Be Awake, College Students! Massive Economic Turmoil is Coming

A friend sent me a copy of the Magnificat journal's Advent Companion, a selection of daily reflections for the Advent season. Advent begins on November 27, and I read the first entry, which reflects on Matthew 24 and Christ's warning to be watchful.

During the time of Noah, Jesus instructed, people ate, drank, and married until the day the flood came and carried them all away.

"Therefore, stay awake!" Christ cautioned, and be prepared for the hour you don't expect.

As I read the Advocate Companion, I thought this passage would make an excellent advertisement for My Patriot Supply, an outfit that sells emergency food kits with a shelf life of 25 years. 

This is not a religious message. Instead, I warn that our national economy, built on financial speculation and easy money, will ultimately collapse. Perhaps it will be brought on by the cryptocurrency meltdown. If you aren't convinced, read James Howard Kunstler's recent blog essays posted on Clusterfuck Nation.

If you are a college student, this is no time to take out extravagant student loans. Higher education is under extreme duress: Since 2004, 861 colleges have closed their doors, and more than 9,000 campuses have shut down.

Stay awake, and don't take out loans to attend an obscure small college with a tuition rate of $25,000 a semester. Don't enroll in an online degree program unless you are pretty damned sure that an online college degree will lead to a good job.

Just importantly, don't be deceived by all the talk of student-loan forgiveness or by the Department of Education's pause on student-loan repayment--which will last more than three years.

A few people will get their loans forgiven under DOE's borrower defense program based on findings of fraud, and President Biden's loan forgiveness initiative may ultimately be approved by the courts. Still, the President's plan to forgive $10,000 of student debt, if it comes to fruition, will be a drop in the bucket for students paying $50,000 a year in college tuition. 

If you are pretty sure a college degree will lead to a job, by all means, go for it. People with degrees in the medical services field will probably find jobs.

But you are insane if you plan to take out $50,000 or more in student loans to get a humanities degree, a liberal arts degree, or a degree in gender studies.

You are insane if your college degree requires your parents to take out Parent Plus loans that they can't discharge in bankruptcy.

You are insane to take out a Grad PLUS loan to get a graduate degree in business, journalism, or the liberal arts.

Sometimes the Bible has some good advice. Indeed, now is an excellent time to head the biblical admonition to "Stay Awake!" and be prepared for global economic turmoil--which is coming.

 

Elon Musk says MBA degrees are overrated: Does it make sense to go to graduate school?

 Elon Musk says MBA degrees are overrated, and he should know.  Musk doesn't have an MBA, and he's worth $166 billion.

Here is what Musk said in a recent interview:

The path to leadership should not be through an MBA business school situation. It should be kind of work your way up and do useful things. There's a bit too much of the somebody goes to a high-profile MBA school land then kind of parachutes in as the leader but they don't actually know how things work. They could be good at, say PowerPoint presentations or something like that, and they can present well, but they don't actually know how things work. They parachute in instead of working their way up. 

Not surprisingly, many MBA teachers disagree with Musk. Robert Siegel, who teaches at the Stanford Graduate School of Business, said Musk is "completely off base talking about M.B.A.s." Siegel challenges Musk's charge that MBA  courses don't teach people how to be entrepreneurs. 

But a Canadian professor of management studies admitted that "[t]he MBA trains the wrong people in the wrong ways with the wrong consequences." And Jessica Stillman, writing for Inc., suggests that people could save a lot of money simply by reading ten well-known books about business. 

Musk's skepticism about MBA degrees falls within a larger debate about the value of graduate degrees in general. Speaking as a person who is embarrassed to have two graduate degrees from Harvard, here is my take on this topic.

First, don't go to graduate school unless you believe a graduate degree will improve your job prospects.  Public-school educators in some school systems get an automatic raise if they have a master's degree in education, so it may make economic sense for a teacher to pursue an advanced degree in education regardless of whether there is any substance to the program.

Second, don't pay too much money to get a graduate degree--especially a degree from a non-elite institution. Many colleges introduced expensive MBA programs after Congress introduced the Grad PLUS program that lifted the cap on how much people could borrow for graduate school.

