Showing posts with label student loans. Show all posts
Showing posts with label student loans. Show all posts

Saturday, June 26, 2021

Will a degree from a fancy, private college improve the quality of your life? Maybe, but maybe not.

 I occasionally see television and print advertisements for weight-loss programs. Invariably, these ads show a slim, young, attractive woman with perfect teeth or a handsome young man with great hair and six-pack abs. We are encouraged to believe that these beautiful people were once fat.

But we know better. We know that no matter what diet plan we go on, we will never be as beautiful as the people in the weight-loss ads.  We'll buy the product and still have crooked teeth and a little flab around our bellies.

America's private colleges are like the weight-loss companies. Enroll at our prestigious institution, study on our cool campus, interact with our brilliant but kindly professors, and you'll be on the road to a fabulously better life.

For example, here is some puffery from Quinnipiac University's website:

From your first day, Quinnipiac’s expansive resources and passionate professors will help you flourish and build a foundation for success. You’ll create your first memories as a Bobcat on this campus, and find supportive resources throughout your journey.

How much will this journey cost you? Only about $70,000 a year in room, board, fees, and tuition.   That's more than a quarter of a million dollars for a bachelor's degree.

But, hey, you'll probably get a scholarship of some kind, and you can take out student loans. And if you need more cash to finance your studies, your parents can take out a Parent Plus loan.

Just remember, no matter where you go to college, you will still be you. And there are probably many people willing to help you reach your dreams who will charge you a lot less than a quarter of a million dollars.


Were these people ever fat?


 

Wednesday, May 26, 2021

Want fries with that burger? Don't go to a college that doesn't at least teach you time-management skills

 Looking back over half a century on my college years, I remember absolutely nothing about the courses I took--130 vacuous credit hours. 

I can't say it was my college's fault. I had no clear idea about what I wanted to do for a living. I changed majors twice and took courses almost at random.  I took religion courses--enough for a minor. I took my university's first course in African American studies, and I got an A.  I even took two classes in the college of agriculture: horse production and livestock feeding. I must have had some vague idea about going back to work on my father's farm.

But I understand now that my college years were not a complete waste. Why? Because I learned to manage my time and weave my way through the bureaucratic maze of academia, and those skills are not to be disparaged.

In my first semester in college, I took five courses: mandatory ROTC, biology, history, freshman English, and a class in swimming. And I had a part-time job as a student custodian. 

I had to get up on time in the morning, get to classes held all over a sprawling campus, and study enough to pass the written exams. I had to figure out a way to amass enough of the courses I needed to graduate. I had to get my ROTC shirts pressed, and I had to learn to do my own laundry.

After getting my undergraduate degree, I gradually discovered that the world of work is often dull, colorless, and even meaningless. To make a living, I had to manage my time and learn the bureaucratic rules of the workplace.  I can see now that I learned those skills by spending four mind-numbing years at a university.  

But maybe colleges are not teaching time-management skills anymore.  According to Inside Higher Ed, a recent survey found that about one-fifth of recent graduates say their college education did not prepare them for their first job. Less than one in four graduates said they learned people-management skills while in college, and only a third said they learned time-management skills

These findings are scary. A college degree is becoming more and more expensive with each passing year, and most students now take out student loans to pay for their studies--loans many will never be able to pay back.

The very least we should expect from our universities is to teach students how to manage their time.  A young person who graduates from college with burdensome student-loan debt and no time-management skills would have been better off working at McDonald's.  

At least McDonald's teaches its employees to show up for work on time, smile, and not overcook the french fries.   


Do you want fries with that college degree?



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'.






Tuesday, April 13, 2021

College students: Don't take out student loans to get a degree in an easy discipline

"Easy money lays light in the hand," Solzhenitsyn observed, "and doesn't give you the feeling you've earned it."

We can say the same thing about easy college courses and easy academic majors. 

It is quite feasible for a student to get an easy college degree. Universities have ditched rigorous admission standards so that anyone can get into college, and grade inflation has made it possible to pass through a university without studying and without learning anything. 

Every university has a few academic majors that are known not to be challenging. And every college has a few professors who are too lazy to engage in rigorous grading.  

Twenty years ago, when I was teaching at the University of Houston, a professor in my department taught multiple sections of a general education course--a course that students from across the university could count toward their degree requirements. Semester after semester, his classes were packed because he did not grade any assignments, and he gave every student an A. 

Young people may think they are playing it smart by choosing nonchallenging classes and easy academic majors. Why enroll in a class taught by a brilliant professor if the prof is a hard grader?  Why not sign up for classes taught by an indolent professor who gives out puffball assignments and then doesn't grade them?

I confess that I am not speaking from the pinnacle of academic rigor. I majored in sociology--the painful enumeration of the obvious. I made straight As my last semester without even buying textbooks.  And I learned absolutely nothing.

Then I went to law school, where the professors graded on a strict curve. Only 5 percent of first-year students received As, 10 percent got Bs, and 75 percent had to settle for a C (or worse).

To my surprise, I excelled in this rigorous environment, and I graduated with honors from the University of Texas School of Law. Forty years later, this is still my proudest professional accomplishment.

Please take my advice and don't choose the easy path while in college, especially if you are taking out student loans. After four, or five, or six years of study, you will wind up with a vacuous degree and no job skills.  

You may then decide to get a master's degree and select a graduate program with low admission requirements. That choice will lead to a second worthless degree.

Then where will you be?  You will find yourself buried under a mountain of debt you cannot pay off. Those mindless courses and that easy major will embarrass you, and you will feel like a fool. 

As Solzhenitsyn put it, "There [is] truth in the old saying: pay short money and get short value."



Thursday, April 1, 2021

Don't let college professors persuade you that learning to speak Standard English is optional

I've been to Georgia on a fast train honey,
I wudn't born no yesterday.
Got a good Christian raisin' and an eighth-grade education
Ain't no need in y'all a treatin' me this way.

Billy Joe Shaver 

A while back, I met an elderly man who told me he had grown up in the Texas Panhandle back in the 1950s.  As a child, he spoke with a strong West Texas accent. But then his family moved to Arizona, and no one could understand him at his new school.

