Public Service Loan Forgiveness Program is a "disaster" according to DOE official: A hurricane is coming to PSLF

In a recent speech, Secretary of Education Betsy DeVos called the federal student loan program "a thunderstorm loom[ing] on the horizon." Only 20 percent of borrowers are paying down the principal and interest on their loans, DeVos said, even as students borrow more and more money to finance their higher education.

Comparing the student loan program to a thunderstorm may be an understatement. It might be more accurate to compare the program to a hurricane bearing down on the Gulf Coast at 150 miles an hour. And--extending my hurricane analogy a bit further, we might say the Public Service Loan Forgiveness Program (PSLF) is the "dirty side of the storm."  In fact, Diane Jones, a senior DOE official, called PSLF a "disaster" earlier this week. Jones said the Department of Education does not support PSLF, although it will meet its legal obligations to administer the program.

But DOE is not administering the PSLF program, or--to be more accurate--DOE is not administering the program competently.  As has been widely reported, DOE had processed 28,000 PSLF loan forgiveness applications by late September and only approved 96! What's going on?

Personally, I think DOE number crunchers looked at PSLF and realized that the program will be extremely expensive if it is administered correctly--shockingly expensive. DeVos and her senior minions know the program will cost taxpayers billions of dollars if DOE processes loan-forgiveness applications in accordance with PSLF participants' reasonable expectations.

As Jason Delisle said in a 2016 paper for the Brookings Institute, by at least one interpretation, PSLF's definition of eligible participants is quite broad. Delisle estimates that one quarter of the entire American workplace is a public service worker and all these people are eligble to participate in PSLF if they have student loans.

Delisle cited a 2015 General Accountability Office report in support of  his conclusion. On page 10, footnote 19, GAO said borrowers are eligible for loan forgiveness under PSLF if they are "employed full time by a public service organization or serving in a full-time Americorps or Peace Corps position."

What is a "public service organization? This is what GAO said:

Qualified public service organizations include those in federal, state, local government; 501(C) nonprofits; and other nonprofit organizations providing a variety of public services. 

That definition is a lot broader than the common perception that PSLF is open primarily to nurses, police officers, and first responders. I know for a fact that many student borrowers who work at public universities and community colleges believe they are eligible for loan forgiveness through PSLF.

We will get some guidance about who is eligible for PSLF when the American Bar Association's lawsuit against DOE is decided. ABA sued DOE in 2016 when it denied PSLF eligibility to public-service lawyers working under ABA's auspices. ABA wants a federal court to rule that its employees are eligible for PSLF; and ABA and DOE have both filed motions for summary judgment.

If a federal court declares ABA to be a public service organization whose employees are eligible for PSLF student-loan forgiveness that will be an indication that DOE's narrow interpretation of a public service organization is far too narrow and legally incorrect.

In the meantime, almost a million people have applied to have their student loans certified as eligible for PSLF.  Of the 28,000 people who filed for loan forgiveness since last September, DOE granted forgiveness to less than 1 percent. DOE declared that seventy percent of the applicants were ineligible.

Millions of people working in the public sector took out student loans in the reasonable belief they are eligible for loan forgiveness after ten years of public service.

DOE has taken the position that most of these student-loan borrowers are wrong. No wonder DOE Undersecretary Diane Jones calls PSLF a "disaster."

PSLF is a "disaster" according to DOE official

References

American Bar Association v. U.S. Department of Education, Complaint for Declaratory and Injunctive Relief, Case No. 1:16-cv-02476-RDM (D.D.C. Dec. 20, 2016).

Stacy Cowley. 28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It. New York Times, September 27, 2018.

Stacy Cowley. Student Loan Forgiveness Program Approval Letters May Be Invalid. New York Times, March 30, 2017. 

 Jason Delisle. The coming Public Service Loan Forgiveness bonanza. Brookings Institution Report, Vol 2(2), September 22, 2016.

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

Casey Quinlan. Education Department official slams Public Service Loan Forgiveness program as 'disaster.' thinkprogress.org, December 4, 2018.

Jordan Weissmann. Betsy DeVos Wants to Kill a Major Student Loan Forgiveness Program, Slate, May 17, 2017.

U.S. Government Accountability Office. Federal Student Loans: Education Could Do More to Help Ensure Borrowers are Aware of Repayment and Forgiveness Options. GAO-15-663 (August 2016). 

"Education Corporation of America, Virginia College, and Brightwood College Turn Out the Lights": Important Advice to ECA students from Steve Rhode

By Steve Rhode (originally posted on December 5, 2018)

I just received a comment from an awesome reader that said, “Just got reports (from several campuses) that ECA has decided to close down all schools (teach out and go forward) effective immediately. Apparently, ACICS pulled their accreditation. Current employees are being let go immediately with no severance or insurance after Friday, 12/7. Don’t know all details yet as its only been a few hours and the media and news outlets have not picked up the story. I wanted to let you know since you have reported the most accurate coverage on ECA’s unraveling. It’s very sad to see ECA end like this. Many people that worked for the colleges truly cared about the students and making a difference in their life. There will be many students that will not be able to finish their education and many remaining employees that will be without a job right before Christmas. This is all so very sad.”

