As John Lennon famously observed, "Life is what happens to you while you are busy making other plans." Certainly, Mr. Shenk, a military veteran, had other plans for his life other than filing for bankruptcy at the age of 59 in an effort to discharge $110,000 in student loans.
Timothy Shenk served 13 years in the U.S. Army (infantryman in the 82nd Airborne Division). He then enlisted in the National Guard in order to obtain the 20 years of military service that would make him eligible for full retirement. That was a good plan.
Shenk also planned to become a teacher and he obtained a bachelor's degree from SUNY Cortland in 1999. He then worked on a master's degree program in Adolescent Education, and he completed all the course work to obtain his degree. That also was a good plan.
Unfortunately, Shenk had unpaid student loans, and SUNY Cortland refused to award him his diploma. In addition, the university had a five-year time frame to meet program requirements and that time period elapsed years ago. Consequently, Mr. Shenk will never receive the degree he worked for, even though he met all program requirements.
Shenk married when he was a young man and he and his wife had four children. But the marriage ended in divorce, and he became liable for public assistance payments made to his ex-wife. By the time he filed for bankruptcy, he had paid off most of that obligation, which is commendable.
Bankruptcy Judge Margaret Cangilos-Ruiz expressed some sympathy for Mr. Shenk. She pointed out that his graduate studies were interrupted because the State of New York called him back for active military service after the terrorist attack on the World Trade Center in 2001. "The bitter irony is that when ordered by the Governor, [Shenk] assisted New York State at a time of dire need only later to have the State refuse to confer the degree that may have put him on a financial path to pay what he owed."
Nevertheless, Judge Cangilos-Ruiz denied Shenk's request for a student-loan discharge on the grounds that he did not meet the stringent standards of the three-part Brunner test. He was unemployed at the time of the bankruptcy proceedings and he could not pay back his student loans and maintain a minimal standard of living. Thus he met Brunner's first requirement. But the judge believed Shenk's financial circumstances would likely improve. He was employable, the judge pointed out, and he would soon be eligible for a small military pension and Social Security benefits. The judge also said that Shenk failed Brunner's good-faith test because he had made no payments on his student loans over a number of years.
I think Judge Cangilos-Ruiz erred when she refused to discharge Mr. Shenk's student loans. First of all, universities should not be allowed to withhold a diploma simply because the would-be graduate has unpaid student loans. Such a policy amounts to putting student borrowers in debtor's prison--they cannot pay back their debts because their credentials are being withheld.
Moreover, Judge Cangilos-Ruiz denied Mr. Shenk a discharge partly due to the fact that he would eventually receive Social Security benefits and a modest military pension. In my view, no one who is nearing retirement age should be required to devote one penny of meager retirement income to paying back student loans.
In short, the equities of this case favored Mr. Shenk. Perhaps he made some mistakes in planning his finances but he served his country for 20 years in the U.S. military and he worked to obtain a graduate degree that his university refused to give him.
In any event, Mr. Shenk will probably never be able to repay $110,000 in student-loan debt. His only recourse now is to sign up for a long-term income-based repayment plan that could stretch out for as long as 25 years--when he will be 85 years old!
Isn't it ironic that presidential candidates are calling for a college education to be free to everyone while a man who served his country for 20 years is burdened by enormous student-loan debt? Thanks for your service, Mr. Shenk.
References
Shenk v. U.S. Department of Education, 603 B.R. 671 (Bankr. N.D.N.Y. 2019).
Wednesday, October 2, 2019
Tuesday, September 24, 2019
Like driving into a CAT 5 hurricane, the Department of Education is taking the student-loan program toward catastrophe
I lived in Houston when Hurricane Rita hit the Gulf Coast in 2005. Weather forecasters predicted that Rita would make landfall in Galveston Bay and that Galveston and towns south of Houston would suffer massive flooding and wind damage. The hurricane predictors also warned that parts of Houston would flood.
Responding to these warnings, hundreds of thousands of people--perhaps a million--fled Greater Houston in every direction. Some Houstonians traveled west toward San Antonio on I-10, some drove up I-45 toward Dallas, and others evacuated to the east on I-10.
My wife and I decided to head east toward Baton Rouge, where we could shelter with family. But we miscalculated. Our major mistake was to evacuate too late. As we drove east on I-10, we discovered that the highway was clogged with cars as were all auxiliary routes and surface roads.
Moreover, as we listened to our car radio, we heard the hurricane experts change their prediction about where Rita would make shore. It would not batter Galveston, they said; it would make landfall in southwestern Louisiana near the town of Cameron.