Fortunately, the man recounted,  an Arizona teacher began tutoring him on a one-to-one basis and taught him to speak standard English without a Texas accent. "If it hadn't been for that teacher," he said, "I would never have made a success of my life."

This man's story made an impression on me because I grew up in western Oklahoma, where the people speak very much like the West Texans.  To this day, I have some range dust in my diction; and I think at least some of my classmates at Harvard wrote me off as hick when they first heard me speak.  

Now there is a movement to de-emphasize standard English because it disadvantages minorities--particularly African Americans.  For example, Professor Asao Inoue of Arizona State University argues that students should not be graded based on the quality of writing but "purely by the labor students complete . . ." 

Why should professors stop grading students on the quality of their writing? "Because, Professor Inoue maintains, "all grading and assessment exist within systems that uphold singular, dominant standards that are racist, and White supremacist."

 Rebecca Walkowitz, chair of the English Department at Rutgers University, is on Professor Inoue's wavelength. She sent an email recently, announcing an initiative to incorporate "critical grammar" into the department's pedagogy.

Critical grammar pedagogy, Professor Walkowitz's email stated, "challenges the familiar dogma that writing instruction should limit emphasis on grammar/sentence-level issues so as not to put students from multilingual, non-standard 'academic' English backgrounds at a disadvantage."

Professors Inuoue and Walkowitz's views on language are in harmony with the ebonics movement, which asserts that Black English should be regarded as a language in its own right and not a substandard dialect of proper English.

I sympathize with the academics who argue that we should show more respect for non-standard English. Indeed, some of America's greatest literature contain expressions in non-standard dialect. Huckleberry Finn, for example. And the lyrics of country music (which I love) are full of non-standard English phrases.

When Merle Haggard wrote Hungry Eyes, he penned, "us kids was too young to realize."  Should we give him a C- because he didn't write "we children were too young to realize"? And Elvis--should he have sung "You are nothing but a hound dog"?

Nevertheless, I believe all Americans should strive to master standard English in both their speech and their writing. After all, shouldn't we endeavor to build a common culture? And if that is so, isn't a common culture built on a common language?

I acknowledge that some Americans grew up in subcultures that did not value standard English. Those subcultures should not be denigrated.  I said "y'all" as a kid, and I still say "y'all." 

But standard English is not that hard to learn. I keep Strunk and White's Elements of Style on my desk, which I consult occasionally; and I subscribe to Grammarly, an online editing tool that checks my writing for spelling and grammar. All our commuters have a spell check function.

Besides, every young American must eventually leave academia, where grammar and spelling are being emphasized, and get a paying job. American employers may insist that their employees write and speak in standard English. Indeed, job candidates who misspell words on their job applications and converse in an obscure dialect may not get hired.

In my view, academics who want to deemphasize standard English grammar and diction are doing their students a disservice. Millions of young people are graduating from universities with crushing student loans. If they leave college speaking and writing no differently from when they entered, what was the point of all that education?







Sunday, January 31, 2021

When did university book stores become T-shirt shops?

 I live about a mile from the Barne & Noble bookstore, the official bookstore for Louisiana State University. Yesterday, I walked over for a cup of hot chocolate at the bookstore's Starbucks coffee shop.

While the barista was constructing my cocoa (a laborious business), I contemplated the murals above the counter. Overhead, I saw some of the great English-language authors: Faulkner, Hardy, Joyce, Kipling, Melville, Nabakov, Shaw, Whitman, and others. 

I found myself wondering whether Barnes & Noble sold any books by the authors who are celebrated at Starbucks.  It is a college bookstore, after all.

So I went upstairs to the store's tiny "fiction and literature" section and looked for works by these famous writers.  Most of them I couldn't find: no Kipling, no Nabakov, no Whitman. 

I did see some comic books, however, in a section titled "graphic novels."  And I saw a hell of a lot of  $20 LSU T-shirts, $70 LSU sweatshirts, and hundreds of LSU ballcaps, selling for $25 a pop.

I also saw $9 LSU wine glasses and $27 LSU waterbottles. And I saw a pile of stuffed animals depicting Mike, the LSU tiger mascot.

In fact, as I scanned both floors of LSU's bookstore, I realized that Barnes & Noble's campus address isn't a bookstore at all; it's a T-shirt shop.  Yes, it sells some textbooks in an obscure corner, but most of the space is dedicated to overpriced souvenirs. 

I am not saying LSU students should be reading the authors who are memorialized at the Starbooks coffee shop.  I've read some Faulkner, some George Bernard Shaw, some of Henry James's excruciatingly dull novels. In my opinion, students can skip all that.

But I find it unsettling to see LSU students swiping their credit cards to buy exorbitantly priced junk and $5 lattes. Why? Because I know many of these students are purchasing that stuff with their student-loan money. 

If these students graduate and can't find good jobs--and many of them won't--what will be their best option? For millions, it will be to sign up for a 25-year income-based repayment plan. That's a high price to pay for an LSU T-shirt.






Monday, January 25, 2021

Neal v. Navient Solutions: A simple student-loan dispute ends up in 12 years of litigation

 Trey Neal took out a private student loan with JP Morgan Chase Bank in 2008.  Neal and Chase signed a promissory note agreeing that interest on the loan would be governed by Ohio law. 

Later, Neal concluded that he was being charged interest at a higher rate than Ohio allowed.  So he sued Chase for damages.

Mr. Neal ran into two problems in getting this dispute resolved. First, he had difficulty determining the proper party to sue.

Chase sold Neal's loan to Jamestown Funding Trust, which assumed Chase's interest in the loan. Jamestown is "related" to Navient Credit Finance, an affiliate of Navient Solutions. Navient Solutions then became Neal's loan servicer. Apparently, Neal was uncertain about who owned the loan because he dropped Chase from the lawsuit and added four Navient entities as defendants to his suit.

Neal's lawsuit had a second problem: he had agreed to arbitrate any dispute over his student loan rather than litigate.

The Navient entities asked a federal court to order Neal to arbitrate his claim under Neal's credit agreement with Chase. A federal district court rejected Navient's request, concluding Navient did not have the legal right to enforce the arbitration clause.

