Showing posts with label for-profit colleges. Show all posts
Showing posts with label for-profit colleges. Show all posts

Saturday, October 1, 2022

Consumer Financial Protection Bureau reports that the Federal Student Loan Program is a mess

The Merriam-Webster dictionary defines snafu as "a situation marked by errors or confusion." The word is an acronym for "Situation Normal, All Fouled (or Fucked) Up." 

Earlier this month, the Consumer Financial Protection Bureau issued a report confirming what we already knew:  the federal student program is all f-cked up. The CFPB's publication is titled Supervisory Highlights Student Loan Servicing Special Edition, which doesn't tell you a damn thing about what's in the report. Perhaps that was intentional.

Although the bureaucratic writing style is turgid. The report makes clear that the federal student loan program is spectacularly mismanaged.

Here are some highlights:

The CFPB found that many colleges and universities refuse to release academic transcripts to students who are indebted to their institution.  This practice often makes it impossible for former students to transfer to another school or get a job. The CFPB believes this practice is "abusive under the Consumer Financial Protection Act." Duh!

Second, CFPB criticizes student-loan servicers for bungling the administration of income-based repayment plans. Many borrowers in IBRPs are kicked out of these programs because they failed to certify their annual income annually. Those borrowers are then required to get recertified.

CFPB  accused student-loan servicers of improperly denying borrowers' applications to get reinstated in an IBRP. "Examiners found that servicers engaged in a deceptive act or practice by providing consumers with a misleading denial reason after they submitted an IDR recertification application."

For example, servicers sometimes don't tell borrowers they must certify their income when they were not in an IBRP. Then they refuse to reinstate those borrowers because they didn't provide their income information.

CFPB also accused servicers of giving parent borrowers inaccurate information about their eligibility for an IBRPeligibility.

In short, the CFPB scolded for-profit colleges for withholding academic transcripts and student-loan services for spectacular mismanagement of income-based repayment plans.

Tellingly, the CFPB did not identify a single malefactor or suggest even one substantive action to correct the problems it identified. Instead, it ended its report with this pathetic and syntax-tangled sentence:

Regardless, where the Bureau identifies violations of Federal consumer financial law, it intends to continue to exercise all of its authorities to ensure that servicers and loan holders make consumers whole.

How reassuring! 

Why didn't the CFPB propose that Congress pass a law that would make it illegal for a college to withhold academic transcripts from students, regardless of the reason?

Why didn't the CFPB call for the Department of Education to collaborate with the Internal Revenue Service to determine the annual income of students in IBRPs? It makes no sense for loan servicers to keep borrowers out of IBRPs because they didn't certify their income when the government can quickly determine annual income by looking at borrowers' annual federal income tax returns.

For some reason, the Department of Education and the CFPB would rather keep the student loan program in a snafu condition than take reasonable steps to make it operate more efficiently.

Snafu









Monday, August 22, 2022

Who Profits From the For-Profit College Industry? Let's Take a Look at Adtalem Global Education

Higher Education in the United States was once considered a civic activity intended to improve people's lives and benefit society. 


Then some people realized they could make money in the education racket, and the for-profit-college industry was born. 


Who makes money from for-profit colleges? Mostly hedge funds, equity funds, and institutional stockholders. 


Let's look at Adtalem Global Education (AGTE), a for-profit education company that owns Walden University, two Caribbean medical schools, and a Caribbean veterinary school. It's trading on the NASDAQ for about $39 a share--near its 52-week high.


Virtually all of Adtalem is owned by institutions, mostly hedge funds and financial companies. 


Which funds own the stock? You would recognize some of them: Blackrock, Berkshire Hathaway, Goldman Sachs, Morgan Stanley, JP Moran Chase, Soros Management, and the California Teachers Retirement System.


Some analysts are bullish on Adtalem and are predicting a higher share price. Certainly, the big financial players think Adtalem is a money maker.


Without a doubt, Adtalelm's educational institutions have been busy little bees. According to the Chronicle of Higher Education Almanac, Adalem's Walden University produced 867 doctoral degrees in 2020--more than Harvard, Yale, or Columbia. It logged 124 doctoral degrees in education and 357 doctorates in psychology and social sciences. That should make investors happy.


Adtalem gets most of its revenues from federal student aid money. Tuition costs are high. Tuition at Adtalem's American University of the Caribbean Medical School is about $25,000 a semester.


