Showing posts with label Elizabeth Warren. Show all posts
Showing posts with label Elizabeth Warren. Show all posts

Thursday, April 30, 2020

Massive student-loan forgiveness is now a mainstream idea: Even Al Jazeera is on board

Around 45 million Americans owe a total of $1.6 trillion in student loans, and approximately 20 million of those debtors are not paying them back.  Betsy DeVos, President Trump's Education Secretary, admitted more than a year ago that only one out of four student borrowers was paying down principal and interest on their federal loans. "In the commercial world," DeVos observed, "no bank regulator would allow this portfolio to be valued at full, face value."  

So why not just forgive all this festering debt--debt that is preventing struggling Americans from buying homes, having children, or saving for their retirement?

That notion is now a mainstream idea in American politics. Senator Bernie Sanders got the ball rolling when he called for wiping out all this debt.  Senator Elizabeth Warren proposed something slightly less radical--forgiving student debt up to $50,000.  And Joe Biden, the Democrats' presumptive nominee for the Presidency, wants to forgive all debt owed by individuals who attended a public university or a historically black college (HBCU).

Even Al Jazeera, an Arabic-focused news organization, based in Qatar, wants to forgive all federal student loan debt.  America is experiencing its worst economic crisis since the 1930s, Al Jazeera reporters pointed out, and the U.S. needs to prioritize relief  for "people, not profit." Al Jazeera calls for canceling all student loan debt, which would "help those hit hard by the coronavirus pandemic to "rebuild their futures."

Writing off all federal student debt is not a crazy idea, especially, as I just said, a bunch of it isn't being paid back anyway. But does Congress have the political will to do it? I don't think so.

After all, the straightforward solution to this crisis would be to simply allow overwhelmed debtors to discharge their student loans in bankruptcy. Bills have been introduced in Congress that would accomplish just that, but those bills have gotten nowhere. 

I've said this before, and I will repeat it. Congress should allow insolvent Americans to file for bankruptcy and discharge their student loans like any other consumer debt: credit cards, car loans, and business obligations. 

And all Congress needs to do to accomplish this sweeping reform is to remove two words from the U.S. Bankruptcy Code: "undue hardship." It is the "undue hardship" language, after all, that the federal courts have interpreted so harshly, and which has denied bankruptcy relief to millions of honest student-loan debtors.

Of course, if Congress abolished the "undue hardship" standard, it would need to appoint a lot more bankruptcy judges to deal with a torrent of bankruptcy filings. And the judges would need to make sure that people who have the financial wherewithal to repay their loans don't fraudulently apply for bankruptcy relief.


In my view, calls to wipe out all student debt are irresponsible because politicians know this is never going to happen. Bankruptcy reform provides an orderly and fair way to give unfortunate student debtors a fresh start while guarding against fraud. 





Saturday, March 21, 2020

The coronavirus pandemic and broad relief for battered student-loan debtors: Congress needs to go big or go home!

The coronavirus pandemic rolls along like a tropical storm gathering force in the Gulf of Mexico.
Every day, it kills more Americans and further batters the national economy. The airline industry, the travel industry, and the restaurant business are begging for financial assistance to help them survive an economic crisis that no one saw coming.

PresidentTrump and Congress are working on a $2 trillion aid package to assist industries that have been hit hardest by the COVID-19 outbreak and provide cash assistance to individuals who lost their jobs or their businesses due to the pandemic.

Lawmakers also recognize that student-loan debtors need relief. Even before the pandemic, millions of college-loan borrowers were struggling to pay off their loans. Now--as the unemployment rate rises and whole industries collapse, a lot of student-loan debtors have their backs to the wall.

Republicans and Democrats have both proposed some form of assistance for student debtors. The Republicans recommend giving students a three-month break from their student-loan payments with no interest accruing.  The Democrats want the Department of Education to make student-loan payments on borrowers' behalf for as long as the national emergency lasts.

These proposals are a good start, but they do not go far enough. More than 45 million people have outstanding student loans, and less than half of them can pay them back. As President Trump might say, it's time to "go big" when we think about student-loan relief.

First of all, let's take a look at Senator Bernie Sander's proposal for total student-loan forgiveness—a $1.6 trillion-dollar bailout. Let's also examine Senator Elizabeth Warren's plan for loan forgiveness up to $50,000 per debtor. These ideas are not as wacky as some commentators have made them sound.

Regarding Bernie's idea, let's face facts. More than 8 million people are in long-term, income-based repayment plans, and most of these people are not paying down the interest on their loans. In fact, their loan balances grow with each passing month due to accruing interest. Millions more are in default or have their student loans in deferment. They're not paying their loans back either.

What's the point of pretending the student-loan scheme is a solvent federal program? It's not.  Bernie's plan to wipe out all student debt and offer a free college education is a logical proposal.

Senator Warren's plan to help student debtors also makes sense.  She wants to cap debt relief at $50,000, and that would help a great many people. After all, as  Don Trooper and colleagues recently reported in The Chronicle of Higher Education, people with small loan balances are more likely to default on their loans than people who owe $100,000 or more.