It does appear that ECA and Virginia College are turning out the lights. WRDW 12 in Georgia said yesterday, “A news photographer on the scene spoke with at least two people who say employees were called into a meeting this morning and told the College was being closed. Workers were reportedly told to go home and that they will not be receiving further paychecks. People we spoke to also say they were told this is occurring at locations in other states.” – Source

WTVC in Tennessee has reported similar closures in Chattanooga. – Source

Virginia College in Birmingham Alabama is reported to have closed as well. Officials at this campus are reported to have said they don’t know why this is happening. – Source

Another ECA school, Brightwood College in Texas have announced its closure as well. – Source

Inside Higher Ed is reporting, “In an email to campus employees Wednesday morning, ECA president Stu Reed said that the Department of Education had added new restrictions on its access to Title IV student aid. And on Tuesday night, the Accrediting Council for Independent Colleges and Schools suspended the colleges’ accreditation. Those steps meant the company couldn’t secure the additional capital needed to operate its campuses, he said.

The company also told employees that it would complete current course modules, which will finish in the next two weeks. A skeleton crew of employees will remain on campuses to assist students with obtaining documentation on their programs.”

The schools said they will work with students to access transcripts.

Students who owe federal student loans should immediately talk to their loan servicer regarding the process for a full discharge of their federal student loans if there is no available teach-out program offered by ECA.

By receiving a closed school loan discharge,

• you have no further obligation to repay the loan,
• you will receive reimbursement of payments made voluntarily or through forced collection, and
• the record of the loan and all repayment history associated with the loan, including any adverse history, will be deleted from your credit report.

To be eligible for a full discharge of your student loans, your loans must have been “William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans.”

Loans most easily eligible for forgiveness are ones if:

• you were enrolled when your school closed;
• you were on an approved leave of absence when your school closed; or
• your school closed within 120 days after you withdrew.

For more information on obtaining a closed school discharge, click here.

*********

This article first appeared on Get Out of Debt Guy blog site.

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here. 

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

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

Here is what Secretary DeVos said in her speech:

• The federal government holds $1.5 trillion in outstanding student loans, one-third of all federal assets.

• Only one in four federal student-loan borrowers are paying down the principal and interest on their debt.

• Twenty percent of all federal student loans are delinquent or in default. That's seven times the delinquency rate on credit card debt.

• The debt level of individual borrowers has ballooned since 2010. Most of this growth is due to the fact that postsecondary students are borrowing substantially more money than they did just eight years ago.

• The federal government's portfolio of outstanding student loans now constitutes 10 percent of our nation's total national debt.

DeVos basically admitted that a lot of federal student loans will never be paid back. In the commercial world, she said, no bank regulator would value the government's massive portfolio of student loans at full value. And she also admitted that the Department of Education, by itself, could only make "a few, small tactical measures" to address this enormous problem.

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

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

But those reforms are not politically possible right now. In the meantime, Congress should join DeVos in adopting some "small tactical measures" to ease massive suffering. Here are some suggestions:

• Congress should adopt legislation banning the federal government from garnishing the Social Security checks of elderly student-loan defaulters. As the Government Accountability Office pointed out two years ago, most of the money collected from garnishing Social Security checks goes to paying off interest and penalties and not paying down the principal on the debt.

• Disabled veterans should have their student loans forgiven automatically by the government without the necessity of making a formal application.

• The Department of Education should streamline the loan-forgiveness process for borrowers who signed up for the Public Service Loan Forgiveness Program (PSLF).  As of a few months ago, DOE had approved less than 100 of 28,000 PSLF applicants.

• Insolvent students who took out private student loans and financially distressed parents who co-signed student loans for their children or who took out  Parent PLUS loans should have free access to the bankruptcy courts.

These measures, if adopted, would do little to relieve the massive suffering caused by mountains of student loan debt. But they would be a token of good faith by our government and a sign that our political leaders finally understand that the federal student loan program is out of control and has ruined the lives of millions of Americans who took out student loans in the naive hope that a college education would lead to a better life.

References

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

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

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

Fewer new international students are enrolling in U.S. colleges: Have foreign families figured out that American higher education is a scam?

Earlier this week, Chronicle of Higher Education reported a drop in new enrollments by foreign students in U.S. colleges. Over a two-year period, new foreign enrollments dropped nearly 10 percent. According to the Chronicle, foreign students contributed $42 billion to the U.S. economy in 2017, so a drop of this magnitude is a significant revenue loss for American higher education.

Why are foreign students staying away from American colleges and universities? Some people blame the "Trump effect." As the Chronicle explained, "The combination of policies and rhetoric from [President Trump], the thinking goes, are making international students reconsider coming to the United States amid a political climate hostile to globalism."

To my knowledge, no one has produced any empirical evidence to support that theory; and Chronicle of Higher Education went on to give some alternate explanations. For example, higher tuition prices and the strong U.S. dollar may have priced some foreign families out of the American higher education market. In addition, some countries are scaling back their financial support for foreign study. Finally, as one expert explained, American colleges are facing stiffer competition for foreign students. "The biggest new development is there are real competitor countries out there that we've never had before," said Allan E. Goodman, president of the Institute of International Education.

