Showing posts with label Student Debt. Show all posts
Showing posts with label Student Debt. Show all posts

Monday, August 5, 2019

The Baby Boomers are Toast: Massive Suffering is Right Around the Corner

I never liked the term "Baby Boomer"--an infantilizing appellation if ever there was one.

I am a Baby Boomer myself, having been born in 1948, almost exactly three years after my father was liberated from a Japanese prison camp in Korea. My birthday, August 9, marked the third anniversary of the day Nagasaki was obliterated by an atomic bomb. And my birthday also fell on the sixth anniversary of the day the Nazis killed St. Edith Stein at Auschwitz.

I was raised to believe that life for my generation would be better than it was for my parents' generation. And for a long time, that expectation looked like it would be fulfilled. My father owned one suit. When I practiced law, I owned seven. My parents' house had one bathroom. For years, I have lived in houses that have two or even three bathrooms.

But when I reached my 50s, I could see that my generation's rise to greater prosperity had stalled. My father and my wife's father retired when they were in their mid-50s. I will retire at the age of 71; and my closest friends, all in their early 70s, are still working.

And many of my contemporaries are frightened. One-third of senior Americans live entirely on Social Security, and the average payout is only $1,220 a month. That's 19 million retirees living near or below the poverty line.

The experts say people need to have $1 million in savings to retire, but most don't have near that amount. And even if they did, how would they invest that money? This morning, the interest rate on the 10-year note dropped to 1.75 percent--1.75 percent! So if you invested your million dollars in Treasury notes, you would have an income of $17,500 a year.

So my generation is still in the stock market--a rigged casino where the croupier (Goldman Sachs and their cronies) can push the hidden button under the roulette table any time they want to make the stock market go up or down. We all know this is going to end badly.

Incredibly, many people my age still have student loans hanging over their heads--loans they will never repay. The federal government is pushing millions of distressed debtors into 25-year income-driven repayment plans that are designed never to be paid off.

More and more television advertising is targeted toward seniors--new medications, financial services, reverse mortgages, etc. All these commercials show prosperous, silvered-haired couples in radiant health, and the wife always looks about 15 years younger than the husband. These couples are shown surfing, skiing, hiking, and fishing with their adorable grandchildren off the docks of their lakeside retirement homes.

But we all know those advertisements are a lie. The reality is this: millions of baby boomers are going to live out their last years in starkly reduced circumstances. In short, the baby boomers are toast.
Put your retirement savings in the stock market. What have you got to lose?







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.








Saturday, December 3, 2016

California bar exam pass rate hits 32-year low, but law-school graduates who fail the bar exam must still pay off their student loans

Last July, 7,737 people sat for the California bar exam, and only 3,332 test takers passed--a 43 percent pass rate. A total of 4,405 people--57 percent of test takers--failed the exam, the lowest pass rate since 1984.

In all 50 states, J.D. graduates cannot practice law until they pass a bar exam pass.  Thus, the 4,405 law graduates who failed the California bar exam last July suffered a major setback in their professional careers.

They also suffered a financial catastrophe. The average J.D. graduate leaves law school with more than $100,000 in student-loan debt; and that debt must be paid regardless of whether the graduate passes a bar exam or ever gets a job as a lawyer. Without a doubt, a majority of the people who failed the California bar exam last July have student-loan debt.

Obviously, the risk of failing the bar is not equally distributed among test takers. People who graduate from ABA accredited law schools have higher pass rates on the California bar exam than people who attended a law school that is only accredited by the state of California. Sixty percent of test takers who graduated from out-of-state ABA accredited schools passed the July bar exam, while only 21 percent of people who attended state-accredited schools passed.

And people who fail the bar exam the first time they take it have a lower pass rate than overall test takers if they retake the exam. Among exam repeaters, only 17 percent passed the California bar exam last July. Pretty bad odds.

The California bar exam results are just another indication that the future for many law-school graduates is bleak. The legal job market has less than six  lawyer's job for every ten new law graduates, and it offers no law jobs for graduates who cannot pass the bar. People who graduate high in their class from a prestigious law school such as Harvard or Stanford are eminently employable, but people who graduate in the bottom half of their class or who attend bottom-tier law schools may never obtain a job that will justify the student-loan debt they piled up to get a law degree.
So if you are thinking about going to law school, here's my advice.  Read Paul Campos' book titled Don't Go to Law School (Unless). And heed Campos' warning; unless you have family connections or are admitted to a top-tier law school, you probably should not take out student loans to pursue a legal career.

And if you went to law school, can't find a law job, and are unable to pay off your student loans, you should consider bankruptcy. But if you go that route and try to get your law-school loans discharged, you must educate the bankruptcy judge about the terrible job market for lawyers.

Now if we can just find a job.


References

Paul Campos. Don't Go to Law School (Unless). 

Kyle McEntee. Law Grads Still Face Tough a Job Market. Bloomberg  Law, May 4, 2016.

Noam Scheiber. An Expensive Law Degree and No Place to Use It. New York Times, June 17, 2016.

Ann Yarbrough. Bar exam pass rate dips to 32-year low. California Bar Journal, December 2016.


Friday, December 2, 2016

Sandy Baum's new book on student debt contains some good ideas

In the past,  I have been critical of Sandy Baum's work on the federal student-loan program. In my view, she sometimes drastically understated the enormity of the student-loan crisis. But her new book, titled Student Debt: Rhetoric and Realities of Higher Education Financing, contains some good ideas, which I endorse.  Here are some of her most important recommendations:

"Don't Garnish Social Security Payments." I have long argued that the federal government should stop garnishing the Social Security checks of elderly student-loan defaulters. Baum agrees. As she put it, it is one thing for the government to garnish wages of student-loan defaulters or scoop up defaulters' tax refunds, but "[f]urther diminishing the living standards of senior citizens . . . with no potential for labor market earnings who are struggling to make ends meet on their Social Security payments is quite another thing." Bravo.

Stop giving private lenders special protection in the bankruptcy courts. In 2005, Congress amended the Bankruptcy Code to make private student loans nondischargeable in bankruptcy unless the borrower could show "undue hardship," the same standard that applies to federal student loans. This is wrong.

As Baum observed, "[t]here is no good reason for the government to sanction these unsecured loans as student loans or to grant them any special provisions, particularly . . ., protection from bankruptcy proceedings." This is an eminently sensible observation, and other respected policy commentators agree with Baum on this.

Treat student loans like any other unsecured debt in bankruptcy. I have argued for years that student loans should be treated like any other unsecured debt in bankruptcy and that the "undue hardship" provision in the Bankruptcy Code should be repealed or at least interpreted far more humanely. 

I was heartened to read that Baum, a leading expert on the federal student loan program, agrees with me on this point. Indeed, reforming bankruptcy laws to allow distressed student-loan debtors relief from oppressive student loan debt is the key to reforming the entire student loan program.

Other reforms Baum proposes. Baum made some other good points in her book. For example, some limits should be placed on the amount of money people can borrow to fund their college studies; and some limit needs to be placed on the amount of interest that can accrue on student-loan debt. She also said limits should be placed on the amount elderly people can borrow to fund their studies since they won't work long enough to pay off enormous amounts of student-loan debt.

Baum makes other good points in her book. But the reforms I've listed here are critical.  If the policy makers aren't going to listen to me (and so far they have not), then perhaps they will listen to Sandy Baum.

References

Sandy Baum. Student Debt: Rhetoric and Realities of Higher Education Financing. New York: Palgrave-MacMillan, 2016.