Saturday, October 29, 2022

Cheer Up! A Liberal Arts Degree May Enitle You to Work on a Cruise Ship

I recently returned from a river cruise down the Rhône River in France. Most of the cruise-ship workers hailed from eastern and central Europe--Bulgaria, Romania, the Balkan states, etc.

I had many opportunities to watch the crew members at work, and I was impressed by their efficiency, courtesy, and professional demeanor. The ones I talked with spoke English well, and I concluded that most had the skills to work in professional jobs instead of waiting tables and cleaning passenger cabins on a cruise ship.

Why, I asked myself, were so many crew members from eastern Europe? And why were they stuck in such menial jobs? After all, working on a cruise ship might be described as living in a floating purgatory--long hours, low pay, and cramped living conditions.

The answers are obvious, of course. Most cruise-ship workers have limited economic opportunities. Few have college degrees, community ties, or family connections that could help them get better jobs.  Their primary qualifications are their language skills and willingness to work under challenging conditions.

If you are an American college student squandering your youth in a liberal arts program at a mediocre college, you should think about these European cruise ship workers. 

What skills will you bring to the workplace after you obtain your bachelor's diploma? Will you have learned how to work under stress, meet deadlines, and communicate well?  Will that degree in medieval literature help you get a professional job that pays well enough to buy a home, raise a family, and save for retirement?

If not, your career prospects will be like many hardworking eastern Europeans--not very good. In fact, you may be worse off than the young Romanians and Bulgarians busing tables on cruise ships.

At least the eastern Europeans have a strong work ethic and an ability to work cheerfully for long hours. You may not have picked up those skills at the frat house, the student rec center, or the bullshit sessions that masquerade as academic courses in the liberal arts.

And the eastern Europeans will have one more advantage if you compete with them for low-skill jobs. They won't be burdened by student loans.

Life as a cruise ship worker.



Thursday, October 13, 2022

Biden's Student-Loan Forgiveness Application Lacks Adequate Fraud Protection: But Does That Really Matter?

Honoring a campaign promise, President Biden will forgive $10,000 in personal student-loan debt owed by about 40 million college borrowers. The only people ineligible for this bonanza will be single persons who make more than $125,000 a year or married people making more than $250,000.

Biden's Department of Education released its loan-forgiveness application a few days ago, which is incredibly simple. Applicants must state their annual income to determine eligibility, and most will not be required to verify their income with tax returns or other supporting documents.

Critics say Biden's distribution plan lacks adequate protections against fraud. People who make $129,000 a year may falsely claim they make less than $125,000 in order to receive $10,000 in debt relief.

Although President Biden's loan forgiveness scheme has plenty of flaws, I'm in favor of it. Millions of Americans took out modest student loans to enroll in college and then dropped out without getting any benefit from their educational experience. Wiping out $10,000 in student-loan debt (or $20,000 for Pell Grant recipients) will free many borrowers from all their student debt. I'm okay with that.

Moreover, I'm not too concerned about fraud. The only student borrowers who might scam the program are single individuals making over $125,000 or married couples making over $250,000. 

These high-income individuals are not likely to fraudulently mispresent their income to get a paltry ten grand in student-loan forgiveness. In any event, the Biden administration promises to ask about 5 million loan-forgiveness applicants to verify their income--targeting people with six-figure salaries.

Let's face it. The feds don't really care if student borrowers pay back their loans. The Department of Education paused student-loan payments for nearly three years.  The suckers who made their monthly student-loan payments anyway are eligible for a refund.

About nine million people are enrolled in income-based repayment plans (IBRPs), allowing them to make modest loan payments so low they don't even cover accruing interest.  Virtually all those people will never pay back their student loans.

And as generous as the present IBRPs are, the Biden administration is working on an even more munificent IBRP program that will require monthly loan payments so low that the Brookings Institution estimates DOE will only get back about 50 percent of the money it loans.

