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.

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!

Wednesday, February 2, 2022

College students: Avoid majoring in liberal arts, social sciences, or humanities: "Nothing was delivered"

 "Nothing was delivered," the Byrds sang more than fifty years ago, and "nothing was received."

I have no idea what the Byrds were singing about when they cut Nothing Was Delivered, but they might have been referring to college degrees.

In 2015, the Department of Education posted its College Scoreboard, allowing people to determine the return on investment for thousands of academic programs across the United States. Several think tanks and policy organizations analyzed the data, and their findings are sobering.

According to Third Way, "a center-left, public policy group," people who graduate in electrical engineering and nursing have very high returns on their investment. Most will be earning more than their student debt within five years of graduation.

On the other hand, the Foundation for Research on Equal Opportunity has terrible news for people getting degrees in the liberal arts. The poor schmucks who study art, music, philosophy, religion, and psychology are likely to end up financially worse off than if they had never gone to college. 

If you want to know more about the financial costs of majoring in liberal arts or the social sciences, you can read the various think-tank reports or the articles posted by the New York Times and the Washington Post.

But the bottom line is this. Given the transformation of the American workplace, with its increased focus on technological skills and mathematics, you would be nuts to take out student loans to get a college degree in a major that does not lead to a good job.

Why do so many colleges offer degrees that don't lead to remunerative employment? A couple of reasons. Schools have thousands of tenured professors teaching subjects for which there is falling demand. No one wants to take Professor Egghead's course on Martin Heidegger, Friedrich Nietzsche, and Soren Kierkegaard. Still, the old gasbag is tenured, and he's going to hang around the university until he is in his eighties.

Second, American universities are not subject to the laws of supply and demand. Enrollments in the humanities and the social sciences have been shrinking for decades. Colleges don't close these programs; they simply raise their prices to cover the growing cost of their bloated overhead and their unproductive faculty.

Students don't complain about rising tuition prices because they take out student loans to pay their tuition bills.  Millions of rubes don't realize they've been swindled until they graduate and suddenly realize they're hopelessly mired in college debt and have no job prospects.

As Friedrich Nietzsche observed, "Sometimes people don't want to hear the truth because they don't want their illusions destroyed." That's good advice. Maybe Nietzsche was trying to warn people not to major in philosophy.

Friedrich Nietzsche: For God's sake, don't major in philosophy!

Tuesday, February 1, 2022

Who the hell is Maximus--the new giant student-loan servicer?

 On October 20 of last year, the Department of Education announced that Navient, a giant student-loan servicer, was turning its business over to Maximus, a government services company. 

DOE spokesperson Richard Cordray said this about the switchover:

We are confident this decision is in the best interest of the approximately 5.6 million federal student loan borrowers who will be serviced by Maximus and will provide the stability and high-quality service they deserve.

So, who the hell is Maximus? To start with, it is a publicly-traded company whose shares are worth about $77.  Bruce Caswell, Maximus's CEO, is well compensated; he made more than $6 million last year.

Maximus has 35,000 employees, including the drudges who chase down student-loan defaulters. How much do the low-end employees make? The new minimum wage for federal contractors was recently raised to $15 an hour. Last year, Maximus's hourly wage for low-end workers was around 13 bucks.

Forty-five million Americans have outstanding student loans, and Maximus will be servicing 5.6 million of them. For those lucky millions, Maximus will be collecting student-loan payments and keeping track of delinquent debtors and defaulters.  Maximus will also replace Navient as the agent that will help student-loan borrowers switch repayment plans and certify eligibility for loan-forgiveness programs.

Navient, you recall, recently settled multiple lawsuits accusing it of deceptive trade practices.  As Pennsylvania's Attorney General summarized:

Navient repeatedly and deliberately put profits ahead of its borrowers – it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back, and placed an unfair burden on people trying to improve their lives through education.

Will Maximus do a better job servicing student loans than Navient? Maybe, but probably not.

However, of one thing you can be sure. Navient's stockholders will do alright. And who are those stockholders?

They include institutional investors like BlackRock and giant banks such as Wells Fargo and Bank of America. 

And--ponder this: At least 17 public-employee retirement funds own shares in Maximus, including funds for California, Louisiana, New York, Oregon, and Wisconsin.

So if you are one of those 5.6 million Americans whose student loans are being serviced by Maximus and you are being ground down by your debt, you can take comfort in the fact that a lot of massive institutions--both public and private--are doing just fine.

Note: This blog relies heavily on Dahn Shaulis's reporting for Higher Education Inquirer