Showing posts with label Wall Street Journal. Show all posts
Showing posts with label Wall Street Journal. Show all posts

Sunday, August 7, 2022

Would You Flip Burgers For $12 an hour? I Thought Not

 I live near a Sonic Drive-In restaurant that has been closed lately during business hours. At first, I thought it closed for good, but yesterday I saw a big HelpWanted sign out front.

Sonic is looking for  "crew" workers--$10 per hour. It's looking for cooks--$12 an hour. And it's looking for managers--$15 an hour.

I had a lot of low-end jobs when I was young, and I did them willingly. I saved some of the money I made working for a buck an hour and banked it at the Anadarko Bank & Trust, where it earned three percent interest.

I was willing to do those jobs because I was confident about my future. Someday, I told myself, I would have a middle-class job and a middle-class lifestyle.

 Yesterday, as I drove by that closed Sonic Drive-In, I found myself wondering how many young Americans are willing to work for $10 or $12 an hour.

Before the pandemic, many adults in my town were willing to work low-wage jobs. But then things changed.

During the pandemic, many unemployed Louisianians received enhanced unemployment checks--equivalent to an annual salary of about $40,000. According to a 2020 Brookings report, $40,000 a year puts a family of four in the middle class.

Forty thousand dollars a year not to work; that's a pretty sweet deal. How many people who got that deal are willing to flip Sonic burgers or do other menial work for 40 hours a week only to earn an annual salary of $25,000? 

Not too damn many, judging from the Help Wanted signs I see all over Baton Rouge. 

According to the Wall Street Journal,  the national economy created about half a million jobs last month, and that unemployment is down to only 3.5 percent.  That's terrific news.

However, remember that the 3.5 percent unemployment rate only measures people looking for work. Millions of Americans aren't looking.

They certainly aren't looking for the countless minimum-wage service jobs in the United States: big-box store clerks, airport baggage handlers, burger flippers, and receptionists.

Years ago, economists predicted that the United States would transform itself from being a manufacturing economy to a service economy.  In the future, the pundits predicted, manufactured goods would be assembled in Asia while Americans would perform high-end services--medical care, research, financial services, legal services, and education.

That prediction turned out to be a pipe dream. It is true that Americans don't manufacture much anymore, but most of them aren't working in high-end service professions.

No, Americans are finding tons of jobs in the low-end service sector: jobs that pay between $10 and $15 an hour: hotel maids, fast-food cooks, delivery truck drivers, and retail sales workers.

Until the Covid pandemic, many Americans were willing to do those jobs, at least until they could find something better. However, once they got a taste of what it was like to raise their living standard by not working, they became unwilling to lower their living standard just so they could go home at the end of the day smelling like a hamburger.

That's my opinion anyway. Would you like fries with it?


Ten bucks an hour to smell like a hamburger? 



Thursday, October 14, 2021

Baylor University Loses Its Way: Low-Income Parents Take Out Loans So Their Kids Can Attend a Pricey School

Baylor University, a Baptist institution located in Waco, Texas, is a well-respected school. Over the years, it has risen steadily in the college ratings and now ranks among the top 100 American universities.

But Baylor is expensive--tuition and fees are about $50,000 a year. Low-income students can take out federal loans, but these loans are capped and do not cover the total cost of going to Baylor. 

So--according to the Wall Street Journal--Baylor has encouraged low-income families to take out Parent Plus loans. In fact, almost half the families that take out these loans are poor.

From Baylor's perspective, the Parent Plus program is a money tree. There is no cap on these loans, and Baylor gets its money upfront. If parents can't pay off these loans, that's their problem. 

As the Wall Street Journal revealed, many Baylor parents aren't paying back their Parent Plus loans. Only 28 percent paid down any of their loans after two years in repayment. In 2018 and 2019, Baylor parents collectively owed 74 percent of what they borrowed ten years after beginning repayment.

Baylor says it does not pressure families to take out Parent Plus loans. In a written statement, a Baylor spokesman said, "We have never strong-armed students to [make] a decision for/against Baylor, as we respect the significance of making a college choice." What the hell does that mean?

Linda Livingstone, Baylor's president, admits that Parent Plus loans are a problem. "My heart goes out to families that are in that situation," she said.  "We are working very, very hard to ensure that we don't see that so much going forward."

I'm not knocking Baylor. It's a fine school. But the fact remains that Baylor and many other universities are relying more and more on Parent Plus loans for their revenue. 

