Ivy League's Biggest Scam: Expensive Graduate Degrees That Don't Pay Off

 If you are thinking about enrolling in a pricey Ivy League graduate program, read a recent Wall Street Journal article titled "'Financially Hobbled for Life': The Elite Master's Degrees That Don't Pay Off." 

Reporters Melissa Korn and Andrea Fuller report on a WSJ analysis of student debt owed by people who graduated from prestigious schools like Harvard, NYU, and Columbia. Two years after getting degrees from these toney joints, a high percentage of elite-school graduates were not working in jobs that would allow them to pay off their student loans.

For example, a New Jersey guy got a master's degree in Fine Arts in film at Columbia. Two years after graduating, he owes nearly $300,000 in student loans (including interest) and earns between $30,000 and $60,000 a year. Will this man ever pay off his student loans? Not bloody likely.

And this is not an isolated example. The WSJ reported that the median student-loan debt for Columbia's film program graduates was $171,000 in 2017-2018.  How many of those people are earning $171,000 in their current jobs? How many will ever pay off their student loans?

What attracts bright people to expensive Ivy League graduate programs? As one Columbia film graduate said, "We were told by the establishment our whole lives this was the way to jump social classes."

But we were told wrong. I got an essentially useless doctorate from Harvard, thinking the degree would erase Oklahoma from my vita. But it didn't. I still have range dust in my diction, and I still see the world much like my hard-scrabble ancestors saw it--the ones who lived through the Dust Bowl.

The WSJ analysis focuses mainly on Columbia University's film program and its graduate program in theatre arts. But there are other unindicted co-conspirators.  

Harvard's master of education degree, for example, is a scam.   You can get a master's degree from Harvard Graduate School of Education in only nine months, but the total cost of that experience is $85,000 (including room and board). 

I picked up a Harvard master's degree as I went through Harvard's doctoral program. I was proud of it at the time. I went to the graduation ceremony (very posh) and even framed the diploma.

But I no longer put that degree on my vita, and I lost the diploma somewhere along the way.  Thinking back on that experience, I wonder at my naivete.  I sat in packed classrooms containing as many as 200 students, and most of my teachers were nontenured instructors.  

One of my Harvard professors enjoyed rock-star status while I was there. She gave one two-hour lecture a week for a four-hour course. Her graduate students taught the other two hours.  Office hours? If you wanted to see this professor, you had to submit a written petition to one of her graduate students explaining why your appointment was worth this professor's precious time.

I say again. If you are thinking about taking out loans to get an Ivy League master's degree, read the WSJ article first.  If you still want to pursue that path, consult a good therapist--because you are delusional.

If you are from Oklahoma, a Harvard degree won't take the range dust out of your diction.


Thursday, July 8, 2021

12-foot long python escapes into a Baton Rouge shopping mall: What the hell are we doing?

 A 12-foot long python escaped from the Blue Zoo Aquarium in Baton Rouge a few days ago, and the Fire Department began looking for it in the Mall of Louisiana.

But do not worry. A Blue Zoo spokesperson said that Cara (the snake's name) is "a very sweet snake." Apparently, it poses no threat to my grandchildren.

I did not know that Baton Rouge's biggest shopping mall even had a zoo. But it does. It is a private enterprise that charges daily admission and (until recently at least) offered a snake show three times a week.

It is illegal for people to own giant, exotic snakes in Louisiana unless they have a government permit.  I quote the statute:

The importation or private possession of constrictor snakes in excess of eight feet long . .  obtained in any manner, shall be only by permit issued by the Department of Wildlife and Fisheries except for animals kept by animal sanctuaries, zoos, aquariums, wildlife research centers, scientific organizations, and medical research facilities . . . .

I feel sure the Blue Zoo is legally entitled to possess a snake and was not breaking the law by keeping it in its shopping mall location. 

But what the hell are we doing? 

The Florida Everglades are infested with pythons because people once owned them as pets. Those snakes either escaped or were set free by owners who got bored with them.

As far as anyone knows, there are no pythons in South Louisiana, although the climate is hospitable to them. The Blue Zoon Aquarium is not far from Bluebonnet Bayou, where native snakes thrive. I'm sure Care would feel at home there.