But Navient appealed that decision to the Eighth Circuit Court of Appeals, which reversed the lower court's decision.  The appellate court ruled that Navient did have the right to compel arbitration under Ohio law. So Neal must submit his interest-rate complaint to an arbitrator, and Neal will probably be required to pay half the arbitrator's fees to get the matter resolved. 

A couple of points. First, Neal's complaint about the interest he was charged on his loan is a simple dispute, but it wound up before a federal appellate court that did not rule until 12 years after Neal took out his loan.

Second, Neal's private student loan became ensnared in a web of entities: 1) Chase Bank, 2) Jamestown Funding Trust, 3) Navient Solutions, 4) Navient Corporation, and 5) Navient Credit Finance Corporation, and Navient Private Loan Trust. No wonder Neal had trouble figuring out whom he was dealing with.

So Mr. Neal must submit his complaint to arbitration. 

One thing seems sure. Whether Mr. Neal wins or loses, his transaction costs will likely be far greater than the sum of money at stake. 

Thus, Neal v. Navient Solution teaches us all this message: Don't mess with the student-loan industry because it won't be worth your while.

References

Neal v. Navient Solutions, LLC, 978 F.3d 572 (8th Cir. 2020).



Saturday, January 9, 2021

Jamie Mudd v. U.S. Department of Education: A Nebraska bankruptcy court discharges a grandmother's student loans

 Between 2006 and 2015, Jamie Mudd took out 41 student loans to attend Heald College, a for-profit institution, and San Joaquin Delta College, a public institution. In 2015, she rolled these loans into two consolidated federal loans, totally about $72,000. 

Mudd put her student loans into an income-based repayment plan (IBRP) that established her monthly payments at zero due to her low income.  Under this plan, she was obligated to certify her income on an annual basis. Evidently, she forgot to do this because the U.S. Department of Education (DOE) removed her from the IBRP and reset her monthly payments at almost $800 per month. 

Mudd was readmitted into an IBRP, but she again failed to certify her income, and DOE set her new monthly payment at $963.

According to Bankruptcy Judge Shon Hastings, Mudd never earned more than $13 an hour, and she often worked two jobs to make ends meet. She lived in a one-bedroom apartment and incurred regular expenses caring for a grandson with disabilities. She also suffered from significant health problems.

Ms. Mudd filed an adversary proceeding, hoping to discharge her student loans, but DOE objected. First, DOE said Mudd's financial circumstances would probably improve, enabling her to make modest payments in an IBRP.  Second, Mudd was a smoker, and DOE said she should save her cigarette money and use it to pay down her student loans. DOE also claimed that Mudd's expenses for her grandson's video streaming were unnecessary.  Indeed, DOE disapproved of any money Mudd spent on her grandson.

Fortunately, Bankruptcy Judge Shon Hastings was considerably more compassionate than DOE. In a decision issued last month, Judge Hastings discharged all of Mudd's student-loan debt.

In ruling in Mudd's favor, Judge Hastings applied the "totality of circumstances" test approved by the Eighth Circuit Court of Appeals. This is a summary of his reasoning:

Mudd has made a good faith effort to maximize her income. Mudd works approximately 53 hours per week at two jobs. . . . Overall, Mudd's expenses are necessary and reasonable and consistent with a minimal standard of living. . . . She has no savings, owns no assets of significant value (except her used car in which she holds no equity), lives in a one-bedroom apartment and obtains food and toiletries from local nonprofit organizations to make ends met. Her medical expenses are higher than budgeted, and she anticipates that her health care costs will continue to rise due to her high cholesterol and diabetes.  

In short, Judge Hastings concluded, Mudd did not have sufficient disposable income to pay on her student loans. Thus, the judge discharged all of this debt.

Judge Hastings specifically rejected DOE's suggestion that Mudd should not be credited for the expenses she incurred for her grandson. "[T]he Court finds it entirely inappropriate to find or suggest that Mudd should not care for her grandson or to weigh undue burden factors against her for doing so." 

Judge Hasting's ruling should not surprise us. Clearly, Jamie Mudd was in dire financial straits and entitled to discharge her student loans in bankruptcy.

What is shocking is the fact that DOE objected. Mudd v. U.S. Department of Education is just one more example of the federal government's heartlessness toward college-loan debtors, heartlessness that borders on viciousness

References

Mudd v. U.S. Department of Education, Adversary No. 19-04048, 2020 WL 7330054 (Bank. D. Neb. Dec. 9, 2020).



Friday, January 1, 2021

Post-Modern America is as vicious and dysfunctional as Victorian England, the Weimar Republic, and 17th century France

If you get your news from network television, you are being bombarded by commercials about prescription medicines and financial services. 

These ads typically show prosperous older Americans who look remarkably fit, live in lovely homes, and spend their days cooking gourmet meals, wind-surfing, and flyfishing with their adorable grandchildren.

These advertisements purport to show life in 21st century America--the best of all possible worlds where everyone is healthy, happy, and financially secure.

But I don't live in that America, and you don't either. Instead, most of us live in a society that is remarkably similar to dysfunctional regimes of bygone centuries.

Our government is printing money at a frightening pace to prop up the financial markets, much like the Weimar Republic did in the 1920s. And we know how that turned out. Germany experienced runaway inflation that set the stage for Adolph Hitler.

We may celebrate the fact that the United States abolished debtors' prisons, but 21st century America treats debtors much the way England treated them in the Victorian age. 

We don't deport debtors to Australia or put them in jail as England did in Charles Dickens' time, but we've created a virtual prison for student-loan borrowers, millions of whom are trapped in income-based repayment plans that last 25 years. Compounding student-debtors' misery, our supposedly benevolent Congress has made it almost impossible for insolvent student-loan debtors to get relief in the bankruptcy courts.

And the American tax system is remarkably like the tax regime in Louis XIV's France. W.H. Lewis, who wrote a masterful social history of seventeenth-century France, described the French tax structure this way;

[T]he whole fiscal system was in itself radically and incurably vicious; as a contemporary remarks, if he Devil himself had been given a free hand to plan the ruin of France, he could not have invented any scheme more likely to achieve that object than the system of taxation in vogue, a system which would seem to have been designed with the sole object of ensuring a minimum return to the King at a maximum price to his subjects, with the heaviest share falling on the poorest section of the population.

