Tuesday, September 27, 2022

Flagship Universities Are Enrolling More Out-of-State Students: That May Be A Good Thing

 Aaron Klein, writing for Brookings Mountain West, reported recently that public flagship universities admit more out-of-state students now than they did twenty years ago.

Klein's research revealed that the share of out-of-state students at the states' premier universities went up an average of 55 percent between 2002 and 2022.  At some flagship universities, 20 percent of their students are non-residents.

What accounts for this trend? Klein posits that the flagships are enrolling more out-of-state students because they can charge those students a higher tuition rate. Indeed that partly explains the phenomenon.

 He also points out that most out-of-state students must take out higher student-loan amounts to pay out-of-state tuition. Thus, the flagships' tendency to enroll more outer-state students who pay higher tuition prices contributes to rising levels of student debt.

Also, Klein notes, many in-state students who are pushed out of their flagship universities to make room for more out-of-state students may elect to enroll at less-prestigious regional universities, which Klein points out, may lower their lifetime earnings.  If so, that is unfortunate.

Nevertheless, generating more tuition revenue isn't the only reason that flagship universities are recruiting out-of-state students. As Klein observed, recruiting students is a zero-sum game.  Fewer students are going to college than just a few years ago, and universities across the U.S. desperately compete to attract enough students to keep their enrollments up. 

Thus, flagship schools are luring more out-of-state students because they need them to maintain optimum enrollment levels.  They particularly want to attract out-of-state students with impressive GPAs and ACT/SAT scores.

To attract these students, the flagships frequently offer generous scholarships to out-of-state students. In fact, high academic achievers might be able to attend an out-of-state flagship for less money than if they had enrolled at a school in their home state.

I recently talked to a man whose granddaughter had a perfect ACT score and a stellar academic record at a prestigious high school. She received no scholarship offers from Louisiana State University but got a beautiful offer to enroll at Auburn University in Alabama.

For this student, going to school in Alabama was cheaper than attending LSU. Thus, she enrolled at Auburn.

This is my point. Students with impressive academic records and dazzling standardized test scores should apply for admission to flagship universities outside their home state. They may find that studying at an out-of-state flagship is cheaper than attending an in-state school.

In addition, there can be enormous intangible benefits to enrolling at a college outside one's home state. I'll give my own experience as an example.

I grew up in rural Oklahoma and got a bachelor's degree from Oklahoma State University in the small Oklahoma town of Stillwater. Later, I went to graduate school at the University of Texas in Austin.

Not only did I receive an excellent education at UT, but I also immersed myself in Austin's music scene. I was introduced to the history and literature of the South and the Southwest. I even discovered new cuisines: Tex-Mex, Czech kolaches, and Texas barbecue.

My Texas educational experience opened up opportunities I would have never had if I had stayed in the state where I grew up.  I shudder to think what my life would have been if I had not gone to Texas.

Attending college is the first opportunity most young people have to begin exploring the world. My advice is to leave your home state to get your college degree--especially if you can get a scholarship that makes an out-of-state university affordable.





Thursday, September 22, 2022

Why does it take students six years to complete a four-year degree?

 In the early 90s, I was program director for a specially-designed higher education institute at Louisiana State University. I designed the program for senior-level Chinese college administrators. In my hubris, I wanted to introduce my Asian audience to American higher education--the envy of the world.

One of the LSU presenters, an enrollment-management specialist, said that LSU's six-year graduation rate for bachelor's degrees was about fifty percent. The university had a plan, the speaker told the audience, to get the six-year rate up to 60 percent.

I'll never forget the collective gasp that came from the Chinese administrators. One of them spoke up. In China, he said, the four-year graduation rate was 95 percent--about twice as high as LSU's four-year rate. I realized right then that LSU had nothing valuable to teach the Chinese. And I also knew that the Chinese had discovered that too. 

Why the hell does it take so many American college students six years to get a four-year college degree? After all, that's not their expectation. As a Hechinger Report article pointed out, ninety percent of college freshmen believe they will finish college in four years. The reality, however, is that less than half of college students will get their bachelor's degree in four years.

Some commentators speculate that colleges are moving the finish line for graduation to collect more tuition. There may be some truth to that. After all, American universities now measure their completion rates based on six years of enrollment, not four. By adding more course requirements and bureaucratic red tape, the colleges have made it more difficult for students to plan a schedule that will get them a bachelor's degree in four years.