My guess is that most of the graduates of Adtalem's medical schools sign up for income-based repayment (IBR) plans that stretch out payments for 20 or 25 years.  


That keeps monthly loan payments down, but often IBR loans are negatively amortizing. In other words, student borrowers in IBRs see their loan balances go up with each passing month because their loan payments aren't large enough to cover accruing interest.


Indirectly, then, taxpayers are subsidizing the for-profit college industry, including Adtalem, because so many of their students will never pay off their student loans.

Is that a good deal for the American people? No, but it's a good deal for the hedge funds, and that's why the federal government will keep propping up the for-profit college industry.


The hedge funds love the for-profit college industry.


Saturday, August 13, 2022

Own a Piece of the American Dream: Buy Stock in the For-Profit College Industry

 Fifty years ago, most Americans understood that education was a public responsibility. It was the community's job to operate good public elementary and high schools. It was the state's job to support high-quality public colleges and universities.

All in all, this notion of publicly supported education worked well. Some public schools were better than others, but most were pretty good.

Some public universities were also better than others. The University of Michigan, University of Wisconsin, the University of Virginia, and the University of Texas were universally regarded as some of the finest universities in the world. Still, even the states of Idaho, Oklahoma, and other flyover states operated pretty good public colleges.

Of course, there was always a place in American education for non-profit schools and colleges. Harvard, Dartmouth, and dozens of lesser-known private colleges were well respected as public-spirited organizations, and the Catholic Church operated flourishing parochial schools.

Until recently, it hardly occurred to anyone that schooling should be turned over to investors who could make a fast buck in the education racket.

How times have changed. We now have for-profit K-12 charter schools and almost a thousand for-profit colleges.

And anyone can get in on the action. Equity funds own some for-profit colleges, and others trade on the stock market.

Adtalam Global Education (ATGE), which owns Walden University and two medical schools in the Caribbean, traded for $39 a share last week--down a few bucks from its 52-week high. 

Grand Canyon Education (LOPE) operates Grand Canyon University, a Christian school that makes money for investors. You can buy into that outfit for $84 bucks a share.

You can't buy shares in the University of Phoenix (UP) anymore. In 2017, a private equity fund out of Chicago took over the company that operates UP.

We all know that complaints have barraged the for-profit industry for many years. Critics have argued that for-profit college tuition is too high at most schools and that many for-profits deliver a shoddy product. Some commentators have pointed out that the for-profit industry preys on minority and low-income students.  

But, hey--this is America, and we're all entitled to make a buck off the rubes. So, if you want a piece of the American Dream, you can purchase some for-profit stock or buy a piece of an equity fund that owns a college.

As for me, if I am going to invest in a dodgy industry, I would prefer to buy stock in the casinos. 

Chicago, home to Adtalem's corporate headquarters



Thursday, June 23, 2022

Student Debtors Say Affordable College is More Important than Debt Forgiveness

 National Public Radio (NPR) recently ran a poll to determine what Americans think about student-loan forgiveness. More than half the respondents favor President Biden's plan to forgive $10,000 in student debt per borrower.  

Among people with outstanding student loans, 84 percent support Biden's debt relief plan, and 68 percent want Biden to forgive all student debt (as reported in Inside Higher Ed.)

That's not surprising. If the President offered to pay off my Visa card, I would certainly say yes. 

And here's the NPR poll's most interesting finding: Among college-loan debtors, 82 percent believe making college more affordable should be the feds' priority

The NPR poll results show that most Americans understand why the federal student-loan program is out of control. A college education costs too much. 

Giving student debtors $10,000 in student-loan relief will do nothing to solve the student-debt crisis, which worsens with each passing month. While politicians and pundits debate whether President Biden should forgive some of this massive debt, the colleges keep raising their tuition. 

The United States has too many colleges and too many frivolous degree programs. Too many universities offer over-priced, mediocre graduate degrees that don't lead to good jobs.  

Most universities are bloated with platoons of highly paid administrators who draw higher salaries than the professors. Several for-profit schools have been found guilty of fraud; almost all charge too much for degree programs that don't pay off financially.

It's easy to shower college-loan borrowers with helicopter money-- a one-time gift of $10,000 in loan forgiveness to every student debtor. Kinda like giving a couple of bucks to a panhandler--how hard is that?

It is much harder to grapple with the underlying reasons for the student loan crisis: corruption, mismanagement, and price-gouging at American universities.