So here's where we are. About 40 million people owe a total of $1.7 trillion in student loans, and many of these borrowers will never pay off their debt. As Steve Rhode wrote in a recent essay, the sensible thing for Congress to do is to revise the Bankruptcy Code so that honest but unfortunate debtors can discharge their student loans in bankruptcy.

But apparently, that suggestion makes too much friggin' sense. 

Thus we see people like Tamara Parvizi, who owes $650,000 in student-loan debt, which she can't pay back and can't discharge in bankruptcy. When she went to bankruptcy court, DOE insisted that she be put in an IBRP. A federal bankruptcy judge agreed.  Under this IBRP, Ms. Parvizi will pay $80 monthly for twenty-five years.

The only relief Ms. Parvizi will get is $10,000 in loan forgiveness on almost two-thirds of a million dollars in student debt.

 In essence, our government behaves like an alcoholic who runs up a tab drinking Jack Daniel's at his neighborhood tavern.  Every so often, the drunk comes in and pays off his tab, but he keeps drinking. 

That's nuts, and everybody knows it.

Just put it on my tab.




 



Monday, October 10, 2022

Do you owe a half million dollars in student loan debt? Maybe you won't have to pay it all back

 Get Out of Debt Guy, an online debt counseling site operated by Steve Rhode, recently received a request for advice from Rose, a graduate of St. George University Medical School. Rose now owes more than half a million dollars in student loans.

Rose said the quality of her education was fine but that the medical school misrepresented the cost. School officials told her she could do clinical rotations in her home state of Connecticut. In fact, she was required to do them in five different states, which substantially increased the cost of her studies.

Steve gave Rose some good advice. First, he advised her to file a Borrower Defense to Repayment application with the Department of Education (DOE). If the Department concludes she was a victim of misrepresentation, Rose might get some or all of her federal student loans forgiven. 

Rose's student debt history is somewhat complicated. She has three loans through Navient, two Stafford loans, and one private loan. Steve advised her to obtain the services of a knowledgeable student-debt attorney who could create a comprehensive solution for all her debt. 

Rose's chances of getting debt relief through a borrower defense application are much better under the Biden administration than the previous presidential administration. 

Betsy DeVos, President Trump's Education Secretary, was highly hostile to borrower defense claims. In contrast, Biden's Department of Education (DOE)has forgiven $6 billion in student debt owed by 200,000 borrowers who filed fraud or misrepresentation claims against their schools.  Indeed,  as Steve pointed out, DOE sent Roses' medical school a Notice of Penalty Offenses about a year ago. 

Rose might have another option for getting her student debt under control.  DOE is preparing a new income-based repayment plan (IBRP). If enacted, student borrowers could pay as little as 5 percent of their discretionary income--without regard to how much they borrowed. Moreover, the threshold for determining discretionary income will be 225 percent of the borrower's poverty-level income--up from 150 percent under current IBRPs.

Adam Looney, writing for the Brookings Institution, explained the new IBRP and its impact on borrowers with high levels of graduate-school debt.

[I]ncreases in the generosity of [new] IDR parameters primarily benefit higher-income borrowers with high debt levels. Per CBO estimates, reducing the percentage of income borrowers pay (e.g. from 10% to 5%) and increasing the threshold that defines discretionary income (e.g. from 150% to 225% of poverty) benefits graduate borrowers three times as much as it benefits undergraduate borrowers.

If the Biden administration's munificent new IBRP is enacted, many student debtors will repay only about 50 percent of what they borrowed.

That will be a hell of a deal for people like Rose, who borrowed heavily to fund their graduate studies. 

For taxpayers, however, the deal is not so good. They will wind up subsidizing people who racked up enormous debt to get a graduate education.

St. George Medical School: Kinda pricey


Wednesday, October 5, 2022

Always Leave a Rat a Way Out: An Old Guy's Misgivings About the War in Ukraine

 When I was a young man practicing law in Alaska, my senior partner gave me some advice I never forgot. Several times during my legal career, I had an opportunity to completely devastate a nefarious party that had pressed a frivolous claim against one of my clients.

"I've got you now," I told myself as I made plans not only to defeat my opponent but to humiliate and destroy him. In these cases, my senior partner always cautioned prudence and restraint. "Richard," he would say, "always leave a rat a way out."

