Showing posts with label Luke Herrine. Show all posts
Showing posts with label Luke Herrine. Show all posts

Tuesday, January 17, 2017

Obama's Department of Education grants automatic loan relief for all students who attended the American Career Institute: A puny effort--too little, too late

Last Friday, the U.S. Department of Education granted automatic debt relief to all students who attended American Career Institute. As Inside Higher Ed pointed out, this is "the first time the department has granted automatic loan relief to all students of a college without requiring individual applications." About 650 former ACI students received closed school discharges; but the rest--about 3,900 students--are getting their loans discharged en masse. In addition, DOE also announced it will grant Borrower Defense discharges to 28,000 student who had attended Corinthian Colleges.

This is a good thing, of course; but why now? And why so small a gesture?

After all, Corinthian Colleges, which closed and filed bankruptcy under allegations of fraud, had more than 300,000 students; and ITT, which also filed bankruptcy, had 191,000 enrollees.  Yet so far, DOE has only grant Borrower Defense discharges to 28,000 former Corinthian students.

As for the small size of the gesture, I think Luke Herrine, legal director of the Debt Collective, got it right. "There's just no coherent logic whatsoever," he said. "The only thing I can think of is it would be deeply embarrassing for them to stop collecting on so much debt." It is one thing to forgive the loans of 4,000 ACI students and a small percentage of Corinthian students; it is quite another to discharge the debt of a half million people.

As for the timing, I think the Obama administration has known for quite a while that the only responsible thing to do about millions of people who took out loans to attend flaky for-profit colleges is to grant massive debt relief to nearly everyone without the necessity of reviewing each case individually. But that is a difficult thing to do politically.

I think DOE waited until a week before Obama leaves officer to offer token relief to ACI students in order to highlight the student-loan crisis when there is no time left for the Obama administration to do something substantive.

Like a retreating army that spikes its cannons before being overwhelmed by the enemy, the Obama administration may have wanted to publicize the student loan crisis to create difficulties for Trump.

Here are my thoughts on DOE's surprising but welcome action:

1) Granting debt relief to ACI students is the first small step toward doing what the federal government will inevitably be forced to do: forgive student debt to nearly all of the millions of people who attended for-profit colleges and received no economic benefit.  Billions of dollars in student loans will eventually be written off.

2) I think Obama's DOE took the action that it did for ACI students because the Obama team thinks Trump, who takes office in a few days, will try to prop up the for profits at the expense of exploited students.

But the Obamacrats may be wrong. After all, President-elect Trump knows how to read a  balance sheet, and he may quickly grasp the fact that the student loan program is a catastrophe. 

And if Mr. Trump realizes the enormity of the student loan crisis, he might actually take decisive action.  Everyone agrees that Mr. Trump understands bankruptcy and its value for distressed debtors.  President Trump might surprise everyone and ease the path to bankruptcy relief for millions of student loan debtors who will never be able to pay back their college loans.



References

Andrew Kreighbaum. Education Department announces thousands of new loan discharges. Inside Higher Ed, January 16, 2017.



Thursday, June 11, 2015

Student Loan Forgiveness for Students Who Attended One of the Schools Owned by Corinthian Colleges: I Recommend Chiang Kai-Shek's Fire Hose Approach

Chiang Kai-shek was the  leader of the Nationalist government of China for many years, but he was also a Methodist of sorts. I read somewhere that he once baptized his soldiers en masse, using a fire hose.  I'm not sure that story is true, but I like to think of all those Chinese soldiers who became Methodists. I'm sure it did them a world of good.

Regardless of the truth of that story, I believe the Department of Education should adopt Chiang Kai-shek's  fire-hose technique when designing a student-loan forgiveness program for all the people who attended one of  institutions operated by Corinthian Colleges--which is now bankrupt.


Chiang Kai-shek(蔣中正).jpg
Chiang Kai-shek: Did he baptize his troops with a fire hose?
The Department of Education is designing a process whereby students who attended a Corinthian campus can apply for loan forgiveness, which at least some of them are legally entitled to do due to Corinthian's shutdown. According to the New York Times, DOE estimates that 350,000 people attended one of the Corinthian  campuses over the past five years. If all of them apply for loan forgiveness and receive debt relief, it will cost taxpayers $3.5 billion.

In the past, DOE has utilized a cumbersome loan-forgiveness process for  students who attended colleges that closed, and DOE says that only 6 percent of students who were eligible for debt relief due to a college closure  actually applied for that relief (as reported in the New York Times).


Secretary of Education Arne Duncan promises a streamlined loan-forgiveness process for former Corinthian students. "We will make this process as easy as possible for them, including by considering claims in groups wherever possible" Duncan said.


But why make Corinthian students jump through hoops to have their student loans forgiven--any hoops at all? Why not adopt Chiang Kai-shek's methods and forgive all those loans en masse? I agree with Luke Herrine, a member of the Debt Collective, who argued that all Corinthian students should be given "blanket relief."


Why give blanket loan -forgiveness to former Corinthian students? First of all, the government is not going to get that money back anyway. In all likelihood, a majority of Corinthian students will either default on their loans or apply for economic-hardship status that will exempt them from making loan payments until they get on their feet financially, which for many Corinthian victims will be never.


Second, the Department of Education is morally responsible for the mess it created by shoveling student-aid money to for-profit colleges that paid their executives lavish salaries while delivering substandard educational programs. A quarter of all student-aid money goes to for-profit colleges, which have the highest default rates. 


The for-profits have kept this shell game going by hiring lobbyists to represent their interests, employing lawyers to file lawsuits to stop DOE's regulatory efforts, and making campaign contributions to strategic members of Congress.  In fact, Corinthian's bankruptcy filings lists its lobbyists as some of its creditors.

No, DOE needs to spray all these students with a metaphorical fire hose, forgiving Corinthian's former students' loans through executive action. These unfortunate folk have been through enough. Duncan shouldn't make them fill out any more forms in order to rid themselves of student-loans they took out to attend one of Corinthian's colleges.



References


Tamar Lewin. Government to Forgive Student Loans at Corinthian. New York Times, June 9, 2015, p. A11.


Help for Victims of College Fraud (Editorial). New York Times, June 10, 2015, p. A24.