Forgiving student debt for individuals who ow relatively small amounts would help a lot of debtors who took out student loans to attend for-profit colleges and trade schools and didn't benefit from their educational experience.  That would be a good thing.

But if we really want to "go big," Congress must do two straightforward things. First, it must strike the"undue hardship." language from the Bankruptcy Code and allow insolvent student-loan borrowers to discharge their college loans in bankruptcy like any other nonsecured consumer debt. Second, it must repeal those provisions of the 2005 Bankruptcy Reform Act that made it more complicated and more expensive for beaten-down debtors to file for bankruptcy.

The very purpose of bankruptcy in American law is to give honest but unfortunate debtors a fresh start. Lawmakers need to remember that now as we enter into this century's Great Depression.

The 2020 Depression will look a lot like the Depression of the 1930s.









Tuesday, March 17, 2020

Joe Biden and the 2005 Bankruptcy Reform Act: "It's not personal. It's strictly business."

The 2020 presidential election is about eight months away, and I'm not going to tell you how to vote. If you hate Trump, you'll vote for Biden. If you think Biden is suffering from dementia, you'll vote for Trump.  And by election day, Biden or Trump will probably be your only choice.

Regardless of their political affiliation, all student-loan borrowers who are drowning in debt will want the next President to do one thing: reform the bankruptcy law. Specifically, they will want the next President to pressure Congress to repeal the Bankruptcy Reform Act of 2005 and to remove the "undue hardship" language from the Bankruptcy Code.

The Bankruptcy Reform Act of 2005--named with unintended irony--made it more difficult for Americans to discharge credit card debt in the bankruptcy courts, and it made the bankruptcy process more expensive and more difficult for beaten-down debtors.

 According to Senator Elizabeth Warren:
After the bill passed, bankruptcy filings went down permanently by 50%, and the number of insolvent people went up permanently by 25%. By making it harder for people to discharge their debts and keep current on their house payments, the 2005 bill made the 2008 financial crisis significantly worse: experts found that the bill “caused about 800,000 additional mortgage defaults and 250,000 additional foreclosures.” 
The law also made private student loans almost impossible to discharge in bankruptcy. Before its passage, debtors could not discharge federal student loans in bankruptcy unless they could show "undue hardship." After the bankruptcy reform law was passed, private loans were also nondischargeable unless a debtor could show undue hardship.

The law was a Republican-backed bill, which Senator Ted Kennedy scathingly criticized. “This legislation breaks the bond that unites America, it sacrifices Americans to the rampant greed of the credit card industry,” Kennedy said.

But many Democratic senators crossed party lines and voted with the Republicans.  One of those aisle-crossing Democrats was Joe Biden. Senator Biden claimed the new law would cut down on abuses in the bankruptcy system. In fact, there was little evidence that debtors were scamming the bankruptcy courts.

In my view, Biden disguised his motives for voting in favor of the bankruptcy reform bill. In reality, Biden was doing the bidding of the corporate banks, which have donated millions to his campaign coffers over the years. To borrow a quote from The Godfather, Biden's vote wasn't personal; it was strictly business.

Now, however, Mr. Biden is singing a different tune. As reported by Matthew Yglesias in Vox,  Biden recently changed his position on the 2005 law. He now endorses the views of Senators Elizabeth Warren and Bernie Sanders, who have called for its repeal.

This is good news for student-loan debtors, but I think Mr. Biden needs to express his change of views more forcefully. Student debtors need to hear Biden explicitly call for the repeal of the 2005 Bankruptcy Reform Act and the abolition of the "undue hardship" language in the Bankruptcy Code. If he does that, Biden will win a lot of votes in the November election.



Biden and the 2005 Bankruptcy Reform Act: It wasn't personal. It was strictly business.

Saturday, February 1, 2020

Urban Institute: Thirty percent of student debtors are enrolled in Income-driven repayment plans

The federal student-loan program is in crisis, but it is hard to figure just how big the problem is.

The Department of Education annually reports the percentage of student borrowers who default three years after beginning repayment. That figure--about 10 percent in recent years--is concerning but not alarming.

Non-governmental studies (Pew Foundation and Brookings Institution) have found that the 5-year default rate for recent cohorts is double the 3-year rate: about 25 percent.  In other words, 1 out 4 student-loan debtors default on their loans within five years of beginning repayment.  Now that is alarming.

But the situation is a lot more dire than that.  A recent report from the Urban Institute (authored by Kristin Blagg, Laurie Goodman, and Kelia Washington) noted that 8 million student-loan debtors are in income-driven repayment plans (IDRs).  According to this report, that amounts to about 30 percent of all college borrowers.

That's really scary because almost no one among those IDR participants is paying down the principal on his or her debt.  Instead, just about all of these 8 million people are making very small monthly payments based on their income--not the amount that they borrowed.

It is always dicey to compare one student-loan analysis to another because we are always measuring apples and oranges. Some of the people counted as 5-year defaulters in one study may be the same people identified as IDR payers in another. (And the Brookings and Pew studies examined cohorts, not the entire student-debtor population.)

