Showing posts with label garnishing Social Security checks. Show all posts
Showing posts with label garnishing Social Security checks. Show all posts

Sunday, January 8, 2023

Elderly Student-Loan Defaulters Will See Their Social Security Checks Garnished When Pause on Student Loan Payments Ends

In response to the COVID pandemic, the Department of Education stopped garnishing the Social Security checks of elderly student-loan defaulters in March 2020. However, DOE will return to that practice soon--probably by midsummer 2023.

In an article posted on MSN.com, Vance Cariaga estimated that garnishment of Social Security checks will cost senior student-loan defaulters, on average, about $2,500 a year. 

Only a small percentage of elderly Americans have outstanding student-loan debt, but that percentage will likely go up in coming years, partly because millions of college borrowers are signing up for income-based repayment plans that can stretch out for as long as a quarter of a century.

In fact, Variaga cited estimates that 22 percent of Black Social Security beneficiaries will have student-loan debt in the coming years, along with 14 percent of White Social Security beneficiaries and 10.4 percent of Hispanics. 

Think about that. Virtually every American is eligible for Social Security benefits. Thus, if the estimates Cariaga cited are accurate, more than one out of five Black Americans will still have student debt when they reach retirement age.

If we were to poll members of Congress, I doubt that a single one supports garnishing Social Security checks of student-loan defaulters in their senior years. Not only is it heartless, but it's also pointless. A Government Accountability Office report that appeared several years ago found that money collected from garnishing Social Security checks seldom reduced defaulters' loan balances. Most of the garnished funds went toward paying accrued interest.

Why doesn't DOE abandon the practice? Alternatively, why doesn't Congress abolish the practice?

I'll tell you why. Despite all the rhetoric, litigation, and policy proposals, our nation's education and political leaders refuse to focus on the core reality of the student loan crisis, which is that millions of college borrowers have had their lives blighted by student debt they can't pay back. Burdened by student loans, Americans are increasingly unable to buy homes, save for retirement, or even get married or start families.

If Congress truly grasped the magnitude of the student-loan catastrophe, it would do at least these two things: It would abolish the practice of garnishing Social Security checks of elderly student-loan defaulters, and it would allow overburdened student debtors to discharge their student loans in the bankruptcy courts. 



Friday, December 2, 2022

The Supreme Court will soon rule on legality of Biden's Student-Loan Forgiveness Plan

 Forty million student debtors are waiting anxiously for President Biden's loan forgiveness plan to kick in. Biden wants to knock off $10,000 from everyone's student loans who makes less than $125,000 a year. That won't mean much to people whose loans are in six figures, but it will mean a great deal to people with modest loan balances. 

Unfortunately for all those millions of college borrowers, the Eighth Circuit Court of Appeals halted Biden's plan.

President Biden appealed to the Supreme Court, and yesterday the Court agreed to consider his appeal. We should have a Supreme Court decision by early summer of next year.

I predict that the Supreme Court will strike down Biden's loan-forgiveness scheme as an unconstitutional usurpation of Congressional authority. If that happens, the President and Congress will be under heavy pressure to provide some sort of loan relief that isn't illegal.

As I have argued repeatedly, Congress should revise the Bankruptcy Code to allow honest debtors to discharge their student loans in bankruptcy. This simple action would do more than anything else to grant loan relief to deserving college borrowers without allowing unworthy student debtors to get a free ride.

If this is too much of a heavy lift for Congress, it could enact more modest reforms. Here are my suggestions:

1) Congress should forbid the Department of Education from garnishing the Social Security checks of elderly borrowers who defaulted on their student loans. 

2) Congress should shut down the for-profit college industry. There is no reason for private investors and hedge funds to profit from young people striving to get their college degrees.

3) We should end the Parent PLUS program, which has impoverished hundreds of thousands of low-income families who took out federal loans so their children could attend college.

4) Congress also needs to reform the Grad PLUS loan program, which currently has no cap on the amount of money students can borrow to attend graduate school.  It is ridiculous for people to borrow $100,000 or more to get a master's degree in journalism.

Will any of these reforms see the light of day? Doubtful. Universities, student-loan servicers, and the banks are all happy with the status quo. As someone remarked after the fall of France during World War II: "Reform was possible only through catastrophe."

Sadly, it will probably take the catastrophic collapse of the American economy before our politicians will do what needs to be done to clean up the calamitous student-loan program.

Reform is not possible without a calamity.




Tuesday, September 20, 2022

The Student Loan Program Is Designed to Shovel Federal Money to Colleges at Students' Expense

Years ago, I traveled through central Uganda in a Land Rover, accompanied by a native guide. As we came around a curve in the road, we surprised a large troop of baboons.  

All the baboons ran away. Large and small, the whole group fled into the woods. All but one.

The largest baboon was reclining against a tree when we appeared, and he stayed put. He was not afraid of us and wanted us to know it.

My guide stopped our vehicle so that we could observe this human-sized creature. The baboon stood up and slowly walked to my side of the Land Rover. My window was open, and soon he was standing only inches from me.

My guide had bought a bunch of Ugandan bananas (very tasty), and I offered one to the baboon. He stared directly into my eyes for a few seconds, which made me extremely uneasy. Finally, he grabbed the banana from my hand and walked away without the slightest sign of gratitude.

"I just did a stupid thing," I admitted to my guide, and he agreed. "Yes, Mr. Fossey, that was stupid."

Our federal government is doing stupid things with the student-loan program. Today, 45 million Americans hold student debt totaling $1.7 trillion, and millions of borrowers are in income-based repayment plans that last as long as a quarter of a century. The prime beneficiaries of all this largesse are colleges and universities. 

Have the colleges used this money wisely? No, they haven't. They raise tuition rates year after year because they know that students will take out ever-larger loans to pay their tuition bills.  They roll out expensive graduate programs that don't lead to good jobs. They overpay their administrators, who proliferate like feral hogs.

In essence, the feds have been feeding bananas to baboons. 

Although the colleges rake in billions of dollars each year from the student-loan program, they have nothing to say about its flaws. The presidents of the nation's most prestigious universities haven't endorsed bankruptcy relief for distressed student debtors. They haven't spoken out about the rapacious for-profit college industry. They've not criticized the Department of Education for garnishing elderly student debtors' Social Security checks.

Why haven't college leaders called for reforming the student-loan program? Because they don't give a damn. 

They just want their bananas.


Give me that goddamn banana.


Friday, July 29, 2022

"Stepped in Blood": The Student Loan Program is So Screwed Up That There Is No Solution Without Pain

I read Shakespeare's Macbeth as a high school student, and I still remember one line from that play:

I am in blood stepped in so far, that, should I wade no more, returning were as tedious as go o'er.

I understood the line to mean that Macbeth had involved himself in so many murders that he might as well continue on the same bloody path as turn back.

That's America's situation with the disastrous federal student loan program. Forty-five million student debtors owe a total of $1.7 trillion in federal loans, and there is no way to undo the monstrous damage that has been done. 