But I offer yet another possible explanation for the decline in new college enrollments from foreign students. Maybe foreign families have figured out that American universities are wildly overpriced and aren't worth the tuition they are charging.

As Peter Morici pointed out in an article for MarketWatch, U.S. colleges have lowered admission standards to keep their enrollments up and have watered down their curriculum to teach students who aren't qualified for postsecondary study.

This phenomenon has led to a poorer overall college experience for many students. Moroci notes that "s]tandardized tests indicate four years of college often adds little to students' analytical abilities and four in 10 graduates lack the critical thinking skills necessary for entry-level professional work."

And Morici also points out that 40 percent of young college graduates are stuck in jobs that don't require a college degree and 3.6 million American college graduates live below the poverty line.

In short, for millions of Americans, their college experiences have been a scam. After four years of largely meaningless study, college graduates are stumbling into a tight job market with little to show for their educational investment other than massive amounts of student-loan debt.

Foreign families may not understand all the dynamics of the big scam called American higher education, but many of them have figured out that it is not worth what U.S. universities are charging.  Little wonder that new foreign student enrollment has dropped nearly 10 percent in two years.

Photo credit: North Idaho College

References

Peter Morici. Opinion: A sensible way to fix the student-loan problem. Marketwatch.com, November 26, 2018.

Vimal Patel. Is the 'Trump Effect' Scaring Away Prospective International Students? Chronicle of Higher Education, November 13, 2018.

Hopson v. Illinois Student Assistance Commission: A clueless bankruptcy judge sentences a 63-year-old student-loan borrower to a lifetime of indebtedness

Janice Faye Hopson, 63 years old, went to trial in an Illinois bankruptcy court last spring, hoping to discharge more than $100,000 in student loans. The Illinois Student Assistance Commission and the U.S. Department of Education opposed her plea for relief; and Judge Jacqueline Cox, the bankruptcy judge who heard Hopson's case, ruled against her.

At the time of Judge Cox's ruling, Hopson was in a 25-year income-based repayment plan (IBRP) that required her to make monthly payments of zero due to her low income. Indeed, Judge Cox ruled that Hopson could maintain "a substantial standard of living" while making student-loan payments of zero dollars a month (588 B.R. 518).

Hopson argued that she would never pay back $100,000 in student loans under a 25-year IBRP and that the principal on the loan will continue to grow in the coming years due to accruing interest. When the 25-year plan ends, Hopson will likely be in her 80s. Moreover, although DOE will write off the amount of her unpaid debt when the 25-year repayment plan is completed, that amount will be taxable to her as income.

Judge Cox was unsympathetic. If Hopson is insolvent when her 25-year plan ends, Judge Cox pointed out, she can file for bankruptcy a third time and discharge her tax bill on the grounds that she is broke (588 B.R. at 515).

Will Ms. Hopson be insolvent when her IBRP ends two decades from now? Of course she will. At age 63, she has virtually no retirement savings (as Judge Cox acknowledged). Twenty years from now, she undoubtedly will be living entirely off her Social Security checks, estimated to be only $1430 a month.

Although Judge Cox probably did not realize it, she essentially ruled that no student debtor who is eligible for a long-term income-based repayment plan is entitled to bankruptcy relief. Of course it is true in one sense that a person allowed to make student-loan payments of zero dollars a month cannot claim her student loans constitute an "undue hardship" in the present moment. But people making token monthly payments or even monthly payments of zero are burdened by student-loan debt that grows with each passing month due to accruing interest and which will never be repaid.

They are also burdened by the specter of a huge tax bill when DOE eventually writes off their loans two decades or more into the future. Like Ms. Hopson, many people will be long past retirement age when their IBRP payment obligations come to an end. And like Ms. Hopson most people in IBRPs won't have sufficient retirement savings to live their last years in comfort and dignity.

*****

A few notes in closing. First, Judge Cox ruled that Ms. Hopson could maintain a "substantial standard of living" while making student-loan payments of zero dollars a month. Apparently, the judge concluded Hopson was living above a minimal lifestyle because she rented a two-bedroom apartment. Judge Cox pointed out Hopson could save $225 a month if she moved into a one-bedroom apartment.

Second, Adam Merrill, a Chicago lawyer, represented Ms. Hopson pro bono. I want to especially commend him for taking on Ms. Hopson's case without a fee.

Finally, Judge Cox did not state in her opinion when Ms. Hopson's 25-year repayment plan will end. Perhaps the date was not important to the judge.  In this essay I presumed that Hopson signed up for a 25-year repayment plan fairly recently and that it won't conclude until she is in her 80s.

Judge Jacqueline Cox: No mercy for a 63-year-old student-loan debtor

References

Hopson v. Illinois Student Assistance Commission, 588 B.R. 509 (Bankr. N.D. Ill. 2018).

Roosevelt Institute researcher says student-loan program is "a failed social experiment." But you already knew that.