And he was right. I learned that a party pressed to the wall almost always lashes out viciously and behaves recklessly to the detriment of everyone--good guys and bad guys alike.

So far, President Putin's war against Ukraine has not gone well for the Russians. To almost everyone's surprise, Ukraine has beaten back the Russian invasion, inflicting heavy casualties. The Ukrainians have destroyed countless Russian tanks, airplanes, and even the flagship of Russia's Black Sea fleet.  The Ukrainians have been so exhilarated by their battlefield successes that President Zelensky promises to evict the Russians from Crimea, where they have been since 2014 (and centuries before that).

What fun! In America, the elite media crows with delight. How delicious to rub Mr. Putin's face in the mud.  

We should remember, however, what George Orwell said about war. "One of the most horrible features of war," he observed, "is that all the war propaganda, all the screaming and lies and hatred, come invariable from people who are not fighting."

With a few rare exceptions, the reporters who work at the New York Times, Washington Post, and CNBC are not being shot at. If the Ukraine war escalates, their children won't be drafted. Their paychecks, restaurants, and expense accounts won't be affected. The beaches of Martha's Vinyard and the Hamptons will be pristine and peaceful no matter what happens to the Russians and the Ukrainians.

We should remember, however, that Russia is a nuclear power. We may sneer at Putin's threats to unleash tactical nuclear weapons. We may comfort ourselves that Russia is merely a regional power, unlike the mighty United States, which is supposedly the most powerful military power in the world.

Nevertheless, we should always leave a rat a way out. 

Our diplomats and political leaders may consider Ukraine an American playground that can be manipulated like a child's toy. Perhaps they have not read about Stalin's Holodomor or the savagery of the Russians and the Germans in the blood lands of Ukraine and Belarus during the Second World War.

Of course, I'm some old guy living in Flyover Country. What do I know compared to the policymakers and political strategists who got their degrees from Harvard, Yale, and Georgetown?

However, I've done a little reading, and I recall that Hitler woefully underestimated the Russians when he launched Operation Barbarossa in the summer of 1941. The Germans pushed the Russian army back to the outskirts of Leningrad, Stalingrad, and Moscow, but in the end, Russian soldiers showed up in the streets of Berlin in May 1945. I'll bet the Germans wished they had let Russia alone.

And Napolean, one of the world's greatest military strategists, lost his entire army when he foolishly invaded Russia in 1812. By the time that adventure ended, little Nappie had lost ninety percent of his army, with the survivors reduced to cannibalism.

So let the United States strip our nation's arsenals to give high-tech weapons to the Ukrainians.  Let's see how it works out. As for me, I don't want my grandchildren fighting in Europe in a war that got out of control because the western powers didn't leave a rat a way out. 

Let's you and him fight!







Monday, October 3, 2022

I Got a Sweet Deal! Is Biden's new income-driven repayment plan too generous?

 College debtors definitely have a friend in President Biden.  So far, his administration has approved $25 billion in loan forgiveness. In addition, it paused student borrowers' monthly payment obligations until the end of 2022.

More relief is on the way. President Biden announced loan cancelation of up to $20,000 per student borrower.  The Congressional Budget Office predicts the program will cost $400 billion.

And that ain't all. The U.S. Department is working on a more generous income-based repayment plan (IBRP), which--for some borrowers--will amount to a free college education. 

Adam Looney, writing for the Brookings Institution, analyzed Biden's new IBRP; his findings are astonishing. As Mr. Looney explains, undergraduate borrowers can enter into an IBRP that only requires them to pay 5 percent of their annual income over $33,000.         

For example, unmarried college graduates who make $50,000 a year will only be obligated to pay about $70 per month on student loans--regardless of how much they borrowed.

What if the monthly payment isn't enough to cover accruing interest? No problem! The government will forgive the unpaid interest, so loan balances don't grow.

Now that's a sweet deal!

On average, Looney concludes, student borrowers can expect to pay back only 50 cents on every dollar borrowed, and some will never make a single loan payment. 