Nevertheless, it is clear that when the 5-year defaulters and the IDR participants are considered together, about half of all student-loan borrowers are not paying off their loans.  In my opinion, that's a meltdown.

You may love Senator Bernie Sanders and Senator Elizabeth Warren or you may hate them, but both deserve credit for putting a serious proposal on the table to address the student-loan crisis.  Forgiving all student debt (Bernie's plan) or $50,000 of a borrower's debt (Elizabeth Warren's plan) are reasonable ideas.

One thing seems clear (at least to me): The student-loan program is out of control and it is kicking millions of people out of the middle class. The program hinders overburdened debtors from buying homes, having children, getting married, and saving for retirement.

And who benefits? Our corpulent, incompetently run colleges and universities whose leaders say the universities need more federal money.

Greedy colleges: "Feed me, Seymour!"





Sunday, January 19, 2020

Trump Administration is "woke" to the student-loan crisis: What can it do in 2020?

Love 'em or hate 'em, student-loan debtors owe a debt of gratitude to Bernie Sanders and Elizabeth Warren for putting the student-loan crisis on the front burner of national politics. Liz proposes to forgive the first $50,000 of student debt if she is elected President. Bernie says--what the hell--let's forgive it all.  That's $1.6 trillion!

Meanwhile, as the Democrats offer to help college borrowers, Trump’s Department of Education (DOE), led by Education Secretary Betsy DeVos, is doing everything it can to alienate a very large constituency--45 million student-loan debtors.  

But last month, the Trumpers became "woke" to the student-loan catastrophe.  As reported by the Wall Street Journal's Josh Mitchell and Andrew Restuccia, the Trump administration is considering some relief options, including allowing borrowers to shed their student-loan debt in bankruptcy.

According to the WSJ, the Trump administration is mulling a policy adjustment whereby DOE "would essentially decline to contest borrowers’ requests before [bankruptcy] judges to have their student loans canceled.” The beauty of this proposal is Trump could make this adjustment without congressional approval.

Better than that, Trump could claim that he is only following the policy announced by the Obama administration in 2015 when DOE's Lynn Mahaffie said in a letter that DOE would not oppose bankruptcy relief for student borrowers if it did not make economic sense to do so.

Of course, DOE never followed that policy. Instead, it has allowed Educational Credit Management Corporation to oppose virtually every student debtor’s petition to shed student-loan debt in the bankruptcy courts.  And this has been DOE’s practice under both the Obama and the Trump administration.

All President Trump needs to do to grant significant relief to college debtors is tell ECMC to fire its battalions of lawyers and file formal non-opposition documents when worthy student debtors seek to discharge their student loans in bankruptcy.

Undoubtedly, a few unscrupulous people would try to use the bankruptcy courts to shed debt they have the means to repay and which they should repay. But filing a fraudulent bankruptcy claim is a federal crime, and the bankruptcy judges know how to sniff out deceitful claims.

If Trump were to follow through with this proposal, we will need a lot more bankruptcy judges because millions of people would be entitled to bankruptcy relief.  Where will we get the money?  Let’s take the cash that DOE is funneling to ECMC and its lawyers and use it to hire some judges. 

Pretty simple really.  

"What do you say, Betsy? Let's tell ECMC to piss up a rope."




Monday, September 16, 2019

Higher education leaders oppose Democrats' proposal for free college: Why?

College tuition has risen faster than the rate of inflation for the past quarter-century. While wages have remained stagnant, the cost of going to college has shot through the roof. According to Forbes writer Camilo Maldonado, tuition rose 8 times faster than wage growth during the years 1989 to 2016. Eight times faster!

Why? The colleges say they are forced to raise tuition rates because the states are providing less support for higher education. But this lame explanation--repeated ad nauseam--is mostly bullshit. The colleges don't mention the explosion in administrative positions-the profusion of assistant vice presidents, executive associate deans, etc. It is not uncommon for senior administrators at public and private universities to draw salaries that exceed a quarter-million dollars a year.

In any event, everyone agrees that rising tuition costs have forced millions of American students to take out student loans, which now total $1.6 trillion. Something must be done to alleviate the distress.

Several Democratic candidates for the presidency have proposed making college education free at all public colleges and universities. You would think the higher education community would love that idea. But it doesn't. Vassar president Catharine Hill criticized Bernie Sanders's free-college idea when he ran for president in 2016. Her lame-brained solution was to expand long-term income-based repayment plans. And that's basically what we've done--creating repayment plans deliberately structured so that students can never pay off their college loans.

Now we are in the early stages of the 2020 presidential election season, and more Democratic hopefuls have joined Bernie in proposing a free college education for everyone. Senators  Elizabeth Warren, Kamala Harris, Cory Booker, and Kirsten Gillibrand (who recently dropped out of the presidential race) have all endorsed a free-college proposal.

But the higher education community still opposes the idea. Just a few days ago, Brian Rosenberg, president of Macalester College, published an op-ed essay in Chronicle of Higher Education, in which he cited a couple of liberal tropes to justify his opposition to free college.

A free college education would hurt low-income students, Rosenberg argues, because they would be "squeezed out" in the application process that would become more competitive if tuition were free. And he also contends that free college would exacerbate the nation's already low graduation rate.