Julie Margetta Morgan and Marshall Steinbaum wrote a blockbuster of a report for the Roosevelt Institute on the student-loan crisis. Unfortunately, the bland title and multiple graphs obscured the authors' key finding, which is this: Contrary to what student-loan advocates proclaim, a great many people who took out student loans for postsecondary education have not seen a rise in wages.

As author Julie Margetta Morgan summarized, "We've essentially engaged in a failed social experiment where the government thought that it would be fine to give people student debt because it would pay off in the long run and we're seeing that's not the case."

On the contrary, this is what Morgan and Steinbaum found:

• "More education has not led to higher earnings over time." Although the higher education community trumpets the myth that rising student debt and more education leads to higher income, that is not true. Instead, "the distribution of earnings in the labor market has remained relatively unchanged over time. And to the extent that individuals see an income boost based on college attainment, it is only relative to falling wages for high school graduates."

•  "Student debt is a burden for a growing share of young adults." Traditional ways of measuring student debt "fail to consider the changing distribution of  debtors over time or the changes in the ways that borrowers repay their loans." When these factors are accounted for, "the data show that many more Americans have debt, and the burden of that debt is more significant now than for previous generations."

•  "Credentialization better explain these dynamics than the 'skills gap.'" Although the nation's population is becoming better educated, "each educational group is becoming less well paid." In the authors' view, this phenomenon "is a result of declining worker power, which allows employers to demand a higher level of educational attainment for any given job, not a broken link between workforce skills and labor market demands."

• "These trends have had particularly negative impacts on Black and brown Americans." Minorities already have to obtain more education than their peers in order to get the same or similar jobs. In general, people of color have less wealth than nonminorities, which means students of color take on disproportionate amounts of debt, which exacerbates disparities in student-loan debt between minority and nonminority students.

 Morgan and Steinbaum fortify their arguments with statistical analysis, but this is the essence of what they found. A higher percentage of Americans have student-loan debt than previous generations, and they have more debt than in the past.  And this trend has developed at the same time that wages have remained stagnant.

As worker power in the job market declines, employers have been able to demand more credentials from job  applicants. In essence, employers have been"upskilling" the labor market.

 I see evidence of this everywhere. Lawyers, for example, need just one professional degree to practice their trade: a J.D.  Yet as the job market for attorneys tightens, I see more and more lawyers get additional education: an MBA, for example,or a master's degree in law.  But these additional credentials often do not lead to higher salaries--and generally are not necessary for the jobs they are seeking.

I give myself as an example of a person who took out student loans to get a credential that did not enhance my job skills. I had a law degree before I became a professor, and my legal skills and experience are all I needed to be a competent education-law professor, a job I have done for 25 years.

But to get my first professor's job, I had to have a doctorate, and so I took out loans to get an Ed.D. degree from Harvard. It was a complete waste of time and money.

Morgan and Steinbaum question the enormous public investment in postsecondary education our government is making through the student-loan program. Midway through their policy report, they make this trenchant observation:

If the only function of that public investment is to increase the credentialization of the labor market and enrich academic institutions that are best able to provide those credentials to students looking to differentiate themselves (at great expense) in a rat race, it's hard to conclude that the public investment s paying off . . . .

Indeed, the investment is not paying off.  For millions of Americans, the student-loan program is doing nothing more than sentencing them to become members of a permanent debtor class.

Will you will be richer if you get an advanced degree?

References

Jillian Berman. America’s $1.5 trillion student-loan industry is a ‘failed social experiment.’Marketwatch.com,October 18, 2018.

Julie Margetta Morgan and Marshall Steinbaum. The Student Debt Crisis, Labor Market Credentialization, and Racial Inequality. Roosevelt Institute, October 2018.

Iowa Wesleyan and Valparaiso Law School make brave decisions: “It is a far, far better thing that I do, than I have ever done"

“It is a far, far better thing that I do, than I have ever done." Who said that? I think it was some dead guy from the 19th century. Charles Dickens maybe?

Iowa Wesleyan University and Valparaiso Law School both made brave decisions this week, and I salute them for it. Valparaiso Law announced it is closing after negotiations to transfer the school to Middle Tennessee State University broke down. And the President of Iowa Wesleyan University, Steven E. Titus, posted a statement on the university web site candidly telling the campus community that the university faces a serious financial crisis and that the governing board is pondering the university's future.

These decisions must have been very hard for both institutions. President Titus acknowledged that publicizing Iowa Wesleyan's financial situation might hurt enrollment, which could hasten its demise. "But we decided it was the right thing to let people know what was going on," Titus said. "There is risk no matter what we do."

As for Valparaiso, the loss of its law school diminishes the reputation of the university as a whole, as a law school is generally seen as a prestige-enhancing program.

In my view, both institutions are facing the stark financial reality that many private colleges are facing, and they are facing it with courage. Let's first look at Valparaiso. 

There are far too many law schools in this country, and enrollments have been declining. As reported in Inside Higher Ed, law-school enrollments have sunk from a high of 52,000 to 37,000. 

