Monday, May 23, 2022

Kool-Aid and Baloney Sandwiches: The Days of Cheap Road Trips Are Over

In Coat of Many Colors, Dolly Parton sang that you are only poor if you choose to be. That was my parents' philosophy when I was a kid. We ain't poor; we're middle class.

Perhaps to prove that we were climbing upward on America's economic ladder, my parents took us kids to Disney Land in 1958. My dad bought a Chevy station wagon without air conditioning, and we were on our way. 

We headed west on Highway 66--America's Mother Road. We stopped for lunch at rest stops along the way, where my mom would slap a slice of baloney between two pieces of Wonder Bread. That was lunch--along with Koolaid, which Mom mixed herself.

In those days, people couldn't book hotel rooms online like we can today. On the road west, my dad would drive the family from one motel to another every evening until we found one with the right price.  I imagine that was a little stressful for my parents.

As I said, our Chevy wasn't air-conditioned, but my dad borrowed a tube-shaped air conditioner that fitted on a passenger window.  Didn't work too well.  

Dad also borrowed a canvas waterbag that pictured a Native American in a war bonnet. He hung the bag on the car's front grille. Dad would turn the hose on the waterbag every time we stopped for gas. 

Of course, the water on the waterbag evaporated quickly under the hot Southwestern sun. Theoretically, this evaporation cooled the water inside the waterbag. Theoretically.

On the way home, our car broke down in Santa Rosa, New Mexico, and we had to spend a night there. The repair cost for fixing the transmission was astronomical--one hundred bucks!

Looking back, I now realize that it wasn't easy for my family to drive to California in 1958. Still, we saw everything a middle-class American family would want to see: the Grand Canyon, the Petrified Forest, Disney Land, Sea World, Knott's Berry Farm, and the friggin' Pacific Ocean.

Oh, those were the Good Old Days! 

Today most families would head for Disney World in Florida--not Disney Land in California. A middle-class family would drive to the resort by car and stay in a respectable chain hotel.  The family would likely eat their meals in restaurants rather than make their own sandwiches at roadside parks. 

But maybe not. Inflation has gone up so fast and so high that many people who consider themselves middle-class may be priced out of a trip to Disney World.

First, the cost of four-day theme-park tickets for a family of four is about two grand.  Five nights in one of Disney's moderate-priced hotels will cost $1600 for a standard room with two queen-size beds. Meals for six days will cost a family of four about $1600 (according to Urban Tastebuds).

So, we're talking five grand plus the cost of driving to the world's grandest theme park.  Gas is projected to hit $6.00 a gallon by summer's end.

And souvenirs--don't forget the cost of souvenirs. Mickey and Minnie don't come cheap.

Altogether, a one-week vacation to Disney World will cost a family of four about $6,000. 

You can't handle that? Don't worry. As Dolly Parton reminded us, we're only poor if we choose to be.  

So if you can't afford a summer vacation for your family this year, just tell yourself you're still in the middle class. And keep telling yourself that until you believe it. 

Who needs bottled water?







Tuesday, May 17, 2022

Walking on the Sunny Side of the Street: 53 percent of the nation's infants receive federal food aid

 Is everybody having fun? According to the feds, the economy is booming: millions of new jobs and rising wages.  The defense industry and its stockholders are getting rich from the Ukraine War, and college students are likely to get all their student-loan debt forgiven. Ain't that great!

In Baton Rouge, where I live, thousands of people got Payroll Protection money. Many of these folks are remodeling their houses or shopping for vacation homes. The restaurants are full of people eating fried oysters and sipping tropical drinks. The roads are full of luxury cars. There's never been a better time to be alive!

But maybe not. A lot of Americans are hurting; we just don't see them. The U.S. Department of Agriculture is feeding millions of low-income families. USDA's own website says it provides supplemental nutrition to 53 percent of all the nation's infants. 

In Houston, where housing prices are going through the roof, and people are waiting in line to buy Audis, the Houston Foodbank is feeding 800,000 people a year. That's a lot of people who need supplemental food in an economy of rising wages and a robust job market. 

And how about the millions of retired people who live on fixed incomes? Television ads show senior Americans gamboling on tropical beaches with their grandkids, playing golf with their buddies, or traveling to beautiful and exotic places,

But that is not a reality for most retired Americans who see their savings depleted. The average Social Security check is $1500 a month, but lean ground meat is pushing six bucks a pound. And by the end of the year, we all know, hamburger meat will cost even more. 

In other words, the inflation we are experiencing is not fuckin' transitory.

We now live in two Americas. Some Americans have a secure seat on the gravy train, and all of our congressional and corporate leaders are rich.

But the un-rich are worried about the future. We know that inflation is not under control, and we know it will worsen. More than half of American families don't even have $1,000 set aside for emergencies.

In my view, Americans will continue to believe that the economy is fine for another year or so. The government continues to print billions of dollars of new money every month, and no one worries about the $30 trillion national debt.

But we are all living on the brink of a financial collapse, and most of us know it--at least on a subconscious level.

And when food becomes scarce and increasingly expensive, we will have to face reality and change our ways.

People will have to stop paying dog walkers and walk their own dogs. Maybe pop will cancel his lawn service and start mowing the grass again. Many of us will stop going out to dinner and start looking for Spam recipes.

And God forbid, some of us will have to wean ourselves off craft beer and go back to drinking cheaper brews.  When I buy my first case of Old Milwaukee,  I will know the end is near.




Thursday, May 5, 2022

Will Americans Starve This Year? Probably Not, But Lets Plant Gardens Anyway

 A few days ago, Chris Martenson posted a blog essay titled "Will You Starve to Death This Year?" Martenson pointed out that escalating prices for natural gas have led to a global rise in fertilizer costs.  The price of diesel, which runs the world's farm tractors, has also shot upward dramatically, contributing to a sharp increase in food prices. A ten percent decline in global food production, Martenson argued, would be catastrophic.