Nevertheless, other factors are in play that help explain why it takes millions of Americans six years to get a bachelor's degree. Thanks to the federal student-loan program, students can finance not only their tuition with borrowed money but they can also pay their living expenses as well.

Low-income students qualify for Pell grants--up to almost $6,500 a year.  Louisiana also doles out so-called TOPS awards to students with good high school GPAs and ACT scores. However, the qualifications are meager; a kid with a 2.5 GPA and an ACT score of only 20 qualifies for a TOPS scholarship.

And a college student may pick up additional scholarships or grant money. In case you haven't heard, universities are emphasizing diversity, equity, and inclusion, and students of color and students from disadvantaged backgrounds might qualify for targeted financial assistance.

In fact, many young people can put together financial packages that allow them to live quite comfortably as college students--perhaps better than they lived at home when they were in high school.  

Using student-loan funds, Pell Grant money, and other financial aid, students can move into luxury student apartments, dine out in restaurants, and maybe even put a downpayment down on a car.

In short, many students are "living their best lives" while in college. If so, why would they want to leave a campus environment, go to work, and start paying off their student loans? Why not stretch out their college career from four years to six?


Luxury student housing: Why graduate and go to work?









Tuesday, September 20, 2022

The Student Loan Program Is Designed to Shovel Federal Money to Colleges at Students' Expense

Years ago, I traveled through central Uganda in a Land Rover, accompanied by a native guide. As we came around a curve in the road, we surprised a large troop of baboons.  

All the baboons ran away. Large and small, the whole group fled into the woods. All but one.

The largest baboon was reclining against a tree when we appeared, and he stayed put. He was not afraid of us and wanted us to know it.

My guide stopped our vehicle so that we could observe this human-sized creature. The baboon stood up and slowly walked to my side of the Land Rover. My window was open, and soon he was standing only inches from me.

My guide had bought a bunch of Ugandan bananas (very tasty), and I offered one to the baboon. He stared directly into my eyes for a few seconds, which made me extremely uneasy. Finally, he grabbed the banana from my hand and walked away without the slightest sign of gratitude.

"I just did a stupid thing," I admitted to my guide, and he agreed. "Yes, Mr. Fossey, that was stupid."

Our federal government is doing stupid things with the student-loan program. Today, 45 million Americans hold student debt totaling $1.7 trillion, and millions of borrowers are in income-based repayment plans that last as long as a quarter of a century. The prime beneficiaries of all this largesse are colleges and universities. 

Have the colleges used this money wisely? No, they haven't. They raise tuition rates year after year because they know that students will take out ever-larger loans to pay their tuition bills.  They roll out expensive graduate programs that don't lead to good jobs. They overpay their administrators, who proliferate like feral hogs.

In essence, the feds have been feeding bananas to baboons. 

Although the colleges rake in billions of dollars each year from the student-loan program, they have nothing to say about its flaws. The presidents of the nation's most prestigious universities haven't endorsed bankruptcy relief for distressed student debtors. They haven't spoken out about the rapacious for-profit college industry. They've not criticized the Department of Education for garnishing elderly student debtors' Social Security checks.

Why haven't college leaders called for reforming the student-loan program? Because they don't give a damn. 

They just want their bananas.


Give me that goddamn banana.


Thursday, September 8, 2022

Vermont Law School is rolling out new master's degrees: But does Vermont even need a law school?

 Vermont Law School, located in the bucolic village of South Royalton, has struggled recently with declining enrollment, demographic shifts, and "wobbly finances." Consequently, VLS is rolling out new law-focused master's degrees and changing its name to the Vermont Law and Graduate School.

Karen Gross, a former president of Southern Vermont College, applauded the move. "VLGS should be commended for trying to innovate, and I think what they did and silo-busting, moving programs online, and staying close to their mission, is smart," Gross was quoted as saying in an Inside Higher Ed article

So, what's new at VLGS? In addition to the law school's traditional J.D. program and its master's degree program for J.D. graduates, VLGS now offers several master's degrees that will not qualify graduates to practice law. Specifically:

  • Master's Degree in Environmental Law and Policy
  • Master's Degree in Energy Regulation and Law
  • Master's Degree in Food and Agriculture Law and Policy
  • Master of Arts in Restorative Justice
In collaboration with other universities, VLGS will also offer eleven dual degrees. For example, working with the University of Cergy-Pontoise (France), VLGS students can get a JD/LLM in French and European Law. Partnering with the University of Cambridge (England), students can obtain a JD/Master of Philosophy degree in real estate finance

What will it cost students for these new degrees? About 50 grand a year in tuition and fees.