After about an hour on the road, my wife and I reached these conclusions. First, we would not reach Baton Rouge before Rita made landfall because the Interstate was fast turning into a parking lot. Second, we would run out of gas before reaching our destination and become stranded on the highway. And third--and perhaps most importantly--we were driving straight into the storm!
So we turned around and headed home to Houston. We arrived at a deserted city, but the Alabama Ice House was open and serving cold, draft beer to a small group of patrons. I still remember the taste of my ice-cold Red Stripe, served by a bartender who didn't give a damn about hurricanes. In the end, we suffered no damage from Rita.
After that experience, I vowed to pay closer attention to oncoming storm and evacuate early if I had any indication that a hurricane was headed my way.
The federal student-loan program is the economic equivalence of a CAT 5 hurricane hovering just offshore of our national consciousness. Education Secretary Betsy DeVos has described the program as a looming thunderstorm but she seems intent on driving straight into it.
As everyone knows from listening to the media, 45 million Americans have outstanding student loans that now total $1.6 billion. As DeVos has publicly admitted, more than 40 percent of those loans are "in distress" and only about one debtor in four is paying back both principal and interest on this debt.
More specifically, we know that 7.3 million college borrowers are in income-driven repayment plans that are designed so that people will never pay off their loans. More than 5 million people are in default, and another 6 million have loans in deferment or forbearance.
That's 18 million people whose total indebtedness grows larger by the month. Very few of these 18 million souls will ever pay back their student loans.
What is the U.S. Department doing about it? As I said, Betsy DeVos is driving full speed into the storm. She refuses to grant significant debt relief to the people who signed up for the Public Service Loan Forgiveness Program--granting only about 1 percent of the applications.
And DeVos's DOE is doing everything it can to deny distressed student-loan debtors relief in the bankruptcy courts. DOE or its hired gunslinger, Educational Credit Management Corporation, fight nearly every student debtor who attempts to discharge student loans by filing for bankruptcy.
DeVos is also slowing down and complicating the process whereby college borrowers can have their student loans forgiven on the grounds that their college or school defrauded them.
Is the student-loan program in a bubble similar to the housing bubble of 2008? Yes, it is. In fact, when the student-loan bubble bursts, the suffering will be greater than the home-mortgage disaster.
The Democrats are "woke" about this crisis and Senators Warren and Sanders propose massive debt relief. As I have said in a previous commentary, I am OK with their proposals; but politically that is not likely to happen.
As I have been saying for a quarter-century (yes, really), the best solution to this train wreck is to allow insolvent student-loan debtors to discharge their loans in bankruptcy. The Democrats have introduced legislation to accomplish this, and several Democratic presidential candidates are among the bill's co-sponsors.
But that bill is going nowhere, in spite of the fact that the Democrats hold the House of Representatives. So we have two political parties that are ignoring the hurricane warnings. The Democrats decry the situation without doing anything about it in Congress, and the Republicans are racing to the center of the storm, oblivious to the human disaster that is building like a tropical depression in the Gulf of Mexico.
This will not end well for anyone.
Responding to these warnings, hundreds of thousands of people--perhaps a million--fled Greater Houston in every direction. Some Houstonians traveled west toward San Antonio on I-10, some drove up I-45 toward Dallas, and others evacuated to the east on I-10.
My wife and I decided to head east toward Baton Rouge, where we could shelter with family. But we miscalculated. Our major mistake was to evacuate too late. As we drove east on I-10, we discovered that the highway was clogged with cars as were all auxiliary routes and surface roads.
Moreover, as we listened to our car radio, we heard the hurricane experts change their prediction about where Rita would make shore. It would not batter Galveston, they said; it would make landfall in southwestern Louisiana near the town of Cameron.
After about an hour on the road, my wife and I reached these conclusions. First, we would not reach Baton Rouge before Rita made landfall because the Interstate was fast turning into a parking lot. Second, we would run out of gas before reaching our destination and become stranded on the highway. And third--and perhaps most importantly--we were driving straight into the storm!
So we turned around and headed home to Houston. We arrived at a deserted city, but the Alabama Ice House was open and serving cold, draft beer to a small group of patrons. I still remember the taste of my ice-cold Red Stripe, served by a bartender who didn't give a damn about hurricanes. In the end, we suffered no damage from Rita.
After that experience, I vowed to pay closer attention to oncoming storm and evacuate early if I had any indication that a hurricane was headed my way.