Other people are beginning to worry about food. On television, I'm now beginning to see ads from emergency-food-supply companies--the outfits that sell food packets that can be safely stored for up to 25 years.  Is it time to stock up on canned goods?

I don't think Americans are in danger of starving to death--in the short term, at least. We live in a great country blessed with fertile soil, a temperate climate, and the advanced technology we need to feed a nation of 330 million people. 

In addition, the U.S. has a pretty good safety net to make sure people don't go hungry. The federal government's SNAP program (food coupons) is readily available to low-income families. Thousands of churches and nonprofit agencies deliver food to people who need it--including elderly shut-ins.

The American consumer is paying more for food, and we can't always get the food we prefer due to kinks in the supply chain. But nobody will die of hunger in the U.S., at least not in the near-term future.

Nevertheless, Americans should not take our food for granted. I've been reading about famines, and history tells us that people can starve to death even in countries that export food.

Several million people starved to death during Ireland's Potato Famine of 1845-1849, even though the British government exported food out of Ireland. Almost four million Ukrainians died of hunger in 1932-1933 due to Stalin's order to seize food stocks from peasant farmers, even while the Soviets were exporting food to Europe.

Anne Applebaum, who wrote a masterful history of the Ukrainian famine, described how people react when they don't get enough to eat. First, hungry people respond with anger and violence--especially if they have access to firearms. Eventually, however, starving people fall into lethargic apathy and quietly die.

In The Great Hunger, the best treatment of the Irish potato famine, Cecil Woodham-Smith explained how mass starvation always leads to epidemics. Disease invariably follows when the living become too weak to bury the dead.

I am also convinced from my reading that mass starvation inevitably leads to cannabilism, even in advanced societies. The starving people of Leningrad began eating the dead during the Nazi's 900-day siege of the city, as did the Ukrainians during the Holodomor. During World War II, German prisoners of war descended into cannibalism when the Russians penned them up and allowed them to starve to death. 

Americans have been blessed by abundant food for so long that we've forgotten its importance. We can eat whatever we want--from Russian caviar to Chicken McNuggets, and the grocery stores are always open.

Nevertheless, I think it is time for us to think about food.  We still have plenty to eat, but the grocery-store shelves no longer have everything we desire. And food prices have gone up alarmingly over the last few months.

Martenson concluded his sobering essay by urging his readers to plant gardens. I agree. I have been gardening for about ten years, and I now grow both a spring and a fall garden.

My little vegetable garden can't sustain my family for any length of time, but I am learning how to tend my crops, how to spot and treat diseases, and when to fertilize and harvest. 

Just as importantly, raising my own food is fulfilling on a spiritual level.  Planting a seed and seeing it grow into a bean plant that twines around a trellis and produces something I can eat is a miracle. And nothing tastes better than a home-grown tomato picked from my own garden. 

As Guy Clark observed in a famous song, "What would life be without homegrown tomatoes?"  Indeed it would not be nearly so sweet.





Wednesday, April 27, 2022

Why Does the Federal Government Subsidize Foreign Medical Schools?

 As Reported by Steve Rhode in Get Out of Debt Guy, the Federal Trade Commission recently filed an action against St. James School of Medicine, located in the Caribbean. According to the FTC, St. James "deceptively marketed the school's medical license exam test pass rate and residency matches to lure prospective students."

The FTC seeks a $1.2 million judgment against St. James. This judgment, the FTC asserts, will go toward student refunds and cancellation of student debt for aspiring doctors who attended St. James over the past five years.

You may wonder why the FTC asserts jurisdiction over a medical school operating outside the United States. As it turns out, this Caribbean medical school receives federal student-loan money. St. James is hardly in a position to argue that its recruiting activities are none of the FTC's business.

St. James is just one of more than twenty foreign medical schools that receive federal student-loan money. Five of these schools are in the Caribbean, but medical schools in Australia, Canada, Ireland, Israel, and Poland also receive revenue from federal student loans.

Going to a foreign medical school is expensive. According to a U.S. government website, the median cost of completing a medical degree at  St. George University's medical school in Grenada is $385,000.

So why not get your medical degree from Ross University in Barbados? The median cost is only $348,000--a bargain!

Why is our federal government subsidizing foreign medical schools? Are there not enough American medical schools to meet the nation's health needs?

If not, why don't we build more medical schools in our own country instead of subsiding medical training in the Caribbean?

Moreover, it can be dangerous for an American to get a foreign medical degree. Why? Because there are more M.D. graduates in the United States than residency programs to train them. 

As the New York Times reported recently, more than half of the American residency programs are "unfriendly" toward graduates of foreign medical schools. In fact, only 60 percent of international medical-school graduates get a residency in the United States compared to 94 percent of doctors who graduated from American medical schools.

Most Caribbean medical schools are for-profit institutions, often owned by American investors. Many have very lax admission standards. The admission rate at some Caribbean medical schools is 10 times higher than at American medical programs.

What are the takeaways? First, Americans should be wary of attending a foreign medical school because they run a high risk of not being selected for a residency program that they will need to get a medical license.

Second, Congress should stop subsidizing foreign medical schools, which are horribly expensive and leave many of their graduates with no job prospects.

But the for-profit industry has powerful lobbyists, and Congress is unlikely to act. At the very least, then, Congress should reform the Bankruptcy Code so that jobless graduates of foreign medical schools can discharge their enormous student debt in bankruptcy. 