In short, as several commentators explained in the Inside Higher Ed article, VLGS is "diversifying its product line," it's "silo-busting,"  "moving the needle," and "going big."

I suppose VLGS should be commended for launching these new degrees, but all this activity begs the question:

Does Vermont even need a law school? After all, there are nine law schools in neighboring Massachusetts and fifteen law schools in nearby New York. 

All across the country, law school applications are down. Many people who are smart enough to be good lawyers are choosing other career paths.

To combat this trend, law schools have spun out new graduate programs to attract more students. These programs are targeted toward people who are not seeking to become lawyers. Often, these master's programs put students in debt without improving their graduates' job prospects.

Moreover, the United States has too many law schools and too many lawyers. The public would be well served if the American Bar Association forced some of these schools to close and pressured the remaining schools to concentrate on their core mission--preparing people to be lawyers.

Unfortunately, that is not what the ABA is doing. And the ABA's inaction leaves schools like VLGS free to spin out new and expensive graduate degrees, which may or may not be worth what students are paying.






Tuesday, September 6, 2022

You Do Know Debt Forgiveness Fuels a Healthy Economy. Essay by Steve Rhode

Opinions and emotions are running high right now regarding student loan forgiveness.

It is one of those topics that has become politicized rather than remain rational and logical.

A recent post from Zachary Carter, the author of The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes raised some very interesting points worth remembering.

Debt forgiveness is important to a fully functioning, healthy economy. Debt elimination is part of the Bible, the U.S. Constitution, and routine government functions in various sectors. The USDA even runs a debt settlement program for farmers.

Indeed, debt relief has always been the handmaiden of debt itself. In the United States, we have a formal legal process for eliminating nearly all forms of debt: bankruptcy. When debts become unbearable, people file for bankruptcy to have them discharged in court. In the 15 years preceding the pandemic, more than 14.3 million people filed for bankruptcy. In the decade before the pandemic, more than 20,000 businesses filed for bankruptcy yearly, with a high watermark of 60,837 in 2009. Debts are discharged daily in the United States and have been for decades.

As Carter says, “Capitalism would collapse without debt relief systems. Businesses get in trouble all the time—both good businesses that would work fine without a few onerous debt deals, and bad businesses that need to be liquidated or restructured. Sometimes bad things just happen. People get divorced. They get injured and are overwhelmed by medical bills. They get laid off. They have to pay for a parent’s funeral or care for children with special needs. And yeah, some people just don’t know how to manage their money and buy things they can’t afford. But we do not consign such people to never-ending financial servitude as a result of unforeseen circumstances, or even totally reckless spending habits. We have a formal process to eliminate debts and start over, with a reasonable chance of living a healthy financial life.”

The issues building today regarding student loan debt don’t hinge on the finer points of forgiveness. No, the problem today was manufactured by special interests and politicians that meddled in changing the bankruptcy code.

“In 2005, Congress passed a law that made it next to impossible to discharge almost any form of student debt. Even the most creative consumer lawyers estimate that only about $50 billion—less than 3 percent of the $1.75 trillion in outstanding student debt—had the potential to be wiped away, but only if students could persuade a court that they had been egregiously wronged, by say, non-accredited programs or institutions that didn’t actually offer degrees,” says Carter.

He’s right. Bankruptcy is an orderly process that allows for the individual examination of debtors to determine if they are eligible for a legal Fresh Start.

The elimination of impossible debts helps people start over and consume again. That is how capitalism works. Without the discharge of impossible debts, the economy would bog do, and all would suffer.

Consumers must consume. Their job is in the name.

Carter says, “There’s no real reason why student debts should be so much more onerous than others. Let’s be clear about the supposedly reckless gambit that student debtors embarked on. They didn’t go to a casino, or buy a Maserati or make bad bets on meme stocks. They tried to get an education—exactly what parents, teachers and financial advice columnists have been telling kids to do for decades if they want to live better and more profitable lives.”

That’s an interesting point to ponder.

You do have to give Carter some props for his observation that the Biden student loan forgiveness program is not perfect, but it might be the best we can do now. Excellent point.