The federal student-loan program is the economic equivalence of a CAT 5 hurricane hovering just offshore of our national consciousness. Education Secretary Betsy DeVos has described the program as a looming thunderstorm but she seems intent on driving straight into it.
As everyone knows from listening to the media, 45 million Americans have outstanding student loans that now total $1.6 billion. As DeVos has publicly admitted, more than 40 percent of those loans are "in distress" and only about one debtor in four is paying back both principal and interest on this debt.
More specifically, we know that 7.3 million college borrowers are in income-driven repayment plans that are designed so that people will never pay off their loans. More than 5 million people are in default, and another 6 million have loans in deferment or forbearance.
That's 18 million people whose total indebtedness grows larger by the month. Very few of these 18 million souls will ever pay back their student loans.
What is the U.S. Department doing about it? As I said, Betsy DeVos is driving full speed into the storm. She refuses to grant significant debt relief to the people who signed up for the Public Service Loan Forgiveness Program--granting only about 1 percent of the applications.
And DeVos's DOE is doing everything it can to deny distressed student-loan debtors relief in the bankruptcy courts. DOE or its hired gunslinger, Educational Credit Management Corporation, fight nearly every student debtor who attempts to discharge student loans by filing for bankruptcy.
DeVos is also slowing down and complicating the process whereby college borrowers can have their student loans forgiven on the grounds that their college or school defrauded them.
Is the student-loan program in a bubble similar to the housing bubble of 2008? Yes, it is. In fact, when the student-loan bubble bursts, the suffering will be greater than the home-mortgage disaster.
The Democrats are "woke" about this crisis and Senators Warren and Sanders propose massive debt relief. As I have said in a previous commentary, I am OK with their proposals; but politically that is not likely to happen.
As I have been saying for a quarter-century (yes, really), the best solution to this train wreck is to allow insolvent student-loan debtors to discharge their loans in bankruptcy. The Democrats have introduced legislation to accomplish this, and several Democratic presidential candidates are among the bill's co-sponsors.
But that bill is going nowhere, in spite of the fact that the Democrats hold the House of Representatives. So we have two political parties that are ignoring the hurricane warnings. The Democrats decry the situation without doing anything about it in Congress, and the Republicans are racing to the center of the storm, oblivious to the human disaster that is building like a tropical depression in the Gulf of Mexico.
This will not end well for anyone.
Saturday, September 21, 2019
"Impeach the mother f--ker": Congresswoman Rashida Tlaib, vulgar discourse, and a personal apology
Almost everyone agrees that public discourse has become cruder, especially public discourse in the political arena. Congresswoman Rashida Tlaib may have hit the low point of this trend when she called President Trump a "mother f--ker," but perhaps not. She justified her profanity by saying she was only "speaking truth to power," and Congress did not censor her for her language.
I've heard three explanations for the explosion in vulgar language in public conversations. Some people put the blame on President Trump, who often resorts to crude language and insults his adversaries by giving them demeaning nicknames. I think there is some truth to that argument.
Some commentators say we are speaking more profanely just to get people's attention. We are continuously bombarded by rude language transmitted by radio, television, and social media. Some people may think they must use profanity just to get noticed. If Congresswoman Tlaib had simply called for impeaching President Trump, no one would have noticed. By calling the President a "mother f--ker," she grabbed worldwide attention. Even the South China Morning Post carried the story.
Finally, I've heard pundits say public figures speak profanely because they do not have the vocabulary to formulate their ideas without cursing. They simply do not have the language skills to present rational arguments.
When I was in law school many years ago, my professors insisted on students speaking civilly and respectfully. I remember a day in Professor Lino Graglia's antitrust-law course. Professor Graglia was pacing back and forth at the front of the classroom while he asked students question after question about relevant court decisions.
One day, a law student used a mild expletive while answering one of Professor Graglia's questions. Graglia stopped in mid-step, and, in a commanding voice, thundered these exact words: "We do not use that kind of language in this classroom."
Professor Graglia then paused for a few seconds to gather his thoughts, and then he said something I will never forget. "You are all training to be officers of the courts and we must use language that shows our respect for the institutions that we serve."
I say I never forgot Professor Graglia's words, but in fact, I forgot them a few days ago. In a blog essay titled "Arrogant Bastards," I chastised our elite college presidents for doing virtually nothing about the student-loan crisis.
I regret those words, and I know why I used them. I felt like I needed to write something shocking just to get people to read my essay and I was too lazy in the moment to convey my criticism through rational language.