Huh? How could free college be bad for low-income students? How could it make graduation rates go down?

Mr. Rosenberg is the president of Macalester College, a very good liberal-arts school in Minnesota, but he does not mention that free college at public institutions would severely disadvantage the private colleges. Who would pay $54,000 a year in tuition and fees to attend Macalester College if they could enroll at the University of Minnesota tuition-free?

 I'm sure Mr. Rosenberg's arguments against free college are sincere and his commitment to private liberal-arts education is genuine. But a great many university presidents and higher-education policy wonks simply don't care about the student-loan crisis, which has motivated political leaders to propose a free college education.  They want to preserve the status quo in higher education, with the federal government spewing more than a $100 billion a year to support the present system.

How many elite-college presidents have come out in favor of a free college education? I don't think any of them have. Unlike Mr. Rosenberg, most college leaders are keeping silent about their qualms, but rest assured they will fight tooth and nail if a Democrat is elected President and tries to get a free-college plan through Congress.

Meanwhile, I don't think any of these arrogant college presidents have lifted a finger to ease the student-debt crisis.  The status quo works just fine for them.

Macalester College: $54,000 in tuition and fees
(the bagpipe music is complimentary)



Sunday, February 24, 2019

Congressman John Katko introduces bill to make student loans dischargeable in bankruptcy. Will presidential candidates endorse the bill?

Last month, John Katko, a Republican congressman from New York, filed H.R. 770, a bill that would make student loans dischargeable in bankruptcy like any other consumer debt.

Titled the "Discharge Student Loans in Bankruptcy Act," Katko's bill is quite simple. It merely strikes the "undue hardship" clause from Section 523(a) of the Bankruptcy Code.

Congressman Katko filed the same bill two years ago. When he filed the bill in 2017, it had ten co-sponsors, including Maryland Congressman John Delaney. When Katko refiled the bill last month, he only had two co-sponsors.

If H.R. 770 becomes law, millions of Americans who are overwhelmed by student loans will get relief in the bankruptcy courts. They will have an opportunity to start families and buy homes. They will get the fresh start that bankruptcy is intended to provide.

Let's make Katko's bill the litmus test for everyone who is running for president or is thinking about running. Let's ask them one simple question: Do you support Katko's bill or not?

  • President Donald Trump, do you support H.R. 770?
  • Senator Elizabeth Warren, do you support Katko's bill?
  • Senator Kamala Harris, do you support H.R. 770?
  • Senator Bernie Sanders, do you support Katko's bill?
  • Former Vice President Joe Biden, do you support H.R. 770?
  • Senator Kirsten Gillibrand, do you support Katko's bill?
  • Senator Amy Klobuchar, do you support H.R. 770?
  • Michael Bloomberg, do you support Katko's bill?
  • Beto O'Rourke, do you support H.R. 770?
  • John Delaney, former Maryland congressman who co-sponsored Katko's bankruptcy-relief bill in 2017, you are now running for president. Do you support Congressman Katko's bill?
Our federal legislators are fond of holding committee hearings where they bully witnesses by demanding yes-or-no answers to all their hectoring questions.

Well, here is a question to everyone who wants to be president, and we should demand a yes-or-no answer. Unless a presidential candidate can say "Yes, I support H.R. 770 without qualification," that person is nothing more than a windbag who doesn't care about average Americans and does not deserve our vote.

*****

Note: I am grateful to Phil Uhrich for calling this bill to my attention.  Mr. Uhrich wrote a provocative essay on national politics in 2016 that is still timely.

Representative John Katko (R-NY)

Wednesday, February 13, 2019

We are all peasants now: The student-loan crisis is destroying the middle class

As the world changed, we reverted to social divisions that we'd thought were obsolete.  . . . A plain majority of the townspeople were laborers now, whatever in life they had been before. Nobody called them peasants, but in effect that's what they'd become.
World Made By Hand
James Howard Kunstler 

American higher education is the emperor who wears no clothes. College leaders boast that our nation's universities are the envy of the world while they rake in so-called federal "student-aid" and parade about in medieval regalia peddling worthless degrees.



And America's young people are the losers. They've been gulled into thinking they can gain a middle-class lifestyle by getting a college degree and maybe a graduate degree as well. But millions are finding that their college degrees gained them little more than massive debt. And those online MBAs and doctorates they purchased with borrowed money--just junk.

According to the Federal Reserve Bank, outstanding student-loan debt reached $1.56 trillion last January. Around 45 million Americans have student-loan obligations and 7.4 million are enrolled in long-term repayment plans that stretch out for as long as a quarter of a century.  As Secretary of Education Betsy DeVos admitted with shocking candor last November, only one out of four student borrowers are paying off the principal and interest on their loans.

It is now well documented that student-loan debt is contributing to the nation's declining birth rates--now near a record low. People can't afford children because they're paying off student loans.

Young people can't afford to buy homes, they can't save for retirement, they can't pay off their debts.  Their liberal arts degrees, their shoddy law degrees, their fluffy MBAs and doctoral degrees qualify them to become baristas and clerical workers.