Tuesday, April 26, 2022

California Coast University v Aleckna: College liable for student debtor's attorneys' fees after it refused to send her a complete transcript

 Jaime Aleckna was a student at California Coast University until 2009, and she met all the academic requirements for graduating. However, she still owed CCU $6215 when she filed for bankruptcy in 2012. Under the Bankruptcy Code, her bankruptcy petition triggered an automatic stay on all collection actions.

CCU filed an adversary complaint against Ms. Aleckna, arguing that her student loans were non-dischargeable in bankruptcy. Then, while the bankruptcy proceedings were pending, Aleckna asked CCU to send her college transcript.

CCU sent Aleckna an incomplete transcript that did not note her graduation date. The university argued that she had not technically graduated because CCU had put a "financial hold' on her account.

Aleckna then filed a counterclaim against CCU in the bankruptcy court, charging the university with violating the automatic stay provision when it failed to send her a transcript that included her graduation date. She argued that CCU had unlawfully attempted to collect on a  pre-petition debt by withholding her full transcript.  Aleckna asked the bankruptcy court to award her damages and attorneys' fees. 

CCU filed a motion to dismiss Aleckna's counterclaim, which the bankruptcy court denied in 2013. The university then withdrew its adversary complaint against Aleckna. According to the Third Circuit Court of Appeals, CCU's withdrawal "was essentially a confession that Aleckna's debt was dischargeable under the Bankruptcy Code . . . ."

CCU and Aleckna ultimately went to trial on her claim that the university had willfully violated the automatic stay provision and was liable for her damages and attorney fees. CCU lost the case in 2016 and faced a potential judgment for Aleckna's fees.

CCU appealed to the Third Circuit Court of Appeals, where it argued that it had complied with any legal obligation to give Aleckna her transcript when it sent her a  transcript that did not include her graduation date.

A panel of Third Circuit judges didn't buy CCU's arguments. In a 2021 decision, the panel agreed with the bankruptcy court that "'a final transcript, with no graduation date, [is] akin to a letter of reference with no signature,' and was essentially useless."

The Third Circuit also agreed with the bankruptcy court that "providing an incomplete transcript is tantamount to providing no transcript at all."  The Third Circuit affirmed the lower court ruling that CCU's action was a willful violation of the automatic stay provision, making the university liable for Aleckna's damages and attorney's fees. 

The end result? CCU's foray into a Pennsylvania bankruptcy court was costly.  In a failed effort to recover $6,215 from Aleckna, it wound up being liable for her attorney fees--which the Third Circuit estimated to be around $100,000! And, of course, CCU's own attorney fees were undoubtedly substantial.

Perhaps a lesson can be gleaned from California Coast University v. Aleckna. A college would be wiser to write off a small debt owed by a bankrupt former student rather than litigate in the federal courts for eight years.

Why? Because, as philosopher Forrest Gump might have put it, bankruptcy court "is like a box of chocolates. You never know what you're gonna get."

References

California Coast University v. Aleckna, 494 B.R. 647 (Bankr. M.D. Pa. 2013).

California Coast University v. Aleckna, Adversary No. 5:12–ap–00247–RNO, 2014 WL 4100702 (Bankr. M.D. Pa. 2014).

California Coast University v. Aleckna, 543 B.R. 717 (Bankr. M.D. Pa. 2016).

California Coast University v. Aleckna, 3:16-cv-00158, 2019 WL 4072405 (M.D. Pa. 2019).

 California Coast University Aleckna, 13 F.4th 337 (3d Cir. 2021).






Friday, April 15, 2022

14,000 Law Firms Received Payroll Protection Money: Why Not Forgive All Student-Loan Debt?

 Our government spent trillions of dollars responding to COVID, and just about everybody got a little something from Uncle Sam.  Sometimes I think my wife and I are the only people in the United States who didn't get a COVID relief check.

For example, 14,000 law firms got Payroll Protection money, ostensibly to help them avoid laying off lawyers during the COVID crisis.  Eleven firms got $10 million each, but all 14,000 firms got at least $150,000.

Prisoners also got some COVID cash. More than a half-million incarcerated individuals got three-quarters of a billion dollars in stimulus checks.

Even drinking establishments managed to get their noses in the trough. Hooters of Louisiana, a "full-service restaurant," got $156,000.

In short, the U.S. government has been spewing out COVID cash like a drunken sailor on shore leave. So why not forgive all student-loan debt--all $1.7 trillion?

After all, student-loan forgiveness makes more sense than handing out Payroll Protection money to professional athletes and politicians.

Wiping out all student-loan debt would benefit 45 million student borrowers, giving them extra cash to put into the American economy. That's got to be a good thing.

Moreover, many student debtors took out loans to get college degrees that are worthless to them. Maybe they attended one of the dodgy for-profit colleges where they paid too much for a mediocre educational experience. Perhaps they borrowed $100,000 to get a gender studies degree from an elite college--a degree that did not lead to a good job.

So--you can put me down as a supporter of total student-loan forgiveness.  That's right; let's wipe out everybody's federal student-loan debt.

But we should recognize the perils of this course of action. First of all, student loans constitute the largest category of federal assets. If those loans disappear from the nation's balance sheet, the government's fiscal situation will look bleaker than it already does.

Secondly, we should recognize the moral hazard of wholesale student-loan forgiveness. People who take out student loans in the future will likely do so with the expectation that the feds will eventually forgive the debt. Thus, they may conclude they can default on their loans with no penalty.

Finally, wiping out all student debt does nothing to pressure colleges to get their costs under control. The higher education industry will continue raising tuition rates, forcing future students to take out more student loans to finance their studies.

In conclusion, I support student-loan forgiveness. Nevertheless, wholesale loan forgiveness will not solve the student-loan crisis. Until higher education cleans up its act and reduces costs, future generations of colleges students will continue getting hammered with unmanageable college-loan debt.