Doesn't that sound like the American tax system? Sure it does. As financial tycoon Warren Buffett has repeatedly observed, he pays federal taxes at a lower rate than his secretary.

And the COVID pandemic didn't change the system at all. Indeed, the latest coronavirus relief package includes 100 percent deductibility for the so-called "three-martini lunch." Think about it: wealthy Americans can write off extravagant meals that can cost more than $1,000, while the working stiff gets a $600 coronavirus-relief check.

 In short, although Americans may deceive themselves into believing that our society is evolving into a paradise based on the principles of equity, diversity, and inclusion, in fact, we live in a world not so very different from Victorian England, Weimar Germany, and 17th century France.

Louis XIV: Is everybody happy?


Friday, December 18, 2020

Mosley v. Educational Credit Management Corporation: "It's not personal. It's just business."

The U.S. Department of Education and Educational Credit Management Corporation (ECMC), DOE's ruthless sidekick, don't want anyone to get bankruptcy relief.  This has been DOE's policy for many years.

Let's take a look at Mosley v. Educational  Credit Management Corporation, decided by the Eleventh Circuit back in 2007. As we will see, Mosley was clearly entitled to discharge his student loans in bankruptcy under the undue hardship standard, but ECMC fought him all the way into the Eleventh Circuit Court of Appeals.

Keldric Mosley attended Alcorn State University, an HBCU, from 1989 to 1994, but he never got a degree. While a student, he was enrolled in Army ROTC, and he injured his back and hip when he fell from a tank during summer ROTC exercises.

Mosley left Alcorn State in 1994 to help his mother, whose health was deteriorating. He lived with his mother from 1994 until 1999. He held numerous jobs during that time but was unable to keep any of them due to depression, heavy drinking, and physical limitations due to his ROTC injury. (p. 1323)

In 2000, Mosley's mother committed him to a state-supported mental health facility, where he was diagnosed with depression and anxiety. He sought treatment for his physical and mental disabilities from the Department of Veterans' Affairs, which placed him on prescription medications. These medications left him groggy. The combination of medicines and his physical disabilities made it difficult for Mosley to find stable employment. (p. 1323)

As noted by the Eleventh Circuit, Mosley was homeless from 2000 until his adversary proceeding in bankruptcy court, and he lived off of food stamps and small disability checks. He had no car and frequently slept at his aunt's house. (p. 1323)

Mosley represented himself in his adversary proceeding and sought to get evidence of his medical disabilities before the bankruptcy court. ECMC showed up to oppose bankruptcy relief and objected to the admission of some of Mosley's medical evidence. 

Although Judge Mullins reluctantly declined to accept some of his medical evidence, he discharged Mosely's student loans without that evidence. Judge Mullins reasoned that Mosley's testimony was sufficient to show that "he was in a vicious cycle of illness and homelessness that prevented him from working" and that repaying his student loans would constitute an undue hardship. (p. 1324)

After a trial, Judge Mullins discharged Mosley's student loans in bankruptcy.  ECMC appealed, but U.S. District Court Judge Robert Vining affirmed Judge Mullins' decision.

ECMC then appealed to the Eleventh Circuit Court of Appeals.  It argued that Judge Mullins erred in admitting Mosley's own testimony about his health. ECMC also argued that Mosley's evidence did not support Judge Mullins' conclusion that Mosley's financial situation was unlikely to improve or his ruling that Mosely handled his student loans in good faith.

But the Eleventh Circuit rejected all of ECMC's arguments and affirmed Judge Mullins' decision to discharge Mosley's student loans.  The appellate court ruled that Judge Mullins properly considered Mosley's testimony about his medical health. The court cited the Sixth Circuit's decision in Barrett v. ECMC, in which that court ruled that requiring an indigent debtor to obtain expensive expert testimony or documentation "imposes an unnecessary and undue burden on the debtor in establishing his burden of proof." (p. 1325)

Regarding the good faith requirement, ECMC argued that Mosley had not managed his student loans in good faith because he had not made a payment on his loans since 1996 and had not enrolled in an income-based repayment plan. 

But the Eleventh Circuit rejected those arguments. 

 [F]ailure to make a payment, standing alone, does not establish a lack of good faith. Good faith is measured by the debtor's efforts to obtain employment, maximize income, and minimize expenses; his default should result, not from his choices, but from factors beyond his reasonable control. (p. 1327)

Nor is a debtor always obligated to sign up for an income-based repayment plan to establish good faith:

While a debtor's effort to negotiate a repayment plan certainly demonstrates good faith, courts have rejected a per se rule that a debtor cannot show good faith where he or she has not enrolled in the Income Contingent Repayment Program. (p. 1327).

In short, Keldric Mosley--who clearly met the undue hardship standard for discharging his student loans in bankruptcy--had to fight for that remedy all the way to the Eleventh Circuit Court of Appeals. Although Mosley had a record of homelessness and chronic health problems, ECMC refused to allow him bankruptcy relief until three levels of federal judges ruled in his favor. 

It was not personal with ECMC. It was just business.

Congress needs to remove the "undue hardship" language from the Bankruptcy Code, and perhaps someday it will. 

But until that day comes, the U.S. Department of Education and ECMC could do a lot to ease the stress on overburdened student-loan debtors if they would merely allow people like Keldric Mosely to discharge their student loans in bankruptcy without having to battle their way into the federal appellate courts.  

References

Mosely v. Educational Credit Management Corporation, 494 F.3d 1320 (1lth Cir. 2007).

"It's not personal. It's just business."


Monday, December 14, 2020

Small private colleges are going down: Don't get trapped under the rubble

 Inside Higher Education carried a story today about major cuts being made at three higher education institutions. Marquette University, a Jesuit institution, is laying off 225 faculty and staff members. The University of Evansville, a Methodist college, is eliminating 17 majors and three departments. The College of Saint. Rose, a Catholic school, is cutting 16 majors and six master's degrees.

These three colleges are not alone. All over the United States, small, private colleges are suffering from declining enrollments and declining revenues.  Many of them will close over the next couple of years.

The colleges blame demographic trends.  There are simply fewer traditional college-age people in the American population.  Consequently, fewer students are going to college.

