Say goodbye to your golden years: 100 million Americans have no retirement savings

According to the  National Insitute on Retirement Security, more than 100 million Americans have no retirement savings whatsoever. 

As Diane Oakley, NIRS executive director, observed:

The facts and data are clear. Retirement is in peril for most working-class Americans . . . When all working individuals are considered--not just the minority with retirement accounts--the typical working American has zero, zilch, nothing saved for retirement.

The NIRS partly blamed the 2007 recession for the bad news. But the report was issued in 2018--before the coronavirus put millions of people out of work.  Over the past year, Americans have dipped into their savings and their retirement accounts just to pay today's bills.

 A 2019 survey also reported bad news for American retirees. A GobankingRanks survey concluded that almost two out of three Americans (64 percent) will retire broke. And--shockingly--nearly half of the people surveyed said they'd didn't care!

Clearly, millions of Americans are not preparing for their retirement years. Many workers don't make enough money to fund a retirement account, and others are overwhelmed with consumer debt--home mortgages, car payments, and credit card bills.

And student-loan debt is a significant contributor to Americans' precarious financial status. More than 40 million people have outstanding student debt, and less than half that number are paying it off. Nine million student-loan debtors are in long-term income-based repayment plans, which means they will never pay down their loan balances.

What is going to happen to all these impecunious Americans when they reach retirement age?

A great many will just keep working until they die or become too incapacitated to be a Walmart greeter. Others will tap the equity in their homes or draw down their meager savings just to pay their utility bills. Some will move in with their kids--who will have their own financial troubles.

As a recent New Yorker article noted, there is a growing movement to increase the minimum wage to $15 an hour. I hope Congress does exactly that.

Nevertheless, even if the minimum wage is roughly doubled, elderly Americans who work full-time at Wendy's for $15 an hour will generate just enough income to keep them above the poverty line.

Working on their feet for eight hours a day will be difficult for people in their seventies.  Many will have to pop Chinese-manufactured Advils to keep their arthritis under control.  But it can be done.

But the days when Americans referred to retirement as the Golden Years are over.  For many Americans, their last years will not be golden. They will be difficult, bitter, and depressing.

photo credit: finance.yahoo.com

Mendenhall v. Navient: Idaho bankruptcy judge grants a family man a partial discharge of student loan debt totally more than $400,00.

Mendenhall v. Navient Corporation: A $76,000 student-loan debt grows fivefold

In 2007, Steven Mendenhall obtained a bachelor's degree in film and video production from Brooks Institute of Photography, a for-profit college in California, which later closed.  To finance his studies, Mendenhall took out about $75,000 in federal student loans and $76,000 in private loans from Sallie Mae.

Mendenhall's private student loans gradually spun out of control. By 2013--six years after graduating, Mr. Mendenhall's private student-loan debt had grown from $76,000 to  $260,357.69--more than three times what he borrowed.  By 2018, his private loan debt had grown to $407,912.84--more than five times what he borrowed.

How did that happen? To begin with, Sallie Mae's interest rate was quite high--13.625 percent. Interest on Mr. Mendenhall's unpaid debt accumulated and capitalized, causing his loan balance to spiral upward.  Also, Sallie Mae charged Mendenhall additional fees--nearly $40,000 in fees as of 2013. That's more than half the amount Mr. Mendenhall borrowed.

Added together then--Mr. Mendenhall's private student-loan debt and his federal debt totaled almost half a million dollars.

Mr. Mendenhall diligently sought employment and finally landed a pretty good job working at Brigham Young University's branch campus in Rexburg, Idaho. He attempted to manage his towering debt by filing for bankruptcy three times. Realizing he could not discharge his student loans absent a showing of undue hardship, Mendenhall filed for bankruptcy twice to discharge his other debts, hoping to free up more money to pay on his student loans. Still, he was unable to pay down his private student-loan debt.

Mendenhall filed his third bankruptcy petition in 2018, hoping to discharge his student loans. He settled with the U.S. Department of Education but still owed over $400,000 to Sallie Mae's successor in interest, Navient.