These loans bear a relatively high interest rate--6.28 percent, and they can be pretty large. Parents of 2018 and 2019 Baylor graduates borrowed a median amount of $59,000.  The Wall Street Journal reported that a school bus driver took out $57,000 in Parent Plus loans so her daughter could attend Baylor.

Low-income parents jeopardize their own financial security when they take out Parent Plus loans to finance their children's college education.  And Parent Plus loans, like student loans their children take out, are almost impossible to discharge in bankruptcy.

That's not right. Congress should shut down the Parent Plus program. 

Baylor president Linda Livingstone and spouse:
"My heart goes out to families that are in that situation."


Saturday, July 31, 2021

Newsweek reports: Parent Plus Loans 'Are Fraught with Peril'

 Years ago, I was strolling along a lakeside hiking trail in a Dallas-area park. As I was walking across a wooden bridge, I looked down to see a ball of wriggling snakes below me.

It was a big cluster--about the size of a beachball. It was a scary sight, and I didn't stick around long enough to determine whether the snakes were poisonous. I just hurried on my way.

The Department of Education's Parent PLUS program is like a big ball of snakes. The program has become so predatory, so large, and so politically charged that we don't want to even try to untangle it.  We just want to hurry along without thinking about it.

Parent PLUS is a federal program that lends money to parents to help them pay for their children's education. Although Congress supposedly intended the program to help affluent families, six out of ten parent borrowers are from low-income households.  And, as Matt Krupnick reported for Newsweek, at 140 schools, 80 percent of parent borrowers are in low-income homes.

Parent PLUS default rates are high. According to a Newsweek analysis, nearly ten percent of parents at 1000 colleges defaulted or were seriously late with payments within just two years of their child left college. At some schools, Parent PLUS default rates ran as high as 30 and even 40 percent.

And borrowing costs are high: "6.28 percent for the 2021-2022 academic year plus an upfront fee of 4.22 percent" (as reported by Newsweek).

In 2019-2020, parents took out Parent PLUS loans on behalf of three-quarters of a million students, and the loan amounts averaged about $16,000. 

But the average Parent PLUS loan at some colleges is much larger. At Spelman College, an HBCU in Atlanta, the median Parent PLUS loan was $85,000 for parents whose children graduated or left school between 2017 and 2019.

Other schools with high Parent PLUS loan amounts include New York University (almost $67,000) and Loyola Marymount in Los Angeles ($60,000). The median loan amount is also high at several art and music schools: Berklee College of Music in Boston, Pratt Institute in Brooklyn, and Savannah College of Art and Design in Georgia.

Newsweek, the Wall Street Journal, and other news media have shown that some colleges are taking advantage of their students' parents by encouraging them to take out loans in addition to the federal loans and Pell grants that students receive on their own.

This is predatory behavior. And parents who take out Parent PLUS loans will find it is almost impossible to discharge these loans in bankruptcy.

Congress needs to shut down the Parent PLUS program. Or at the very least, Congress should amend the Bankruptcy Code to allow financially distressed parents to discharge these loans in bankruptcy.

But Congress will probably take no action. It sees the Parent PLUS program as a big ball of snakes, and no politician has the guts to close down this pernicious scam against low-income parents.

The Parent PLUS program is a ball of snakes.





Wednesday, June 16, 2021

Will an Ivy League degree make you LESS employable?

 In a recent Wall Street Journal essay, R. R. Reno, Editor of First Things, wrote that he had stopped hiring graduates from elite colleges.  He noted that he had watched a Zoom meeting of students at Haverford College (Reno's alma mater), where students displayed "a stunning combination of thin-skinned narcissism and naked aggression." 

Haverford, like most elite private colleges, is a "progressive hothouse." If students are traumatized by racial insensitivity in that liberal bastion, Reno observed, "they're unlikely to function as effective team members in an organization that has to deal with everyday realities."

Reno acknowledged that not all college students are radical activists. Nevertheless, most have allowed themselves to be intimidated by allegations of racism or some other transgression of the unwoke. "I don't want to hire a person well-practiced in remaining silent when it costs something to speak up."

Reno went so far as to say that some politically conservative students at elite colleges suffer from a form of post-traumatic stress disorder. "Others have developed a habit of aggressive counterpunching that is no more appealing in a young employee than the ruthless accusations of the woke."

America's elite colleges charge students more than $25,000 a semester. Do they add value? Reno thinks not. "Dysfunctional kids are coddled and encouraged to nurture grievances, while normal kids are attacked and educationally abused." He doesn't think these snooty schools are teaching students to be courageous adults or good leaders.