We are now in the early stages of the 2020 presidential election season, and what do our politicians talk about? Russia, border walls, free health care, and the Green New Deal.  We should be discussing the New Raw Deal--the deal our government and our universities have imposed on guileless young people.

For too long, Americans have bought the line that our colleges and universities operate for the public good and that the people who run them are wise and kindly. We particularly revere the ivy league colleges where we get nearly all our prune-faced Supreme Court justices and most of our presidents.

But if the folks who run Harvard are so goddamned wise, how could they have fallen for Elizabeth Warren's scam that she's a Cherokee? And if our elite college leaders are sensitive and kindly, how did little boys wind up getting raped in a Penn State shower room? And how could dozens of female athletes get groped by Larry Nasser while he was on Michigan State's payroll?

No, let's face the truth. Many American colleges and universities are not run by wise and kindly people; most are run by administrators who are primarily concerned with the bottom line. And far too often, higher education is not preparing young Americans to enter the middle class. On the contrary, by forcing people to take on oppressive levels of debt to get a college degree, colleges are setting up millions of Americans for a lifetime of peasantry.








Friday, October 6, 2017

Why won't Congress do a few things to ease the student debt crisis like stop the government from garnishing Social Security checks of elderly student-loan defaulters?

James Howard Kunstler posted a blog last week in which he challenged Congressional Democrats to introduce legislation to counteract the effect of Citizens United v. Federal Election Commission, 558 U.S. 310 (2010). In that case, you may recall, the Supreme Court ruled that corporations can give as much money as they like to political campaigns. 

All sensible people agree that Citizens United triggered a new level of corruption in national politics as corporations pump millions of dollars into Congressional campaign coffers in order to protect their venal interests.

President Obama complained publicly about Citizens United while he was in office.  But he didn't do anything about it, even though he could have ameliorated its effect through legislation when the Democrats controlled the Senate and the House of Representatives.

Democrats can still put a Citizens United override on their legislative agenda as Kunstler challenged them to do:
That’s your assignment Chuck Schumer, Nancy Pelosi, and the rest of the Democratic Party leadership. Get serious. Show a little initiative. Do something useful. Draw up some legislation. Get behind something real that might make a difference in this decrepitating country. Or get out of the way and let a new party do the job.
And of course there are plenty of other things the Democrats can do to promote fairness and justice in our society. As Gretchen Morgenson pointed out in a New York Times article last year, hedge fund managers get a special tax break allowing them to pay lower taxes on their income than most Americans.  That's right: a hedge fund manager is taxed at a lower rate than a New York school teacher.  President Obama could have closed that loophole in the tax law by executive action, but he didn't.

And then there's corporal punishment in the schools. Researchers are unanimous that beating children with boards is not good for them, and the United Nations has identified corporal punishment as a human rights abuse.

In the waning days of the Obama administration, Secretary of Education John King, Jr. condemned corporal punishment in an open letter to the nation's school leaders. But why didn't King speak up sooner? Corporal punishment in schools is a wrong that Obama's Department of Education could have stopped with an administrative regulation. Why didn't it? 

And then there's the student-loan program, which has brought suffering to millions.  According to the Government Accountability Office, the Department of Education garnished the Social Security checks of 173,000  student-loan defaulters in 2015, a practice that Senator Elizabeth Warren bitterly condemned. The amount the government collects each year is a pittance--about one eighth the amount Hillary Clinton spent during the 2016 election season. And most of the money the Feds collect goes to paying interest and penalties without reducing the debtors' loan balances at all.

Senator Warren and Claire McCaskill filed a bill to stop the garnishment of student debtors' Social Security checks, but the measure never made it out of committee. Why won't Senator Schumer and Representative Pelosi get behind that bill? Who could decently oppose it?

In fact, there are numerous noncontroversial things our Congressional representatives could do to ease widespread suffering among the nation's poorest Americans. But  our Congressional representatives are not doing these things. 

Why? Two reasons.

 First, they don't want to do noncontroversial good things because that would mean sharing the credit with their political enemies.

And second, Nancy Pelosi, Chuck Schumer, John McCain, Mitch McConnell and all our other bozo representatives don't work for us. They work for the lobbyists, their campaign contributors, and the global financial institutions; and that keeps them pretty busy.




References

Secretary of Education John B. King, Jr. Letter to Governors and State School Officers, November 22, 2016.

James Howard Kunstler. Homework AssignmentClusterfuck Nation, September 29, 2017.

Gretchen Morgenson. Ending Tax Break for Ultrawealthy May Not Take Act of CongressNew York Times, May 6, 2016.


Senator Elizabeth Warren Press Release, December 20, 2016. McCaskill-Warren GAO Report Shows Shocking Increase in Student Loan Debt Among Seniors

United States Government Accountability Office. Social Security Offsets: Improvement to Program Design Could Better Assist Older Student Borrowers with Obtaining Permitted Relief. Washington DC: Author, December 2016).