Our world is dangerous enough without running unnecessary risks that can make it more dangerous. We will not be made safer by doing things we shouldn't be doing just to make a buck.

The Blue Zoo people are sorry Cara slithered away. "This is like we lost our child," a spokeswoman lamented.

Nevertheless, Cara is no less dangerous because it has a cute name. You can name an alligator Tiffany, and the son-of-a-bitch will still kill you.

Postscript: Searchers found Cara this morning. The snake was in a crawlspace inside the shopping mall. 

"A very sweet snake"


Wednesday, July 7, 2021

Want to be a College Professor? Some Things to Consider

So you want to be a college professor. 

You enjoy writing, research, and teaching. You want to live in a world of ideas. Why not academia?

It may seem like a nice life. Most professors have almost complete control of their time. They are required to teach their classes and hold office hours, but you may be able to do that work remotely.

Colleges have no dress codes, so you can show up on campus dressed in "business casual," a jogging outfit, or even your pajamas.  The pay is not great, but the benefits may be pretty good: health insurance and a decent retirement plan.

But before you pursue an academic career, ask yourself these questions:

What are the opportunity costs?

Almost all professors have advanced degrees, and it can take a long time to get your doctorate. When I was at Harvard, Professor John Willett told my cohort that the median time for completion of our doctoral program was seven years.

Seven years! Seven years of being out of the workforce! Seven years living off of student loans! Seven years hanging out in the squalid town of Cambridge, Massachusetts!

I will be forever grateful to Professor Willett for his warning. I managed to get my doctorate in four years and be back in the workforce after three and a half years. 

But my starting salary as a professor was one-third what I made practicing law. My opportunity costs were high.

What will you teach?

It is a tight job market for academics, especially in social sciences, education, and the liberal arts. You may write your doctoral dissertation on Balkan nationalism during the Habsburg era and discover that you can't get a job.

On the other hand, the job market is better in business schools and the hard sciences.  And the colleges need more and more administrators--especially in the fields of student services and diversity.

Don't pursue an advanced degree in a field with dismal job prospects. You will end up taking out student loans that you can't pay back.

Where will you teach?

When you are out on the job market, consider where you want to live. Do you want to work at a major research university in a big city--somewhere like the University of Texas or the University of Chicago? Do you have the chops for that?

Or does a small liberal arts college in rural New England look more appealing? 

When making that decision, be aware that the small, liberal arts colleges are under severe stress due to declining enrollments and dwindling revenues. Many will close in the next few years. Don't start your career at an institution that is on the verge of shutting down.  That misstep will be difficult to recover from.

Also, look closely into an institution's benefits plan before taking a job. My first job was at Louisiana State University, which has one of the worst retirement programs in the United States. And Louisiana public employees do not participate in Social Security.

If you make your career in Louisiana, you will be a lot poorer when you retire than if you retire from a Texas or a California university. That may not mean much to you when you are young, but it will mean a lot to you when you are 70.

Conclusion

After reading this, you might conclude that I regret my decision to become a university professor. Actually, I don't. Practicing law--my former profession--was a lot more challenging than teaching, but it was stressful. Being a professor is not stressful--especially if you don't take your job too seriously.

I met a wonderful woman in Louisiana, married into a terrific family, and emersed myself in the riches of South Louisiana culture--its music, its cuisine, and even its 100-proof Catholicism. I've had a good life.

But if you decide to be a college professor, go forward with your eyes open.  It can be a more difficult life choice than you anticipated.

So you want a job like this guy has?


You can now follow my blog on follow.it: Thanks to my faithful readers

Many of my readers follow my blog on FeedBurner, but that service is being eliminated this month.  I am now signed up with follow.it, an alternative to Feedburner.  If you would like to know more about this service, here is the link: https://follow.it 

I generally post about once or twice a week, and if you are a FeedBurner subscriber, you've already been switched to follow.itMy new format also has an easy-to-see and easy-to-access button at the top of my blog page, which you can use to become a subscriber.

I have been writing on the student-loan crisis for more than 20 years. I have been blogging about it on condemnedtodebt.org for about 10 years. Over the years, I've posted more than 850 essays, and so far, only one person has threatened to kill me. (That turned out to be a misunderstanding).