Northeastern University, for example, offers an online MBA program costing $78,000, which Northeastern claims is "an affordable option" compared to other programs, which charge as much as $200,000. 

Maybe that is so, but ask your friends who have MBAs if they think the experience was worth the cost.  You may be surprised by some of the responses you will get.

Third, don't get a graduate degree that might actually hurt your job prospects.  For example, many law schools offer master's degrees, which require an additional year of study beyond the basic J.D. degree. Some law schools offer graduate degrees in law for people who do not intend to practice law. 

I've known people who pursued a graduate degree in law because they didn't excel in law school and didn't get a good law job after graduating.  An extra law degree, they think, will enhance their job prospects.

But employers can sniff out the motivation for that strategy. If the job applicant had a brilliant career in law school, that person would probably be pulling down a six-figure salary in a prestigious law firm instead of hanging around a law school for an additional year.

And an online graduate degree from a for-profit school may be absolutely worthless in the job market. I've sat on many faculty hiring committees and heard committee members reject any job candidate who obtained a doctoral degree from a for-profit school.

Finally, weigh the opportunity costs of going to graduate school. Are you gaining experience in your present job that will likely pay off later in salary increases and promotions?  If so, why leave the job market and take out student loans to go to graduate school?

This is the bottom line. Don't take out student loans to go to graduate school unless there is absolutely no other way to achieve your professional goals. Millions of Americans have had successful careers without graduate degrees, and millions more have graduate degrees and don't know nuthin'.

This Recession is different: Unemployed Americans should be wary about going to graduate school

Traditionally, graduate school has been an excellent place to hang out for people who are unemployed or clueless about their life's vocation.

 In the old days, tuition was cheap, and a grad student had a good chance of picking up an instructor's job or a research assistant position to help pay the bills. The cost of living was low in a lot of college towns, and there were plenty of bars, live music, and sexually active young people.

Not a bad life! And you could tell your parents that you were in graduate school instead of admitting that you were out of work.

It's not surprising then that in the recession of 2008-2009, a great many unemployed Americans flocked to graduate school.  Graduate school seemed like the right place to park until the economy rebounded. And a master's degree, students told themselves, would help them get back in the job market.

To meet the growing demand, the universities ramped up their graduate programs. Like a medicine-show huckster at the county fair, the colleges rolled out all sorts of new master's degree programs in such fields as sports management, emergency management, hospital administration, criminal justice, and law enforcement.

And of course, the big lure for a lot of young people struggling in a faltering economy was the MBA degree.  All the elite universities have had MBA programs for years: Harvard, Stanford, M.I.T., etc.  But, a few years ago, the regional public universities and second-rank private colleges got in on the act. Some rolled out online MBA programs or so-called "executive" MBAs that offered classes on weekends.

Unfortunately, many of the people who got graduate degrees over the past decade saw little or no economic benefit. So many people obtained them for a time that employers saw them as nothing special. As The Economist observed in an article published almost four years ago, "Simply put, MBAs are no longer rare, and as such are no longer a guarantee for employment."

But the most significant danger of going to graduate school is cost. Under the Grad Plus program, students can take out federal student loans for the entire cost of their degrees, including living expenses, no matter how much tuition that a college or university charges.

The University of Texas, for example, now pegs the cost of getting an MBA degree at its Austin campus at $100,000 for its two-year program. Graduates who borrow the entire sum will enter the job market with $100,000 in debt.

So if the current Recession throws you out of work, don't go to graduate school without giving it a great deal of thought. A master's degree might improve your chances of getting a good job, but it might leave you with no prospect of a job and a mountain of student-loan debt--debt that is virtually nondischargeable in bankruptcy.

Step right up, ladies and gentlemen, and sign up for our prestigious executive MBA program.