I am totally on board with Mr. Reno.  I attended Harvard almost thirty years ago, and it was clear to me even then that I should keep my views and opinions to myself.  I can't say Harvard traumatized me. I had worked as a practicing lawyer in the rough-and-tumble world of rural Alaska.  I knew within a few months that most of my Harvard professors were slinging bullshit--very expensive bullshit.

But I pitied my Harvard classmates who had taken on mountains of student debt and got very little in return.  I have no doubt that some of them are still paying off their college loans.

So if you have an opportunity to attend an Ivy League school or some elite joint like Bowdoin, Amherst, or Swarthmore, you should read R.R. Reno's essay. You don't want to wind up with a diploma from a fancy college that costs you $200,000 and find that you picked up habits and world views that make you unemployable. 


A gathering of the woke





Saturday, February 6, 2021

What will happen to you if you take out student loans to get a liberal arts degree and can't find a job?

 Late last year, the University of Vermont announced it will shut down two dozen academic programs with low enrollment. 

Geology, religion, and Asian studies are on the chopping block, along with several language programs--Greek, Latin, and German.  At least three departments will close: Religion, Classics, and Geology. Some minors are being eliminated--Theatre and Vermont Studies.

All across the country, universities are shrinking or closing their liberal arts programs because fewer students major in those disciplines. Young people sense they are in a bleak job market, and many are shifting to more vocation-directed academic majors.

Indeed, Jeffrey Selingo and Matt Sigelman, writing in the Wall Street Journal, report that entry-level college graduate jobs have fallen 45 percent in recent years.  Many graduates will be forced into "lifeboat jobs," where they will be underemployed both in terms of salary and vocational development. 

"[T]hose who graduate into underemployment are five times more likely to remain stuck in mismatched jobs after five years compared with those who start in a college-level job," Selingo and Sigelman warn.

Should students stop majoring in the liberal arts? Not necessarily, Selingo and Siegelman argue. Instead, they give this advice:

None of this requires abandoning the liberal arts or social sciences; it's just a matter of ensuring that students also acquire marketable skills. English departments don't need to teach computer programming, but they should show students how to develop writing and critical thinking skills in ways that resonate with employers. And they should help students to acquire more technical skills, whether on campus, through internships or through the growing array of online  options.

With all due respect to Mr. Selingo and Mr. Sigelman, I am deeply skeptical of the proposition that liberal arts departments can make their academic programs more vocationally driven. 

Does anyone think a medieval-history professor will adjust his teaching style to help students acquire more technical skills?  I doubt it.

And how will sociology, political science, and religion departments develop internship programs that help students find jobs after graduation? I don't see it happening.

It is no good to say liberal arts departments can adjust their academic programs to make them more job-relevant. Students won't buy that line.  They know that a degree in liberal arts probably won't lead to a good job. That's why more and more of them are majoring in business.

Brutally put, it is madness for young people to take out six-figure student loans to get degrees in history, religion, political science, ethnic studies, or sociology.  In today's economy, an individual who takes out student loans to earn a bachelor's degree must immediately find a good job.  

What will happen to you if you borrow $100,000 to get a humanities degree and can't find employment? You will be forced to apply for an economic hardship deferment to get short-term relief from making your monthly loan payments.

But while you are skipping those payments, interest is accruing on your student loans. That interest gets capitalized so that your loan balance increases.

At some point, your student loan debt will become unmanageable, and then your only option will be to sign up for an income-based repayment plan that stretches out your loan obligations for a quarter of a century.  

And that will give you plenty of time to ruminate about the stupid decision you made when you were 18 years old to major in sociology with a minor in Vermont Studies.

Will this guy teach you critical thinking skills?




Saturday, December 5, 2020

Parent Plus Loans at Historically Black Colleges: Should Parents Jeopardize Their Financial Future so their Children Can Go to an HBCU?

Andrea Fuller and Josh Mitchell of the Wall Street Journal have done some excellent reporting over the years on the student-loan crisis. Fuller and Miller recently published a WSJ article about poor and middle-class parents who take on substantial debt to help pay their children's college expenses. Most of these parents signed up for Parent Plus loans offered by the U.S. Department of Education.

You might think that parents whose children are enrolled at elite private colleges would be the ones with the biggest Parent Plus loans, but you would be wrong. According to Fuller and Mitchell,

The schools with the largest parent debt burdens aren't world-famous Ivy League schools . . . Rather, they include art schools, historically Black colleges and small private colleges where parents are borrowing nearly six-figure amounts to fulfill their children's college dreams . . . .