The quality of students being admitted to law schools is also declining. As tracked by Law School Transparency, a nonprofit group that reports on law -school admissions, some law schools have admitted students with LSAT scores so low that half the entering class faces a very high risk of failing the bar.

Valparaiso is closing its law school,  which is certainly in the public interest. It is far better for Valparaiso to close than for it to lower its admissions standards just to enroll more students.

As for Iowa Wesleyan, the school has been discounting tuition to attract students; according to one report, it has discounted tuition by more than half.  At some point that practice raises ethical issues.  How can a college justify charging its least attractive students full price when the average price is less than half that amount?

And how does a college explain the discounts to the students who receive them? Some colleges have been showering first-year students with scholarships--athletic scholarships in particular.  But is it honest to give an incoming student a volleyball scholarship when the school doesn't even field a decent volleyball team?

No, Valparaiso and Iowa Western should be commended for their courage and their honesty. It was a far, far better thing they did than perhaps anything they've ever done.

References

Scott Jaschik. Iowa  Wesleyan could become the latest small college to close. Insider Higher Ed, November , 2018.

Emma Whitford. Valparaiso Law School will close following unsuccessful attempt to transfer to Middle Tennessee University. Inside Higher Ed, October 31, 2018.

Alabama trashes the LSU Tigers and tailgaters trash the LSU campus: How about bloody marys for brunch?

Number 1 ranked University of Alabama trashed Number 3 ranked LSU on LSU's home field last night.  About 200,000 people were on hand for the debacle: 102,000 in the stadium and another 100,000 tailgaters. The score was 29 to 0. LSU's star field-goal kicker made one attempt for 3 points, but he missed.

In the hours leading up to the game, tailgaters were packed shoulder to shoulder around the stadium, making the campus look something like a Civil War army camp. Portapotties and trash cans were overwhelmed, and picnickers squatted on the sidewalks because there was no room for them on the lawns.

On the morning after game day, the crowds were gone, save for a few dozen recreational vehicles (each costing about a quarter of million). Shades were drawn in the RVs, but the generators were running, so the owners must have been inside, sleeping off their hangovers.

And shortly after dawn, the cleanup crews were out early picking up thousands of discarded beer cans, plastic cups, and styrofoam fast-food containers. LSU used to hire prison trustees to do this work, but the optics were bad. This morning, young people are picking up the trash, perhaps LSU student volunteers.

Big disappointment. If only LSU could have knocked off Alabama and its satanic football coach, Nick Saban. If LSU coach Ed Ogeron had pulled it off, the fans would certainly have erected a statue in his honor, a statue even larger and gaudier than the one Alabama installed for Saban. But it was not to be.

No matter. Lots of Baton Rouge restaurants offer Bloody Mary brunches on Sunday, and it least one restaurant includes all-you-can drink mimosas for folks nursing hangovers.  And then the Saints play the Rams on Sunday afternoon--an opportunity to drink Bud Lites and eat chicken fingers--chicken fingers that Coach Ogeron personally endorses.

Fall is the season of bacchanal in South Louisiana. Let's get drunk for every LSU game, every Saints game, and every playoff game.  Let's get drunk at the fraternity hazing exercises. After all, hardly anyone dies from alcohol poisoning.

And then spring comes--another season of bacchanal. Mardis Gras parades start at least two weeks before Fat Tuesday, and the St. Patrick's Day parade is another occasion for a huge town drunk. The garbage trucks follow closely behind the St. Patrick's Day floats, sweeping up the discarded beads and beer bottles.

A friend told me he attended a Mardis Gras parade in New Orleans a few years ago. A drunk driver, driving a beer truck as it happened, plowed into a crowd of spectators, killing a woman who was pinned under the vehicle. My friend said he saw revelers crawl under the truck and loot the woman's Mardis Gras beads. The corpse was still warm.

Fox Business Report assures us daily that the economy is booming with record-low unemployment and a robust growth in wages. In Baton Rouge, people drive around in late-model luxury cars and pack the restaurants every night.

Cheaply built apartment complexes are being thrown up willy nilly for LSU students in the flood plain next to the Mississippi River levees. They feature swimming pools, and enormous television screens in the common areas. Meanwhile LSU passed a rule requiring most first-year students to live on campus, and it built its own faux-luxury residence halls to accommodate them.

But in North Baton Rouge, weekend killings are routine. A six-year-old was shot dead a couple of days ago, and thirteen-year-old was arrested.  Baton Rouge schools are a mess, and almost no one of means will put their children in a public school.

The rich go to private schools, and the less well-to-do buy inexpensive homes in adjoining parishes where the schools are better. They drive to work every morning on Interstate 10, which is a parking lot from 7:30 AM until about 10 AM on workdays.

But the commute is not so bad. You can check your cell phone when the traffic grinds to a halt or listen to Stuart Varney on Fox Business Report tell you how much money we're all making in the stock market.

Nick Saban's statue at University of Alabama
Photo credit: David Mercer, USA Today

Education Corporation of America brazenly uses an Alabama court to delay lawsuits against it. Is this a great country or what?