Thousands of articles, books, news stories, and scholarly reports have been written about the student-loan catastrophe, but Eleni Schirmer summarized it very well in a recent New Yorker article.

Shirmer focused on elderly student-loan debtors, beginning her article by telling the tale of Mary Ann, who borrowed $29,000 to attend law school in the early 1980s. Today, she is 91 years old, and her debt has grown to $329,000.

As Schirmer explained, oppressive student debt is not only a problem for the young. One in five student borrowers is 50 years or older--about nine million Americans.

Hundreds of thousands of student debtors reach retirement age without paying off their debt. The federal government garnishes their social security checks if they default on their loans.

Millions of overburdened college borrowers have rolled their loans into income-driven repayment plans (IDRs) to lower their monthly payments. Theoretically, their debt is canceled if they successfully complete the terms of their IDR.

Unfortunately, only a handful of debtors have had their loans forgiven through IDRs. As Schirmer explained:
[O]wing to negligent bookkeeping, I.D.R's promise of cancelation has proved to be a mere mirage: as of 2021, more than four million borrowers could have accessed I.D.R. loan cancellation, but only a hundred and fifty-seven had ever received it.
As Shirmer relates, the federal student loan program is so screwed up, so burdened by bureaucracy, and so complicated that the government can't even tell us how much of the $1.7 trillion that is owed is principal on the debt and how much is accrued interest.

For years, the Department of Education has claimed that the federal government makes a profit on federal student loans. Over the last quarter of a century, DOE maintained, the feds created a tidy $114 billion on the program.

But the Government Accountability Office reported this week that DOE grossly miscalculated. In fact, the government lost about $197 billion--a $311 billion math error!

In fairness to the Biden administration, his Department of Education has brought significant relief to millions of distressed student borrowers--mainly by forgiving debt owed by students who claimed to have been defrauded by their colleges. And DOE has initiated several other minor reforms.

Unfortunately, the federal government can't tinker its way out of the student-loan mess. Real reform will be painful.

What, then, needs to be done?
  • The feds have got to stop sending student-loan money to the for-profit colleges and shut down this sleazy industry.
  • DOE urgently needs to terminate the Parent PLUS program, which has devastated hundreds of thousands of low-income and minority families.
  • Congress must reform the Bankruptcy Code to allow distressed student debtors to discharge their loans in bankruptcy. 
Finally, the federal government must put some reasonable cap on the amount of money students can borrow for their college education and force the colleges to get their costs under control.

Sadly, none of these reforms will ever take place. Why? Because reining in the student-loan program would be too painful for various higher-education constituencies, who are happy with the status quo.

Much like Macbeth, the federal student loan program is so mired in corruption, incompetence, and venality that it can't be fixed.  Tragically, this program, designed to help Americans go to college and improve their lives, has destroyed the lives of millions.


Steeped in blood and no painless options



Tuesday, October 5, 2021

Millions of Americans are going to die poor: Something to talk about at the Jackson Hole Economic Symposium

 About six months ago, I received a letter from the Social Security Administration informing me that it had miscalculated the amount of my monthly Security check for the past six years. I had been overpaid, the feds said, and it would not send me any more monthly checks until it collected the entire amount the government said I owed.

Meanwhile, a Baton Rouge strip club received a Payroll Protection check for more than a million dollars. And the press reported that more than a thousand Louisiana prisoners received enhanced unemployment checks totaling $6.2 million. 

I will survive the loss of a couple of Social Security checks, but not every elderly pensioner could take the hit.  For me, this incident is just another sign that our government does not care about the elderly.  

The U.S. Department of Education, for example, garnishes the Social Security checks of thousands of elderly student-loan defaulters, driving many of them below the poverty line. Congress could pass a bill to stop this cruel practice, but apparently, it is too busy to address this outrage.

A great many Americans are entering old age with no savings, no pensions, and no assets.  These people will die poor.

And it is going to get worse. Inflation is on the rise, and inflation--it is often observed--is one way the rich rob the poor, including poor people who are elderly.

Jerome Powell and Janet Yellen assure us that the recent uptick in inflation is transitory, but that's bullshit. Our national debt is $29 trillion, and yet the government keeps printing money. The price for just about everything is going up--including food. Five bucks for a loaf of bread?

In one of his plays, Tennessee Williams observed that you can be old or you can be poor, but you can't be both. Unfortunately, that's not true. America is about to see millions of impoverished old people as inflation heats up.  

How much time did the financial fat cats spend talking about poverty at the Jackson Hole Economic Symposium last August?  I would guess not much.  After all, there aren't many poor people in Jackson Hole.

I have a suggestion for next year's economic summit meeting. Instead of holding it in Jackson Hole, book it in Anadarko, Oklahoma--my hometown.  Lot's of poor people there. 

But attendees should book their reservations early. The Budget Inn has only a limited number of rooms, and it would be unseemly for Paul Krugman, Janet Yellen, and Jerome Powell to bunk together.

Anadarko's Miller Theater: A great venue for next year's Economic Symposium






Wednesday, October 9, 2019

Why doesn't Congress do something useful to relieve the student-loan crisis? A couple of modest suggestions

Some famous guy once said that people are prone to see the speck in another person's eye while ignoring the log in their own eye. That observation reminds of our national political scene--nothing but vitriol and no good being done.

But there are several things Congress can do--uncontroversial things in my opinion, which would help relieve the massive student-loan crisis.  For example, Steve Rhode recently wrote an essay on a new California law that requires colleges to give students their transcripts--including students who have unpaid debts to their college.

As Mr. Rhode quoted, the new law (AB-1313) states: "Schools and colleges have threatened to withhold transcripts from students as a debt collection tactic. The practice can cause severe hardship by preventing students from pursuing educational and career opportunities, and it is therefore unfair and contrary to public policy." Does anyone in Congress disagree with that statement?

The law's dictate is quite simple:
Whenever a student transfers from one community college or public or private institution of postsecondary education to another within the state, appropriate records or a copy thereof shall be transferred by the former community college, or college or university upon a request from the student.
Withholding transcripts and diplomas because a former student is indebted to the college is a common practice among the for-profit institutions, which prompts an obvious question. Why are colleges lending money to students in the first place?

There are two answers to that questions. Some for-profit colleges are not content simply to suck up Pell Grant money and federal student-loan money. They want more cash, and many have no qualms about forcing their students to take out loans--often at high interest rates--in order to continue with their studies.

Second, many for-profits have trouble meeting the Fed's 90/10 rule, which requires a for-profit college to receive no more than 90 percent of its operating revenues from federal student-aid money.  One strategy for getting the 10 percent of auxiliary funding that they need is to loan their students money.

California passed a sensible law, and Congress should adopt it so that the law's restrictions apply nationwide. I repeat--does any person in Congress disagree with what the California legislature did?