Judge Joseph Meier grants Mr. Mendenhall a partial discharge of his massive student debt

Idaho Bankruptcy Judge Joseph Meier reviewed Mr. Mendhall's financial situation and concluded that Mendenhall and his wife had lived frugally. The judge specifically approved of Mendenhall's expenditures for life insurance and his contributions to a retirement fund and a small savings account.

In fact, Judge Meier found only two unreasonable expenses--Mendenhall's $400 a month charitable contribution to the family church and his $300 monthly payments on his attorney fees.

After reviewing the totality of Mr. Mendenhall’s income and expenses, Judge Meier concluded that Mendenhall only had $150 a month in available income to pay on his student-loan bill---$407,000, which was accruing interest at the rate of 13.625 percent.

Judge Meier then analyzed Mendenhall’ situation under the three-pronged Brunner test to determine whether Mendenhall and his dependents would suffer an “undue hardship” if he were required to repay his private student-loan debt.

In the Judge’s view, Mendenhall met all three prongs of the Brunner test.  First, he was unable to repay his student loans and maintain a minimal standard of living. Second, his current financial situation was unlikely to change substantially.  And third, Mendenhall had handled his loans in good faith.

After completing his extensive analysis, Judge Meier then gave Stephen Mendenhall a partial discharge of his private student loans. The judge discharged all of this debt except $45,000--a little more than 10 percent of the total amount he owed. This debt could be paid without accruing interest, Judge Meier instructed, in payments of $150 a month over 25 years.

Sometimes a partial student-loan discharge is an appropriate remedy

Judge Meier made the right decision, one that other bankruptcy judges should follow. Granting a partial student-loan discharge gives a judge the flexibility to fashion a reasonable and just remedy for an honest but unfortunate debtor burdened by massive student-loan debt. Such a remedy is particularly appropriate for Mr. Mendhenhall, a husband and father with four children, burdened by student debt that had careened out of control due to a high interest rate and unconscionable fees.

References

Mendenhall v. Navient Corporation, JMM Adversary Case No. 19-8010-JMM, 2020 WL 6557964 (Bankr. D. Idaho Oct. 15, 2020).

A good news/bad news joke: American universities awarded 55,000 doctoral degrees in 2019

 First, the good news. American universities cranked out 55,000 doctoral degrees last year, slightly more than the year before. 

Now the bad news. American universities cranked out 55,000 doctoral degrees last year, slightly more than the year before.

Our nation's tired universities are investing some of their dwindling resources into ginning out more graduate degrees. Why? Because the population of undergraduate students is shrinking and graduate programs command higher tuition rates.  For example, Baylor University has about 400 doctoral students in its Ph.D. program in curriculum studies, and it hopes to enroll more.

But do we need more Ph. D.s? Probably not. And why is that? Because many people will not get the salaries that they will need to justify the cost of their doctoral studies.

Maren Wood, who was interviewed by Inside Higher Ed, is a Ph.D. career advisor and founder of Beyond the Professoriate. She is troubled by the fact that doctorate recipients in fields with the highest median cumulative debt have the lowest median expected salaries. Less than half the recipients of doctoral degrees in education graduate without debt.

Traditionally, people with Ph.D.s could find jobs in academia, but that market is drying up--particularly in the soft disciplines--education, humanities, and social sciences.  Colleges across the country are slashing positions in the liberal arts due to declining interest in those fields.  

Ms. Woods advises doctoral graduates to consider private-sector careers outside the academic sector. But is that realistic?  The University of Texas offers a Ph.D. in African and African Diaspora Studies. But what does that qualify a graduate to do other than get a job teaching African and African Diaspora Studies?

Woods' advice is similar to the reassurances that law-school students sometimes receive as they face the prospect of a crumbling job market.  A law degree is a versatile degree, people say soothingly. I once gave this advice myself.

But Paul Campos, a law professor, poured cold water on this argument in Don't Go To Law School (Unless). 