Education Corporation of America (ECA), a for-profit college chain, brazenly filed a federal lawsuit in Alabama last month, asking Judge Abdul Kallon to put it into receivership and enjoin all litigation against it. ECA hopes to delay its creditors and other litigants while continuing to receive federal student-loan money.

What a cocky, shameless and impudent strategy!

Judge Kallon initially obliged ECA, ordering a halt to all litigation against ECA until October 29. Then, on October 29, the judge  extended the injunction until November 5. Parties opposing ECA's Alabama litigation must find lawyers to represent them in Alabama, which will be costly.

For example, Gleneagles Office, LLC, a Maryland corporation, filed a lawsuit in Maryland last month, seeking to collect almost $100,000 in back rent and late fees from Virginia College, which ECA owns. Judge Kallon's injunction, issued seven days after Gleneagles filed its lawsuit for back rent, halted that litigation.

Gleneagles hired an Alabama law firm to oppose ECA's attempt to enjoin lawsuits against it. Gleneagles pointed out that ECA guaranteed the Virginia College lease and agreed that any dispute about the lease would be litigated in Maryland. Gleneagles also argued that Judge Kallon does not have jurisdiction over it.

A Texas company also joined the Alabama lawsuit to oppose ECA's request for an injunction. The Texas company is landlord to a Brightwood College campus in Arlington, Texas. Brightwood is another college owned by ECA.

Perhaps ECA's various landlords and creditors have the financial resources to fight ECA in Alabama, but ECA's former students do not. ECA's list of litigation against it (or its subsidiary affiliates) include several suits by former students. ECA managed to force many of these suits into arbitration, probably because ECA required students to sign arbitration agreements as a condition of enrollment.

So what's going on?

ECA is in financial trouble. Enrollments have dropped, and it is in danger of losing its accreditation. Meanwhile it has been sued by landlords, former students, and former employees on a variety of grounds.  ECA managed--temporarily at least--to halt all the litigation against it based on the signature of one Alabama federal judge, who may not have jurisdiction over any of this litigation. Some creditors have joined the Alabama lawsuit to stop this charade, but most of ECA's former students and employees don't have the financial wherewithal to do that.

Essentially, ECA's Alabama lawsuit has given ECA  all the benefits of bankruptcy without the downside of losing federal student loan money.  And when it becomes advantageous to do so, ECA can stroll into bankruptcy court any time it likes.

Isn't it ironic that ECA can use the courts to its advantage while its students are barred from suing it based on arbitration agreements ECA or its subsidiaries required them to sign as a condition of enrollment?

And isn't ironic that ECA can file for bankruptcy whenever it chooses (which it will probably do eventually), while ECA's students face enormous obstacles to discharging their student loans in bankruptcy?

Is this a great country or what?

References

Joinder of  Pioneer Industrial LLC and Pioneer Parking Lot, LLC to National Retail Properties LP's Memorandum in Opposition to Emergency Motion for The Appointment of a Receiver and Entry of a Temporary Restraining Order and Injunctive Relief, filed October 29 2018 in Education Corporation of America v. U.S. Department of Education, Case No. 2:18-CV-01698-AKK.

Non-party Gleneagles Office, LCC's Opposition to Plaintiff's Motion for Preliminary Injunction, filed October 29, 2018 in Education Corporation of America v. U.S. Department of Education, Case No. 2:18-CV-01698-AKK.

Order Extending Temporary Injunctive Relief, signed on Octobe 29, 2018 in Education Corporation of America, et al. v. United States Department of Education, 2:18-CV-01698-AKK.

Augustin v. U.S. Department of Education: Adventures in Fantasy Land

In  April 2016, Pierre Augustin filed an adversary complaint in a Maryland bankruptcy court, seeking to discharge $210,000 in student loan debt. He told the court he had been burdened by this debt for 24 years, and that his financial circumstances did not permit him to pay it back. Augustin's wife also had student-loan debt: $120,000. Together the couple had accumulated a third of a million dollars in student debt.

Augustin had three postsecondary degrees: a bachelor's degree in political science from Salem State University in Massachusetts, a master's degree in public administration from Suffolk University in Boston, and an MBA from University of Massachusetts Lowell. Seventeen years after receiving his MBA degree, he was working  as a security guard.

Augustin claimed he was unable to find a job in the field of his degrees, but together he and his wife earned a net income of more than $6,000 a month. The Department of Education (DOE) offered Augustin a 25-year income-based repayment plan that would allow him to pay $331 a month toward his student loans or a 15-year plan with payments of $1,138 a month.

Augustin did not accept DOE's offers. Under the 25-year plan, he argued, he would face a lifetime of indebtedness. Moreover, when the payment term ended, he would face massive tax liability for the amount of forgiven debt. The 15-year plan was also unacceptable, he maintained, because it would not allow him to save money for his retirement.

Bankruptcy Judge Thomas Catliota was not sympathetic. The judge applied the three-pronged Brunner test to determine whether Augustin's student debt constituted an undue hardship.  Under Judge Catliota's analysis, Augustin failed all three prongs.