The coronavirus pandemic didn't help matters. The COVID outbreak caused a lot of young people to postpone their college plans. And it imposed high costs on institutions that were left with empty dorm rooms this fall.

An overall decline in religion has sapped the vitality of schools that were founded by various churches.  The University of Evansville, for example, is affiliated with the United Methodist Church, but how many young people choose a college because it has ties with a religious denomination?

The small private schools have been fighting desperately to reverse their enrollment crops. They've rolled out new programs, spiffed up their study-abroad offerings, hired public relations firms, and slashed tuition. But for many--these survival strategies won't be enough. 

If you are a young person in the process of deciding where to go to college, here is my advice. Do not go to a small, private school with enrollment below 1,000 students.  The smaller colleges are the most vulnerable. 

You do not want to enroll at a college that closes before you obtain your degree or shortly after graduating.  You don't want to take out student loans to pay tuition at a school that is slashing programs and laying off faculty.  You certainly don't want your parents to take out a Parent Plus Loan so you can study at some obscure little school in the Midwest that won't prepare you for a good job.

In short, private liberal arts education is on the verge of collapse. Don't get trapped under the falling rubble.






Tuesday, November 24, 2020

Parent Plus Loans: A despicable government program cruelly drives mom and pop into poverty so their kids can go to college

If you are not outraged by the federal government's Parent Plus student-loan program, you have a heart of stone.

According to The Hechinger Report, 3.5 million parents have taken out federal student loans to help their kids pay for college. Collectively, these parents owe almost $100 billion in outstanding debt, and about 12 percent have gone into default.

In other words, if you take out a Parent Plus loan to help finance your child's college education, you are running about a 1 in 8 chance of having your life ruined by debt you can't repay—pretty grim statistics.

Nevertheless, colleges and universities still offer Parent Plus loans as part of their individual student aid packages, and parents continue to take them out. Often parents do not realize that these loans are almost impossible to discharge in bankruptcy.  Even if mom and pop lose their jobs or are hit with significant hospital bills, they are still obligated to send Uncle Sam a monthly check.

The Hechinger Report tells the story of Jay and Tina Rife, who borrowed $40,000 so their son and daughter could attend public universities in Indiana. The loan balance has grown over 20 years, and they now owe $100,000. Their Parent Plus loan payment is bigger than their mortgage payment.

The Rifes' daughter, Stacy, is 41 years old and has her own student-loan payments. Meanwhile, Stacy's mother goes without health insurance so that she and her husband can make their Parent Plus payments.

The Hechinger Report quoted Amy Laitinen, a policy expert at New America, regarding Parent Plus loans.  "I don't think these loans should be presented with the financial aid offer at all," Laitinen said. "I think it speaks more to the school's desire to bring in the student than to what's best for the family . . . .To present [a Parent Plus Loan] as if it's really a way for paying for college when there's no way for those parents to pay it back is shameful and harmful."

Exactly. 

There is only one way to deal with this reprehensible government program, and it's a two-part response.  The Parent Plus program should be shut down immediately, and every parent who has been trapped by this despicable sham should be able to shed their Parent Plus debt in bankruptcy. 





Wednesday, July 22, 2020

Portland protesters: Are student loans and a crummy job market driving the anger?

Like many Americans, I have been surprised by the intensity of the Black-Lives-Matter protests that take place nightly in Portland, Oregon. Why Portland?

USA Today speculated yesterday that Oregon's racist past is fueling the city's protests.  As the newspaper pointed out, Oregon's territorial constitution, adopted in 1857, barred people of color from entering Oregon Territory.  And Oregon had a very active Ku Klux Klan during the early 1920s, as USA Today noted.

But I don't think Oregon's "dark history" of racism explains the violence in Portland's streets.  Portland is, after all, one of the most progressive cities in America. US News and World Report recently listed Portland as one of the nation's top ten best cities.

And no one can accuse Portland's politicians of being racist. The city's progressive political scene is so famous that the television series Portlandia lampooned it for eight seasons.

Nor is Portland torn by racial strife. Portland is a mostly white city in a primarily white state.  Only two percent of Oregon's population is Black, and only about one in twenty Portland residents is African American.  Compare that ratio to Baton Rouge, where I live. My city is 52 percent African American, and no one is rioting.

Watching the Portland protests night after night, I have been struck by the fact that most of the protesters are young, white people. I find myself wondering whether these enraged wokesters have college degrees, whether they have good jobs, and whether they have student-loan debt.

We know that millions of Americans are burdened by student loans that hinder them from getting married, buying homes, or saving for retirement.  And we know that a majority of these debtors are not paying down their loans.  Education Secretary Betsy DeVos admitted as much almost two years ago.

I'm guessing that a lot of the people who are protesting on Portland's streets have student-loan debt that is completely unmanageable. Although the demonstrators may have college degrees, those degrees did not lead to good jobs for many of them.

I am not questioning the sincerity of people who have taken to the streets of Portland this summer. I am sure most of them are genuinely disturbed by racism and economic injustice.

But I wonder: How many people who are throwing bricks and bottles at the police would stay in their homes at night, munch on popcorn and watch a Netflix movie if they believed they were financially secure, had a good job, and were not weighed down by student loans.

Portland protesters: most are young and white

Monday, July 6, 2020

Trejo v. U.S. Department of Education: A Texas bankruptcy judge grants student-loan discharge to 47-year-old single mom

The Sad Case of Jessica Trejo

In 2017, Jessica Trejo filed an adversary action in a Texas bankruptcy court, seeking to discharge $90,000 in student-loan debt. Ms. Trejo had borrowed about $65,000 to attend three Texas colleges. She also took out a Parent Plus loan for $13,522 to help pay for her eldest daughter's college education. And she owed a little over $7,000 in accrued interest.

At the time of trial, Ms. Trejo was a 47-year-old single mother with two dependent daughters. Both daughters were "afflicted with serious Type II diabetes, high blood pressure, psoriasis, eating disorders, severe depression, suicidal tendencies, and Attention-Deficit Hyperactivity Disorder" (p. 2). Ms. Trejo testified that she had to continually monitor her daughters' activities due to their depression and suicidal tendencies.