I apologize. I should not have called these college presidents arrogant bastards. I should have described them as arrogant and heartless. That's what I really meant to say.
I've heard three explanations for the explosion in vulgar language in public conversations. Some people put the blame on President Trump, who often resorts to crude language and insults his adversaries by giving them demeaning nicknames. I think there is some truth to that argument.
Some commentators say we are speaking more profanely just to get people's attention. We are continuously bombarded by rude language transmitted by radio, television, and social media. Some people may think they must use profanity just to get noticed. If Congresswoman Tlaib had simply called for impeaching President Trump, no one would have noticed. By calling the President a "mother f--ker," she grabbed worldwide attention. Even the South China Morning Post carried the story.
Finally, I've heard pundits say public figures speak profanely because they do not have the vocabulary to formulate their ideas without cursing. They simply do not have the language skills to present rational arguments.
When I was in law school many years ago, my professors insisted on students speaking civilly and respectfully. I remember a day in Professor Lino Graglia's antitrust-law course. Professor Graglia was pacing back and forth at the front of the classroom while he asked students question after question about relevant court decisions.
One day, a law student used a mild expletive while answering one of Professor Graglia's questions. Graglia stopped in mid-step, and, in a commanding voice, thundered these exact words: "We do not use that kind of language in this classroom."
Professor Graglia then paused for a few seconds to gather his thoughts, and then he said something I will never forget. "You are all training to be officers of the courts and we must use language that shows our respect for the institutions that we serve."
I say I never forgot Professor Graglia's words, but in fact, I forgot them a few days ago. In a blog essay titled "Arrogant Bastards," I chastised our elite college presidents for doing virtually nothing about the student-loan crisis.
I regret those words, and I know why I used them. I felt like I needed to write something shocking just to get people to read my essay and I was too lazy in the moment to convey my criticism through rational language.
I apologize. I should not have called these college presidents arrogant bastards. I should have described them as arrogant and heartless. That's what I really meant to say.
 |
| Congresswoman Rashida Tlaib: "Impeach the mother f--ker" |
Friday, September 20, 2019
Student Debt Only Went Up 2 Percent Last Year! (Is This a Good News-Bad News Joke?)
An airline pilot, flying a transoceanic route, made an announcement over the intercom to the passengers. "I have some good news and bad news," he said.
"First, the bad news. One engine is on fire, we're low on fuel, and we have no idea where we are." But on the bright side, he continued, "We're making great time!"
The Institute for College Access and Success issued a report this week that strikes me as a good news-bad news joke. Student debt levels for the graduating class of 2018 was $29,200, only 2 percent more than the previous year. I suppose that's good news.
But the bad news is this: About 45 million Americans are student-loan debtors, and collectively they owe $1.6 trillion in student debt. According to TICAS, over 20 percent of African Americans will default on their student loans within 12 years of entering college, 7 times the rate for whites (p, 9).
Among students who began their studies at for-profit colleges, TICAS reported, 30 percent will default within 12 years of entering college, seven times the default rate for students who first enrolled at public institutions.
These dismal outcomes are happening during a nationwide enrollment decline, which is hitting the nonprofit private schools the hardest. The small liberal arts colleges are frantically trying to keep enrollments up. They've slashed tuition by an average of 50 percent. They've started new academic programs. They're cutting faculty lines, particularly in the humanities. They've hired marketing firms, and have tried re-branding themselves with billboards and hip slogans.
But for many liberal arts schools, these strategies will not keep them afloat. And this reminds me of another story.
A Texas rancher told a friend he had begun an experiment to lower his livestock feed bills. "I began feeding my horse a little less hay everyday," he confided, "until I finally weaned him off hay altogether.
"How did that work out for you?, his friend asked.
"It was working great," the rancher said. "But unfortunately, my horse died before I was able to complete the experiment."
"First, the bad news. One engine is on fire, we're low on fuel, and we have no idea where we are." But on the bright side, he continued, "We're making great time!"
The Institute for College Access and Success issued a report this week that strikes me as a good news-bad news joke. Student debt levels for the graduating class of 2018 was $29,200, only 2 percent more than the previous year. I suppose that's good news.
But the bad news is this: About 45 million Americans are student-loan debtors, and collectively they owe $1.6 trillion in student debt. According to TICAS, over 20 percent of African Americans will default on their student loans within 12 years of entering college, 7 times the rate for whites (p, 9).
Among students who began their studies at for-profit colleges, TICAS reported, 30 percent will default within 12 years of entering college, seven times the default rate for students who first enrolled at public institutions.