Far from being "versatile," a law degree can turn into a toxic asset for law school graduates who, by choice or necessity, look for work outside the legal profession. If you go to law school and end up not practicing law, there's a real risk that you'll find your law degree is actually worse than worthless, and that you would have been better off not getting it even if you could have gotten your degree for free.

Some law firms have an aversion to hiring J.D. graduates as paralegals, even though those individuals are exceptionally qualified for a paralegal's job. Why pay an attorney who could not get a job in his or her chosen field and take the risk that the lawyer will resent working in a legal support role?

And think about it. If you are applying for a job in the business sector, will your Ph.D. in medieval history help you or hurt you? 

Speaking for myself, I believe my doctorate from Harvard actually had a negative impact in some settings. Some people associate Harvard with a certain snootiness or arrogance.  Who wants to hire a snob when there is a congenial person with a Ph.D. from a respected state university?

Occasionally, I blurted out that my doctorate from Harvard is damned near worthless and that I wish I had never gone there. But that confession hardly helped my employment prospects. Basically, that admission just confirms in an employer's mind what I have long known to be true: I was smart enough to get into Harvard but not smart enough to avoid the damned place.

So, take the advice of an overeducated curmudgeon.  If you don't have a firm idea about what you will do with a Ph.D., don't get one.  And for God's sake, don't take out student loans to obtain a doctorate in gender studies.

On the other hand, if you are already a doctoral student in a field with dismal job prospects, don't delay your completion date to avoid a bad job market. I agree entirely with what Ms. Wood said about that strategy. "[R]un, don't walk, out of academia."

Steven Brint says American higher education Is doing great!: Pardon me Professor Brint, but what planet do you live on?

 Steven Brint, a professor at UC Riverside, wrote an essay for Chronicle of Higher Education titled "Is This Higher Education's Golden Age?" Brint didn't answer this question directly, but his article argues that American higher education is doing great.

Here's his evidence:

Lotsa money! Brint boasts that the demand for postsecondary education has remained steady in spite of rising tuition, which is true. Families are still willing to pay college tuition at nosebleed levels, at least at the elite colleges.  The most prestigious colleges continue packing in the suckers. A quarter million dollars for an Ivy League degree? Hey, no problem!

And, as Brint points out, the federal government is still higher education's sugar daddy. Brint notes that the feds shovel  $65 billion a year in Pell grants, work study, and tax benefits; and a lot of that money eventually winds up in college coffers.  Federal research money amounts to about $30 billion a year, Brint says; and the Department of Education pumps out  another $100 billion a year in student loans. And there's no sign the government will ever shut off the money spigot. So that's good news from Professor Brint's perspective.

More degrees! Brint also celebrates the rising number of college degrees. In 1970, American colleges produced 840,000 college graduates. In 2015, 1.9 million people received bachelor's degrees. Over that same time period, American higher education tripled its annual production of master's degrees and more than doubled the number of doctorates. In fact, in 2015, American universities dispensed more than three quarters of a million doctoral degrees.

That's certainly good news for the universities, their deans, and their professors. But graduate degrees have become insanely expensive, and it is now clear that a lot of people who got law degrees or MBA degrees from second-and third-tier universities were throwing their money away--not to mention the people who got master's degrees in the fine arts.

More professors! The United States is employing more college teachers than ever before, and Professor Brint thinks that's good news. In 2005, the nation employed 1.3 million postsecondary teachers. By 2015, the number had grown to 1.9 million--an increase of 300,000 professors and instructors in just ten years.

More research! And all those professors are doing more and more research. As Brint reports: "[T]he Web of Science indexed 12,000 journals, 160,000 conference proceedings in more than 250 disciplines, and reached a total count of 90 million records and more than a billion citations."

Professor Brint is the director of the Colleges & Universities 2000 Project at his home university and the author of a book about higher education. So we should presume, I suppose, that he knows what he's talking about.