Thanks for the PPP money!






Friday, April 8, 2022

Under Water On Your Student Loans? Don't Count On Your Parents to Bail You Out

 In the 1990s, Wendi LaBorde took out student loans totaling about $75,000, but she could not repay those loans. Over time, interest accrued on the debt. 

In 2010, the Department of Education obtained a judgment against Ms. LaBorde for approximately $395,000--five times what she borrowed.

In 2014, LeBorde received the proceeds from her late mother's life insurance--$485,902, which was enough money to pay off the judgment on her student debt.

LaBorde didn't use the insurance money to pay off her student loans. Instead, she created a trust that named Connie Christine LeBorde, her daughter, the beneficiary. The trust bought a condo in California and then sold the condo and purchased a home in Riverside County, California, for $403,000. 

In 2020, the federal government sued LaBorde, accusing her of making a fraudulent transfer to avoid paying the judgment against her for her unpaid student loans. The feds pointed out that LaBorde's daughter, the trust beneficiary, lived in Arkansas and LaBorde lived in the Riverside County house. 

A federal court agreed with the federal government. Late last month, the court ruled that Laborde's transfer of life insurance money to the trust was fraudulent. It ordered that LaBorde be named the owner of the Riverside County house, making it subject to the government's lien for $437,000--the amount of her unpaid student loans plus accrued interest.

What happens next?  The federal government will enforce its lien on the California home where LaBorde was living. Ultimately, the house will probably be sold, and most of the proceeds will go to Uncle Sam.

Millions of Americans are burdened by college loans they can't repay. Many have given up even trying to pay off their student debt. Meanwhile, interest continues to accrue. It is not uncommon for people to owe three, four, or even five times the amount of their student loans due to penalties and accrued interest.

Undoubtedly, many of these debtors are counting on an inheritance from their parents or life insurance benefits to bail them out. Perhaps they intend to use inheritance money or life insurance proceeds to help prepare for retirement or purchase a modest home.

Unfortunately, as the LaBorde decision demonstrates, the feds can claim life insurance proceeds to satisfy a judgment for unpaid student loans. Moreover, the same logic that applies to life insurance may also apply to inheritances. At least one court has held that a student-loan debtor was not entitled to discharge student loans in bankruptcy because she did not use inheritance money to help pay off her student loans.

In retrospect, Ms. LaBorde's mother would have been wise to have made her granddaughter, Connie Christine LeBorde, the beneficiary of her life insurance policy. Connie could then have used the insurance proceeds to purchase a house and rent it to her mother at a modest price.  Structuring the transaction in that way would have avoided an allegation of fraud.

In my view, the LaBorde decision is unfortunate. I do not believe student-loan defaulters should be deprived of their inheritances or life insurance proceeds for the sole reason that they were unable to repay their student loans.


I want your house!





Wednesday, April 6, 2022

White House Extends Pause on Student-Loan Payments Until the End of August: Will Biden Go the Full Monty?

The White House is extending the pause on student-loan payments until August 31st--an extraordinary development. By the time this pause ends in September, millions of student borrowers will have been relieved from making payments on their student loans for almost two-and-a-half years.

Indeed, as Ron Kline, President Biden's chief of staff, pointed out:

Joe Biden, right now, is the only president in history where no one's paid on their student loans for the entirety of his presidency.  

 What's next? I predict President Biden will announce significant student-debt relief this fall--in time to impact the 2022 midterm elections. 

After all, it would be political madness for the Biden administration to force student borrowers to begin making payments again only weeks before the nation goes to the polls to elect the next Congress.

Sometime in August or September, I think the President will do one of three things:

  • He may reduce each student debtor's loan balance by $10,000, which he promised to do on the campaign trail.
  • President Biden might go the full monty and cancel all student debt, totaling $1.7 trillion.
In my opinion, the President will take the middle course and give college borrowers $50,000 in debt relief. A $10,000 write-off is not big enough to satisfy his base, and wiping out all $1.7 trillion in student debt is too audacious.

But regardless of what President Biden decides to do regarding student-debt relief, here are things the federal government will probably not do:

Congress will not rein in the for-profit collegesThe for-profits' lobbyists and campaign contributions will continue protecting this sleazy racket.  

Congress will not reform or eliminate the Parent PLUS program. Parent PLUS has brought financial ruin to hundreds of thousands of low-income families, but too many colleges depend on Parent PLUS money for Congress to shut down the program.

Congress will not reform the Bankruptcy Code to allow distressed student borrowers to shed their college loans in bankruptcy. 

As I have said for twenty years, the simplest and most equitable way to address the student-loan crisis would be to allow honest but unfortunate college borrowers to discharge their student loans in the bankruptcy courts. But that reform makes too goddamned much sense for Congress to do it.

In short, what we are likely to see in the coming months is massive student-loan debt relief with no reforms whatsoever for the federal student-loan program--the biggest boondoggle in American history.

Will President Biden wipe out all student loan debt?








Wednesday, March 30, 2022

The Pandemic Forbearance on Student Loan Payments Will End Soon: Federal Reserve Bank Expects Default Rates to Rise

In March 2020, the U.S. Department of Education allowed 37 million student-loan borrowers to pause their monthly loan payments due to the COVID pandemic.  DOE extended the payment moratorium several times, allowing all these college borrowers to skip making payments for two years without accruing interest or penalties.

This moratorium gave student debtors much-needed relief during the corona crisis. According to the Wall Street Journal,  borrowers saved almost $200 billion due to DOE's debt holiday. 

But that debt-payment moratorium ends in May unless President Biden extends it. Will all borrowers be financially able to begin making payments again?