According to the article, the college where parents borrowed the most money for their children's schooling was Spelman College in Georgia, a historically Black institution.  Among parents who took out federal loans for their kids, the average amount was $112,127.  Among low-income families, the average amount was more than $83,000.

Keep in mind that the money parents borrow through the Parent Plus program is in addition to the student loans that their children took out themselves. 

Fuller and Mitchell's article contains a handy feature that allows readers to type in the name of an American college and learn the average amount of parent debt at that institution. I ran the numbers for some prominent HBCUs, and parent debt at several of these institutions is quite high.

Median By School

All Recipients

Low-Income Recipients

Spelman College, GA

$112,127

$83,894

Morehouse College, GA

$79,000

$48,862

Howard University, DC

$66,728

$52,145

Hampton University, VA

$73,244

$47,974

Clark Atlanta University, GA

$66,359

$40,095

Johnson C. Smith University

$28,586

$20,166

These numbers are disturbing. Perhaps even more disturbing is the fact that the Wall Street Journal's school-reporting mechanism had no figures at all for several HBCUs.  For example, the feature reported no data for Jarvis Christian College in northeastern Texas; Huston-Tillotson University in Austin, Texas; and Miles College in Alabama. All three colleges are HBCUs.

As reported by the Wall Street Journal, 20 percent of African American parents who took out  Parent Plus loans in 2003-2004 defaulted on those loans by 2015. In other words, Black parents who take out Parent Plus loans to help their kids pay for college are running a one-in-five chance of being financially ruined.

All progressive-minded people support the historically Black colleges and universities and believe they should be adequately funded. But we should also think about the students who attend HBCUs and their parents as well. 

Perhaps the best thing we could do to protect African American parents from risking their own financial security would be to eliminate the Parent Plus loan program altogether.



Monday, November 23, 2020

Toilet-paper college degrees paid for with toilet-paper money: DOE's expert says taxpayers on hook for $400 million in student loans

 Our old friend, the U.S. Department of Education, released an internal report showing that the U.S. government will probably lose about $435 billion in unpaid student loans.  

As Josh Mitchell pointed out in a Wall Street Journal article, this amount approaches the amount of money private lenders lost during the 2008 home-mortgage fiasco.  Unlike 2008, however, the student-loan crisis will probably not trigger a financial meltdown.  The feds will simply borrow billions of new dollars to absorb the loss. The taxpayers won't even notice.

But I think the student-loan debacle is worse than DOE's internal report admits.  Nine million people are in long-term, income-based repayment plans (IBRPs), and almost all of them are not making monthly loan payments that are large enough to cover accruing interest on their underlying loans.  DOE's report estimates that IBRP borrowers will only pay off about half the amount of their loan balances. But the loss must be larger than that if the vast majority of people in these plans aren't paying down their loans.

Millions of people are taking out student loans to finance their college degrees--betting that their education will land them a good job. Too often, they lose the bet.

Meanwhile, people who skip college for a vocational school or an apprenticeship in the trades are making more money than college grads and aren't mired in student-loan debt. As Zero Hedge Fund put it, "there are plenty of hard working plumbers earning six-figures, who didn't take on a mountain of debt for a toilet-paper degree."

As conservative economists keep warning us, the Unites States will soon experience a spike in inflation unless the government stops printing money and running deficit budgets. When that occurs, students will have the bitter satisfaction of paying off their loans for toilet paper degrees with toilet-paper money. 

This is what hyperinflation looks like.







Wednesday, June 3, 2020

George Floyd gets 3 funerals: Who mourns the death of 2 black police officers?

Many years ago, I was driving on a lonely stretch of highway in northeast Louisiana when I was stopped for speeding by a Madison Parish deputy sheriff. The officer was polite and didn't threaten me in any way. Nevertheless, it was dark when I got pulled over, and I was a little frightened.

I suppose you could say it was an edifying experience because I never speeded through rural Louisiana again. In fact, I  gradually gave up speeding altogether because I didn't want to scare the hell out of myself by getting pulled over by a Southern cop.

Cops scare me, and I don't mess with them. I don't know anyone who does.

 I don't feel entitled to disobey a cop because I am a middle-class, white guy. Unlike a couple of attorneys in New York City, I don't feel privileged to throw a firebomb into a police cruiser simply because I have a law degree.