“There are perfectly reasonable critiques that can be lodged against Biden’s program. The plan isn’t comprehensive—only $20,000 can be discharged, and this is only for borrowers whose incomes were low enough to qualify for Pell Grants. The program looks the way it does because it is the only solution to this problem that our current politics will bear.

It would be far better to reform the higher education financing system than to simply wipe out a big chunk of higher ed debt. In a better America, students wouldn’t have to pay any more for a college education than they do for a high school education.

But we don’t live in that America right now. In time we may be able to reform the broader higher ed system, but for now, providing reasonable debt relief is the best our government can do.

Biden’s student debt relief initiative is no wild, unprecedented idea. Governments pay for education and eliminate unsustainable debts. That is how the world has worked for centuries.”

If I had a magic wand to wave, it would be to not go forward with the Biden student loan forgiveness program and just return all student loan debt to elimination through bankruptcy.

*****

This essay was originally posted on September 2 on Get Out of Debt Guy.

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


Monday, September 5, 2022

Froma Harrop, Progressive Op-Ed Writer, Chats Up Secession

 Froma Harrop, a cheerleader for the progressive Democrats, chatted up the notion of secession in a recent op-ed column. Likely candidates in Harrop's mind are "the rural South, Appalachia, and Texas." Not all of Texas, apparently. She would like the city of Austin to stick with the union. 

Harrop's secession talk is slightly less radical than Dana Milbank's spiel. He would like to see Oklahoma leave the union along with Texas.

This progressive speculation about secession is in harmony with President Biden's derisive description of Republican voters as "semi-fascist."  

I hear a lot about fascists these days, but I've actually only met one--my high school principal when I was growing up in Oklahoma. My community allowed him to beat school kids with a board, which is a popular fascist pastime, but he died years ago.

Ms. Harrop thinks the U.S. can get along without the Flyover States. She points out that the states that voted for Joe Biden account for 71 percent of the national economy.

Perhaps she is unaware that Texas is the nation's biggest international exporter and has a majority of the country's natural gas reserves. Not to mention that there are about 30 million friendly people who live in Texas--and some of them are Republicans.

Personally, I agree with Rodney King's observation, which he made in 1992: "Can't we all just get along?"

I believe we can all get along, but it would help if progressive pundits stopped spouting bigotry about the good folks who dwell in Flyover Country.


Be careful what you wish for.






President Biden, please be honest with the American people about the student-loan crisis


Be real
Baby, be real
That's all I ask of you
Baby, be real.


An Officer and a Gentleman is a terrific movie about a couple who mistrust each other. Zack Mayo, played by Richard Gere, is an officer candidate at a Navy training facility. To put it mildly, Mayo grew up in a dysfunctional family and wants a better life. 

Paula Pokrifki, played by Debra Winger, is an ethnic factory worker in a dead-end job. She too wants a better life. She can leave her blue-collar world behind if she marries a handsome, up-and-coming naval officer.

Zack and Paula fall in love but are wary. Paula wonders if Zack is just looking for a casual relationship to help him get through basic training. Zack wonders whether Paula is trying to trap him into a marriage that will spring her out of the loser's bracket.

Their complicated relationship is encapsulated in the movie's soundtrack, especially the song "Be Real," sung by the Sir Douglas Quintet. "Be real. Baby, be real. That's all I ask of you. Baby, be real."

An Officer and a Gentleman and "Be Real" are metaphors for the American people who just want to know what the fuck is going on with the federal student loan program.

We know that about 45 million Americans have federal student loans. And we know that the total outstanding debt is about $1.7 trillion. We also know that millions of college borrowers are not paying back their student loans.

Will President Biden's debt forgiveness plan do anything to clean up this colossal mess?

Will the plan rein in the spiraling cost of a college education? Will it help make a college degree something that will get student borrowers into real jobs?

Or is Biden's student-debt forgiveness plan just a gimmick rolled out by the cynical hucksters in the Department of Education to help the Democrats win the midterm elections?

Be honest with us, President Biden. Be real. That's all we're asking: baby, be real.

That's all we ask of you: baby, be real.










Bed, Bath & Beyond CFO leaps to his death: Better to fail with honor than succeed by fraud

 

Rather fail with honor than succeed with fraud.

Sophocles

Gustavo Arnal, the Chief Financial Officer of Bed, Bath and Beyond, leaped to his death from the 18th story of a Manhattan office tower on Friday. He was 52 years old.