Just this morning, Steve Rhode  responded to a a man who claimed that his entire Social Security check was garnished by some outfit called Account Control Technology due to an unpaid student-loan debt. As Mr. Rhode pointed out, the Internal Revenue Service cannot deduct more than 15 percent of an individual's Social Security check as a garnishment. So there is a screw-up somewhere for this individual to lose his entire Social Security check.

But why should elderly Americans have any of their Social Security checks garnished due to unpaid student loans? As the General Accountability Office reported some time ago, these garnishments almost always go toward paying accumulated interest and penalties; and the sums collected do nothing to actually pay down the underlying debt. So what's the damn point?

Senators Elizabeth Warren and Clair McCaskill introduced a bill a few years ago to stop the practice of garnishing Social Security checks to collect on defaulted student loans, but the bill went nowhere. Why can't Congress get off its fat ass and pass that bill?






Thursday, March 7, 2019

I know more about farting cows than Alexandria Ocasio-Cortez. What does AOC know about the student-loan crisis?

Let me begin by saying I recognized global warning a long time ago--before Congresswoman Alexandria Ocasio-Cortez was born. I lived in Alaska in the early 1980s, and we all saw the glaciers retreating.

The planet is heating up, we observed--not a political statement, just an acknowledgement of fact. Some of us naively believed global warming might even be a good thing. Alaska is such a great place to live, we told ourselves, but it would be so much nicer if the winters were just a wee bit warmer.

I also know a whole lot more about farting cows than AOC. My father was a cattle raiser, and I saw a lot of flatulent bovines in the stock pens. In fact, I admit that my father's Angus herd is at least partly responsible for a rise in global temperatures. Mea friggin' culpa.

But will AOC reverse global warming with her Green New Deal? No she won't.  Everybody knows that--even the wax-museum Democrats in Congress.

Better questions to ask are these: What does AOC know about the student-loan crisis, and what will she do about it?

I think the answer to both questions is "Not much." Our national politicians--with AOC in the forefront--bray on and on about problems they know they will not fix. Meanwhile millions of Americans--more than 20 million--have had their lives ruined by student loans that enriched the venal and corrupt higher education industry.

The student-loan crisis is complicated; I acknowledge that. But there are some small things Congress can do that would alleviate the suffering. For example:

Congress could pass Representative Katko's bill to allow distressed debtors to discharge their student loans in bankruptcy. Or if that lift is too heavy, Congress could at least allow parents who cosigned their children's student loans  to shed those debts in bankruptcy if they are insolvent.

Congress could also pass legislation barring the Department of Education from garnishing elderly student-loan defaulters' Social Security checks, which Senator Elizabeth Warren proposed in a bill that got nowhere in the U.S. Senate. AOC could endorse that bill, and it would probably be passed in the House of Representatives.

And here is another thing Congress could do. It could pass legislation requiring Betsy DeVos' Department of Education to streamline the process for forgiving student loans owed by people in the Public Service Loan Forgiveness program.

I suspect AOC has never thought about the student-loan crisis, even though a lot of the sufferers reside in her congressional district. And I will close by saying again that politicians who won't do something tangible toward solving the student-loan crisis don't deserve our votes.

It's farting cows, stupid!





Friday, November 30, 2018

Betsy DeVos compares the student-loan program to a thunderstorm looming on the horizon

Betsy DeVos, President Trump's Secretary of Education, gave a speech a few days ago in which she candidly acknowledged that the federal student-loan program is in crisis. In fact, she compared the student loan program to a "thunderstorm loom[ing] on the horizon."

Here is what Secretary DeVos said in her speech:
  • The federal government holds $1.5 trillion in outstanding student loans, one-third of all federal assets.
  • Only one in four federal student-loan borrowers are paying down the principal and interest on their debt.
  • Twenty percent of all federal student loans are delinquent or in default. That's seven times the delinquency rate on credit card debt.
  • The debt level of individual borrowers has ballooned since 2010. Most of this growth is due to the fact that postsecondary students are borrowing substantially more money than they did just eight years ago.
  • The federal government's portfolio of outstanding student loans now constitutes 10 percent of our nation's total national debt.
DeVos basically admitted that a lot of federal student loans will never be paid back. In the commercial world, she said, no bank regulator would value the government's massive portfolio of student loans at full value. And she also admitted that the Department of Education, by itself, could only make "a few, small tactical measures" to address this enormous problem.

 In my view, DeVos's speech is the most useful statement about the student-loan program coming from a federal official since the publication of A Closer Look at the Trillion, released more than five years ago by the Consumer Financial Protection Bureau's Student Loan Ombudsman, Rohit Chopra.

As I have said repeatedly, the student-loan crisis will not be resolved until the for-profit college industry is shut down and struggling debtors have access to the bankruptcy courts to discharge their student loans.

But those reforms are not politically possible right now. In the meantime, Congress should join DeVos in adopting some "small tactical measures" to ease massive suffering. Here are some suggestions:
  • Congress should adopt legislation banning the federal government from garnishing the Social Security checks of elderly student-loan defaulters. As the Government Accountability Office pointed out two years ago, most of the money collected from garnishing Social Security checks goes to paying off interest and penalties and not paying down the principal on the debt.
  • Disabled veterans should have their student loans forgiven automatically by the government without the necessity of making a formal application.
  • The Department of Education should streamline the loan-forgiveness process for borrowers who signed up for the Public Service Loan Forgiveness Program (PSLF).  As of a few months ago, DOE had approved less than 100 of 28,000 PSLF applicants.
  • Insolvent students who took out private student loans and financially distressed parents who co-signed student loans for their children or who took out  Parent PLUS loans should have free access to the bankruptcy courts.
These measures, if adopted, would do little to relieve the massive suffering caused by mountains of student loan debt. But they would be a token of good faith by our government and a sign that our political leaders finally understand that the federal student loan program is out of control and has ruined the lives of millions of Americans who took out student loans in the naive hope that a college education would lead to a better life.

References

Rohit Chopra. A closer look at the trillion. Consumer Financial Protection Bureau, August 5, 2013.  Accessible at: http://www.consumerfinance.gov/blog/a-closer-look-at-the-trillion/.

Betsy DeVos. Prepared Remarks by U.S. Secretary of Education Betsy DeVos to Federal Student Aid's Training Conference. November 27, 2018.

United States Government Accountability Office. Social Security Offsets: Improvement to Program Design Could Better Assist Older Student Borrowers with Obtaining Permitted Relief. Washington DC: Author, December 2016).

Friday, February 16, 2018

Congress enacts teeny weeny student-loan reform legislation: Is the glass half full or half empty?

As reported by Steve Rhode, Congress passed a very modest student-loan reform bill late last year.  Titled the Stop Taxing Death and Disability Act, the new law eliminates an unfair tax on forgiven student loans.

Prior to passage of this law, the government would forgive student loans held by debtors who became permanently disabled, but the amount of the forgiven debt was considered taxable income by the IRS. You may remember the story of Will Milzarski,  a military veteran who was wounded and disabled while fighting in Afghanistan.  The Department of Education forgave about a quarter of a million dollars in student loans, but the IRS sent Mr. Milzarski a tax bill for $62,000.