Wednesday, April 6, 2022

White House Extends Pause on Student-Loan Payments Until the End of August: Will Biden Go the Full Monty?

The White House is extending the pause on student-loan payments until August 31st--an extraordinary development. By the time this pause ends in September, millions of student borrowers will have been relieved from making payments on their student loans for almost two-and-a-half years.

Indeed, as Ron Kline, President Biden's chief of staff, pointed out:

Joe Biden, right now, is the only president in history where no one's paid on their student loans for the entirety of his presidency.  

 What's next? I predict President Biden will announce significant student-debt relief this fall--in time to impact the 2022 midterm elections. 

After all, it would be political madness for the Biden administration to force student borrowers to begin making payments again only weeks before the nation goes to the polls to elect the next Congress.

Sometime in August or September, I think the President will do one of three things:

  • He may reduce each student debtor's loan balance by $10,000, which he promised to do on the campaign trail.
  • President Biden might go the full monty and cancel all student debt, totaling $1.7 trillion.
In my opinion, the President will take the middle course and give college borrowers $50,000 in debt relief. A $10,000 write-off is not big enough to satisfy his base, and wiping out all $1.7 trillion in student debt is too audacious.

But regardless of what President Biden decides to do regarding student-debt relief, here are things the federal government will probably not do:

Congress will not rein in the for-profit collegesThe for-profits' lobbyists and campaign contributions will continue protecting this sleazy racket.  

Congress will not reform or eliminate the Parent PLUS program. Parent PLUS has brought financial ruin to hundreds of thousands of low-income families, but too many colleges depend on Parent PLUS money for Congress to shut down the program.

Congress will not reform the Bankruptcy Code to allow distressed student borrowers to shed their college loans in bankruptcy. 

As I have said for twenty years, the simplest and most equitable way to address the student-loan crisis would be to allow honest but unfortunate college borrowers to discharge their student loans in the bankruptcy courts. But that reform makes too goddamned much sense for Congress to do it.

In short, what we are likely to see in the coming months is massive student-loan debt relief with no reforms whatsoever for the federal student-loan program--the biggest boondoggle in American history.

Will President Biden wipe out all student loan debt?








Saturday, March 19, 2022

Baton Rouge Man Convicted of Massive Student Loan Fraud: Baton Rouge Community College Becomes Crime Scene

 A few days ago, Elliott Sterling of Baton Rouge was convicted of massive student-loan fraud. As reported in the Baton Rouge Advocate, Sterling stole $1.4 million in student loan money by pretending to be a Baton Rouge Community College student 180 times.

Prosecutors also presented evidence that the Sterling falsified student-loan applications for 168 people. In furtherance of his scheme, he bought 42 fake high school transcripts, paid people to represent themselves as students, and filed false information on student-aid applications.

Sterling's criminal scheme went on for two years. FBI agents seized $422,000 in fraud proceeds, but Sterling blew a great deal of money at gambling casinos.

Apparently, numerous people helped Sterling bilk the federal government. He collected hundreds of thousands of dollars in student-loan money intended for other people and kept two-thirds of the proceeds. He even enlisted the help of a couple of people in prison.

Sterling's convictions raise several questions. First, did any of the bogus students at BRCC attend classes?  Did they receive grades? How long did it take BRCC to realize that someone was using the college to scam the federal student-loan program?

Of course, all the people who took out student loans as part of Sterling's scheme are indebted to the Department of Education and required to pay back the money they were awarded. How many of these "students" will pay back their loans?  My guess is that none of them will.

College leaders and the U.S. Department of Education would like Americans to believe that the federal student loan program is competently administered and that federal loan money helps students get a valuable college education.

In fact, the student loan program is riddled with fraud and mismanagement. Several for-profit colleges have been accused of misrepresenting their programs; some individuals take out loans just to capture the income with no intention of studying for a college degree. Hundreds of colleges have rolled out dodgy graduate programs to enhance their revenues, leaving students with worthless MBAs and professional diplomas.

Today, 45 million Americans collectively owe $1.8 trillion in student debt. Parents have impoverished themselves by taking out Parent PLUS loans to help their offspring pay their college bills. Private lenders have loaned another $150 billion to students at high-interest rates.

It is time for Americans to admit that higher education in this country is a racket. Congress doesn't have the courage to legislate reforms. But surely, our federal legislators can summon the political will to amend the Bankruptcy Code to allow the victims of this massive fraud scheme to discharge their student loans through bankruptcy.