Looney predicts the new IBRP will lead to increased borrowing. Why? "Because when . . . students are offered a substantial discount by paying with a federal loan, they will borrow billions more each year."

As Looney pointed out in his report, students can take out student loans to cover their tuition and living expenses. Students who receive checks for living expenses can deposit them in their bank accounts, knowing they may not have to pay back their student loans.

As Looney put it, "Some people will use [student] loans like an ATM, which will be costly to taxpayers and is certainly not the intended use of the loans."

Looney also predicts that Biden's incredibly generous IBRP will lead to tuition inflation. 

He thinks the new IBRP will prompt colleges to create new and expensive programs to juice their revenues. "My fear," he wrote, "with regards to overall college costs, is that institutions will have an incentive to create valueless programs and aggressively recruit students into those programs with promises they will be free under an IDRP plan. 

I'm in favor of student-loan relief. Millions of Americans are saddled with crippling debt for college degrees that did not benefit them financially.  Let's give those folks a break.

But President Biden's new IDRP program goes too far. Adam Looney is right: Biden's poorly-designed IBRP will encourage students to borrow more and more money to attend college, knowing they will not be obligated to pay back their loans.



A  student-loan bonanza is coming soon to your hometown.









Saturday, October 1, 2022

Consumer Financial Protection Bureau reports that the Federal Student Loan Program is a mess

The Merriam-Webster dictionary defines snafu as "a situation marked by errors or confusion." The word is an acronym for "Situation Normal, All Fouled (or Fucked) Up." 

Earlier this month, the Consumer Financial Protection Bureau issued a report confirming what we already knew:  the federal student program is all f-cked up. The CFPB's publication is titled Supervisory Highlights Student Loan Servicing Special Edition, which doesn't tell you a damn thing about what's in the report. Perhaps that was intentional.

Although the bureaucratic writing style is turgid. The report makes clear that the federal student loan program is spectacularly mismanaged.

Here are some highlights:

The CFPB found that many colleges and universities refuse to release academic transcripts to students who are indebted to their institution.  This practice often makes it impossible for former students to transfer to another school or get a job. The CFPB believes this practice is "abusive under the Consumer Financial Protection Act." Duh!

Second, CFPB criticizes student-loan servicers for bungling the administration of income-based repayment plans. Many borrowers in IBRPs are kicked out of these programs because they failed to certify their annual income annually. Those borrowers are then required to get recertified.

CFPB  accused student-loan servicers of improperly denying borrowers' applications to get reinstated in an IBRP. "Examiners found that servicers engaged in a deceptive act or practice by providing consumers with a misleading denial reason after they submitted an IDR recertification application."

For example, servicers sometimes don't tell borrowers they must certify their income when they were not in an IBRP. Then they refuse to reinstate those borrowers because they didn't provide their income information.

CFPB also accused servicers of giving parent borrowers inaccurate information about their eligibility for an IBRPeligibility.

In short, the CFPB scolded for-profit colleges for withholding academic transcripts and student-loan services for spectacular mismanagement of income-based repayment plans.

Tellingly, the CFPB did not identify a single malefactor or suggest even one substantive action to correct the problems it identified. Instead, it ended its report with this pathetic and syntax-tangled sentence:

Regardless, where the Bureau identifies violations of Federal consumer financial law, it intends to continue to exercise all of its authorities to ensure that servicers and loan holders make consumers whole.

How reassuring! 

Why didn't the CFPB propose that Congress pass a law that would make it illegal for a college to withhold academic transcripts from students, regardless of the reason?

Why didn't the CFPB call for the Department of Education to collaborate with the Internal Revenue Service to determine the annual income of students in IBRPs? It makes no sense for loan servicers to keep borrowers out of IBRPs because they didn't certify their income when the government can quickly determine annual income by looking at borrowers' annual federal income tax returns.

For some reason, the Department of Education and the CFPB would rather keep the student loan program in a snafu condition than take reasonable steps to make it operate more efficiently.

Snafu