Arnal joined Beth, Bath & Beyond in 2020 and was well compensated. His 2021 income was $2.9 million.  Last month he sold company stock worth $1 million.

The shares of Bed, Bath & Beyond, where Arnal worked,  are labeled as a meme stock whose price has bounced around like a ping pong ball in recent months. As the stock gyrated up and down, some people got rich, and others lost a lot of money.

Arnal's death brings up images of the 1929 stock market crash when a few people jumped out of windows as their wealth evaporated over the course of a few hours.

No one can say with certainty why someone commits suicide, but it is always a response to despair.  My guess--and I think it is a good one--is that Gustavo Bernal was an honorable man who could not cope with a financial mess he did not create.

Perhaps he exemplifies Sophocles's observation that it is better to fail with honor than to succeed by fraud.








Sunday, September 4, 2022

Department of Agriculture Wants Farmers to Grow Two Crops a Year: I'm From the Government, and I'm Here to Help

 The world's grain supplies are threatened by the war in Ukraine, one of the world's largest wheat producers. In fact, Ukraine and Russia together produce a quarter of the world's wheat.

The U.S. Department of Agriculture, always ready to lend its expertise, wants farmers to start growing two crops yearly instead of one to help meet the global demand for grain.

Those dumb farmers. It's a good thing that the federal government is telling them what to do, or we'd probably all starve to death.

But here's the thing. American farmers are already doing everything they can to maximize the productivity of their land. In Louisana, some farmers are harvesting crawfish in their rice fields. Alfalfa farmers get anywhere from four to six cuttings a year--depending on rainfall and weather conditions.

My father farmed winter wheat in the Washita valley of southwestern Oklahoma. He planted in the fall and harvested in the early summer. And, like wheat farmers all over the United States, he often planted a second crop after plowing the wheat stubble.

Here's my point. Centralized control of agriculture can be dangerous. Stalin tried to control grain production in Ukraine in the 1920s by driving small farmers off their land and forcing them onto collective farms.

The result of Stalin's policies? Almost four million Ukrainians starved to death, and collective farms produced less grain than independent farmers.  

You can read about this sad episode, commonly called the Holodomor, in Anne Applebaum's book, Red Famine: Stalin's War on Ukraine. Mr. Jones, a 2019 movie starring James Norton, also tells the story of the Holodomor.

I don't think American farmers will suffer from federal agricultural policies like the Ukrainian kulaks did. Nevertheless, we should be skeptical of news stories that tout the wisdom of national farm policies as if the farmers in flyover country don't know what in the hell they're doing. 

In fact, farmers are among the few people in America who do know what they're doing. We would all be better off if we had more farmers in Congress and fewer lawyers.


I'm from the government, and I'm here to help.




Saturday, September 3, 2022

You got some 'splaining to do: Alleghany College cuts its minor in Chinese and lays off a tenured Asian professor

 Allegheny College, an old and respected school in western Pennsylvania, closed its Chinese program (an academic minor) and laid off the program's only tenured professor, who is Asian.

Apparently, Allegheny didn't explain its decision very well, and now the college is coming under fire. Xiaoling Shi, the laid-off professor, is concerned the college's decision "was motivated by racial animus," possibly because she has been outspoken about anti-Asian hate.  She filed a complaint against Allegheny with the U.S. Equal Employment Opportunity Commission.

I am skeptical of any suggestion that Allegheny's leadership harbors racial prejudice. America's colleges and universities are the wokest places on the planet. Higher education in the U.S. is obsessed with Diversity, Equity, and Inclusion, and most have DEI officers at the highest administrative levels.

Indeed, Allegheny's website includes this solemn affirmation:

Allegheny students and employees are committed to creating an inclusive, respectful and safe residential learning community that will actively confront and challenge racism, sexism, heterosexism, religious bigotry, and other forms of harassment and discrimination. 

In my opinion, Allegheny's pledge is sincere. Nevertheless, the college must defend against Professor Shi's EEOC complaint, which will cost it money. And Shi's actions may well discourage Allegheny from streamlining its programs.

According to an Inside Higher Ed article, Allegheny College only had 12 students in the Chinese program. Still, Professor Shi pointed out that her program had more students than 21 other minors, including five minors in ethnic studies.

The Inside Higher Ed piece reported that Allegheny would like to eliminate 29 faculty positions to reduce costs and invest in programs that are likely to attract more students.