The Stop Taxing Death and Disability Act, which was adopted by Congress with bipartisan support, eliminates this unfair tax provision. Under the new law, all student-loan debt (including private student loans) that is forgiven due to the death or disability of the debtor is exempt from federal income taxes.

In addition, the law gives a tax break to the parents of student-loan debtors. Parents who owe student loans on behalf of their children may obtain a student-loan discharge if their child becomes disabled.  And parents who obtain such a discharge won't be taxed on the forgiven debt.

So, is the glass half full or half empty?

On the good side, passage of this modest and noncontroversial bill is a sign that Republicans and Democrats can work together to pass student-loan reform legislation. The bill's three co-sponsors--Senators Rob Portman (R-Ohio), Chris Coons (D-Delaware), and Angus King (I-Maine) are to be commended for getting this little bill adopted.

But on the other hand, as Mr. Rhode pointed out, the bill did not address the enormous tax liability that college borrowers face who are in income-driven repayment plans (IDRs).  More than six million student debtors are enrolled in IDRs, and most of them are making monthly loan payments so small that they will never pay off their loans.  Why? Because the monthly payments aren't large enough to cover accruing interest on the underlying debt.

People locked into IDRs are obligated to make monthly loan payments for terms that stretch out for 20, 25 and even 30 years. At the end of the repayment term, any remaining unpaid debt is forgiven, but the amount of the forgiven debt is considered taxable income.

In other words, a student debtor who successfully completes a 20-year IDR sheds one unpayable debt to the Department of Education and acquires another unpayable debt to the IRS.

Nevertheless, the fact that Congress passed the Stop Taxing Death and Disability Act is a good sign. Maybe Democrats and Republicans can build on this tiny victory to enact more sweeping student-loan reform.

For example, perhaps a bipartisan coalition could rally behind the Warren-McCaskill bill to stop the IRS from garnishing the Social Security checks of elderly student-loan defaulters. Who in good conscience could vote against that bill?

And is it too much to hope that Congress might someday reform the Bankruptcy Code and allow suffering student-loan borrowers to discharge their crushing student loans in bankruptcy?

Will Milzarski, Wounded Veteran (photo credit: Chicago Tribune)


References

Associated Press. Wounded Michigan vet gets student loan debt forgiven, but now IRS wants $62,000Chicago Tribune, October 20, 2017.

Judith Putnam. Student debt forgiven, but wounded vet gets $62,000 tax billUSA Today, October 20, 2017.

Representative John Delaney press releaseDelaney and Katko File Legislation to Help Americans Struggling with Student Loan Debt, May 5, 2017.

Representative John Katko press release. Reps. Katko and Delaney File Legislation to Help Americans Struggling with Student Loan Debt. May 8, 2017.

Steve Rhode. 15 Seconds of Positive News About Student Loans and Congress. Get Out of Debt Guy, February 15, 2108.

Some physical or mental impairments can qualify you for a total r permanent disability discharge on your federal student loans and/or TEACH grant service obligation. U.S. Department of Education web site (undated).



Wednesday, January 3, 2018

James Howard Kunstler's negative assessment of American higher education is spot on

James Howard Kunstler posted an essay a few days ago containing his predictions for American higher education in the coming year. He predicts big trouble.

As Kunstler correctly observed, "college has become, most of all, a money-grubbing racket tuned to the flow of exorbitant student loans for exorbitant college costs."  In other words, as he has said before, higher education in the United States basically operates from a "criminal ethic" where costs have "developed an inverse relationship to the value of a college education."

Kunstler's essay also includes a withering assessment of college leadership: "The presidents, deans, and faculty of colleges around the country have turned into the most obdurate enemies of free thought since the Spanish Inquisition, a gang of cowards and villains who disgrace the meaning and purpose of higher ed[ucation]."

In fact, Kunstler's indictment of the people who run American colleges is too gentle. If these clowns lived in another age, they would be the people who staffed the French Vichy regime during Word War II--the bureaucrats who dutifully rounded up French Jews for the Nazis and shipped them from Paris to the German death camps. No courage, no intellect, no sense of decency whatsoever. They babble ceaselessly about trigger words, safe spaces and "white male heterosexual privilege" while they pick their students' pockets.

The federal student loan program is quietly and inexorably destroying the lives of millions of Americans; has anyone in higher education spoken up? Have the presidents of Harvard, Yale, University of Chicago, Brown, Johns Hopkins, or the University of Michigan uttered a single word of criticism about it? Has any university leader endorsed bankruptcy relief for overburdened student debtors?  Has any college president or dean criticized the government policy of garnishing Social Security checks of elderly student-loan defaulters? Has any higher-education leader of national standing called for the closure of the for-profit college industry?

No, our elite colleges and universities are almost as addicted to federal student-aid money as the sleaziest for-profit schools. In terms of dependency on federal money, there is not a dime's worth of difference between Harvard and Bob's Beauty Academy.

Kunstler predicts that "a shocking number of small four-year colleges will go out of business this year," and I share his view. Harvard professor Clayton Christensen said recently that half of American colleges will be bankrupt in 10 to 15 years.

In fact, the small liberal arts college is dead, although the leaders of some small colleges stubbornly keep their institutions on life support. Parents need to warn their children to stay away from these decaying institutions. It would be a grave mistake to borrow $100,000 to get a degree from a college that will close before its graduates pay off their student loans.


French officials registering French Jews.

References

Abigail Hess. Harvard Business School professor: Half of American colleges will be bankrupt in 10 to 15 years. CNBC.com, November 15, 2017.

James Howard Kunstler. Forecast 2018--What Could Go Wrong? Clusterfuck Nation, January 1, 2018.

James Howard Kunstler. Made for Each Other. Clusterfuck Nation, February 13, 2017.


Saturday, December 2, 2017

Senators Elizabeth Warren (D-MA) and John Kennedy (R-LA): Can these two lead a bipartisan effort for student-loan reform?

Congress is more divided along partisan lines than any time since Representative Preston Brooks caned Senator Charles Sumner on the floor of the Senate back in 1856.  No major legislation gets passed with bipartisan support, and Republicans and Democrats seem content to be obstructionists rather than try to do something useful.

Is there no public issue on which Republicans and Democrats can agree? I think there is.

More than 40 million Americans have outstanding student loans, and at least 20 million  can't pay them back.  Last year, 1.1 million college borrowers defaulted on their loans--that's an average rate of 3,000 people a day. People who borrowed to attend for-profit colleges have suffered the most. Nearly half of these hapless souls default within five years of beginning repayment. Among African Americans, the pain is even worse. Three fourths of African Americans who took out student loans to attend for-profit schools eventually default.

Big problems require big solutions. As I have said before, the student loan crisis will not abate until for-profit colleges are kicked out of the federal student-loan program and distressed student debtors are allowed to discharge their student loans in bankruptcy.  But these two fixes are politically impossible right now.