Wednesday, May 3, 2017

Senator Elizabeth Warren and Senate progressives should press for hearings on Educational Credit Management Corporation and the student loan crisis

Senator Elizabeth Warren has had a brilliant career. She grew up in Oklahoma, went to law school, and wound up on the Harvard Law School faculty. Now she is in the U.S. Senate, and pundits say she may run for President in 2020. Impressive!

Somewhere along the way, Senator Warren represented that she had Cherokee blood, although she never provided a shred of evidence to support that assertion. Her claim may have been a factor in getting that cushy Harvard Law School job. But Harvard says no, and Harvard always tells the truth.

Nevertheless, Harvard Law School claimed it had a Native American professor while Warren was on the faculty, without identifying who it was. (To be fair, it may have been Alan Dershowitz).

If Warren misrepresented her heritage to advance her career, we can't be too hard on her. Higher education is a rough business, and Warren certainly played the game better than I did. And, as the song goes that Willie Nelson made famous, Liz only did what she had to do.

But Warren is a senator now, and she has an obligation to do some good for the American people. She claims to be an advocate for distressed student-loan debtors, but what has she done for them?

She's written letters to the Department of Education and spouted a lot of nonsense about the "obscene" profits the government makes off the student-loan program. More substantively, she co-sponsored a bill in 2015 to protect seniors from having their Social Security checks garnished, but the bill never became law.

In my view, Senator Warren could do more to address the student loan crisis than file bills and write letters. Specifically, she should join with other progressives in the Senate and press for Senate hearings on the student loan guaranty agencies and Educational Credit Management Corporation in particular. ECMC is perhaps the federal government's most ruthless debt collector and has amassed a billion dollars in unrestricted assets, at least partly from hounding destitute student debtors.

In the Bruner-Halteman case, for example, ECMC garnished the wages of a bankrupt Starbucks employee 37 times in violation of the Bankruptcy Code's automatic stay provision. A Texas bankruptcy slapped ECMC with $74,000 in punitive damages.

And in the Hann case, ECMC continued trying to collect on a woman's student loans even though a bankruptcy court had discharged those loans on the grounds that she had paid them off.  ECMC only got stung with a small penalty for that misbehavior.

Rafael Pardo and the Century Foundation both established that the federal government is paying ECMC's attorney fees, and ECMC is using its attorneys to ground down overburdened student borrowers in the bankruptcy courts. Many of these destitute people don't have the money to hire a lawyer, but ECMC is paying its lawyers as much as $300 an hour.

The public has no idea what ECMC has been up to, and Senate hearings could shine some light on this sleazy organization. How much is ECMC paying its CEO, Jan Hines, and its other senior executives? What is ECMC doing with its wealth? Why does the Department of Education pay ECMC's attorney fees to engage in what Rafael Pardo described as "pollutive litigation"?

Senator Warren could do a great deal of good if she would use her powers of persuasion to get the Senate Banking Committee to hold hearings on ECMC's shady activities. In fact, if Senator Warren got the opportunity to ask ECMC executives some tough questions, I'll bet she could bring this rotten outfit down.

Senator Warren needs to accomplish something tangible to address the student loan crisis if she wants people to regard her as a consumers' advocate. If she doesn't accomplish something soon, Americans will be forced to conclude she is not really a progressive, just as we know she's not really a Cherokee.


How much does ECMC pay its CEO, Jan Hines?

References

Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).

Hann v. Educational Credit Management Corporation, 711 F.3d 235 (1st Cir. 2013).

John Hechinger. Taxpayers Fund $454,000 Pay for Collector Chasing Student LoansBloomberg.com, May 15, 2013.

Joshua Hicks. Did Elizabeth Warren check the Native American box when she "applied" to Harvard and Penn? Washington Post, September 28, 2012.

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student DebtNew York Times, January 1, 2014.

Rafael Pardo. The Undue Hardship Thicket: On Access to Justice, Procedural Noncompliance, and Pollutive Litigation in Bankruptcy. 66 Florida Law Review 2101 (2014).


Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. 

Brian Walsh. Elizabeth Warren is Rewriting American HistoryU.S. News & World Report, April 22, 2014.

Thursday, September 22, 2016

Senator Elizabeth Warren grills Wells Fargo CEO John Stumpf. But hey, Liz: What have you done to help solve the student-loan crisis?

Senator Elizabeth Warren made headlines this week when she grilled Wells Fargo CEO John Stumpf at a Senate Banking Committee hearing. Unless you've been living under a rock, you know Wells Fargo employees were caught scamming customers by creating 2 million fake bank accounts without their customers' knowledge or approval.

In the wake of this scandal, Wells Fargo fired 5,000 low-level employees and refunded some money, but the company did not terminate the senior executive who supervised the unit where the fraud occurred. Wells Fargo's CEO John Stumpf made millions of dollars from these misdeeds because the scheme caused his stock to go up. But Stumpf isn't giving back any of his ill-gained profits.

So Stumpf was a sitting duck when Senator Warren began questioning him at the Senate Banking Committee hearing. "You should resign," Warren told Stumpf. "You should give back the money that you took while this scam was going on, and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission."

Stumpf, of course, is lawyered up. He went into his flak-catcher crouch, continually repeating his talking points and saying he was sorry for Wells Fargo's misdeeds.