Probably not.  The Federal Reserve Bank of New York recently analyzed repayment data from three student-loan programs, including two programs that did not allow student borrowers to skip payments during the pandemic.  It concluded that the default rate for FFEL loans (the program that allowed borrowers to miss payments) will go up when all those 37 million borrowers are required to start making monthly loan payments again in May. 

According to some insiders, President Biden is likely to extend the student-loan payment moratorium yet again, perhaps until after the 2022 midterm elections. Would that be a good thing?

In some ways, yes. The two-year break from making monthly loan payments gave millions of Americans much-needed financial relief. Some probably took advantage of the payment holiday to continue paying down their loans while interest wasn't accruing.  

But I think there may be a downside to DOE's pause on collecting student loans. People have gotten used to having extra money in their pockets, and it will be hard for them to begin writing those monthly checks again.

In some ways, the debt moratorium is like that loan from your brother-in-law. If he doesn't set a firm deadline for getting his money back, you are less inclined to repay the debt. Maybe your brother-in-law will forget all about it.

It would be lovely if the federal government forgave all federal student loans, a scenario millions of student debtors devoutly wish for.

But it will be difficult for our government to write off $1.8 trillion in student debt when that debt makes up about a quarter of all federal assets.

It is easier for everyone to treat the federal student loan program like a brother-in-law loan.  Hey, no hurry about paying it back.

Hey, brother-in-law: About that money you loaned me . . . .



Tuesday, March 22, 2022

Congress & DOE Can't Fix the Student Loan Program: They're Just Making It Up As They Go Along

 Paolo Bacigalupi's apocalyptic novel The Water Knife is a tale about the struggle for water in the desert Southwest. Lucy, one of the novel's lead characters, is an investigative reporter trying to understand the major power players who use the law, violence, and vigilantes to control water for their various constituencies.

At some point, Lucy realizes that none of the big players has a long-range strategy, and she has a revelation: 

They have no idea what they're doing. These are the people who are supposed to be pulling the strings, and they're making it up as they go along.

Suppose you are a college-loan borrower who hopes Congress will reform the federal student-loan program and maybe even forgive all $1.8 trillion in outstanding student debt. In that case, you need to have the same revelation that enlightened Lucy.

All the major players who participate in the massive grift called the federal student loan program are just making it up as they go along. There is no long-range plan. In fact, I don't think Congress or the Department of Education even know for sure how much money has been borrowed.

Reporters Warren Rojas and Camila DeChalus, writing for Business Insider, recently reported that 360 high-ranking congressional staffers owe money on student loans. Almost fifty of those staffers owe more than a quarter-million dollars. More than 250 of them owe up to $100,000. One congressional aide has been paying on student loans for 32 years.

Many of these staffers hope President Biden will cancel all this debt before the November elections, fearing the prospect of a Republican-controlled Congress. They may think the Biden administration has a plan.

But I don't think so. I don't think any of the leading players have a plan.

Four thousand colleges and universities depend on getting regular infusions of federal student-aid money.  They're like drug addicts who live from moment to moment, waiting on their next fix.

The people who run the for-profit colleges are getting rich, and so are their shareholders. The status quo works just fine for them.

The Department of Education bureaucrats are paper shufflers.  Their only goal is to keep shuffling all that paper until they're eligible to retire.

Rojas and DeChalus reported that four dozen student-debt-related bills have been introduced in this session of Congress. But so what? Reform bills have been filed every year for more than a decade, but none of those bills has made it out of committee.

The student-debt strikers hope to put enough pressure on Congress to get significant relief on their massive student loans. I hope they're successful. But I'm not sure the strikers have even gotten Congress's attention.

Let's face it. Congress, DOE, and the universities don't have a long-term plan for solving the student-loan crisis. They're just making it up as they go along. 

Making it up as they go along




Saturday, March 19, 2022

Another Day Older and Deeper in Debt: The Student-Loan Crisis is Getting Worser and Worser

"It's a thankless job," Kurt Vonnegut observed in Titans of Siren, "telling people it's a hard, hard Universe they're in."

I know how Kurt feels. I've been writing about the student loan crisis for 25 years. About ten years ago, I started blogging about it.  I've written over 900 essays, and I've gotten a million hits. 

Has anything changed?

The short answer is no. Forty-five million Americans have outstanding federal loans, a total of $1.8 trillion. Americans hold another $150 billion in private student loans, and students' parents owe another $100 billion.

Research confirms that student debt prevents people from getting married, buying homes, and saving for retirement. Indeed, some college graduates would be better off financially had they never gone to college.

Over the years, Congress and the Department of Education have launched various programs to ease the burden of college debt, but everything they do just makes matters worse.

Income-based repayment plans, which set repayment rates based on a borrower's income, have turned nine million student debtors into indentured servants who make monthly payments based on their income, not how much they owe.

The result? Virtually none of those nine million people will ever pay off their student loans because their monthly payments aren't big enough to cover accruing interest. As a practical matter, these college borrowers have defaulted on their loans even though DOE pretends the loans are in good standing.

The Public Service Loan Forgiveness program benefits people who take low-paying service jobs (firefighters, teachers, EMS personnel, etc.). But until recently, only about two percent of the people who thought they were entitled to PSLF debt relief actually got it.

Parent PLUS loans have driven thousands of families into poverty, but Congress refuses to reform the Parent PLUS program. The Wall Street Journal published an essay listing five reasons Congress refuses to act--including the colleges' desire to get Parent PLUS revenue.

When I started writing about the federal student loan program, I viewed it solely as a problem for individual student borrowers--not a boondoggle that could weaken the entire nation.

But it's now clear to me that the program has become so large, corrupt, and mismanaged that it is destroying the integrity of American higher education and undermining the national economy.  Millions of student debtors cannot buy homes, save for retirement, or start families because they are burdened with college debt they can never repay.