But Shi's EEOC complaint may prompt the college to rethink its academic plans and stick with the status quo. If so, that would be unfortunate because Allegheny College and hundreds of other American colleges need to get their costs down and focus on academic programs that will help their graduates get jobs that will allow them to pay off their student loans.

By the way, what does it cost to attend Allegheny College? More than $60,000 a year (including room and board).



Friday, September 2, 2022

A Degree From a Tiny College Is Like A Thousand Dollar Car: Ain't Worth Nothing

 The Bottle Rockets, whose music has been compared to Woodie Guthrie's, sing a poignant tune about a thousand-dollar car:

A thousand dollar car, it ain't worth nothin' 

A thousand-dollar car, it ain't worth shit

Might as well take your thousand dollars
And set fire to it.
A thousand-dollar car ain't worth a dime
You lose your thousand dollars every time.
 
Oh, why did I ever buy a thousand-dollar car?

If you are thinking about getting a liberal arts or humanities degree from a college with less than a thousand students, you should listen to the Bottle Rockets' Thousand-Dollar Car song.  Simply substitute "tiny college" for "thousand-dollar car." A degree from a school with less than a thousand students "ain't worth nothing. . . ain't worth shit."

Colleges with less than 1,000 students are in a precarious financial position, with many on the brink of closure. Nevertheless, the number of these schools is growing.

According to a recent Chronicle of Higher Education article, there were 395  "micro colleges" in 2010. In 2020, there were 435.

That's not because more tiny colleges are being founded; many small colleges are shrinking due to declining enrollments.

Indeed, many of these little colleges would have folded during the COVID pandemic if the federal government hadn't shoveled money into them. The feds sent $77 billion of helicopter money to colleges and universities through the Higher Education Emergency Relief Fund, and the micro colleges got a piece of that pie.

Federal money has propped up small private colleges for years, much like a terminal patient on life support. But isn't it time these schools shut down?

For example, Harvey Mudd College in California only had 854 students in 2020, and its annual cost of attendance is $84,000. Why would you want to study there?

Wesley College in Delaware has 917 students and saw a 50 percent drop in enrollment between 2010 and 2020.  The total cost of attendance for a four-year degree is $178,000 (including room and board).  That's a shocking price tag for a degree from a little-known school with a tiny student body.

I don't mean to disparage the small private colleges. Many have an honorable record of serving students in their communities, and many were founded by religious groups for a noble purpose. Many did a fine job teaching the liberal arts and the humanities--some for a hundred years or more.

Nevertheless, the era of the small private college is over. You would be nuts to take out student loans to attend a college with less than 1,000 students.


A liberal arts degree from an obscure, tiny college ain't worth nothing.


Thursday, September 1, 2022

Like Manna From Heaven, Biden Administration Cancels Half a Trillion Dollars in Student Debt

Like manna raining down from heaven, President Biden will cancel a mountain of college debt. Student debtors making less than $125,000 will get ten grand in relief. People who got Pell grants while in college will get $20,000 shaved off their college-loan balances.

What will this cost the taxpayers? Who knows? Who the fuck cares?

The White House budget office says Biden's plan will cost $24 billion annually for the next ten years. Hey, that's nothing. The feds can find $24 billion under the seat cushions in the Congressional cafeteria. 

Indeed, Paul Krugman, a Nobel Prize-winning economist, assures us that Biden's giveaway is peanuts--no more than a "rounding error" in the government's $25 trillion budget. He also said that people criticizing Biden's loan-forgiveness plan are "comically out of touch." 

Maybe the coastal elites are giggling at people who are alarmed about President Biden's largesse, but people in Flyover Country aren't laughing.

On the contrary, the Baton Rouge Advocate, which is a liberal newspaper, criticized Biden's giveaway as bad policy and bad politics:

Bad policy because Biden undermines the notion that debt is an obligation. His move will create the expectation that there will be more debt forgiveness just around the bend, the next time the country faces a crisis.

In addition, the Advocate argued, "Schools will feel free to charge more and young people choosing a course of study will pay less attention to whether their degree will produce a job that enables them to pay back their loan."

The Advocate also says Biden's reckless generosity is bad politics. In the editors' view, "
Biden is spitting in the face of voters who didn’t go to college, parents who worked extra jobs to keep their children debt free, and those who paid off their loans."