From 2008 until 2013, Ms. Trejo took college courses on a part-time basis at Tarrant County College, Hill College, and Texas Wesleyan University. Her ultimate goal was to get a degree in bilingual education. However, "because of her family and financial situation, she no longer intend[ed] to return to college or obtain a degree" (p. 3).

At the time she filed for bankruptcy, Ms. Trejo's financial situation was precarious. As Judge Mark Mullin observed, Ms. Trejo had not had a full-time job in the last 15 years. She had worked part-time at a nail salon, but she gave up that work to care for her daughters. Due to her daughters' disabilities, she received Supplemental Security Income (SSI) checks from the Social Security Administration, totaling $1470 a month.

The U.S. Department of Education opposed Ms. Trejo's request for student-loan relief, arguing that she should sign up for a 25-year income-based repayment plan. According to DOE, Ms. Trejo's income was so low that she would not be obliged to pay anything under such a program (p. 4).

Judge Mullin applies the Brunner test and discharges Ms. Trejo's student-loan debt.

Judge Mullin applied the three-part Brunner test to determine whether it would work an undue hardship on Ms. Trejo if she were forced to repay her student loans. In Judge Mullin's view, Ms. Trejo met all three parts of that test.

First, the judge ruled that Ms. Trejo could not maintain a minimal standard of living for herself and her two dependent daughters if forced to pay her student loans.

Second, Ms. Trejo had shown that her financial situation was not likely to improve in the foreseeable future.

Third, Judge Mullin ruled that Ms. Trejo had handled her student debt in good faith. Although she had not made any payments on her student loans, she never had the financial wherewithal to do so.

Implications of the Trejo decision

Judge Mullin made the right decision when he discharged Ms. Trejo's student-loan debt. Clearly, she could not maintain a minimal standard of living for herself and her family and pay back her student loans. And, as Judge Mullins recognized, it was highly unlikely that Ms. Trejo's financial situation would improve significantly in the years to come.

The Trejo decision is a significant decision for at least three reasons. First, Judge Mullin flatly rejected DOE's tired argument that distressed student-loan debtors should be forced into long-term income-based repayment plans instead of getting their loans discharged in bankruptcy.  Over the years, DOE has snookered some bankruptcy judges with that silly argument, but those days may be over. It is absurd to deny an honest debtor bankruptcy relief in favor of a 25-year plan that requires the debtor to pay nothing.

Second, Judge Mark Mullin is one of a growing number of bankruptcy judges who are interpreting the Brunner test compassionately and with a dose of common sense. Judge Mullin took great care to write a judicial opinion that will be difficult to overturn on appeal. His decision contained 124 footnotes showing that his ruling was based on evidence in the trial record.

Finally, the Trejo decision prompts us to think about the enormous cost of higher education today, particularly when we consider how often the college experience does not lead to a good job.  Ms. Trejo borrowed about $65,000 to pay tuition at three colleges and got minimal benefit from the experience. Nevertheless, all three institutions that took Ms. Trejo's tuition money get to keep it.

We need to find a better way to provide low-income people like Jessica Trejo with the postsecondary education and training they need to become self-sufficient citizens. Clearly, the federal student loan program, as it is now operating, is not doing a good job.



References

Trejo v. U.S. Department of Education, Adversary No. 17-4052, 2020 WL 1884444 (N.D. Tex. Apr. 15, 2020).

Monday, June 29, 2020

Coronavirus update: The Fed bought $428 million of corporate debt while distressed student-loan debtors get diddly squat

Perhaps you have noticed, as I have, that a high percentage of the George Floyd protestors are young White people.

 Youthful White men and women helped pull the ropes that brought down statues of Confederate figures across the South. And it is Millenials--White Millenials--who joined in the vandalism and destruction that damaged many American cities.

Why is that? Are White protestors merely standing in solidarity with their Black brothers and sisters over the residue of racism in the United States? Or do they have their own grievances?

I think it is both. In this season of discontent, we should remember how many Americans have been thrown out of work--tens of millions.  And we should never forget that 45 million Americans--more young than old--owe $1.7 trillion in student debt, and only about half can pay it back.

This nation has been in lockdown for four months now due to the coronavirus epidemic.  Public employees--professors, teachers, administrators, etc.--are still getting paid.  Workers in the private sector have been laid off by the millions, especially in the service industry. And many of these unemployed workers have student loans.

What has our federal government done to assist laid-off student-loan debtors?  Diddly squat.  The Department of Education has granted a brief reprieve from making monthly loan payments and is abstaining from charging interest, but that is about it.

Oh, yes, DOE said it would stop collection efforts against defaulted college-loan borrowers until the coronavirus crisis had passed. But last May, DOE was sued for allowing employers to continue collection efforts.

Meanwhile, the Federal Reserve Bank is buying up corporate debt--over $400 million. So far, the Fed has bought corporate debt owned by Berkshire Hathaway Energy, Coca-Cola, AT&T, Boeing, Exxon-Mobile, Ford and Walmart. And it has distributed more than $350 million in forgivable loans to businesses that promise to maintain their payrolls.

Who has benefited from the Fed's helicopter money over the last few months?  Corporate executives and corporate stockholders, that's who.  And--in case Fed Chair Jeremy Powell hasn't noticed--the people protesting on America's streets don't own stock.

I don't mean to question the motives of White protestors who join the Black Lives Matter demonstrations. I feel most are expressing real and legitimate anger about race relations in the United States.

But I also believe that White protestors feel a kinship with Black protestors on economic issues and consider themselves to be fellow victims of corporate America.  And I agree with them about that.

Many White demonstrators have racked up thousands of dollars in student debt and are not holding down jobs that will allow them to pay back what they owe. Some have come to realize that their college education was way too expensive and didn't prepare them for decent jobs. 

Now, these student-loan debtors are out of work and struggling to make their loan payments. They realize that our federal government has been spewing out billions of dollars to corporations to help them deal with the coronavirus while it has done virtually nothing for distressed college borrowers.

They are angry. I would be angry too--very, very angry. 





Saturday, June 27, 2020

Planning on going to college this fall? Why not wait a year or two?