These dismal outcomes are happening during a nationwide enrollment decline, which is hitting the nonprofit private schools the hardest. The small liberal arts colleges are frantically trying to keep enrollments up. They've slashed tuition by an average of 50 percent. They've started new academic programs. They're cutting faculty lines, particularly in the humanities. They've hired marketing firms, and have tried re-branding themselves with billboards and hip slogans.
But for many liberal arts schools, these strategies will not keep them afloat. And this reminds me of another story.
A Texas rancher told a friend he had begun an experiment to lower his livestock feed bills. "I began feeding my horse a little less hay everyday," he confided, "until I finally weaned him off hay altogether.
"How did that work out for you?, his friend asked.
"It was working great," the rancher said. "But unfortunately, my horse died before I was able to complete the experiment."
 |
| The experiment was a success, but the horse died. Photo credit: DelawareOhioNews.com |
Thursday, September 19, 2019
The enrollment crash is an existential threat to liberal arts colleges: Bucknell VP Bill Conley's insightful essay
Bill Conley, Vice President for Enrollment Management at Bucknell University, wrote a perceptive essay for Chronicle of Higher Education about the "Great Enrollment Crash" at liberal arts colleges. There has been a huge downturn in undergraduate education at liberal arts colleges, and no turnaround is in sight. As Conley put it:
First, as Conley explains, the demographics are bad. Americans are having fewer children. In fact, the birth rate has fallen below replacement levels in the U.S., just as it has in Europe. There are fewer high school graduates who want to go to college.
Secondly, the demand for a liberal arts education has plummeted. As Conley reports, degrees in the humanities dropped from 17 percent of all degrees in 1967 to just 5 percent in 2015.
Moreover, the current crop of college students is more focused than past generations on getting a college degree that will lead to a good job. More and more students are choosing to major in business, biology, or economics, while philosophy majors are becoming an endangered species.
The liberal arts colleges have responded to this threat by slashing tuition prices for incoming first-year students. On average, the colleges are only collecting half their posted tuition rates. Colleges hoped to attract more students by lowering tuition, but that strategy hasn't worked for many of them.
Of course, the liberal arts colleges aren't the only sector of higher education facing enrollment declines. As Conley pointed out, the Pennsylvania System of Higher Education has seen its public institutions lose 20 percent of their enrollments in less than 10 years.
Increasingly, families are looking to more affordable public universities for their children's college education and eschewing the small, private liberal arts schools. The obscure, non-elite liberal arts colleges are suffering the most, and several have closed in recent years.
"I don't see these trends changing," Conley wrote, "especially when coupled with stagnating income and the resulting pressure on a family's return-on-investment calculus." In short, he summarized, "Disruption is here to stay."
I agree with Mr. Conley's forthright assessment of liberal arts education; and personally, I think it is doomed. Liberal arts colleges were founded to educate students in the humanities, literature, history, and philosophy; but few students appreciate those fields of study. Furthermore, the liberal arts have been balkanized, as faculty obsess on race, class, gender, and sexual orientation so that there is no longer even a broad consensus about what constitutes a liberal arts education.
In my view, I think the small, liberal arts colleges should prepare for a dignified death because they are going to die anyway. They need to develop contingency plans for placing their students in other institutions when they close and they need to make the best provision they can for laid-off faculty members--many of whom will be unable to find new jobs. After all, what university wants to hire a middle-aged philosophy professor?
This is a sad turn of events, and I do not think the liberal arts colleges brought this calamity on themselves. Rather they are like the blacksmiths of the early twentieth century, who were put out of work by Henry Ford's cars.
I don't have a solution to this existential crisis among the small, private schools. But I have some advice for students who are choosing a college. Don't enroll at an expensive, obscure, private college. Get your degree from a reputable public institution.
And if you are a newly minted Ph.D. looking for your first academic job, don't go to work at a small liberal-arts college. Even if you get tenure at some out-of-the-way little school in New England or the Midwest, that won't keep you from being laid off. And once you lose that tenured job at a college that was closed, you will find it damned hard to get another one.
Higher education has fully entered into a new structural reality. You'd be naïve to believe that most colleges will be able to ride out this unexpected wave [ declining enrollment] as we have the previous swells.What's going on?
First, as Conley explains, the demographics are bad. Americans are having fewer children. In fact, the birth rate has fallen below replacement levels in the U.S., just as it has in Europe. There are fewer high school graduates who want to go to college.