But in fact, Brint's article is nonsense. Sure, higher education is doing great from the perspectives of the insiders: tenured professors and over-paid administrators. As Brint points out, the professors managed to eke out annual raises even during the recession of 2008 when millions of Americans lost their homes in foreclosure and millions more saw their retirement accounts deflate. Unlike most Americans, college professors enjoy lifetime employment, defined-benefit pensions, and gold-plated health insurance. Yes, for the professors, life is indeed beautiful.

But are we supposed to cheer because the Web of Science lists 12,000 journals and contains 90 million research documents? Have you read the titles of some of those articles and conference presentations?

I'm sorry, Professor Brint, but your insouciant boast about the value of research reminds me of that scene in the movie Out of Africa where Meryl Streep's character tries to convince a Kikuyu chief to allow the children in his village to be taught how to read.  The chief is skeptical. "The British know how to read," he pointed out, "and what good has it done them?"

The education research community has produced thousands of books, articles and scholarly presentations over the past 30 years on education topics. Are American kids better educated?

And the law schools turn out literally thousands of law-review articles every year. Do we have more justice?

I would like Professor Brint to think a moment about higher education's students--a constituency he said precious little about in his essay. Almost 45 million Americans owe on student loans. According to the Federal Reserve Bank, as of this month, total outstanding student-loan indebtedness has reached $1.56 trillion.

Secretary of Education Betsy DeVos gave a speech last November in which she reported that only 1 out of four student debtors (24 percent) are making payments on both principal and interest on their loans.  In fact, she acknowledged, 43 percent of all outstanding student loans are "distressed."

Although academia is a pleasant place for Professor Brint,the federal student-loan program is a train wreck. Millions of people have their loans in deferment, which means they aren't making loan payments while interest accrues on their loan balances. Another 7.4 million are in income-based repayment programs and are making monthly payments so small that their loans are negatively amortizing.

And the disastrous student-loan program is pulling down the small, nonprofit liberal arts colleges, especially in New England the Mid-Atlantic states and the upper Midwest. Legal education has been corrupted by the flow of student-loan money, with bottom-tier law schools turning out lawyers who can't find jobs.

And then there is the for-profit college industry, rife with corruption, fraud, and cronyism. Professor Brint said nothing about that problem.

So is higher education in a Golden Age, Professor Brint? I don't think so.

I close by noting that Professor Brint is a sociology professor. I was once told that sociology is nothing more than the painful enumeration of the obvious. But after reading Brint's essay, I would modify that observation. In fact, sociology is the painful enumeration of the oblivious.

Professor Steven Brint
Universities are stronger than ever?

The Federal Government Should Stop Bankrolling the For-Profit College Industry

Floyd Norris recently wrote a mild but provocative article in the New York Times that focused on ITT Educational Services, a for-profit corporation that offers post-secondary education programs in 48 states. Norris reported that ITT students pay an average cost of $48,000 in tuition and fees to receive a two-year associate's degree in business administration.

Of course students can obtain a two-year associate's degree from a public community college for a fraction of that cost. One would think the federal government would develop policies to encourage students to attend reasonably priced community colleges instead of supporting the for-profit college industry.

As has been widely reported, for-profit colleges enroll about 10 percent of all post-secondary students but get about 25 percent of the federal student-aid money. According to Norris, the federal government guaranteed nearly $24 billion in loans for students attending for-profit schools in 2010-2011 and  distributed nearly $9 billion in grants that went to for-profit institutions.

Without question, most of the for-profit colleges could not exist without federal student-aid money.  For example, in 2011, ITT received 89 percent of its revenues from the federal government in the form of student loans and grants. (Norris, 2012, p. B7)  Meanwhile, state and local-government are drastically cutting their financial support for public colleges and universities.

In my opinion, the federal government should stop funding the for-profit colleges altogether and redirect the money toward public community colleges.  Unfortunately, such a reform is not coming any time soon.  The for-profits pay highly effective lobbyists to protect their interests (Kirkham, 2012), and they make strategic political contributions to key legislators in Washington (Kirkham, 2011).