All great theater. Who doesn't enjoy seeing a transnational financial executive publicly humiliated? But what will come of all this drama? Nothing. Stumpf won't face criminal charges, and the Wells Fargo senior executives who profited from the fake-account scheme won't give back a penny of their loot.

Elizabeth Warren enjoys a great reputation as the champion of consumer rights and the friend of the little guy. But what tangible thing has she done to help working-class Americans? And more particularly, what has she done to ease the suffering of millions of student-loan debtors?

I'll tell you what Warren has done--she's done nothing.  She's all blather. In fact, I don't think Warren even understands the student-loan crisis. She charged awhile back that the government is making "obscene" profits from the student-loan program, but that's not true. The government would be making a profit on the loan program if borrowers were paying back their loans, but they are not. As the Wall Street Journal reported recently, 40 percent of student-loan borrowers aren't making payments on their loans.

Here are some things Senator Warren could propose that would help relieve the suffering of distressed student-loan debtors.

Legislation banning the government from garnishing the Social Security checks of elderly student-loan debtors who defaulted on their loans. Around 155,000 Americans are having their Social Security checks dunned right now, causing real hardship for these people.

And how much money does our government collect from this disreputable practice? Probably less than the Secret Service spends guarding President Obama on just one of his Hawaiian vacations. Why doesn't Senator Warren use her bully pulpit to stop the government from going after elderly student-loan debtors who are living off their Social Security checks?

Wholesale relief for student-loan borrowers who were ripped off by the for-profit college industry. Senator Warren joined 22 other Democratic Senators in a letter to Secretary of Education John King asking the Department of Education to grant broader relief to the 35,000 students who were enrolled at one of ITT Tech campuses when ITT closed and filed for bankruptcy. But that letter is almost completely incoherent and doesn't  propose real relief.

DOE should forgive the loans of all the people who took out student loans to pay for ITT programs. Giving former students longer to file for loan forgiveness under DOE's "closed school" regulations (as the Democratic Senators proposed) does not go nearly far enough.

Amending the Bankruptcy Code to allow distressed student-loan debtors to discharge their federal student loans in bankruptcy like any other nonsecured debt. Senator Warren co-sponsored a bill to make private student loans dischargeable in bankruptcy, but private loans are only a small part of the overall student-debt crisis--only about 10 percent of total outstanding student-loan debt. The bill does nothing about reforming the Bankruptcy Code to allow distressed student-loan debtors to discharge their federal student loans in bankruptcy.

Conclusion; Senator Elizabeth Warren is a phony

Senator Elizabeth Warren is a phony. She hasn't accomplished anything significant to help solve the student-loan crisis. It is true she supports a bill to make private student loans dischargeable in bankruptcy, but such a law--if passed--is small potatoes.

Let's face it. Although Warren portrays herself as a progressive fighting for overburdened student-loan debtors, she will never do anything that would threaten the core interests of the higher education industry. After all, there are 114 colleges and universities in Warren's state of Massachusetts; and most of the professors and administrators who work at those colleges voted for her.

Those colleges and universities have to have federal student-aid money to survive. They are like crack addicts waiting for their next federal fix. Warren can talk all she wants about helping student-loan debtors, but she won't do anything that upsets the status quo. And real reform of the Bankruptcy Code to allow people to discharge their federal loans in bankruptcy would definitely upset the status quo.

Image result for elizabeth warren wells fargo


References

Anne Gearan and Abby Phillip. Clinton to propose 3-month hiatus for repayment of  student loansWashington Post, July 5, 2016. Accessible at https://www.washingtonpost.com/news/post-politics/wp/2016/07/05/clinton-to-propose-3-month-hiatus-for-repayment-of-student-loans/?hpid=hp_special-topic-chain_clinton-loans-11pm%3Ahomepage%2Fstory

Ashlee Kieler, Senators Introduce Legislation to Make Private Student Loans Dischargeable in Bankruptcy. Consumerist, March 12, 2015.   Accessible at https://consumerist.com/2015/03/12/senators-introduce-legislation-to-make-private-student-loans-dischargeable-in-bankruptcy/

Jena McGregor. 'You should resign': Elizabeth Warren excoriates Wells Fargo CEO John Stumpf. Washington Post, September 20, 2016. Accessible at https://www.washingtonpost.com/news/on-leadership/wp/2016/09/20/you-should-resign-elizabeth-warren-excoriates-wells-fargo-ceo-john-stumpf/

Josh Mitchell. More than 40% of Student Borrowers Aren't Making PaymentsWall Street Journal, April 7, 2016. Accessible at http://www.wsj.com/articles/more-than-40-of-student-borrowers-arent-making-payments-1459971348

Secretary of Education John B. King Jr. A Message from the Secretary of Education to ITT Students. Accessible at http://blog.ed.gov/2016/09/message-secretary-education-itt-students/

Sen. Warren Questions lack of Private Student Loan Relief Options. Senator Warren Website, July 31, 2014. Accessible at https://www.warren.senate.gov/?p=press_release&id=591