Since time immemorial, middle-class parents have urged their children to get a college education. A college degree, parents believed, was the indispensable ticket to a good life.  College was where young people prepared for the world of work, where they often met their future spouses, and where they formed lifelong ties to classmates.

But listen carefully. Times have changed. The coronavirus, campus unrest, and a troubled economy have undermined the value of a college degree. If you are thinking about enrolling for college this fall, you might want to postpone that plan--at least for a year. And here is why:

The coronavirus pandemic. First of all, the COVID-19 epidemic forced virtually every American college to close last spring and to shift from live instruction to a distance-learning format.  Most schools have announced that they will be teaching their courses online this fall. 

Moreover, dorm life, college sports, and extracurricular activities will all be negatively impacted by the coronavirus.  In short, going to college next year may not be much fun.

Colleges and universities will learn to adapt to a post-pandemic world, but it will probably take a couple of years before they figure it out. Why not postpone college for a year or two while this transition is ongoing?

Less police protection.  Colleges have a legal duty to keep their students safe on campus and in the dorms. Most colleges meet this responsibility by maintaining a campus police force.

In the wake of George Floyd's killing, however, many colleges and universities are facing intense pressure to dismantle their police forces. As Insider Higher Ed recently reported:
 Student organizations, workers’ unions and individual activists at dozens of universities are calling on administrations to cut ties with local police or disband campus police departments, saying that policing institutions enact violence upon black people and uphold white supremacy.
So if you go to college this fall, there is a good chance that police protection on your campus will be diminished from what it was a year ago or even eliminated.  In my view, this is another reason to postpone going to college. Wait until the debate about campus law enforcement is resolved before embarking on your college career.

Growing uncertainty about the worth of a college degree. Although the higher-education industry tirelessly touts the value of college education, that mantra is becoming shopworn.

Without question, the cost of going to college is far too high.  In particular, students who take out student loans to major in "soft" disciplines (social sciences, humanities, gender studies, etc.) are finding that their degrees leave them with massive debt and no job.

Some young people go to college with a clear idea about how their degree will qualify them for vocations in such fields as engineering, business, computer sciences,  or medical technology. But others are clueless about why they are on campus.

If you have only a hazy notion about how you want to make a living, you should strongly consider working for a year after graduating from high school. You should use the time to reflect on your future and explore alternatives to chasing a college degree.

In my state, thousands of people have gotten technical training at vocational and community colleges and gone on to get good jobs with six-figure salaries.  If you ask these people whether they are sorry they didn't acquire a bachelor's degree, I think most will tell you no.

So think long and hard before going to college this fall, especially if you plan to finance your studies with student loans. Your chosen university will still be around in 2021 if you decide to pursue a college education. 



Saturday, April 4, 2020

"Seeing poor white people makes me happy": Should you take out student loans to attend SUNY Old Westbury?

Do you remember Associate Professor Nicholas Powers, who made the national news a while back for posting an online essay titled "Seeing poor white people makes me happy"?

According to the New York Post, Powers penned an essay in which he wrote that "White people begging us for food feels like justice . . . it feels like a Black Nationalist wet dream."

Professor Powers is a tenured professor at SUNY Old Westbury, a public university in the state of New York. He makes $82,122 a year, plus benefits, which undoubtedly includes excellent health insurance and a pension plan.

And yet he rails against poor white people.  Describing his reaction to seeing a homeless white man in a black neighborhood, Powers wrote, "Should I kick him in the face? Hard?" Also describing his emotions about seeing a white homeless man, he wrote: "Today I own my anger. I want to snatch his food and say, 'Go beg in a white neighborhood!' And eat it. And rub my belly. And laugh."

So what does it cost to attend SUNY Old Westbury, where Professor Powers teaches in the English Department?  For in-state students, it cost about  $24,000 for tuition, fees, room, and board. That's roughly $100,000 for a four-year degree.

America has plunged into a deep economic Depression. According to the Federal Reserve Bank of St. Louis, the unemployment rate may hit 32 percent--higher than during the 1930s.  Young people who are in college now need to keep their expenses down and study a subject that will lead to a good job.

So if you are a young New York college student, ask yourself this question. Does it make sense to take out student loans to attend SUNY Old Westbury and take classes from Professor Powers? I don't think so.

On the other hand, if you borrow money to get a degree from SUNY Old Westbury and can't get a job, you shouldn't worry. You can always sign up for a 25-year, income-based repayment plan to service your student loans.

That plan will terminate when you are in your fifties. By that time, Professor Powers will probably be retired and living on his generous New York state pension, a pension you will help pay for with your taxes.


Professor Nicholas Powers: "Seeing poor white people makes me happy."




I

Thursday, August 15, 2019

"Luxury" apartments for college students: How will the kids pay the rent?

Bloomberg Businessweek carried a story recently about the emergence of luxury housing for college students. In recent years, real estate developers have been building "amenity-rich luxury apartments" near universities. These new apartment complexes are very attractive to students, especially when compared to the often run-down dormitories that the universities operate.

But these so-called luxury apartments are expensive, and they've contributed to the rising cost of student housing. As Bloomberg writer Ali Breland reported, "the estimated cost of on- and off-campus room and board at a four-year public university climbed by more than 82 percent, adjusted for inflation." During the same time period, rents across the nation as a whole only rose 19 percent.

How are students paying for their fancy digs? Many of them are paying the rent with student loans. The average college graduate now leaves school with $35,000 in student debt, and for many students, a significant chunk of that money was spent on housing.

So what's the problem?

First of all, a lot of students are taking out student loans for housing they really can't afford. When their student-loan bills come due, a lot of them will wish they had lived more modestly while they were working on their degrees in medieval literature.

Second, by borrowing money to pay for "luxury" living, students are living a lifestyle they can't sustain after they finish their studies and go looking for a job. It is hard for college students to accept the reality that their standard of living will go down once they've obtained their college degrees.

The upscale student-housing boom imposes a cost on college communities as well.  A lot of this so-called luxury student housing isn't luxurious at all.  Student-housing complexes may have swimming pools, clubhouses, and shiny appliances, but many of them are shoddily constructed, with plastic interior doors and particle-board cabinets.

I live just a few blocks from some of these student-oriented apartment complexes, and even the newer ones are beginning to look the worse for wear.  The day is fast approaching when these faux-luxury apartment buildings will just be slums.