But Congress could approve smaller measures of relief  if our elected representatives would just work together. For example:
  • Congress could pass a law barring the federal government from garnishing Social Security checks of elderly student-loan defaulters. Senators Elizabeth Warren and Claire McCaskill introduced a bill along these lines but it has gotten nowhere.
  • All student loans should be refinanced at current, low interest rates, something Hillary Clinton endorsed during the 2016 presidential campaign. 
  • Our tax code needs to be amended to make clear that people who complete income-based repayment programs are not taxed when the remaining balance on their loans is forgiven. Representatives Mark Pocan and Frederica Wilson (both Democrats) introduced a bill to accomplish this reform but it has not become law. 
Who in Congress--Republican or Democrat--could disagree with these reforms? Even our most Neanderthal representatives could not look their constituents in the eye if they voted against any of these proposals.

If this is so, how can Congress kick-start bipartisan student-loan relief?  Here is a feasible scenario: Senator John Kennedy, a Republican from Louisiana, could contact Senators Warren and McCaskill and offer to co-sponsor their bill to stop the government from garnishing Social Security checks of elderly student-loan defaulters.

Why do I nominate Senator Kennedy for this bipartisan overture? Because Kennedy has shown a commendable reluctance to follow the Republican party line on important policy issues. For example, he was one of only two Senate Republicans to vote against a law that allows financial institutions to force their customers to sign mandatory arbitration agreements.

If Senator Kennedy were to come on board for the Warren-McCaskill bill, other Republican Senators might also signal their support.  Once this bill received some publicity, I predict the Warren-McCaskill-Kennedy bill would be adopted into law without a single dissenting vote in either the House or the Senate.

After this small victory, Republicans and Democrats could join together to provide further relief to suffering college borrowers: lowering interest rates on current student loans, imposing restraints on the government's rapacious debt collectors, revising the tax laws so that participants in income-driven repayment plans aren't taxed on forgiven loan balances.

All these reforms are feasible; indeed they might all pass through Congress with little or no opposition. Some broad-minded legislator just needs to reach across the aisle to get the ball rolling.  Senator Kennedy,  please make that call to Senator Warren and assure her you will support the Warren-McCaskill bill.


Representative Preston Brooks canes Senator Charles Sumner, May 22, 1856
References

Danielle Douglas-Gabriel. The disturbing trend of people losing Social Security benefits to student debt. Washington Post, December 20, 2016.

James Gill. John Kennedy is quickly becoming 'Senator No' when facing Donald Trump.
Baton Rouge Advocate, December 3, 2017.

Anne Gearan and Abby Phillip. Clinton to propose 3-month hiatus for repayment of  student loansWashington Post, July 5, 2016.

Melanie Lockert. Surprise! Here's When You'll Owe Taxes on Student Loan Forgiveness (and When You Won't). studentloanhero.com (blog), February 27, 2017.

The Wrong Move on Student LoansNew York Times, April 6, 2017.

Sunday, November 19, 2017

House of Representatives taxes graduate students' tuition waivers: Kicking 'em while they are down

A tax bill passed the House of Representatives a few days ago, and Republican congresspeople went out of their way to show contempt for America's postsecondary students. The House bill treats tuition waivers as income, which means that American graduate students who receive these waivers will get big tax bills in the years to come if the bill becomes law in its present form.

 A great many graduate students get tuition waivers as compensation for the work they do for the universities where they pursue their studies.Some graduate students work as classroom teachers and researchers; and in return for their services the universities waive tuition. Many Americans would not be able to pursue graduate degrees if it were not for these tax-free waivers. After all, tuition at prestigious private universities is about $50,000 a year.

Under current tax law, tuition waivers are not taxable; and if the law changes, thousands of graduate students will suffer. As Erin Rousseau explained in a New York Times op ed essay, taxing tuition waivers "would make meeting living expenses nearly impossible, barring all but the wealthiest students from pursuing a Ph.D." Undoubtedly, this new tax burden would force graduate students to take out even more student loans, and many may do the math and decide that it doesn't make economic sense to get a graduate degree.

And this is not the only kick in the ribs that House Republicans delivered to American students. The House bill also eliminates the student-loan interest deduction, which allows middle-income student borrowers to get a modest tax break while they are paying off their student loans.

Millions of Americans are already suffering from staggering levels of student-loan debt; and the House bill only adds to their burdens. Instead of making life harder for students, Congress should pass legislation that will relieve some of their distress.  For example:

  • Congress should pass a law barring the government from garnishing the Social Security checks of elderly student-loan defaulters.
  • The tax code needs to be amended so that student borrowers on income-driven repayment plans don't get tax bills for forgiven debt when their long-term repayment plans are complete.
  • Student-loan debt collectors should be brought under control and some limit should be placed on the amount of fees and penalties that can be assessed against debtors who default on their loans.
But Congress isn't doing anything to ease the suffering of student borrowers. Instead, the House of Representatives passed a bill to raise their taxes!

Congress should be careful.  Forty-four million Americans are weighed down by student-loans. That's a big voting block if students ever get together.



References

Rousseau, Erin. The House Just Voted to Bankrupt Graduate Students. New York Times, November 16, 2017.

Saturday, June 3, 2017

Betsy DeVos should resign as Education Secretary and Trump should replace her with a junkyard dog

Betsy DeVos should resign as Secretary of Education in the Trump administration. I say this for two reasons:

First, Ms. DeVos is too nice a person to be President Trump's Secretary of Education.


No matter what you think of her politics or her education philosophy Betsy DeVos is not a toxic person. She did not deserve to be shut out of a public school, as District of Columbia protesters tried to do shortly after she took office.

And she did not deserve to have students boo her and turn their backs on her when she spoke at a college graduation exercise this spring. If I were her, I would tell the whole wide world to stick the Secretary of Education's position where the sun doesn't shine and go home to Michigan and spend time with my grandchildren.

Second. Betsy DeVos knows next to nothing about higher education policy.

The federal student loan program is in meltdown, destroying the lives of millions of people and undermining the integrity of higher education. Numerous small private liberal arts colleges are on the verge of closing; law schools are admitting students of a lower and lower quality, and huge swaths of the for-profit college industry are defrauding their students--or, at the very least, they are gouging their customers. The federal student loan program bears a big share of the blame for this dismal state of affairs.

Betsy DeVos knows next to nothing about the student loan crisis. She has shown no capacity to deal with this enormous problem, and she has already made a number of missteps. For example, she hired some empty suits from the for-profit sector to advise her--the wrong move, in my opinion.

Trump needs to hire a junkyard dog to run the Department of Education

President Trump needs to gracefully accept DeVos' resignation, praise her extravagantly in a tweet message, and then appoint a junkyard dog to replace her.