Our higher education leaders tell themselves that they are the most sensitive people in America. They constantly prattle about equity, inclusion, and the need to expand opportunities for low-income Americans.

But not a single university president has called for student-loan reform. No college CEO has demanded an overhaul of the Parent PLUS program or legislation to stop the Department of Education from garnishing Social Security checks of elderly student-loan defaulters. 

 Harvard President Lawrence Bacow bent over backward to get a student visa for a single Palestinian, but has this Ivy League prig said anything about a federal program that has injured millions of people, including students at his own university? No, he has not.

University leaders have nothing to say about the federal student loan program because their institutions are addicted to federal money. The status quo suits them just fine.

 After all, if college students graduate with worthless degrees and a mountain of debt, it's not the universities' problem. The colleges get their money upfront.


Harvard University: Ain't we got fun!



Baton Rouge Man Convicted of Massive Student Loan Fraud: Baton Rouge Community College Becomes Crime Scene

 A few days ago, Elliott Sterling of Baton Rouge was convicted of massive student-loan fraud. As reported in the Baton Rouge Advocate, Sterling stole $1.4 million in student loan money by pretending to be a Baton Rouge Community College student 180 times.

Prosecutors also presented evidence that the Sterling falsified student-loan applications for 168 people. In furtherance of his scheme, he bought 42 fake high school transcripts, paid people to represent themselves as students, and filed false information on student-aid applications.

Sterling's criminal scheme went on for two years. FBI agents seized $422,000 in fraud proceeds, but Sterling blew a great deal of money at gambling casinos.

Apparently, numerous people helped Sterling bilk the federal government. He collected hundreds of thousands of dollars in student-loan money intended for other people and kept two-thirds of the proceeds. He even enlisted the help of a couple of people in prison.

Sterling's convictions raise several questions. First, did any of the bogus students at BRCC attend classes?  Did they receive grades? How long did it take BRCC to realize that someone was using the college to scam the federal student-loan program?

Of course, all the people who took out student loans as part of Sterling's scheme are indebted to the Department of Education and required to pay back the money they were awarded. How many of these "students" will pay back their loans?  My guess is that none of them will.

College leaders and the U.S. Department of Education would like Americans to believe that the federal student loan program is competently administered and that federal loan money helps students get a valuable college education.

In fact, the student loan program is riddled with fraud and mismanagement. Several for-profit colleges have been accused of misrepresenting their programs; some individuals take out loans just to capture the income with no intention of studying for a college degree. Hundreds of colleges have rolled out dodgy graduate programs to enhance their revenues, leaving students with worthless MBAs and professional diplomas.

Today, 45 million Americans collectively owe $1.8 trillion in student debt. Parents have impoverished themselves by taking out Parent PLUS loans to help their offspring pay their college bills. Private lenders have loaned another $150 billion to students at high-interest rates.

It is time for Americans to admit that higher education in this country is a racket. Congress doesn't have the courage to legislate reforms. But surely, our federal legislators can summon the political will to amend the Bankruptcy Code to allow the victims of this massive fraud scheme to discharge their student loans through bankruptcy.

Baton Rouge Community College: A crime scene







Sunday, March 13, 2022

How Screwed Up is the Federal Student Loan Program? We Can Tell You, But Then We'd Have to Kill You!

 Betsy DeVos, the Wicked Witch of the Midwest, was perhaps the most despised member of President Trump's cabinet. As Trump's Education Secretary, she coddled the for-profit college industry and (in my opinion) bungled the Public Service Loan Forgiveness (PSLF) program.

Nevertheless, in a speech delivered in November 2018, DeVos revealed to the nation just how totally screwed up the federal student loan program really is. She deserves some credit for that.

Here's what DeVos said:

  • The federal government holds $1.5 trillion in outstanding student loans, one-third of all national assets.
  • Only one in four federal student-loan borrowers were paying down the principal and interest on their debt.
  • Twenty percent of all federal student loans were delinquent or in default, which was seven times the delinquency rate on credit card debt.
  • The debt level of individual borrowers had ballooned between 2010 and 2018 because students were borrowing substantially more money.
  • The federal government's portfolio of outstanding student loans constituted 10 percent of our nation's total national debt.
Soon after giving this speech, DeVos engaged a private firm to determine just how bad the student loan crisis was. Jeff Courtney, a former JP Morgan executive, headed up this investigation, and here is what he found:

Although DOE calculated that it would eventually receive 96 cents of every student-loan dollar in default, in fact, it would only recover between 51 and 63 percent.

Courtney also found that DOE allows student-loan defaulters to sign up for new loans, which are used to pay off the defaulted loans. When that happens, the defaulted loans are categorized as paid in full when, in fact, they aren't paid off at all.

DeVos acknowledged that private businesses could not legally operate in this way. In fact, she said, if a private actor engaged in DOE's accounting practices, that person would "probably be behind bars." 

Of course, we know that Courtney's findings aren't the only evidence of DOE's financial skulduggery.  DOE has been putting distressed debtors into income-based repayment plans (IBRP) and counting the loans in these plans as performing loans.

But that is not correct. Approximately 9 million student borrowers are in IBRPs, and their monthly payments are not large enough to pay accruing interest. Thus, IBRP participants see their loan balances grow with each passing month, even when they make regular monthly loan payments. 

In fact, all 9 million IBRP participants are in default--if default means never paying off the debt.

In recent months,  Congressional members have been asking DOE to disclose the actual cost of the federal student loan portfolio, but Education Secretary Miguel Cardona hasn't been forthcoming.

Here is the essence of the matter. DOE knows the federal student loan portfolio is a trainwreck, but it hopes to keep the catastrophe a secret for as long as possible.  