Unfortunately, the federal student loan program has not been reformed in any substantive way since it was created in 1965.  As I have tirelessly argued, Bankruptcy relief is the only straightforward remedy for the abuse; and that reform is not on the political horizon.

I have recently begun shifting my focus to giving practical advice about how to avoid falling into the student-loan trap. Once students have crossed the line into excessive student debt, they become like saber-toothed tigers who stumble into the La Brea tar pits.  They can never get out. 



Tuesday, July 6, 2021

U.S. Army abandons Bagram Airfield at night--doesn't tell local commander: Good luck, guys! Don't forget to write!

 Afghanistan soldiers guarding Bagram Airfield woke up Tuesday morning to discover that the U.S. Army had sneaked out in the night without telling its ally.  

But the Army left some going-away gifts to soften the blow: several hundred armored vehicles, small arms, and tons of ammunition.

Good luck, guys! Don't forget to write!

Retired General Jack King, a television news analyst, said the Americans made a mistake. We should have left enough troops to support the Afghan army--particularly air support. Otherwise, the Taliban--America's sworn enemy--will retake the county in a matter of weeks or months.

And the Taliban will retaliate against the local people who worked for the United States as translators, security guards, and informants.  Those people will have to leave their native country or be killed.

King is being proven right. Aljazeera News reports that the Taliban now controls about a third of the country, and Afghan soldiers are fleeing across the border into the old Soviet-era Asian republics.

 Remember those hapless Vietnamese people scrambling onto retreating American helicopters? Yes, we've seen this movie before.

On the other hand, America's twenty-year war in Afghanistan--like a bad marriage--had to end sometime.  The British were in Afghanistan in the nineteenth century and got their clock cleaned. If you want to read a fictional account of that disaster, check out George McDonald Fraser's humorous novel Flashman and the Great Game

Then the Russians invaded Afghanistan and got their Slavic butts kicked.  Wanna see a movie about that? Watch Charlie Wilson's War, starring Tom Hanks, Julia Roberts, and Amy Adams.

Would America have been better off spending trillions of dollars on infrastructure rather than blowing it in Asia? What if we had built a high-speed train system like the Europeans or stabilized our eroding coastline instead of hauling gasoline into Afghanistan over the Khyber Pass?

But I do not claim to be a foreign-policy expert. Maybe our government did the right thing by invading Afghanistan after 9/11. I simply don't know.

When I face a philosophical quandary, I often consult the archives of country music, which ponders the cosmic issues. The Afghan army may be listening to Willy Nelson this morning as it tours the abandoned American military bases:

[T]he last thing I needed
The first thing this morning
Was to have you walk out on me

But Willie knew the end was coming when his girlfriend stayed out all night and came home drunk. And the Afghanis surely knew the U.S. would be feckless in the end.

But America better not pull out on Israel the way it pulled out on Afghanistan.  Because if we do, the consequences will be dire not just for the Israelis but for our children and grandchildren.





Sunday, July 4, 2021

Is that a Glock in your pocket or are you just glad to be in Massachusetts? Armed "Moorish Americans" run out of gas on I-95

 Massachusetts police arrested eleven armed men on Interstate 95 over the Fourth of July weekend. A spokesperson for the arrestees said group members are "Moorish Americans,"  who were peaceably headed for Maine to do some training. 

And why not? 

Unfortunately, these Moorish Americans had the extreme bad luck of running out of gas in Massachusetts, which has stringent gun laws.

So--who are these guys? 

Associated Press tells us someone posted a video on 1-95, which identified the group as Rise of the Moors (ROM). ROM is headquartered in nearby Rhode Island and has a website explaining itself as a group that celebrates Moorish contributions to human progress:

Because of Moorish innovation and science came algebra, arithmetic, compasses and tools of navigation, astronomy, cosmology; our mastery of pens and printing; advances in medicine and the understanding of how disease spreads and how it can be healed through plants and other medicinal herbs.

But they also seem to be associated with what the Anti-Defamation League [ADL]calls the "Moorish Movement," which ADL identifies as "[a]n Afro-centric offshoot of the sovereign citizen movement that emerged in the mid-1990s. . . " 

According to the ADL:

Moorish sovereign citizens often claim to have special rights because of their “Moorish” status or because they are “indigenous inhabitants” of North America. In recent years, the Moorish movement has grown considerably, making the African-American community a surprising growth area for a movement with extreme right-wing origins

I checked out the ROM website, and it all seems benign to me. 