By junkyard dog, I don't mean a vicious person or an unethical person; I mean a tough person.  The next Education Secretary needs to be tough enough to confront the for-profit college industry, tough enough to handle higher education's legions of lobbyists, and tough enough to get rid of the student loan guaranty agencies that have amassed billions of dollars in cash hounding distressed student loan debtors.

The next Secretary of Education needs to be tough enough to tell the public the truth about the student loan crisis, which is this: Millions of people have taken out student loans they will never pay back.

What a junkyard dog do if  appointed Education Secretary?


  • First, the Consumer Financial Protection Bureau's 2013 report, A Closer Look at the Trillion, needs to be updated. How many people have defaulted on their loans, and how many are delinquent? How many are not making payments because their loans are in deferment or forbearance? How many are in income-driven repayment plans (IDRs) and making monthly payments so low that their payments don't cover accruing interest?
  • Second, the new Secretary should endorse the Democrats' bill to protect student loan defaulters from having their Social Security checks garnished.  This is a small matter in terms of the overall student loan crisis, but symbolically, such a move would signal that the Trump administration is not completely heartless.
  • Third, the Education Secretary should cancel the performance bonus program for DOE's student-loan bureaucrats. James Runcie, Chief Operating Officer for the student loan program, received $430,000 in bonuses--an outrage. The new Secretary of Education should fire everyone who got a performance bonus.
  • Fourth, the DOE Secretary needs to streamline the process whereby students who file administrative claims based on the closed-school rule or the so-called borrower defense can have their claims resolved quickly.
  • Fifth, DOE's junkyard dog should dismantle all the student loan guaranty agencies, starting with Educational Credit Management Corporation. While the termination process is taking place, DOE should stop paying the agencies' attorney fees to hound suffering student borrowers in the bankruptcy courts.
  • Sixth, the Secretary of Education, as junkyard dog, should revise Lynn Mahaffie's 2015 letter outlining when DOE will not oppose bankruptcy discharge of student loans to clarify to the federal courts that DOE supports a bankruptcy discharge of student loans under the same terms that apply to other unsecured consumer debt.
Obviously, any Secretary of Education who attempts to carry out the agenda I outlined will need to be tough as a junkyard dog. Betsy DeVos is not a junkyard dog, and I mean that as a compliment to her.


The next Secretary of Education should be a junkyard dog.
References

Lauren Camera. Protesters Disrupt DeVos School Visit. U.S. News & World Report, February 10, 2017.


Rohit Chopra. A closer look at the trillion. Consumer Financial Protection Bureau, August 5, 2013.

Erica L. Green. Bethune-Cookman Graduates Greet Betsy DeVos With Turned Backs. New York Times, May 10, 2017.




Saturday, February 18, 2017

Louisiana man gets 10 years in prison for stealing a toolbox from a church: A plea for bipartisan cooperation to promote justice

Michael Duplessis, age 34, was sentenced to 10 years in prison for stealing a toolbox from Holy Rosary Catholic Church in St. Amant, Louisiana. Duplessis was sentenced after he agreed to a plea deal to avoid the possibility of  a life sentence.

A life sentence for stealing a toolbox! How could that be?

Michael Duplessis: Sentenced to 10 years in prison for stealing a toolbox from Holy Rosary Church

Apparently, Duplessis is a repeat offender. He had previously been convicted of stealing a cellphone charger from a residence and later a boat battery. Under Louisiana's habitual offender law, Duplessis is a three-time loser and could have been sentenced to life in prison for lifting that toolbox. I imagine the plea bargain looked pretty good to him.

Obviously a law that can send a man to prison for the rest of his life for stealing a cellphone charger, a battery and a toolbox is unjust and inhumane. In fact, Pope Francis has said that life sentences are essentially death sentences.

Surely, reasonable people can work together to repeal such a barbaric statute.

So why aren't Republicans and Democrats working together to do that? In fact there are dozens of unjust laws that could be repealed. As I wrote awhile back, Senators Elizabeth Warren and Claire McCaskill introduced a bill to stop the federal government from garnishing the Social Security checks of elderly student-loan defaulters. Who in Congress could oppose such a bill?

Unfortunately, our elected representatives at the state and national level are so caught up in political warfare that nothing gets done. And the mainstream press has become so obsessed with criticizing President Trump that it has abandoned its traditional role of advocating for justice.

Just today, in my local newspaper, Richard Cohen, a syndicated columnist, published an essay that was nothing more than warmed over criticism of President Trump. In case the public had forgotten, Cohen reminded us that Trump unfairly criticized Senator John McCain and the Hispanic judge who presided over the Trump University litigation. Isn't there something more timely and important that Cohen can write about?

Enough already. Republicans and Democrats should look for problems they can solve together, and the press should resume its traditional roll of publicizing injustices like the one perpetuated on poor Mr. Duplessis. This is how democracy works after all, or how it used to work, before everyone in public life began behaving like children.

References

Richard Cohen. Can't anybody play this game? The Advocate (Baton Rouge), February 17, 2017, p. 5B.

David J. Mitchell. Man gets 10 years in burglary of church. The Advocate (Baton Rouge), February 17, 2016.

Kathy Schiffer, Pope Francis Opposes Capital Punishment; Calls Life Sentences for Violent Criminals "A Hidden Death Penalty." Seasons of Grace blog site, October 23, 2014.











Friday, February 10, 2017

President Trump and the Democrats: Washington DC has become a kindergarten

A few moments ago, I watched a video showing protesters blocking Secretary of Education Betsy DeVos from entering a public school--a school where she was scheduled to attend a meeting with educators. The video clip wasn't long but I saw one guy shouting at her and I saw someone trying to block Secretary DeVos's vehicle as she was being driven away.  You should watch this video.

In only a matter of weeks, Washington DC has turned into a giant kindergarten. I suppose President Trump bears part of the blame. He has a distressing tendency to lash out at his detractors with tweet messages that only give his most unreasonable critics publicity and credibility. I wish he would take the high road and simply ignore his hysterical attackers.

But I blame the Democrats for plunging political discourse to the level of a playschool.  The Democrats behaved like children during the nomination process for President Trump's cabinet choices. Why did they do that, knowing that the President had the votes to get them all confirmed?

It would be hard to choose the chief tantrum thrower, but I give my vote to Senator Elizabeth Warren. She showed a shocking level of immaturity when she insinuated on the floor of the Senate that Jeff Sessions, one of her colleagues, is a racist.

A lot of people are upset about Donald Trump being our President. I understand that. But disappointment is no reason for political leaders to jettison civility in public discourse. What will that accomplish?

Furthermore, I believe there is bipartisan support around solving several important public policy problems. As I have already written, surely everyone from Senator Mitch McConnell to Congresswoman Nancy Pelosi can agree that the government should not be garnishing the Social Security checks of elderly student-loan defaulter.s  And if I'm right about that, why can't Republicans and Democrats unite around the McCaskill-Warren bill to stop that practice?