Baton Rouge Community College: A crime scene







Wednesday, November 24, 2021

Marchus v. Student Loans of North Dakota: Another Victory for Student-Loan Debtors in the Eighth Circuit

In 2020, Debra Jean Marchus filed an adversary proceeding in a North Dakota bankruptcy court, seeking to discharge about $38,000 in student-loan debt. After a trial, Bankruptcy Judge Shon Hastings wiped out the debt.

As summarized in Judge Hastings's decision, Ms. Marchus began her journey through higher education in 1975, forty-five years before she filed for bankruptcy. She first enrolled at North Dakota State University, then attended a couple of for-profit institutions, and finally obtained an associate degree in accounting from the University of Phoenix in 2013.

When Marchus appeared in Judge Hastings's courtroom, she only made $11.00 an hour working as a North Dakota grocery store stocker. Moreover, Marchus had never made a lot of money. Her average annual income over the previous fifteen years was only $14,493. 

As Judge Hastings noted, Marcus bought her clothing from second-hand stores, received health care from Medicaid, and supplemented her food budget with financial assistance from the federal government's SNAP program. She drove a 17-year-old car and lived in a one-bedroom apartment.

Ms. Marchus also suffered from serious health problems, which Judge Hastings summarized in some detail:
[Marchus's] physical conditions include arthritis, water retention, relaspes of colitis, chronic sinusitis . . . , no upper arm strength, weight gain, lack of blood flow in her legs, thyroid disease, hiatal hernia and kidney disease
After sifting through all the evidence (including more than 500 pages of medical records), Judge Hastings concluded Ms. Marchus's financial future did not look promising.
[Marchus] is almost 64 years old. She holds no pension or investment accounts and saved no money for retirement. Her employment and income opportunities are limited, and the prospect of [Marchus] increasing her income either through new employment or a promotion at her current job appears bleak.
Summarizing the evidence (which included more than 500 pages of medical records), Justice Hastings concluded that it was unlikely that Ms. Marchus would ever earn more than her current income. He discharged her debt to SLND in its entirety.

What are we to make of Marchus v. SLND

First, Debra Machus is one among millions of Americans who took out student loans to attend for-profit colleges but did not benefit financially. For more than forty years, Marchus attempted to improve her lot in life by enrolling at for-profit schools, and yet she wound up working at a job that paid only $11 an hour.

Second, Marchus's case shows how interest and penalties can cause a student-loan debt to balloon out of control. Debra Marchus borrowed $14,000 in 2007 to attend Aakers Business College, and she paid back more than half that amount with money she received from an inheritance. Nevertheless, by the time she filed for bankruptcy, her debt had grown to more than $38,000! 

Finally, Marchus v. SLND is another win for student-loan debtors who reside in the Eighth Circuit Court of Appeals. Like Diane Ashline's victory in Iowa and Michael Abney's success in Missouri, Marchus's victory in North Dakota is a sign that the bankruptcy judges in the Eighth Circuit are becoming more willing to grant student-loan debtors the relief to which they are clearly entitled.    

References

Abney v. U.S. Department of Education, 540 B.R. 681 (Bankr. W.D. Mo. 2015).

Ashline v. U.S. Department of Education, Adversary No. 16-09028 (Bankr. N.D. Iowa, Sept. 28, 2021).

Marchus v. Student Loans of North Dakota, 630 B.R. 91 (Bankr. D.N.D. 2021).

Elizabeth Lally, N.D. of Iowa Judge Collins Leads the Way On Discharge of Student Debt in the Eighth Circuit, Goosmann Law Firm (July 28, 2018).





Tuesday, November 2, 2021

105 Organizations Want Biden to Cancel All Student Loan Debt: It Ain't Happenin'

 More than one hundred public interest groups sent a letter to President Biden this week urging him to cancel all student debt. How much are we talking about? Close to $2 trillion.

I will say upfront that I support wholesale student-loan forgiveness. As numerous studies have pointed out, burdensome student debt has kept millions of Americans from buying homes, having children, and saving for retirement. 

If the President were to cancel all student debt, 45 million college-loan borrowers could pour approximately $5 billion a month back into the economy.  That would be good for everybody.