It's like that old joke about the  CIA and classified information: We can tell you the truth about the student-loan program, but then we'd have to kill you.

Sources

Betsy DeVos. Prepared Remarks by U.S. Secretary of Education Betsy DeVos to Federal Student Aid's Training Conference. November 27, 2018. [The DOE link to this speech  was either taken down or obscured.]

Betsy revealed just how screwed up the federal student loan program really is.



Friday, March 11, 2022

Like Prisoners on Death Row: 25 million student debtors may get another reprieve from making their student-loan payments

Around 2,500 prisoners sit on Death Row in American prisons. Nearly 700 condemned men await death in the Golden State of California. A couple hundred are housed on Death Row in Texas, the Lone Star State. And Florida--the Sunshine State-- has 330 prisoners who've been sentenced to die.

How long do condemned prisoners sit in prison before being executed? On average, 19 years. Most men on death row can postpone their execution date by filing multiple appeals in the courts.

Of course, Americans living in freedom cannot compare their situation to the men on Death Row. Nevertheless, student-loan debtors are somewhat like condemned prisoners. They are seeing their lives drain away while the federal government issues multiple stays of execution on their student-loan payments without giving them real relief.

In March 2020, the Department of Education allowed 25 million student debtors to stop making payments on their loans due to the economic disruption of the COVID pandemic.  DOE said it would not penalize borrowers who didn't make their loan payments and wouldn't charge interest on the underlying debt.

That moratorium has been extended four times, and the Biden administration may extend the moratorium yet again.

Are these debt-forgiveness edicts a good thing for the nation's overburdened student-loan borrowers? Yes, of course.

But there are psychological and emotional costs to being burdened by debt that can never be paid back, costs that some federal bankruptcy courts have explicitly recognized. And these costs are not alleviated by giving college borrowers a series of loan holidays.

And allowing 25 million Americans to skip their student-loan payments for two years does nothing to solve the student-loan crisis, which has grown to catastrophic proportions. Together, American college borrowers owe $1.8 trillion in student debt and another $150 billion in private student debt.

Maybe President Biden will forgive $10,000 in personal student debt as he promised during the 2020 presidential campaign. But that will do little or nothing to ease the debt burden of most borrowers.

Perhaps Congress will pass legislation to forgive all federal student-loan debt, or President Biden will do that by executive order. But I think relief of that magnitude is unlikely.

In the meantime, while our legislators and policymakers ponder global solutions,  why doesn't Congres simply amend the Bankruptcy Code to allow insolvent student borrowers to discharge their student loans in bankruptcy?

But Congress probably won't do that. For all the sympathetic rhetoric, Congress is content to allow millions of Americans to sit helplessly in a vast debtor's prison without bars--financially unable to buy homes, save for retirement, or start families.

In the meantime, college borrowers live much like the men on Death Row. Like condemned prisoners, they get numerous reprieves from making payments. They get deferments, they sign up for long-term income-based repayment plans, and they get to skip loan payments during the COVID crisis. 

Condemned prisoners whose sentences are postponed again and again will never be free. Some will eventually be executed, but many of them will die of old age.

Likewise, America's student loan debtors can manage their massive loan debt with various types of reprieves. They can apply for economic-hardship deferments. They can sign up for long-term, income-based repayment plans. They can skip payments during the COVID loan-payment pauses.

But millions of them will never be free of their college debt. They will die before it's repaid. That's a high price to pay for going to college.

 

California's death row





Tuesday, February 8, 2022

A student-debt strike to pressure Congress for wholesale student-loan forgiveness simply won't work

Student Debt Strike, an online Reddit community, advocates for a mass student-debt strike as the best way to pressure Congress to grant wholesale student-loan forgiveness.  I totally support this group's goals.

Economist Stephanie Kelton and others have argued persuasively that forgiving all federal student-loan debt would stimulate the economy. Relieved of burdensome student loans, more than forty million Americans would be free to buy homes, start families, and save for their retirement. 

Furthermore, I agree with Professor Kelton, who believes the federal government can handle massive student-loan forgiveness without wrecking the economy. The feds can simply select one of its many accounting gimmicks to absorb the loss, much as it dealt with the savings-and-loan crisis in the 1980s, the real-estate turmoil of 2008, and Puerto Rico's bankruptcy.  

After all, $1.7 trillion in outstanding student-loan debt is peanuts to a nation with a federal deficit that tops $30 trillion. What's $1.7 trillion among friends?


Nevertheless, it is dangerous for people to participate in a student-loan strike by refusing to make their monthly loan payments.


First, defaulting on a student loan is catastrophic for the individual debtor. Interest and penalties add up and get added to the loan balance. Over time, a student-loan defaulter's loan balance can double, triple, and even quadruple.


Moreover, student-loan defaulters rarely get free of student-loan debt in bankruptcy.  Congress inserted the "undue hardship" rule into the Bankruptcy Code to discourage bankruptcy relief. Many bankruptcy judges interpret "undue hardship" quite harshly and refuse to discharge student debt even when the debtor is in desperate circumstances.

Secondly, I do not believe a student-loan strike will have the desired effect on Congress. Thus far, Congress has shown little appetite for reforming the federal student loan program. Political pressure from the higher education industry (including the for-profit colleges) has blocked reform.

Besides, a significant percentage of college borrowers are already on strike because they have defaulted on their student loans. In a 2018 report, the Brookings Institution calculated that 40 percent of student borrowers may ultimately default on their student-loan obligations. If that is not a strike, I don't know what is.

If I thought a student-debt strike had any chance of succeeding, I would support it 100 percent. But I'm afraid strikers will simply be labeled as deadbeats without moving the needle on reform or loan forgiveness.