Secondly, the demand for a liberal arts education has plummeted. As Conley reports, degrees in the humanities dropped from 17 percent of all degrees in 1967 to just 5 percent in 2015.
Moreover, the current crop of college students is more focused than past generations on getting a college degree that will lead to a good job. More and more students are choosing to major in business, biology, or economics, while philosophy majors are becoming an endangered species.
The liberal arts colleges have responded to this threat by slashing tuition prices for incoming first-year students. On average, the colleges are only collecting half their posted tuition rates. Colleges hoped to attract more students by lowering tuition, but that strategy hasn't worked for many of them.
Of course, the liberal arts colleges aren't the only sector of higher education facing enrollment declines. As Conley pointed out, the Pennsylvania System of Higher Education has seen its public institutions lose 20 percent of their enrollments in less than 10 years.
Increasingly, families are looking to more affordable public universities for their children's college education and eschewing the small, private liberal arts schools. The obscure, non-elite liberal arts colleges are suffering the most, and several have closed in recent years.
"I don't see these trends changing," Conley wrote, "especially when coupled with stagnating income and the resulting pressure on a family's return-on-investment calculus." In short, he summarized, "Disruption is here to stay."
I agree with Mr. Conley's forthright assessment of liberal arts education; and personally, I think it is doomed. Liberal arts colleges were founded to educate students in the humanities, literature, history, and philosophy; but few students appreciate those fields of study. Furthermore, the liberal arts have been balkanized, as faculty obsess on race, class, gender, and sexual orientation so that there is no longer even a broad consensus about what constitutes a liberal arts education.
In my view, I think the small, liberal arts colleges should prepare for a dignified death because they are going to die anyway. They need to develop contingency plans for placing their students in other institutions when they close and they need to make the best provision they can for laid-off faculty members--many of whom will be unable to find new jobs. After all, what university wants to hire a middle-aged philosophy professor?
This is a sad turn of events, and I do not think the liberal arts colleges brought this calamity on themselves. Rather they are like the blacksmiths of the early twentieth century, who were put out of work by Henry Ford's cars.
I don't have a solution to this existential crisis among the small, private schools. But I have some advice for students who are choosing a college. Don't enroll at an expensive, obscure, private college. Get your degree from a reputable public institution.
And if you are a newly minted Ph.D. looking for your first academic job, don't go to work at a small liberal-arts college. Even if you get tenure at some out-of-the-way little school in New England or the Midwest, that won't keep you from being laid off. And once you lose that tenured job at a college that was closed, you will find it damned hard to get another one.
Monday, September 16, 2019
Higher education leaders oppose Democrats' proposal for free college: Why?
College tuition has risen faster than the rate of inflation for the past quarter-century. While wages have remained stagnant, the cost of going to college has shot through the roof. According to Forbes writer Camilo Maldonado, tuition rose 8 times faster than wage growth during the years 1989 to 2016. Eight times faster!
Why? The colleges say they are forced to raise tuition rates because the states are providing less support for higher education. But this lame explanation--repeated ad nauseam--is mostly bullshit. The colleges don't mention the explosion in administrative positions-the profusion of assistant vice presidents, executive associate deans, etc. It is not uncommon for senior administrators at public and private universities to draw salaries that exceed a quarter-million dollars a year.
In any event, everyone agrees that rising tuition costs have forced millions of American students to take out student loans, which now total $1.6 trillion. Something must be done to alleviate the distress.
Several Democratic candidates for the presidency have proposed making college education free at all public colleges and universities. You would think the higher education community would love that idea. But it doesn't. Vassar president Catharine Hill criticized Bernie Sanders's free-college idea when he ran for president in 2016. Her lame-brained solution was to expand long-term income-based repayment plans. And that's basically what we've done--creating repayment plans deliberately structured so that students can never pay off their college loans.
Now we are in the early stages of the 2020 presidential election season, and more Democratic hopefuls have joined Bernie in proposing a free college education for everyone. Senators Elizabeth Warren, Kamala Harris, Cory Booker, and Kirsten Gillibrand (who recently dropped out of the presidential race) have all endorsed a free-college proposal.
But the higher education community still opposes the idea. Just a few days ago, Brian Rosenberg, president of Macalester College, published an op-ed essay in Chronicle of Higher Education, in which he cited a couple of liberal tropes to justify his opposition to free college.
A free college education would hurt low-income students, Rosenberg argues, because they would be "squeezed out" in the application process that would become more competitive if tuition were free. And he also contends that free college would exacerbate the nation's already low graduation rate.