Nevertheless, I don't think President Biden will wipe out $2 trillion in student debt. As Betsy DeVos, President Trump's Education Secretary, pointed out in a 2018 speech, student loans make up one-third of all federal assets

What will be the consequences if the federal government removes one-third of its assets from the national balance sheet?  I don't think anyone knows.

Also, the President surely realizes that forgiving all student debt undermines the integrity of the federal student-loan program.  If all student loans are forgiven this year, how can the Department of Education expect to collect on the student loans it makes in the future?

Moreover, I don't see the wisdom of wiping out $2 billion in student debt unless American higher education is fundamentally reformed. Tuition rates have reached an insane level--$25 thousand per semester at most private colleges. Colleges are cranking out worthless degrees in the liberal arts and social sciences, not to mention vapid graduate degrees in law and business.

And we have far too many colleges. Does it make sense to grant wholesale student-loan forgiveness while the government continues propping up the for-profit college industry and small schools that are losing enrollment and teetering on closure?

I think everyone who calls for massive student-loan forgiveness is sincere. I believe our President and most members of Congress really want to grant relief to millions of Americans who are saddled with unmanageable debt levels.

But when we look closely at the federal student loan program, we see what a monster it has become. We can't fix the loan program without fixing higher education on a massive scale.  And no one has a clue how we can do that.














Tuesday, August 10, 2021

The Feds messed up the federal student loan program: And everything they do to fix it just makes things worse

 Many years ago, when I was a fledgling attorney, my senior partner gave me some advice I never forgot. 

He told me that a competent attorney won't make many errors, but all lawyers will make a mistake at some point in their careers.

When you realize you made an error, he advised me, admit it to yourself and immediately begin trying to repair the damage. 

Why? Because the longer you ignore a blunder, the worse the consequences will be. 

I have tried to follow my senior partner's advice throughout my career--first as a lawyer and then as a professor--and I have learned that this advice is always the right thing to do.

But Congress is not following my law partner's advice. Since it created the student loan program more than 50 years ago, it's made several colossal mistakes, but it muddles on--like a drunk driver who causes a multi-car pileup and then leaves the scene of the accident.

For example, Congress screwed up when it allowed for-profit colleges to participate in the student-loan program.  The evidence of corruption, price gouging, and fraud in that sector is well documented.

But the for-profits are sort of like a deadbeat relative who asks you if he can crash on your couch. Once you let him in and give him a house key, you can't get the sonofabitch out.

Congress also made a mistake when it amended the Bankruptcy Code to make it almost impossible for distressed college borrowers to discharge their student loans in bankruptcy. We now have thousands of people who owe three or four times what they borrowed, but they can't free themselves from that debt in bankruptcy court.

And here's another screwup--the Public Service Loan Forgiveness program (PSLF). PSLF was intended to relieve the student-loan burden for people wanting to take public service jobs:--firefighters, school teachers, nurses, etc.

But that program is so botched up that 98 percent of the people who thought they were in the PSLF program were denied relief. As Steve Rhode said in a recent podcast--PSLF is a "dumpster fire."

And then there are the various income-based repayment plans (IBRPs) that the brainy policy wonks said would relieve the debt burden on people who had taken out so many loans that they could not pay off the debt under ta standard 10-year repayment program.

How's that working out? We now have more than 8 million people in IBRPs that can last for a quarter of a century. And how many of these people have had their deads cleared? According to the National Consumer Law Center--only 32!

And the IRBP participants are making monthly payments that are not large enough to cover accruing interest. Virtually all these people will owe much more than they borrowed when they finish their 25-year repayment plans.

Do you want to talk about the Parent PLUS program, which preys on low-income families and has a ten percent default rate?

Let's face it, the federal student loan program and its toxic offshoots is a calamity--the mother of all calamities. Its impact on the economy and individual lives makes the 2009 home-mortgage scandal look like a Sunday school class.

And now, what has our government done? It has extended the pause on student loan payments until the end of January 2022. That's right, millions of student loan debtors are excused from making their monthly payments for almost two years!

Did that move solve anything? No, it did not. By extending the loan-payment pause, the Department of Education merely postponed the day it will have to admit that the student-loan program is a trillion-dollar screwup.


It is always best to admit your mistakes and do your best to repair the damage.


Sunday, May 9, 2021

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'.






Friday, April 2, 2021

President Biden ponders $50,000 student-loan cancelation: That doesn't go nearly far enough

 President Biden has asked Education Secretary Miguel Cardona to prepare a memo on the president's legal authority to cancel up to $50,000 in student debt.  