First, Judge Catliota noted, Augustin could make monthly loan payments of $331 under the 25-year repayment plan while maintaining a minimal standard of living. Second, Augustin could not show additional circumstances that would make it impossible to make monthly payments in that amount.

Finally, Judge Catliota ruled, Augustin had not demonstrated good faith. Augustin had not made a single payment on his student loans for more than a quarter of a century. "By his own  admission,"the judge pointed out, "Mr. Agustin deferred his loans for approximately 26 years."

Moreover, Mr. Augustin was not willing to accept DOE's offer of a  manageable repayment plan. In Judge Catliota's view, "This shows lack of good faith on [Augustin's] part."

Not surprisingly then, Judge Catliota refused to discharge Mr. Augustin's student debt. Applying the three-part Brunner test, Augustine was not entitled to relief.

Perhaps Judge Catliota reached a just outcome in the Augustin case. But let's look at the case in a larger context. Why does the Department of Education loan people money for multiple college degrees and then permit borrowers to make no payments on those loans for 25 years?

Why does the government push people into 25-year repayment plans that allow debtors to make monthly payments so low that they don't cover accruing interest? Even if Mr. Augustin agrees to make income-based payments of $331 a month for 25 years, he will never pay back the $210,000 he owes.

Finally, why apply the Brunner test to people like Mr. Augustin? Why not simply ask whether Mr. Augustin and his wife will ever pay back $330,000 in student-loan debt? The answer is clearly no.

In short, Augustin v. Department of Education is another adventure in Fantasy Land, which is what the federal student-loan program has become. Our government has rigged an insane student-loan program that is trapping millions of people to a lifetime of indebtedness from which there is no relief.

References

Augustin v. U.S. Department of Education, 588 B.R. 141 (Bankr. D. Md. 2018).

Education Corporation of America files for receivership: Using lawyers' tricks to suck up more federal student-loan money

Education Corporation of America (ECA), a for-profit college chain, filed a lawsuit a few days ago in an Alabama federal court. The lawsuit seeks to put ECA into receivership, and it asks the court to halt all litigation against it. ECA also wants Betsy DeVos and the Department of Education to keep showering it with student-loan money while it straights out its financial affairs.

ECA is closing more than two dozen of its campuses; and it needs to keep getting federal student-loan money, it argues, so it can do a "teach out" at campuses it intends to close. If it allows current students to finish their academic programs (through a teach-out), those students won't be eligible to have their student loans forgiven under the "closed school" rule. That will save the Department of Education a lot of money, ECA says.

This line of bull reminds me of the story about a man who murdered his parents and then begged the court for leniency on the grounds he was an orphan.

ECA operates  under numerous brand names, including Virginia College, New England College of Business, Brightwood College, and Golf Academy of America; and it is in big financial trouble. It submitted a list of legal claims against it to the Alabama court, which is 15 pages long. Landlords are suing for back rent and other litigants have sued for breach of contract, fraud, failure to pay wages,  race discrimination, age discrimination, false advertising and some other stuff. 

Why doesn't ECA just file for bankruptcy? One reason: Under federal law, ECA would immediately lose access to all federal money if it filed for bankruptcy. It is hoping to keep federal money flowing as a long as possible.

I hope Judge Abdul Kallon sees through ECA's dodgy litigation ploy and refuses its plea for a receiver and an injunction against its creditors. (Judge Kallon granted ECA a temporary restraining order on October 19, but he will have to extend it to keep ECA's creditors at bay.)

  ECA needs to close, and it needs to close NOW. Every day it continues operating is another day uninformed students will be taking out student loans to pay for an ECA education that probably won't get them a good job. In fact, ECA's own accrediting agency scored ECA's campus-level job placement rate at only 16 percent.


References

David Halperin. For-Profit College Chain Claims Financial Distress, Sues DeVos. Republic Report, October 18, 2018.

Steve Rhode. Education Corporation of America Whines Over Failure. Get Out of Debt Guy (blog), October 22, 2018.

Alan White. For-profit college chain files (for receivership). Credit Slips, October 22, 2018.

Thomas Jefferson Law School won't admit new students next spring: Ask not for whom the bell tolls; it tolls for the legal profession

Thomas Jefferson School of Law (TJ) announced it will not admit new students to enroll this spring. Why?

Linda Keller, Thomas Jefferson's new dean, gave this explanation (which was probably drafted by a public relations person):

The Law School is committed to providing the best environment for our students. We've decided to forego the revenue that a spring entering class would provide because a proportionally smaller spring entering class might not provide the vibrant, collaborative atmosphere for our new students that is an essential part of the first-year law student experience.

My cynical interpretation of this cheery blather is that Thomas Jefferson didn't recruit enough students to make up a decent cohort for spring 2019. Indeed, TJ's student enrollment dropped from more than 400 in 2010 to less than 300 in 2017.

Thomas Jefferson School of Law should close--period. By almost any measure, the school is not producing lawyers who can find decent jobs in the legal profession. According to Law School Transparency, which reports important metrics for law schools, TJ's 2017 graduating class had an employment rate of only 21.3 percent. Graduates' under-employment rate was 42.3 percent.

