Showing posts with label COVID pandemic. Show all posts
Showing posts with label COVID pandemic. Show all posts

Tuesday, September 7, 2021

Department of Education pauses collection efforts against student-loan debtors: Guaranty agencies garnish wages anyway

In response to the COVID pandemic, the Department of Education allowed student-loan debtors to skip their monthly loan payments without penalty until September 30, 2021.  That pause was recently extended to January 30, 2022. 

Thanks to the Department's forbearance, millions of college-loan borrowers are enjoying a respite from making loan payments, knowing that DOE will not charge interest and penalties during this grace period and that their wages will not be garnished due to nonpayment. 

But guess what? Loan guaranty agencies continued garnishing the wages of student-loan borrowers despite the federal moratorium.  According to the Student Borrower Protection Center, the guarantee agencies garnished $27.2 million in May 2021 and $12.9 million in June 2021.

Will student borrowers recover these lost wages? Probably. But it will probably take a long time. After all, the Department of Education didn't forgive all student loans taken out by people who were defrauded by ITT Tech until five years after the for-profit college filed for bankruptcy.

The federal student loan program has enormous problems, and some of them will be difficult to fix. But surely, the Department of Education can require the loan guarantee agencies to abide by Department policy and the law.

But apparently, the guaranty agencies think they are above the law. In 2016, Educational Credit Management was assessed punitive damages for repeatedly garnishing the wages of a bankrupt student debtor in violation of the Bankruptcy Code. 

In an earlier case, ECMC was sanctioned for violating the Bankruptcy Code by collecting on a debt discharged in bankruptcy. 

Perhaps, you might conclude, the guaranty agencies inadvertently violate the law because they don't have the financial resources they need to keep track of their legal obligations. But that conclusion would be incorrect. According to a report issued by the New Century Foundation in 2016, Educational Credit Management, a nonprofit corporation, had more than $1 billion in nonrestricted assets.

Congress has a lot to do to clean up the student-loan mess, but it might start by holding hearings to examine the practices of the guaranty agencies.  Congress might begin by asking why some of the guaranty agencies are so rich. It might also inquire into the agencies' attorney fees the agencies run up chasing distressed student-loan debtors into the bankruptcy courts. 

Finally, Congress might look into how much the guaranty agencies are paying their senior management.  More than ten years ago, Bloomberg reported that the current CEO of ECMC was making more than $1 million a year.  What do you think ECMC's current CEO makes?  My guess--somewhere in the high seven figures. 

We don't need no stinkin' pause on student-loan collections.





Friday, August 20, 2021

Online teaching sucks: Don't pay $50,000 a year to take classes in your pajamas

 American universities are in a tight spot. When the coronavirus pandemic hit in March 2020, almost all of them closed their campuses and switched to online instruction.

Result? Students filed hundreds of lawsuits against the colleges, claiming--rightly in my opinion--that online teaching is inferior to face-to-face instruction and wasn't what they paid for. In many of these cases, students were paying tuition priced north of $25,000 a semester, yet they could not personally interact with a single professor.

Now, as the 2021 fall semester approaches, colleges must decide what to do.  Basically, they have three choices:

First, they can continue with online instruction, hoping that students will consent to another year of taking courses on their home computers.

Second, colleges can reopen their campuses but require students to wear masks and maintain social distancing. But such a policy imposes onerous burdens on students, which many of them probably won't accept.

Third, colleges and universities can reopen their campuses for face-to-face learning while insisting that all students get the COVID vaccine.

In my opinion, most colleges have no real choice--they've got to get professors and students back in the classroom under more or less normal conditions, and they've got to require everyone in the campus community--students, instructors, and staff-- to get vaccinated. 

If colleges continue teaching in an online format, they will experience significant losses in enrollment.  Why? Because online learning sucks, and everyone knows it.

 A recent report by the Brookings Institution confirmed what everybody already knew: "Online coursework generally yields worse student performance than in-person course work." Moreover, the Brookings researchers reported, "The negative effects of online course-taking are particularly pronounced for less academically prepared students and for students pursuing bachelor's degrees."

College bureaucrats may worry about getting sued if they make professors and students get vaccinated.  But the Seventh Circuit, in a decision issued in early August, ruled that Indiana University can require its students to be vaccinated as a condition of enrollment.

So--the bottom line is this--universities have the legal authority to require students to get vaccinated against COVID and refuse admission to students who won't get their shots.

And that's what they had better do. Because students and their parents won't put up with another year of online instruction that costs 25 grand a semester.

College professors: They're alive! They're alive!

References

Klaassen v. Trs. of Indiana Univ., No. 21-2326, 2021 WL 3281209 (7th Cir. Aug. 2. 2021).




Monday, March 15, 2021

All Sales Final! No Refunds! Students lose lawsuit for tuition reimbursement against four Rhode Island universities that closed their campuses during COVID pandemic

Almost exactly one year ago, American higher education shut down in response to the COVID pandemic.  All across the United States, universities closed their campuses and switched from face-to-face instruction to online teaching.

Over the past several months, students brought dozens of lawsuits against their colleges, seeking partial tuition refunds for the 2020 spring semester. They argued that the quality of teaching suffered when teaching shifted to computerized learning.

Some student plaintiffs found sympathetic courts, but a federal judge in Rhode Island dismissed students' lawsuits against four Rhode Island schools: Brown Univesity, Johnson & Wales University, Roger Williams University, and the University of Rhode Island.

 Judge John McConnell ruled that the four universities had no contractual obligation to deliver in-person instruction during the spring of 2020.  In Judge McConnell's view, the universities' recruitment materials, which touted lovely campuses and stimulating classroom environments, were mere "puffery" and did not amount to a contractual obligation to teach classes face-to-face.

I think Judge McConnell ruled correctly. Confronted with the coronavirus pandemic, American colleges and universities had no choice but to switch instruction from the classroom settings to an online format.

I sympathize with the students who brought these lawsuits, particularly the one brought against Brown University, an elite Ivy League school. Brown's tuition and fees total $58,000 per year. Students did not shell out that kind of money to take classes by sitting in front of a commuter in their parents' basements. 

Nevertheless, America's college leaders were justified in closing their campuses last spring. It was the only responsible thing to do. Surely they realize, however, that they cannot teach students via computers over the long term, even if the coronavirus pandemic stretches out for many months or years to come.

The total cost of attending America's most prestigious colleges now amounts to about $70,000 a year or even more. Most students will have to take out student loans to cover the bill.

If Brown's academic leaders think their students will take out student loans indefinitely for computerized instruction, they are in for a rude awakening.  No one will go into six-figure debt to get an online diploma, even if the credential is from Brown University.

Thus if the COVID pandemic isn't quickly brought under control, it will be the end of expensive private-college education.  After all, a young person smart enough to be admitted to Brown is smart enough not to pay $58,000 a year for an online college degree.




References

Burt v. Board of Trustees of the University of Rhode Island, __ F.3d ___, C.A. No. 20-465-JJM-LDA (D.R.I. March 4, 2021).