If he did that, the experts tell us, President Biden would forgive all college-loan debt for 36 million people--about 80 percent of all borrowers. 

Is that a good idea? 

Sort of. Anything the federal government does to provide relief to distressed student-loan debtors is good, so I support a massive cancelation of student debt.

Nevertheless, one-time debt forgiveness is the wrong approach. 

Wiping out student debt without reforming the student-loan program is like fixing a flat tire on a broken-down car and then putting it back on the highway with no brakes. Someone down the road is going to get hurt.

The whole damned, rotten student-loan system has to be torn down. Otherwise, the corrupt, venal, and incompetent American higher education system will continue ripping off the American people.

Obviously, massive reform can't be accomplished overnight.  But here is what we need to do for starters:

1) Congress must remove the "undue hardship" clause from the Bankruptcy Code and allow insolvent student-loan debtors to discharge their loans in bankruptcy. 

2) We've got to shut down the Parent Plus program.

3) The federal government has got to stop subsidizing the for-profit colleges, which have hurt so many young people--especially people of color and low-income people.

4) We've got to stop shoving student borrowers into 25-year, income-based repayment plans that are structured such that no one in these plans can ever pay off their loans.  There almost 9 million people in IBRPs now. 

5) The universities have got to start offering programs that help their graduates get a real job. Degrees in ethnic studies, diversity studies, LGBT studies, and gender studies only prepare people for jobs teaching ethnic studies, diversity studies, gender studies, and LGBT studies.

6) Finally, we must restore the integrity of the nation's law schools.  We've got too many mediocre law schools. California alone has more than 50 law schools, with only 18 accredited by the American Bar Association.   And the law schools need to go back to admitting students based on objective criteria--the LSAT score, in particular.

If we had fewer but better-trained lawyers, we'd have less litigation and fewer attorneys who see their job as being hired political hacks.

Will the Biden administration do any of the things I've outlined? I doubt it.

Higher education is in desperate need of reform. A college education is far too expensive, and much of what is taught at the universities is not useful.  Wiping out student debt will bring some relief to millions of college borrowers. But if the colleges don't change how they do business, the student-debt crisis will not be solved.








Tuesday, March 2, 2021

House version of COVID relief bill modifies 90/10 rule for for-profit colleges. Critics say the change may cause some for-profits to close

 The House of Representatives passed a $1.9 trillion relief bill a few days ago, and the legislation is now before the Senate. House Democrats inserted a provision that would modify  an obscure statute that requires for-profit colleges to obtain at least 10 percent of their revenues from non-federal student aid.

The purpose of the 90/10 rule is to require for-profit colleges to obtain at least a small part of their income from non-federal sources. As a recent paper by the Veterans Education Project noted:

The rationale for the [90/10] policy is that a worthwhile educational provider should be able to attract other sources of revenue beyond federal grants and loans, and that students should be willing to put some of their own money toward their education (i.e., “skin in the game”).

 Or as Representative Bobby Scott (D-Virginia) put it, the rule requires for-profit institutions to “show some semblance of attraction to people.”

Under current law, GI Bill benefits--federal student aid for veterans--are not counted as federal student aid under the 90-10 rule. Thus, for-profits can get 90 percent of their revenue from federal student aid and get additional federal money from veterans' benefits without violating the 90/10 rule. 

The House version of the COVID relief bill would change the way the 90/10 rule is calculated by including veterans benefits as federal student aid.  The Wall Street Journal criticized the measure, pointing out the rule change would cause 87 for-profit schools to fall out of compliance with federal regulations and perhaps close.

I disagree with the Wall Street Journal. For-profit colleges have a long and well-documented history of providing overly-expensive, often substandard services to students.  As the Brookings Institute reported recently, for-profit schools enroll only 10 percent of postsecondary students but account for half of all student loan defaults.

Moreover, on average, for-profits are four times more expensive than community colleges, and black and Latino students are overrepresented in this low-performing education sector. Indeed, some research suggests that a for-profit college education may be no better than no college education at all. 

Tightening the 90/10 rule is a modest reform. All it will do is require for-profits to find more non-federal operating funds than they are required to have now.  

If the Senate includes the modified rule in its version of the COVID legislation, some for-profits may indeed closeWe should not mourn their loss.

Rep. Bobby Scott (D. Virginia)