I feel sorry for the ROM guys, and I hope the Massholes turn them loose so they can celebrate the Fourth of July weekend in Maine--perhaps munching on hotdogs and shooting off some fireworks. 

And if ROM is, in fact, a "sovereign nation" group, I further hope the Commonwealth of Massachusetts treats all such groups alike, regardless of race. Although the ROM members happen to be Black, other sovereign nation groups are Native American or White. 

In my opinion, all these organizations are mostly made up of people who hold idealistic political views, but they are not dangerous. Thus, the Massachusetts police should not have confronted them with armored vehicles, as AP reported.

Incidentally, Wikidictionary identifies Masshole as "a contemptible or obnoxious person from Massachusetts. 

Rise of the Moors folks look like friendly people. (Photo credit: ROM website)




 

 

Friday, July 2, 2021

40-year home mortgages, 9-year car notes, and 25-year student-loan programs: This will end badly

Interest rates, as the tv hucksters constantly remind us, are near historic lows. So now is an excellent time to refinance your mortgage--maybe take out some equity to upgrade the bathrooms, take a little vacation, or purchase a home entertainment center.

Or maybe it's time to buy a new vehicle--perhaps a premium class crew-cab pickup, an Audi, or a BMW.  At today's interest rates, the monthly car note won't be that high--especially if you finance your new set of wheels over six, seven, eight, or even nine years!

How about those student loans? You don't make enough money to pay off your college debt under a standard 10-year repayment plan because you have other bills to pay.  But that's no problem. You can sign up for an income-based repayment plan that will stretch out your monthly payments over 25 years.

Twenty-five years is a long time, but maybe the federal government will forgive all that student debt--including yours. After all, what's $2 trillion among friends?

So is everybody happy with their new homes, fancy cars, and impressive college credentials? If so, enjoy the feeling because it won't last much longer.

Inflation is on the move, and who believes it is transitory as our Treasury Secretary tries to reassure us. Wages will probably rise to cover inflation for some employees but not for others. And if you a retired person on a fixed income, inflation will soon erode your standard of living.

That vacation cruise to Greece that you've always dreamed of? Maybe you'll just go to Oklahoma's Boiling Springs State Park this year--a lot cheaper.

Of course, you can't fly to Boiling Spings because airfares are way up, and car rental rates are just short of obscene.  So you will have to drive.  But you should do it soon because gas prices are on the rise. Oil is already back up to $75 a barrel.

So maybe you'll skip a vacation this year and enjoy your backyard--grill a few steaks or hamburgers. But that's becoming more expensive too. A premium steak at the grocery store can cost you $25 a pound.  But hot dogs are cheaper--especially the ones that aren't all beef.

There's nothing the people living in flyover country or modest urban neighborhoods can do about the scary shifts in the national economy.  We will have to tighten our belts, pay off our debts, and cut back on our lifestyles.  

It won't be fun, but we will probably all be OK if we don't do something stupid like refinance our home over 40 years, buy a car on a 9-year note, or borrow $100,000 to go to college.  But most of us are too smart to do something reckless like that.   Right?


You will own it outright in only 9 years!


 

40-year home mortgages: Is that a good idea?

 The chickens have come home to roost.  The federal government allowed millions of homeowners to suspend payments on their mortgages during the COVID crisis. Now that moratorium is ending, and all those missed payments are now due.

Many American homeowners--maybe most of them--cannot pay a dozen mortgage payments at once. I know I could not.

So what will the feds do? According to a Houston Chronicle story, the government is thinking about allowing mortgagees to refinance their home loans over 40 years. Interest rates are low right now, and monthly payments on a 40-year mortgage would be less than payments on a 30-year or 20-year mortgage.

Is that a good idea?

No, it is not. Most people who refinance their homes over 40 years will never own their residences. Essentially, they will become renters. 

Of course, many people will sell their houses long before they pay off their mortgages. If they are lucky, the value of their home will have gone up, and they can pay off their mortgage and have enough remaining equity to buy another home.