In my opinion, the Advocate's editorial represents the view of nearly everybody in Flyover Country who did not benefit from President Biden's latest giveaway. 

Indeed it is disingenuous for the media to suggest that the President's student-loan cancellation initiative will have little impact on taxpayers or that the cost is comparable to a rounding error in the federal budget.

The University of Pennsylvania's Wharton School, a reputable institution, estimates the cost of Biden's student-loan largesse at half a trillion dollars. When other details are considered--loan forbearance and behavioral changes--the total cost is over $1 trillion.

For those who live in Flyover Country, a trillion dollars seems like more than a rounding error. Then again, perhaps the people in the Heartland are just "comically out of touch."

Paul Krugman: Somebody's "comically out of touch."



Wednesday, August 24, 2022

Biden Administration Extends Pause on Student-Loan Payments Until End of This Year: Has The Government Created A Moral Hazard?

 Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. 

 The Economic Times

Christmas came early this year for student-loan debtors. First, the Biden administration is extending the pause on student-loan payments until the end of 2022, which means that college borrowers are getting a two-and-half-year holiday from making monthly loan payments. 

That's not all. President Biden will give every borrower under an income cap of $125,000 (or $250,000 for married couples) $10,000 in student-debt relief.

Borrowers who received Pell Grants in college will get $20,000 in debt relief.

That's big news--especially for borrowers who got Pell Grants while in school. If we add the Pell Grant money these student-borrowers obtained while in college, plus the $20,000 loan write-off, many of these people will have gotten a free education.

And there's more. The Biden administration will launch a more generous income-based repayment (IBR) plan that will lower income-based payments for undergraduate loans from 10 percent of discretionary income to just five percent. The Department of Education also intends to raise the amount of income considered nondiscretionary, meaning that undergraduate borrowers will pay less than five percent of their income on their student loans.

Still, Santa's sack of gifts is not empty. Under DOE's proposed rule, the government will cover the unpaid monthly interest for people in IBRs, meaning student debtors on income-based repayment plans won't see their loan balances go up due to negative amortization.

Party poopers like Larry Summers say that all this federal generosity will fuel more inflation, but who cares? Certainly not the student-loan debtors. In fact, rising inflation will be a bonanza for them because they will be paying back student loans with deflated dollars.

Grumps also argue that the Biden student-loan forgiveness scheme acts as a moral hazard, and I think this is true. If students know they will make loan payments based on their income, not the amount they borrowed, they have every incentive to borrow extravagantly.  

And Biden's munificent changes in income-based repayment plans will likely act as a moral hazard for the colleges as well. University leaders have no incentive to keep their costs in line when they know that students will cheerfully absorb tuition hikes because their loan-repayment plans are so generous that it won't matter whether their tuition bills get larger.

In defense of Biden's sweeping student-loan reforms,  I think everyone agrees that many students took out loans to get a college education that wasn't worth much and was too expensive. 

Millions of students were scammed by for-profit colleges or private nonprofit universities that cranked out overpriced, worthless graduate degrees. Surely the victims of the higher education racket deserve some relief. 

Nevertheless, the federal government is headed for catastrophe if it rolls out student-loan repayment plans that are overly generous while doing nothing to rein in the higher-education racket.

Unfortunately, the feds are doing nothing to stop students from being scammed. Instead, federal money is propping up the colleges--both profit and nonprofit, which allows them to raise tuition prices yearly. 

At the same time, the hucksters who run the colleges offer students educational experiences that don't help them get jobs after they graduate. As a consolation, I suppose, the government is making it very easy for ripped-off students to manage their college debt.

The cold war Russian economy, it was said, ran on the principle that the government pretended to pay the workers and the workers pretended to work.

Something like that is going on in American higher education. The colleges are pretending to educate their students, and the students are pretending to pay for it.

This will end badly for everyone--students, colleges, and taxpayers.  

Merry Christmas!



Monday, August 22, 2022

Who Profits From the For-Profit College Industry? Let's Take a Look at Adtalem Global Education

Higher Education in the United States was once considered a civic activity intended to improve people's lives and benefit society. 


Then some people realized they could make money in the education racket, and the for-profit-college industry was born. 


Who makes money from for-profit colleges? Mostly hedge funds, equity funds, and institutional stockholders. 


Let's look at Adtalem Global Education (AGTE), a for-profit education company that owns Walden University, two Caribbean medical schools, and a Caribbean veterinary school. It's trading on the NASDAQ for about $39 a share--near its 52-week high.