Over my lifetime, I have dealt with a lot of people who behaved boorishly toward me, tried to bully me, or behaved deceitfully toward me; and those people upset me. But I learned that I was always better off to retain my dignity and to respond to unprofessional behavior in a reasonable and straightforward manner.

Trump's detractors  seem to think that behaving like kindergarten children is the appropriate way to show their dissatisfaction with the 2016 election results. But they are wrong. If the Democrats don't pull themselves together and begin to behave like grownups, this nation is headed for real trouble--and I don't mean just political trouble.




Tuesday, February 7, 2017

Betsy DeVos is the new Secretary of Education: How About Bipartisan Support for Senator Warren & Senator McCaskill's Bill to Stop Garnishing Social Security Checks of Elderly Student-Loan Defaulters?

Any excuse for a slumber party, right?

Yesterday, Democrats kept the Senate in session all night to register their opposition to Betsy DeVos as the  new Secretary of Education. But Vice President Pence broke the tie vote in the U.S. Senate this morning, and today Betsy DeVos is President Trump's new Secretary of Education.

Senate Democrats bitterly opposed DeVos's nomination, but that battle is over. Now is a good time for Democrats and Secretary DeVos to cooperate on a common objective--an objective that should attract broad bipartisan political support.

So here's what I suggest: relief for elderly student-loan debtors.

Senators Claire McCaskill and Elizabeth Warren supported a bill in 2015 that would stop the federal government from garnishing the Social Security checks of elderly and disabled people who defaulted on their student loans.  The bill got nowhere.

The Senators also asked the Government Accountability Office to prepare a report on elderly Americans with student loan debt, and GAO delivered that report last December. The report was widely covered by the media and contained some fascinating information.
  • First, "[t]here has been a 10-fold increase in the amount of student debt held by people age 65 or older--from $2 billion in 2005 to $22 billion" in 2015  (quoting the Washington Post).
  • The federal government has increased efforts to garnish Social Security check of student-loan defaulters. According to Senator McCaskill's office, "The number of Americans whose Social Security checks are being garnished by the government to recoup defaulted student loans has increased by 540 percent in the last decade to over 114,000 older borrowers."
  • In 2015, 173,000 Americans had their Social Security income offset due to defaulted student loans. This is a dramatic increase from 2002, when the government only applied offsets to 36,000 Social Security recipients (page 11 of GAO report).
  • Some Social Security recipients whose income was offset lived below the federal poverty guideline and others dropped below the poverty level after their Social Security checks were reduced (p. 27 of GAO report). In fact, as Senator Elizabeth Warren emphasized in a recent press release, "Since 2004, the number of seniors whose Social security benefits have been garnished below the poverty line increased from 8,300 to 67,300."
  • More than 7 million people age 50 and older still owe on student loans, and 870,000 people age 65 and older have student loan debtAmong student-loan borrowers age 65 and older, 37 percent are in default (figure 2, page 10 of GAO report).
  • The amount of money the government collects from Social Security offsets is a pittance compared to overall student debt. The government  only collected $171 million from Social Security offsets in 2015, about $1,000 per garnishee.
  • Most of the money collected from Social Security offsets went toward paying fees and accumulated interest.  "Of the approximately $1.1 billion collected through Social Security offsets from fiscal year 2001 through 2015 from borrowers of all ages, about 71 percent was applied to fees and interest" (p. 19 of GAO report).
Surely, Senators McCaskill and Warren can muster bipartisan support for legislation that will stop the federal government from garnishing the Social Security checks of elderly student-loan defaulters. Perhaps they might ask for a couple of Senate Republicans to join as co-sponsors. I suggest Senator Lisa Murkowski of Alaska and Susan Collins of Maine. Both voted against Ms. Devos' confirmation.

And I'll bet Senators McCaskill and Warren could get Betsy Devos and the Department of Education to endorse the bill. At least they could ask.

Who would oppose such a bill? I don't think anyone would.  What a wonderful message such a law would send to the American people: the message that our elected leaders--Congress and the Executive Branch--can work together to advance the common good.

On the other hand, if Congress and the U.S. Department of Education can't cooperate to get this wholly beneficial legislation adopted, then the political process is indeed broken.




References

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

Jordan Carney. Two GOP senators to vote no on Betsy DeVosThe Hill, February 7, 2017.

Danielle Douglas-Gabriel. The disturbing trend of losing Social Security benefits to student debt. Wall Street Journal, December 20, 2016.

Senator Claire McCaskill Press Release, December 20, 2016. McCaskill-Warren GAO Report Shows Shocking Increase in Student Loan Debt Among Seniors.

Senator Elizabeth Warren Press Release, December 20, 2016. McCaskill-Warren GAO Report Shows Shocking Increase in Student Loan Debt Among Seniors

United States Government Accountability Office. Social Security Offsets: Improvement to Program Design Could Better Assist Older Student Borrowers with Obtaining Permitted Relief. Washington DC: Author, December 2016).

Monday, January 30, 2017

ECMC abuses the bankruptcy process: Hann v. Educational Credit Management Corp.

Last week I posted a blog about Bruner-Halteman v. ECMC, which was decided last April. In that case, a Texas bankruptcy judge awarded punitive damages against Educational Credit Management Corporation for repeatedly garnishing the wages of a bankrupt Starbucks employee in violation of her legal rights.  ECMC got slapped with $74,000 in punitive damages.

Brunner-Halteman is not the first case in which ECMC has been found guilty of abusing the bankruptcy process. In Hann v. ECMC, decided in 2013, the First Circuit Court of Appeals upheld a lower court decision  against ECMC for continually trying to collect on student loans it claimed were owed by Barbara Hann, even though a bankruptcy judge had ruled that Hann owed ECMC nothing.

Hann v. ECMC: Sanctions are imposed on ECMC for abusing the bankruptcy process

Here is a brief rendition of the facts. Barbara Hann filed for bankruptcy in November 2004, and she dutifully listed all her debts.  ECMC filed a proof of claim in the case, alleging Hann owed ECMC more than $54,000 for unpaid student loans (including accrued interest and collection costs).

Hann objected to ECMC's claim on the grounds that she had paid her student loans in full. The bankruptcy judge held a hearing on the matter, which ECMC did not attend.

At the hearing, Hann testified that she had paid off her student loans and produced documentary evidence to support her testimony. After considering Hann's evidence, the bankruptcy judge ruled that Hann owed ECMC nothing.

Hann probably thought her student debts were behind her, but she was wrong. After her bankruptcy case was concluded, ECMC renewed its efforts to collect on Hann's old student loans. In fact, it even garnished her Social Security.

Richard Gaudreau, Hann's lawyer, contacted ECMC and told the company that Hann's student-loan debt had been discharged in bankruptcy. Nevertheless, ECMC continued trying to collect the debt.

 Gaudreau then reopened Hann's bankruptcy case and asked a new bankruptcy judge to order ECMC to stop its collection efforts.   ECMC showed up for the hearing, where it, argued that the former bankruptcy judge, who had retired, had never adjudicated the amount of ECMC's claim and that student-loan debt is generally nondischargeable. ECMC, did not, however, quantify how much it claimed Hann still owed.