So this is the situation. Billions of federal dollars flow each year into the coffers of for-profit schools and colleges that educate about 10 percent of the nation's post-secondary students and account for about half of all the student-loan defaults (Kirkham, 2012). Until Congress stops subsidizing the for-profit colleges industry, we will never solve the student-loan crisis, which is growing worse with each passing year.

References
Kirkham, C. (2012, February 3). Auction 2012: For-profit colleges win when lobbying blitz weakens regs. Huffington Post.   http://www.huffingtonpost.com/2012/02/03/auction-2012-education-for-profit-colleges_n_1251072.html

Kirkham, C. (2011, July 29). John Boehner backed deregulation of online learning, leading to explosive growth at for-profit colleges. Huffington Post. http://www.huffingtonpost.com/2011/07/29/john-boehner-for-profit-colleges_n_909589.html

Norris, F. (2012, May 25). Colleges for profit are growing, with U.S. aid. New York Times, p. B1.

What's a Trillion Dollars Among Friends? Is Student-Loan Debt "Good Debt"?

A couple of days ago, Beckie Supiano wrote an article for Chronicle of Higher Education, entitled “What Does $1-Trillion in Student Debt Really Mean? Maybe Not That Much,” which suggested that the nation's massive student-loan debt is no big deal.  Some of the people cited in Supiano’s article apparently believe that student-loan indebtedness is fundamentally different from the home-mortgage crisis because education, unlike a mortgaged home, has intrinsic value that does not diminish over time.

For example, Anthony P. Carnevale, director of Georgetown University's Center on Education and the Workforce, described student-loan debt as "good debt". In fact, Carnevale maintained, “This is exactly the kind of debt a society wants.” 

Mr. Carnevale’s perspective on student loans would be correct if all students received good value when they borrowed money to obtain a college education. But, as everyone knows, millions of people have borrowed money to pursue post-secondary education and did not see their lives improve in any meaningful way.  A person who borrows $100,000 to obtain a degree in religious studies, winds up working as a waitress, and defaults on her student loans does not have the kind of debt society wants. That kind of debt is not “good debt”.

Furthermore, contrary to some of the views expressed in the Supiano article, the student-loan crisis is very similar to the home-mortgage crisis. In fact, student loans have probably caused more human suffering than the home-mortgage meltdown.  People who own homes worth less than their mortgages are certainly under stress. But at least these people have roofs over their heads, and they own tangible assets. Furthermore, home-mortgage holders who are financially unable to pay their monthly mortgage payments can discharge their mortgages in bankruptcy.

In contrast, people who took out student loans to obtain a college education did not obtain anything tangible except their diplomas, and many did not receive the skills or training from their experience that would enable them to obtain good-paying jobs or otherwise improve their lives.  Many people who borrowed substantial amounts of money to obtain degrees in such fields as art history, religious studies, sociology and anthropology are in real financial trouble because they can’t find employment that compensates them enough to pay off their student loans.

Furthermore, unlike homeowners who have unmanageable mortgages, most overburdened student-loan debtors cannot discharge their loans in bankruptcy.  Although they can obtain deferments on their loan payments if they can show economic hardship, interest on their loans will continue to accrue in most instances, increasing the size of their debt

In short, to suggest that the nation’s $1 trillion in accumulated student-loan debt is not a serious problem shows a profound lack of understanding about the tremendous suffering that millions of student-loan debtors are experiencing. There are lots of things we can do to get the student-loan crisis under control, but we should begin by providing meaningful relief to overburdened student-loan debtors who have no reasonable prospect of ever paying off their student loans.

References

Supiano, B. (2012, May 16). What Does $1-Trillion in Student Debt Really Mean? Maybe Not That Much. Chronicle of Higher Education. http://chronicle.com/article/What-Does-1-Trillion-Mean-/131900/?key=TWwidAI8byUVbHBhYDpAbj4AaH0%2BMUp2YydBPX4rblpXGQ%3D%3D.