George Floyd's death is an outrage. The killing of any unarmed black man while in police custody is a tragedy. But I do not believe our nation's police departments are packed with racists. I agree with the Wall Street Journal editorial board, which said yesterday that "[a] solid body of evidence finds no structural bias in the criminal justice system with regard to arrests, prosecution or sentencing [of African Americans]."

Hysterical and baseless charges of endemic police racism have made cops vulnerable to violence.  David Dorn, a retired St. Louis police officer, was shot and killed by a looter while guarding a friend's pawn shot. A video shows him lying in his own blood on a sidewalk.  People were filming his mortal distress, but I didn't see anyone try to help him. Dorn was black.

Patrick Underwood, a federal security officer, was shot to death a few days ago while guarding a federal building in Oakland. Underwood was black.  

Mr. Floyd will have funerals in three states: Minnesota, North Carolina, and Texas. I'm sure Mr. Underwood and Mr. Dorn will have just one funeral.

Over the past week, more than a hundred law enforcement officers have been injured while they were trying to preserve public order and stop arson, looting, and vandalism.  Some of them are men. Some of them are women. Many of them are white, but some of them are black.

I don't know about you, but I'm in favor of "domestic tranquility"--the domestic tranquility that our Constitution promises to promote. And we won't have domestic tranquility if a significant portion of our population believes that attacking a police officer is justified as an act of civil disobedience.



David Dorn, retired police officer








Monday, May 28, 2018

Mike Meru racked up $1 million in student loans to go to dental school. Will he ever pay it back?

Perhaps you read Josh Mitchell's story in the Wall Street Journal about Mike Meru, who took out $600,000 in student loans to go to dental school at University of Southern California. Due to fees and accrued interest, Meru now owes $1 million.

How did that work out for Dr. Meru? Not too bad actually. He's now working as a dentist making $225,000 a year. He entered an income-based repayment plan (IBR), which set his monthly payments at only $1,590 a month. If he makes regular payments for 25 years, the unpaid balance on his loans will be forgiven.

But as WSJ's  Josh Mitchell pointed out, Dr. Meru's payments don't cover accruing interest, which means his student-loan debt continues to grow at the rate of almost $4,000 a month. By the time, Dr. Meru completes his 25-year payment obligations, he will owe $2 million. Although this huge sum will be forgiven, the IRS considers forgiven debt as taxable income. Dr. Meru can expect a tax bill for about $700,000.

The student-loan program's many apologists will say Dr. Meru's case is an anomaly because most people borrow far less to get their postsecondary education. In fact, only about 100 people owe $1 million dollars or more. But 2.5 million college borrowers owe at least $100,000; and even people who borrow far less are in deep trouble if they drop out of school before graduating or don't land a good job that allows them to service their loans.

Here are the lessons I draw from Dr. Meru's case:

First, income-based repayment programs are insane because student debtors make payments based on their income, not the amount they owe. Dr. Meru's payments are set at $1,590 a month regardless of whether he borrowed $100,000, $200,000 or $600,000.  Thus, IBRs operate as a perverse incentive for students to borrow as much as they can, because borrowing more money doesn't raise the amount of their monthly payments.

Second, IBRs allow professional schools to raise tuition year after year without restraint because students simply borrow more money to cover the increased cost. USC told Mr. Meru that dental school would cost him about $400,000, but USC increased its tuition at least twice while Meru was in school; and Meru wound up borrowing $600,000 to finish his degree--far more than he had planned for.

Does USC feel bad about putting its graduates into so much debt? Apparently not. Avishai Sadan, USC's dental school dean, said this: "These are choices. We're not coercing. . . You know exactly what you're getting into." By the way, Dr. Sadan got his dentistry degree in Israel: and I'll bet it cost him a lot less than $600,000.

And here's the third lesson I draw from Dr. Meru's story. The student loan program is destroying the integrity of professional education.  As I've explained in recent essays, the federal student loan program has allowed second- and third-tier law schools to jack up tuition rates, causing graduates to leave school with enormous debt and little prospect of landing good jobs.

A medical-school education now costs so much that graduates are forced to choose the most lucrative sectors of the medical field in order to pay off their student loans. That is why more and more general practitioners are foreign born and received their medical training overseas, where people don't have to borrow a bunch of money to get an education.

Dr. Avishai Sadan, Dean of USC's School of Dentistry
"You know exactly what you're getting into."
References

Josh Mitchell. Mike Meru Has $1 Million in Student Loans. How did That Happen? Wall Street Journal, May 25, 2018.