Letter to the Honorable John King, Secretary of Education, from 23 Democratic Senators, September 15, 2016. Accessible at https://www.insidehighered.com/sites/default/server_files/files/9_15_16%20ITT%20Tech%20ED%20Letter%20(1).pdf

Dawn McCarty and Shahien Nasirpour. ITT Educational Services Files for Bankruptcy After ShutdownBloomberg, September 16, 2016. Accessible at http://www.bloomberg.com/news/articles/2016-09-16/itt-educational-services-files-for-bankruptcy-after-shutdown-it6byu6t

Jena McGregor. 'You should resign': Elizabeth Warren excoriates Wells Fargo CEO John Stumpf, Washington Post, September 20, 2016. Accessible at

Reuters. ITT Educational Services Files for Bankruptcy After Aid CrackdownInternational New York Times, September 17, 2016. Accessible at http://www.nytimes.com/2016/09/18/business/itt-educational-services-files-for-bankruptcy-after-aid-crackdown.html?_r=0


Marian Wang. Q & A: Elizabeth Warren on Spiraling Student Debt  and What Should Be Done About ItPro Publica, May 20, 2014. Accessible at https://www.propublica.org/article/qa-elizabeth-warren-on-spiraling-student-debt-and-what-should-be-done-about

Alia Wong. When Loan Forgiveness Isn't EnoughAtlantic Monthly, June 15, 2015. Accessible at http://www.theatlantic.com/education/archive/2015/06/government-corinthian-college-loan-plan-problems/395513/

Tuesday, July 5, 2016

Democratic Party Platform Plank on Higher Education: A Big Pile of Horse Manure

The Democratic Party released its Platform this week, or rather it released a draft marked "Deliberative and Predecisional." The Higher Education plank is only a few hundred words long, but it still adds up to one big pile of horse manure.

First, the Democrats promise to cut interest rates on student loans, "thereby preventing the federal government from making billions of dollars in profits from student loans." What was the Platform Committee smoking when it wrote that sentence?

Everyone who knows even a little bit about the student-loan crisis realizes that the federal government is not making a profit on student loans. It is incurring huge losses--losses that are growing by the day.

Why do I say this? First of all, the student-loan default rate is catastrophic--far higher than the anemic rate the Department of Education publishes every autumn. The Brookings Institution reported that almost half of students who take out loans to attend a for-profit institution default in five years. The five-year default rate for students overall is 28 percent.

Moreover, the Obama administration is pushing distressed student-loan borrowers into long-term repayment plans that set monthly payments so low that borrowers are not paying down accruing interest. In fact, more than half of student borrowers are seeing their loan balances go up two years after beginning the repayment phase of their loan--not down.

Do the Brookings numbers indicate to you that the government is making a profit on the student loan program? Of course not. And the fact that Senators Elizabeth Warren, Charles Schumer, Barbara Boxer, and now the whole Democratic Party insist that the government is reaping huge profits off the student loan program demonstrates that the Democrats are clueless about the student-loan crisis or that they are lying about it.

The Democrats also promise to "simplify and expand access to income-based repayment so that no student loan borrowers have to pay more than they can afford." In other words, the Democrats want to push more and more student borrowers into 20- or 25-year income based repayment plans (IBRPs).

Five million people are in IBRPs now; and President Obama wants to enroll 2 million more by the end of next year. Apparently, the Democrats want to increase that number even further.

Of course, IBRPs are nothing more than a conspiracy by our government to create a giant class of sharecroppers who will pay a percentage of their incomes to Uncle Sam over the majority of their working lives.

And finally, the Democrats pledge to "restore the prior standard in bankruptcy law to allow borrowers with student loans to discharge their debts in bankruptcy as a measure of last resort." I interpret this pie-in-the-sky promise to mean the Democrats will delete the "undue hardship" provision from the Bankruptcy Code.

I hope that is a promise the Democrats will keep if Hillary becomes President. If Congress would actually strike the "undue hardship" standard from the Bankruptcy Code, millions of Americans would be lining up to file bankruptcy within a week after the law is changed. And if distressed student-loan borrowers could truly get relief from their oppressive student-loan debt, a half trillion dollars in student loans would be wiped off the books.

That scenario would cause the student-loan program to collapse, which would cause hundreds of colleges and universities to close.

Our government will never let that happen. Which is why the Democratic Party's Higher Education platform is a big pile of horse manure.

Image result for elizabeth warren and charles schumer
Senators Schumer and Warren: Shoveling horse manure

References

Democratic Party Platform Draft, July 1, 2016 [Deliberative and Predecisional]. Accessible at https://demconvention.com/wp-content/uploads/2016/07/2016-DEMOCRATIC-PARTY-PLATFORM-DRAFT-7.1.16.pdf

Schumer and Warren Pushing Obama to Address Student Debt. CNN Transcript, January 12, 2016. Accessible at http://www.cnn.com/TRANSCRIPTS/1601/12/nday.06.html

Democrartic Senators Highlight Obscene Government Profits Off Student Loan Program. Senator Warren press release, January 31, 2014. Accessible at https://www.warren.senate.gov/?p=press_release&id=329