Democrats are "woke" about Public Service Loan Forgiveness: Senators Kaine and Gillibrand file legislation to overhaul PSLF

The Trump Administration hates the Public Service Loan Forgiveness Program (PSLF). Signed into law by President George W. Bush in 2007, PSLF allows student-loan debtors who work in public-service jobs to have their student loans forgiven if they make 120 student-loan payments in a qualified repayment plan.

The first PSLF participants to have accumulated 120 student-loan payments became eligible for debt relief in 2017--10 years after the program was introduced. As has been widely reported, the Department of Education approved less than 1 percent of the applications for PSLF forgiveness that it had processed as of  September 2018.  In fact, DOE said 70 percent of the applicants were not eligible for PSLF participation.

So far, over one million student-loan borrowers have applied to DOE to have their employment certified as PSLF eligible, and millions more are counting on PSLF for debt relief but haven't applied yet. It's a mess.

And it is especially a mess for people who borrowed $100,000 or more to get a law degree or other graduate degree. According to the American Bar Association, the average debt load for people who attended a private law school is $122,000. For many of the people who accumulated six-figure student-loan debt to finance their graduate studies, PSLF is the only viable option for debt relief.

Betsy DeVos, Trump's Secretary of Education, apparently does not care that her agency has frightened or angered millions of people who are counting on PSLF to manage their student loans. According to a news report, a senior DOE official said that DOE does not support PSLF and would not implement it if it were not legally obligated to do so.

But the Democrats are "woke" about this problem. This week, Senators Tim Kaine and Kirsten Gillibrand introduced a bill to overhaul the PSLF program. Thirteen Democratic senators signed on as co-sponsors, including all the U.S. Senators running for President (Elizabeth Warren, Kamala Harris, Bernie Sanders, Amy Klobuchar and Cory Booker).

The Kaine-Gillibrand proposal defines eligible public-service organizations broadly to include all federal, state, and local government agencies and all charitable organizations that qualify  for tax-exempt status under 501(c)(3) of the tax code. As Jason Delisle pointed out in a 2016 analysis of PSLF, that definition applies to one quarter of the American workforce.

In fact, the bill's definition of public service differs markedly from the one developed by DeVos's DOE. DOE defines a public service organization as one that is primarily involved in public service,thus excluding organizations like the American Bar Association, which is primarily devoted to serving the legal profession, although it engages in some public service work.

The Kaine-Gillibrand bill also specifies that all student-loan debtors qualify for PSLF, regardless of the federal loan program or repayment plan they are in. This provision also expands eligibility for PSLF participation far beyond what the DeVos DOE permits.

I support passage of the Kaine-Gillibrand bill, and I hope it is enacted by Congress. But we should not deceive ourselves about the cost of PSLF. Thousands of people seeking debt relief under PSLF owe $100,000 or more. Most of these people are making income-based monthly payments on their loans that are not large enough to cover accruing interest. Their debt load is increasing month by month as accrued interest gets capitalized and added to their loan balances. If these people's student-loan debts are forgiven after 10 years, the government will essentially be forgiving the entire amount that was borrowed plus a lot more due to the accrued interest that will also be forgiven.

Remember Josh Mitchell's story in Wall Street Journal about Mike Meru, who borrowed $400,000 to go to dental school? Dr. Meru is making payments of about $2,000 a month in an income-based repayment plan, but his debt has grown to $1 million due to accrued interest. If Meru gets a qualified public-service job and holds it for ten years, DOE will forgive the entire $1 million plus additional interest!

This is a huge problem, and the Kaine-Gillibrand bill won't solve it. Under the GRAD Plus program, graduate students can borrow the total cost of their graduate education--tuition, books, and living expenses--no matter what the cost. It is not surprising then that graduate-school tuition prices went up dramatically after the GRAD Plus program was enacted.

If the bill becomes law, the Kaine-Gillibrand proposal will give relief to millions of student-loan borrowers. But the bill is just a stop-gap measure. As I have said, the only solution to the student-loan crisis is bankruptcy relief for honest debtors who can't pay back their student loans.  More than 45 million Americans have outstanding student loans. I think most of them would vote for a presidential candidate who endorses bankruptcy relief for distressed student-loan debtors.