Virtually all of Adtalem is owned by institutions, mostly hedge funds and financial companies. 


Which funds own the stock? You would recognize some of them: Blackrock, Berkshire Hathaway, Goldman Sachs, Morgan Stanley, JP Moran Chase, Soros Management, and the California Teachers Retirement System.


Some analysts are bullish on Adtalem and are predicting a higher share price. Certainly, the big financial players think Adtalem is a money maker.


Without a doubt, Adtalelm's educational institutions have been busy little bees. According to the Chronicle of Higher Education Almanac, Adalem's Walden University produced 867 doctoral degrees in 2020--more than Harvard, Yale, or Columbia. It logged 124 doctoral degrees in education and 357 doctorates in psychology and social sciences. That should make investors happy.


Adtalem gets most of its revenues from federal student aid money. Tuition costs are high. Tuition at Adtalem's American University of the Caribbean Medical School is about $25,000 a semester.


My guess is that most of the graduates of Adtalem's medical schools sign up for income-based repayment (IBR) plans that stretch out payments for 20 or 25 years.  


That keeps monthly loan payments down, but often IBR loans are negatively amortizing. In other words, student borrowers in IBRs see their loan balances go up with each passing month because their loan payments aren't large enough to cover accruing interest.


Indirectly, then, taxpayers are subsidizing the for-profit college industry, including Adtalem, because so many of their students will never pay off their student loans.

Is that a good deal for the American people? No, but it's a good deal for the hedge funds, and that's why the federal government will keep propping up the for-profit college industry.


The hedge funds love the for-profit college industry.


Sunday, August 21, 2022

University Foundation Accounts Are Basically Slush Funds for University Big Wigs

 As a professor at the University of Louisiana at Lafayette, I was often assigned to teach courses off campus. 

Would the university reimburse me for my mileage when I traveled to teach a course? Sorta. I had to fill out paperwork for every off-campus trip.

And such paperwork! I had to file a triplicate form for every journey to teach away from campus. Every time I filled out the form, I had to verify that I had auto insurance, list my driver's license number, and certify that I had taken the university's stupid online driver safety course within the previous two years.

That form had to be signed by seven people!

Do you think the big muckety mucks at Louisiana's public universities fill out all that paperwork when they travel off campus? 

Hell no. They have credit cards on university foundation accounts.  Their expenses are not subject to state travel rules or to public scrutiny.

That's what we see from the recent public uproar about LSU Health Chancellor Larry Hollier's Foundation expense account.

Hollier used his Foundation credit card to fly first class with his wife, stay at expensive hotels, and eat at expensive restaurants.

Any problem with that?  Apparently not. The LSU Foundation defends the expenditures, saying all the charges followed the Foundation's policies and procedures.

But that can't be right because all charges of more than $1,000 must be reported quarterly to the LSU Board of Supervisors or its designee. According to the Baton Rouge Advocate, Hollier made more than 20 charges of more than $1,000, and there are no quarterly reports. 

This episode is just another example of the arrogance and lavish lifestyles of senior university administrators. They make a hell of a lot of money and then get special perks like foundation account credit cards, housing allowances, and other stuff that lowly professors don't get.

According to a recent Chronicle of Higher Education report, fifty presidents at public universities make more than $700,000 a year. Hollier, the LSU Health Chancellor, raked in $1.1 million.

For many of those presidents, some of their pay is not taxable: health insurance, for example, and deferred compensation.

And, as the Larry Hollier scandal illustrates, not all executive administrative expenses are subject to public scrutiny because they are paid for through foundation accounts.

LSU recently signed a 10-year, $95 million contract with its new football coach. And the new guy gets an interest-free loan of $1.2 million to buy a house, two cars, and 50 hours of private travel on LSU's airplanes.

Where do you suppose that football money comes from? Foundation accounts, most likely.

Americans need to wake up to the fact that our nation's public universities are not citadels of culture and learning. They are rackets run by people who play by different rules than the lowly students and professors.

And these racketeers have the gall to hike tuition prices every year--confident that the rubes will take out student loans to pay for these empires of corruption, greed, and arrogance. 

As for Larry Hollier, he is back on the LSU Health Center faculty and only makes $750,000 a year. And you know what? I'll bet he and his wife still fly first class.

Larry Hollier all duded up