Again, a bankruptcy judge ruled in Hann's favor, and the judge awarded sanctions against ECMC.  ECMC appealed this order to the First Circuit's Bankruptcy Appellate Panel, and the Panel upheld the bankruptcy court.  The BAP specifically approved the sanctions against the debt collector, explaining that ECMC's continued collection activities in spite of the bankruptcy court's ruling, "constituted an abuse of the bankruptcy process and defiance of the court's authority."

Did ECMC get the message? Apparently not. ECMC then appealed the BAP's ruling to the First Circuit Court of Appeals,  On March 29, 2013, almost nine years after Hann filed for bankruptcy, the First Circuit ruled in Hann's favor yet again. Hann owed ECMC nothing, the appellate court ruled; and the bankruptcy court had appropriately sanctioned the debt collector for abusing the bankruptcy process.

Implications of the First Circuit's ruling in Hann v. ECMC

The Hann case is extraordinary for two reasons. First, ECMC defended its right to collect on Hann's student loans all the way to the First Circuit Court of Appeals, despite its "repeated inability to identify or quantify [Hann'] outstanding debt obligation" to the bankruptcy court.

Second, the sanctions that ECMC fought were not large: only about $9,000. Clearly, it made no economic sense for ECMC to fight a pitifully small sanction award at two appellate levels. Surely, ECMC's attorney fees were many times the amount of the sanctions award.

Taken together, the Bruner-Halteman decision and the Hann decision portray ECMC as  a pretty rough outfit. It has appeared in hundreds of court cases involving student-loan debtors, and surely it knows the Bankruptcy Code. Yet it was willing to garnish Bruner-Halteman's wages 37 times in defiance of settled law and to continue trying to collect on student loans that had been discharged in bankruptcy.

Who paid ECMC's attorney fees in these two wild-hare cases? It is not entirely clear, but the Century Foundation's report on ECMC and other student-loan guaranty agencies suggests that the federal government is paying ECMC's fees.

If that is true, then you, Mr. and Ms. Taxpayer, are paying ECMC's lawyers to hound distressed student-loan debtors through the federal courts. Don't you think we should find out? And wouldn't that be a good question for the U.S. Senate to explore through its hearing process?


References

Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).

Hann v. Educational Credit Management Corporation, 711 F.3d 235 (1st Cir. 2013).

John Hechinger. Taxpayers Fund $454,000 Pay for Collector Chasing Student Loans. Bloomberg.com, May 15, 2013. Accessible at: http://www.bloomberg.com/news/2012-05-15/taxpayers-fund-454-000-pay-for-collector-chasing-student-loans.html

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014. Acccessible at http://www.nytimes.com/2014/01/02/us/loan-monitor-is-accused-of-ruthless-tactics-on-student-debt.html?_r=0

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. Accessible at https://tcf.org/content/report/student-loan-guaranty-agencies-lost-way/

Monday, January 23, 2017

A Bipartisan Solution to the Student Loan Crisis: What if Betsy DeVos and Senator Elizabeth Warren Worked Together to Craft A Fix?

At the conclusion of Betsy DeVos's Senate hearing last week, Senator Elizabeth Warren refused to shake DeVos's hand. If this is a sign of enmity between Senate Democrats and the Trump administration over education policy, this is a scary development for distressed student-loan debtors.

Millions of borrowers are drowning in student loan debt--now pushing $1.4 trillion dollars. Eight million have defaulted, and millions more are teetering on the edge of default. Now is the time for Republicans and Democrats to work together.

What if Secretary of Education DeVos and Senator Warren cooperated to solve the student loan crisis? Thinks what they could achieve.

Here's a plausible scenario:

1. During the first month of the Trump administration,  Secretary of Education DeVos calls a press conference to announce that the federal government will stop garnishing Social Security checks of elderly student-loan defaulters.

At the press conference, Secretary DeVos is flanked by several U.S. Senators, including Senators Warren, Bernie Sanders, and Lamar Alexander. Senator Warren announces she will introduce legislation barring the government from garnishing Social Security checks of student-loan defaulters.

2. Next, DeVos issues a directive to DOE bureaucrats, ordering them to speed up the process for processing so-called "Borrower Defense" claims by students who are trying to get their student loans discharged on the grounds that their colleges defrauded them.

DOE responds quickly, and thousands of debtors who were scammed by shady for-profit colleges get their loans discharged. Warren and her Senate compadres issue press releases praising DeVos's action.

3.  Shortly thereafter, DeVos tells reporters that she agrees with the Obama administration's stance on arbitration clauses in student enrollment documents. The for-profits routinely require their students to sign these clauses, which forces students to arbitrate their fraud claims in unfriendly forums.  The Obama administration said it opposed these clauses but did not do anything to stop them from being used.

DeVos says, as of the day of her announcement, DOE will not allow any for--profit college to participate in the student-loan program that forces students to sign coercive arbitration agreements. Senators Warren and Senate Democrats applaud DeVos's step.

4.  In spring of 2017, Senator Warren holds Senate hearings on the student loan guaranty agencies, which rake in millions of dollars in fees from collecting student loans. Warren points out that four of these agencies have each amassed $1 billion in unrestricted assets, even though they are non-profit companies. She subpoenas the agencies' records and learns that the guaranty agencies' CEOs are paid millions in salaries and benefits for harassing destitute student borrowers.

DeVos testifies at Warren's Senate hearing, pledging DOE will do what it can to rein in the debt collectors.  DeVos makes good on her pledge by terminating its contract with Education Credit Management Corporation, perhaps the nation's most ruthless student-loan debt collector.

5. A bill passes Congress that disbands the student-loan guaranty agencies and abolishes all fees and penalties that have been applied to defaulted student loans over the past 20 years. President Trump signs the bill.

6. With bipartisan support and Trump's blessing, another bill is approved by Congress to amend the Bankruptcy Code to eliminate the restriction on discharging private student loans in bankruptcy.

Trump signs these bipartisan student-loan reform bills and give the bill-signing pens to Senator Warren. Senator Warren then shakes Secretary DeVos's hand.


What will it take for Senator Warren to shake Betsy DeVos's hand?
References

Paul Crookston. Betsy DeVos Hearing Ends with Handshakes — Except from Elizabeth Warren. National Review, January 18, 2017.

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014. Acccessible at http://www.nytimes.com/2014/01/02/us/loan-monitor-is-accused-of-ruthless-tactics-on-student-debt.html?_r=0

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. Accessible at https://tcf.org/content/report/student-loan-guaranty-agencies-lost-way/

U.S. Department of Education. U.S. Department of Education Takes Further Steps to Protect Students from Predatory Higher Education Institutions. March 11, 2016. Accessible at http://www.ed.gov/news/press-releases/us-department-education-takes-further-steps-protect-students-predatory-higher-education-institutions?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=