Much as I hate to admit it, I think the best option for an overburdened college-loan debtor is to sign up for the most generous income-based repayment plan that is available.

Someday, the student-loan crisis will become so massive and so scandalous that Congress will be forced to act--either by canceling all student debt or easing the path to bankruptcy relief. 

Unfortunately, I think that day is a long way off. 




Monday, February 7, 2022

"LSU administrators paid at outrageous levels, with faculty far behind:" Professor A.R. Rau's letter to the Baton Rouge Advocate

Professor A.R.P Rau published a letter to the editor of the Advocate this morning. I am printing the letter in its entirety.

LSU recently hired a football coach for an obscene $100 million. Athletic directors, other coaches, and umpteen assistant coaches have million-dollar salaries. And now the revenue secretary who is stepping down from state government is being hired as “chief administrative officer” at LSU for $370,000 in place of her previous $250,000.

LSU’s chancellor-president was recently hired for $750,000 plus substantial house and car allowances. There is a provost, and multiple vice chancellors and vice provosts, all making equally impressive six figures.

Why then is a new administrative officer needed, created by fiat by administrators and the LSU Board of Supervisors? This is taxpayer money.

The rot started with then-chancellor Mark Emmert. By bringing Nick Saban as a multi-million-dollar coach, he parlayed that to doubling his own salary, out of all proportion to salaries of faculty or staff. He went to his own further millions at the NCAA but left behind administrators down the line, all making huge salaries, more than double that of professors with decades of teaching, research and scholarship.

This has been noted elsewhere as “rapacious contemporary capitalism” at institutions that were created by societies for different purposes. It is an abuse of the tax-exempt status granted them on the grounds that knowledge generated and taught is a societal good.

LSU’s worth rests on its performance in education. Hiring contingent faculty at fractions of even the smallest numbers cited above, and grudging graduate teaching assistants who are paid even less minus health insurance and other fees they then must pay out of pocket, is shameful.

I leave as an exercise to our boards to calculate how many assistant professors, adjunct instructors, and graduate TAs would be supported by that $370,000 they conjured out of thin air for this new administrative hire.

A.R.P. RAU
professor
Baton Rouge

Revenue Secretary Kimberly Lewis will make $370,000 in new LSU job


Sunday, February 6, 2022

Wind turbines have raped West Texas and the Great Plains: I hate the goddamn things

  John Prine wrote a lovely song called Paradise, a tribute to the landscape of his childhood, located "down by the Green River, where Paradise lay."

But that landscape was destroyed by strip mining, as Prine's lyrics attest. "I'm sorry my son, you're too late in asking; Mr. Peabody's coal trains have hauled it away."

Progressive Americans hate coal as they hate all fossil fuels. They lament the damage that was done by strip mining.

Let's stop drilling for oil and gas, they say. Let's stop mining for coal. Let's switch to renewable energy: solar power and wind power.

And the nation is going in that direction, faster than most Americans realize.  Enormous wind turbines are being erected on the Great Plains, turbines so large than an 18-wheeler can only transport one turbine blade at a time.

Year by year, wind power supplies a larger percentage of the nation's energy demands. But you have to drive over the High Plains to grasp the scope of the transformation.

Drive along Highway 84 across the Llano Estacado or motor up Highway 281 in western Oklahoma. Wind turbines by the thousands blight the landscape.

If you live in Boston, you may say that is all to the good. Sure, wind turbines destroy the grandeur of the prairie country, the majestic vistas of West Texas. But who cares?

After all, the nation's truly beautiful scenery only exists on America's East and West Coasts and in blue-state Colorado.  Nobody lives in West Texas, and those who do are elderly white people with non-progressive values who need to be ground down for the greater good.

But I disagree. The vast, lonely panoramas of the trans-Brazos country, the undulating hills of the Oklahoma short grass country are beautiful--as beautiful as the Rockies or the seascapes of California. This country once sustained the Kiowa, the Comanche, and the Cheyenne, who lived off the buffalo that grazed these lands in the millions.

If our national policy is to pollute our natural environment with wind turbines, I say let's share the pain. I will reconcile myself to wind turbines in West Texas when I can see them off the beaches of Nantucket, Martha's Vineyard, and the Hamptons.





Friday, February 4, 2022

Voting with their feet: College enrollment dropped by 475,000 students in the fall of 2021

As the Chronicle of Higher Education reported recently, college enrollment dropped by 475,000 students last fall. Since the COVID pandemic began two years ago, undergraduate enrollment has plunged by 9.2 percent.

A look at college enrollment over the last 10 years shows an even more dramatic decline.  Dahn Shaulis, writing for Higher Education Inquirer, reported that college enrollment is down by 20 percent or more in 18 states during the past decade. Unless conditions change, Shaulis writes, most states will see enrollments drop by 25 percent in the 20226-2027 academic year when compared to enrollment levels in 2010.

COVID is blamed for the recent enrollment exodus.  Doug Shapiro, Executive Director of the National Student Clearing House Research Center, said that students "are continuing to sit out in droves" due to the pandemic, which has forced colleges all over the U.S. to switch from face-to-face instruction to an online teaching format.

But there are larger forces at play. As Shaulis explained:

Enrollment declines are the result of several interrelated economic and demographic shifts. Reduced populations of college age people, economic distress, growing inequality, and migration are some of the interacting factors. 

 And there is another factor at work--difficult to quantify. Young people have begun to figure out that a college education is too damned expensive and often does not lead to a good job.  Liberal arts majors, in particular, often find that their college degree was not a ticket to the good life. Instead, it was a trap that ensnared them in debt and sentenced them to a life of penury. 

Perhaps that is why the number of students majoring in the liberal arts declined by almost a million students last fall, a drop of 7.6 percent from the previous year (as reported by CHE).

We're outta here!