But here is the problem.  Home prices are going up right now because of low interest rates--only about 3 percent. Also, some Americans are worried about inflation, and they are scrambling to put their money into hard assets--a second home perhaps.

But interest rates won't stay low forever, and the housing market will eventually cool. Everybody knows that.

Thus, a couple who finance their home for 40 years at 3 percent may be forced to sell it someday when mortgage rates are higher--say 6 percent. Buyers who take out mortgages at the higher rate will be making bigger monthly payments on their home purchase--even if the cost of the house does not go up.

So what's going to happen? Many people who finance their homes over 40 years at 3 percent interest will not be able to sell their homes for enough money to pay off their mortgages. 

In the years to come, hundreds of thousands of homeowners who can't sell their homes after interest rates spike upward will simply walk away from them.

But hey, what do I know? I'm just a retired professor who lives in the very heart of flyover country.

But I have seen this movie. I bought my first home in Anchorage, Alaska, in 1981.  Conventional mortgage rates were 11 percent at that time, but the State of Alaska subsidized home loans to get the interest rates down to 9 percent.  

In a further act of generosity, Alaska subsidized low-priced homes--homes selling for $80,000 or less--at 6 percent. The required down payment was low--only 5 percent. Such a deal! Developers put condos and even mobile homes on the market that cost--guess what? $79,900.

Unfortunately, the Alaska economy went south when oil prices slid to $13 a barrel.  People were thrown out of work, and home values plummeted.

Many Alaska homeowners could not sell their property for enough to pay off their mortgages.  So what did they do?

They mailed their house keys back to the bank and simply walked away.  

That, dear readers, is what will happen all over the United States if people start financing their homes at artificially low-interest rates over 40 years.




Thursday, July 1, 2021

Bentley University launches a bachelor's degree in Diversity, Equity and Inclusion: Is this program for you?

 Bentley University, a private university in the Boston area, offers a new major this fall: Diversity Equity and Inclusion (DEI). Gary David, a sociology professor, was part of the design team for the new program. 

According to the Chronicle of Higher Education, David said that he:

wanted a major that moved DEI away from compliance--where institutions, companies, and nonprofits feel they need to or are required to meet certain diversity standards--and toward opportunity, with graduates working on ideas and programs to improve society with diversity, equity and inclusion at top of mind.

So--is Bentley's DEI program a good major for you? Before you decide, ask yourself these questions:

First, are there entry-level jobs for people who get a DEI degree from Bentley? 

The answer to that question is yes. Diversity is on the mind of every college president, whether that person leads an Ivy League institution or a small liberal arts school.  Nearly all major universities have a DEI officer at the senior executive level (vice president or associate provost). Schools are also hiring DEI-trained people to work in student services, student housing, and Title IX offices.  

UC Berkely, for example, spends $25 million a year on equity and inclusion and has 400 employees running programs to enhance diversity across the university.  

Second, how much will it cost to get a DUI degree from Bentley?  

Tuition, books, fees, room, and board at Bentley total approximately $76,000 per academic year--or about $300,000 for a four-year degree.  That's pretty damn expensive. Of course, you may qualify for a scholarship or tuition reduction of some sort, which will reduce your costs. 

Still, every student who does not come from a wealthy family will probably have to take out student loans to get a DUI degree from Bentley. That means Bentley graduates will enter the job market with a lot of debt.

Third, is DEI the career for you?

Finally, students should consider whether DEI is the right career choice. On the one hand, there are jobs in this field--from entry-level to executive positions.

On the other hand, once a person begins a career in DEI, it may be hard to switch to another field. Someone who wants to become a professor, for example, will need more than a DUI degree from Bentley to get a faculty job. 

Also, everyone surely understands that People of Color (POC) are more attractive candidates for DEI jobs than--for example--a white male who hails from rural West Texas.  I feel sure that a survey of the senior DEI executives at major U.S. universities will find many more POCs than non-POCs.

In my view, a person wishing to make a career in DEI would probably be better off skipping Bentley's DEI program (with its $300,000 price tag), getting an undergraduate degree in a mainstream major, and then going to law school.  



Christopher Manning, USC's first Chief Inclusion and Diversity Officer