Huh? How could free college be bad for low-income students? How could it make graduation rates go down?
Mr. Rosenberg is the president of Macalester College, a very good liberal-arts school in Minnesota, but he does not mention that free college at public institutions would severely disadvantage the private colleges. Who would pay $54,000 a year in tuition and fees to attend Macalester College if they could enroll at the University of Minnesota tuition-free?
I'm sure Mr. Rosenberg's arguments against free college are sincere and his commitment to private liberal-arts education is genuine. But a great many university presidents and higher-education policy wonks simply don't care about the student-loan crisis, which has motivated political leaders to propose a free college education. They want to preserve the status quo in higher education, with the federal government spewing more than a $100 billion a year to support the present system.
How many elite-college presidents have come out in favor of a free college education? I don't think any of them have. Unlike Mr. Rosenberg, most college leaders are keeping silent about their qualms, but rest assured they will fight tooth and nail if a Democrat is elected President and tries to get a free-college plan through Congress.
Meanwhile, I don't think any of these arrogant college presidents have lifted a finger to ease the student-debt crisis. The status quo works just fine for them.
Why? The colleges say they are forced to raise tuition rates because the states are providing less support for higher education. But this lame explanation--repeated ad nauseam--is mostly bullshit. The colleges don't mention the explosion in administrative positions-the profusion of assistant vice presidents, executive associate deans, etc. It is not uncommon for senior administrators at public and private universities to draw salaries that exceed a quarter-million dollars a year.
In any event, everyone agrees that rising tuition costs have forced millions of American students to take out student loans, which now total $1.6 trillion. Something must be done to alleviate the distress.
Several Democratic candidates for the presidency have proposed making college education free at all public colleges and universities. You would think the higher education community would love that idea. But it doesn't. Vassar president Catharine Hill criticized Bernie Sanders's free-college idea when he ran for president in 2016. Her lame-brained solution was to expand long-term income-based repayment plans. And that's basically what we've done--creating repayment plans deliberately structured so that students can never pay off their college loans.
Now we are in the early stages of the 2020 presidential election season, and more Democratic hopefuls have joined Bernie in proposing a free college education for everyone. Senators Elizabeth Warren, Kamala Harris, Cory Booker, and Kirsten Gillibrand (who recently dropped out of the presidential race) have all endorsed a free-college proposal.
But the higher education community still opposes the idea. Just a few days ago, Brian Rosenberg, president of Macalester College, published an op-ed essay in Chronicle of Higher Education, in which he cited a couple of liberal tropes to justify his opposition to free college.
A free college education would hurt low-income students, Rosenberg argues, because they would be "squeezed out" in the application process that would become more competitive if tuition were free. And he also contends that free college would exacerbate the nation's already low graduation rate.
Huh? How could free college be bad for low-income students? How could it make graduation rates go down?
Mr. Rosenberg is the president of Macalester College, a very good liberal-arts school in Minnesota, but he does not mention that free college at public institutions would severely disadvantage the private colleges. Who would pay $54,000 a year in tuition and fees to attend Macalester College if they could enroll at the University of Minnesota tuition-free?
I'm sure Mr. Rosenberg's arguments against free college are sincere and his commitment to private liberal-arts education is genuine. But a great many university presidents and higher-education policy wonks simply don't care about the student-loan crisis, which has motivated political leaders to propose a free college education. They want to preserve the status quo in higher education, with the federal government spewing more than a $100 billion a year to support the present system.
How many elite-college presidents have come out in favor of a free college education? I don't think any of them have. Unlike Mr. Rosenberg, most college leaders are keeping silent about their qualms, but rest assured they will fight tooth and nail if a Democrat is elected President and tries to get a free-college plan through Congress.
Meanwhile, I don't think any of these arrogant college presidents have lifted a finger to ease the student-debt crisis. The status quo works just fine for them.
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| Macalester College: $54,000 in tuition and fees (the bagpipe music is complimentary) |
Thursday, September 12, 2019
Overbuilt "luxury" student housing: Speculators are turning university towns into slums
The Commercial Observer ran a story a few days ago about a financial crisis in the so-called luxury student-housing market. As reported by Matt Grossman, the default rate in this niche of the securitized real-estate market has gone up dramatically in recent years and now stands at15.3 percent. That's 60 percent higher than the default rate just eight months ago when it was 9 percent.