But the real estate developers don't care. These complexes are being packaged and sold to investors as commercial real-estate-backed securities--very similar to the mortgage-backed securities that were being peddled before the housing crisis of 2008.

In my view, the luxury student-housing boom is a bubble. Too many of them are being built. No wonder the default rate on student-oriented housing mortgages has rocketed up to 9 percent!

Luxury student housing: Living the good life while still in college

Saturday, June 1, 2019

Dude! Don't move to India to escape student loans!

Zero Hedge posted an article yesterday about people who fled the United States to escape their student loans. (Annie Nova wrote the original story for CNBC).  Chad Haag, for example, graduated from the University of Northern Colorado and emigrated to India to get away from $20,000 in college-loan debt.

Apparently, Haag is somewhat ambivalent about India. He gets to see elephants--a plus.  But Haag is not crazy about the plumbing. "Some toilets here are holes in the ground you squat over," he confided.

Zero Hedge went on to report on a woman who went to Japan to teach English and a guy who moved to China--also to teach English. Both said they were partly motivated to leave the U.S. by their student-loan debt.

Dudes! Don't move overseas to dodge your student loans. People who cannot find good jobs can enroll in one of the Department of Education's income-based repayment plans (IBRPs). If they are unemployed or living below the poverty line, their monthly loan payment will be zero. An IBRP is a terrible option, as I have often said. But for most people, it beats moving to Asia.

Frankly, I'm not buying the underlying premise of this story. Millions of people have defaulted on their student loans and hardly any of them have left the U.S.  Why would they? People can't dodge their student loans by moving overseas. The debt will be waiting for them when they return, along with accumulated interest and penalties.

My guess is that student-loan debtors who leave the United States have multiple motives. Mr. Haag, for example, married an Indian national, which must be the major reason he is living in a country that doesn't meet his hygiene standards. And thousands of people teach English overseas simply to experience another culture.

If we are looking for signs of suffering, we shouldn't focus on a handful of people who have left the country with student loans hanging over their heads. We should reflect on plummeting birth rates, declining homeownership, and inadequate savings for retirement.

The student-loan program is a catastrophe but publicizing a few outliers is a distraction. We need to relieve the suffering experienced by millions of people. In my mind that can best be accomplished in the bankruptcy courts. And then we need to find a better way to finance higher education.




Tuesday, May 7, 2019

A Kansas bankruptcy judge grants Vicky Jo Metz a partial discharge of her student loans, and she wins her appeal

Vicky Jo Metz borrowed $16,613 back in the 1990s to attend a community college, but she never got a degree. Over the years, she filed for bankruptcy three times, but she continued making payments on her student loans under court-approved repayment plans. In fact, she paid almost 90 percent of what she originally borrowed.

Nevertheless, Metz's student-loan debt kept growing due to accruing interest. By 2018, her total debt had grown to $67,277--four times what she borrowed. 

In 2017, Metz commenced an adversary proceeding in a Kansas bankruptcy court, seeking to discharge her student loans. Her creditor, Educational Credit Management Corporation (ECMC), objected to a discharge. Put Metz in an income-based repayment plan (IBRP), ECMC demanded. 

But Bankruptcy Judge Robert Nugent disagreed. Metz, who was 59 years old, would never pay off her student loans under an IBRP, Judge Nugent reasoned. On the contrary, if Metz entered a 25-year IBRP and faithfully made her income-based monthly payments, her debt would continue to grow due to accruing interest. By the time Metz completed her repayment plan, she would owe $157,277—nine times what she borrowed! Although her student-loan debt would be forgiven after 25 years of making payments, Metz would face significant tax liability because the IRS considers forgiven debt as taxable income.

 Judge Nugent granted Metz a partial discharge of her student loans. He canceled all the accrued interest on her student debt but required her to pay the original $16,613.

ECMC appealed Judge Nugent's decision to a federal district court, and Judge John Broomes upheld Judge Nugent's ruling. Like Judge Nugent, Judge Broomes applied the three-part Brunner test to determine whether it would be an undue hardship for Metz to repay her student loans.

In Judge Broomes' view, Metz could not repay her student loans and maintain a minimal standard of living. Thus, she met part one of the Brunner test. Moreover, she met part two of Brunner because her financial situation was not likely to change. Finally, in Judge Broomes’ view, Metz met part three of the Brunner test because she had handled her student loans in good faith.

In its appellant’s brief, ECMC renewed its argument that Metz should be placed in an IBRP and downplayed the tax consequences of such a plan. Metz would probably suffer no tax consequences from an IBRP, ECMC argued, because she would likely be flat broke when her IBRP concluded.  Under current law, ECMC pointed out, individuals pay no federal tax on forgiven debt if they are insolvent at the time the debt is forgiven.

In a footnote, Judge Broome pointed out the absurdity of ECMC’s position. “The import of that argument,” Judge Broome wrote, “is that under ECMC’s plan, [Metz] will be kept insolvent, if not entirely impoverished, until she is eighty years old and the debt is forgiven—what a pleasant system.”

Judge Broomes’ Metz decision is the second appellate court decision out of Kansas to uphold a bankruptcy court’s partial discharge of student-loan debt. The first decision, Murray v. ECMC, granted a partial discharge to Alan and Catherine Murray, a married couple in their late forties, whose student-loan debt had quadrupled over 20 years due to accruing interest.

Together, Metz and Murray stand for the proposition that long-term, income-based repayment plans are not appropriate for insolvent student-loan debtors when it is clear that debtors in these plans will never pay off their loans. Had ECMC had its way with Vicky Jo Metz, she would have made monthly student-loan payments for a quarter of a century—until she was in her eighties.  At that point, she would face a huge tax bill for $150,000 in forgiven debt or she would be insolvent. As Judge Broome remarked: What a pleasant system.



References

Educational Credit Management Corporation v. Metz, Case No. 18-1281-JWB (D. Kan. May 2, 2019).

In re Murray, 563 B.R. 52 (Bankr. D. Kan 2016); aff’d sub nom. Educational Credit Management Corporation v. Murray, No 16-2838, 2017 WL 4222980 (D. Kan. Sept. 22, 2017).