Luxury student-housing became a hot new investment sector a few years ago. Speculators built thousands of student-housing units in college towns all over the United States. These units included features to attract college students--swimming pools, basketball courts, tanning beds, and fitness centers. Rents were high--over $1,000 a month. But parents often co-signed the leases, and many students paid their rent with student-loan money.
After the new complexes were rented up and began showing positive cash flow, the speculators packaged them into mortgage-backed securities and sold them to investment pools--pension funds, hedge funds, and other institutional investors.
But the speculators built too many luxury student apartments. College students--a notoriously fickle bunch--tended to move out of older units to take up residence in swankier new digs. Vacancy rates spiked upward in the older buildings, the new owners found themselves unable to service their mortgages, and now many of these so-called luxury apartment buildings are going into default.
How did this happen? First, as I have said, these luxury apartments were overbuilt by speculators; and the speculators simply did not care. They had no local ties to the college towns. Their plan was to sell the units quickly while they were still new, take their profits, and move on to the next investment.
Moreover, most of this so-called luxury student housing is not luxury housing at all. It's just new housing. If you go inside one of these apartments, you will likely find plastic interior doors, cabinets made out of particle board rather than wood, and cheap appliances and amenities.
And now--in the space of just a few years--universities all over America are ringed by aging apartment complexes, many of which have gone into default. As the buildings decay, rents are slashed, maintenance is deferred, and before long these so-called luxury apartment buildings become slums.
I see this tragedy unfolding in my own neighborhood, where thousands of apartment buildings have been thrown up in the flood plain near Louisiana State University. But you can see this phenomenon in almost any town with a major university.
Everybody knows that the federal student-loan program has created millions of paupers, people who have amassed so much student debt that they will never pay it off. Even Education Secretary Betsy DeVos has acknowledged this calamity.
But the federal student-loan program has also contributed to an environmental crisis--the emergence of slum housing around America's colleges and universities. The glut in student housing is at least partly attributable to the federal student loan program, which allowed students to rent luxury apartments with borrowed money
If you want to see an example of this crisis, drive through the Tigerland neighborhood, a jumble of old apartment buildings originally built for students near LSU in Baton Rouge.
Parts of Tigerland are now a serious slum where you would not want to live if you were a college student. And not far away, new apartments are still being built--Tigerlands in the making in just a few years.
Luxury student-housing became a hot new investment sector a few years ago. Speculators built thousands of student-housing units in college towns all over the United States. These units included features to attract college students--swimming pools, basketball courts, tanning beds, and fitness centers. Rents were high--over $1,000 a month. But parents often co-signed the leases, and many students paid their rent with student-loan money.
After the new complexes were rented up and began showing positive cash flow, the speculators packaged them into mortgage-backed securities and sold them to investment pools--pension funds, hedge funds, and other institutional investors.
But the speculators built too many luxury student apartments. College students--a notoriously fickle bunch--tended to move out of older units to take up residence in swankier new digs. Vacancy rates spiked upward in the older buildings, the new owners found themselves unable to service their mortgages, and now many of these so-called luxury apartment buildings are going into default.
How did this happen? First, as I have said, these luxury apartments were overbuilt by speculators; and the speculators simply did not care. They had no local ties to the college towns. Their plan was to sell the units quickly while they were still new, take their profits, and move on to the next investment.
Moreover, most of this so-called luxury student housing is not luxury housing at all. It's just new housing. If you go inside one of these apartments, you will likely find plastic interior doors, cabinets made out of particle board rather than wood, and cheap appliances and amenities.
And now--in the space of just a few years--universities all over America are ringed by aging apartment complexes, many of which have gone into default. As the buildings decay, rents are slashed, maintenance is deferred, and before long these so-called luxury apartment buildings become slums.
I see this tragedy unfolding in my own neighborhood, where thousands of apartment buildings have been thrown up in the flood plain near Louisiana State University. But you can see this phenomenon in almost any town with a major university.
Everybody knows that the federal student-loan program has created millions of paupers, people who have amassed so much student debt that they will never pay it off. Even Education Secretary Betsy DeVos has acknowledged this calamity.
But the federal student-loan program has also contributed to an environmental crisis--the emergence of slum housing around America's colleges and universities. The glut in student housing is at least partly attributable to the federal student loan program, which allowed students to rent luxury apartments with borrowed money
If you want to see an example of this crisis, drive through the Tigerland neighborhood, a jumble of old apartment buildings originally built for students near LSU in Baton Rouge.
Parts of Tigerland are now a serious slum where you would not want to live if you were a college student. And not far away, new apartments are still being built--Tigerlands in the making in just a few years.
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