Not a single 2017 graduate got a judicial clerkship, jobs that go to the most able law graduates. And none went to work for large law firms,  which generally pay the highest salaries.

And most shocking of all, TJ's 2014 entering class had a 2017 bar passage rate of only 26.5 percent! That's right, only a little more than one in four of TJ's 2017 graduates passed the bar.

Why do students enroll at a law school with such a dismal record? Is it cheaper than more prestigious schools? No, it is not. The non-discounted cost to get a law degree from Thomas Jefferson is $280,000! That's right, it costs more than a quarter of a million dollars to get a law degree from Thomas Jefferson, and only one out of four 2017 graduates passed the bar.

This country has too many law schools. There simply are not enough jobs for the newly minted attorneys coming out of the nation's lawyer factories. The American Bar Association, which accredits law schools, has done a poor job and allowed too many schools to operate. Based on their bar passage rates and poor job-placement rates, at least 20 schools should be shut down immediately.

Some of Thomas Jefferson's graduates sued the school awhile back for fraud, but TJ beat the wrap. But enrollment is dropping, bar pass rates are awful, and the time has come for TJ to close its doors.

Thomas Jefferson School of Law

References

Scott Jaschik. Thomas Jefferson Law Won't Admit Students for Spring. Inside Higher Ed, October 18, 2018.

Staci Zaretsky. Struggling Law School Will Not Accept New Students This Spring. Above the Law, October 17, 2018.

Staci Zaretsky. Verdict Reached in the Alaburda v. Thomas Jefferson Landmark Case Over Fraudulent Employment Statistics. Abovethelaw.com, March 24, 2016.

FedLoan Servicing is accused of fraud. What did the Department of Education know about how FedLoan treated student debtors in the PSLF program?

As Alan White reported in Credit Slip yesterday, the U.S. Department of Education assigned the complex task of monitoring the Public Service Loan Forgiveness (PSLF) program to its worst-performing student-loan servicer--FedLoan Servicing (Fedloan).  In 2017, DOE ranked FedLoan last among 9 student-loan servicers "based on delinquency rates and customer satisfaction survey results."

PSLF, created by Congress in 2007, is a federal program designed to make it easier for student-loan borrowers in public service jobs to pay off their loans. And it is a very big program. Almost 1.2 million people have applied to have their student loans certified for PSLF participation; and 890,000 borrowers have been approved so far.

PSLF borrowers are entitled to have their student loans forgiven after 120 on-time loan payments. The first PSLF participants became eligible for debt relief in September of last year. As of last month, 28,000 borrowers had applied for debt relief, but DOE had approved less than 100.

What's going on?

According to a federal lawsuit filed in Pennsylvania earlier this year, FedLoan has fraudulently administered the PSLF program to enrich itself at the expense of student borrowers (paragraphs 80-91). Plaintiffs in the suit claim FedLoan penalized borrowers who made extra payments by posting all subsequent payments as being paid late. Since late payments don't qualify toward the 120 on-time payments, student debtors who made extra payments in good faith actually increased the number of months they would have to make loan payments. Since FedLoan gets a service fee for managing student loans, the longer a borrower makes payments, the more money FedLoan earns in fees.

In addition, FedLoan reputedly made bookkeeping errors while administering the PSLF program; and when borrowers tried to straighten out these mistakes, FedLoan put their loans into forbearance. Student debtors whose loans are in forbearance do not get credit for loan payments they make, and this practice also extended the time borrowers are obligated to make student-loan payments.

Plaintiffs in the federal lawsuit allege FedLoan engaged in these activities to increase its revenues. And indeed, FedLoan is making a bundle of money in the debt collection business. According to the plaintiffs' complaint (paragraph 33), FedLoan earned net revenues of more than $220 million in 2014 and owns assets worth $700 million!

But here is a question the Pennsylvania plaintiffs did not ask: Why did DOE permit FedLoan to allegedly defraud student debtors?

After all, DOE must have known something was wrong based on the sheer volume of complaints that student borrowers were filing against FedLoan. All DOE would had to have done to bring FedLoan into line was write a letter telling it not to interpret the PSLF program in a way that harms PSLF participants.

I think DOE intentionally allowed FedLoan to operate the PSLF program so unfairly because DOE knows the PSLF program will cost the government billions if every PSLF applicant gets the debt relief the program promises. In other words, DOE knew exactly how FedLoan would behave if it got the PSLF servicing project, and that's why DOE chose FedLoan.

I hope a federal court ultimately finds FedLoan liable for defrauding PSLF participants. And if it does, then DOE should be named as a co-conspirator in a scandalous fraud.

References

Danielle Douglas-Gabriel. Watchdog agency blasts government contractor for mishandling student loan forgiveness program. Washington Post, June 27, 2017.

Department of Education slow rolls the Public Service Loan Forgiveness Program: Like a drunk weaving through traffic

For many years, the Department of Education has managed the federal student-loan program like a drunk creeping through heavy traffic. It has stumbled, reeled, dissembled, weaved and bobbed, but always avoided a head-on collision with reality.

But that time is over. Under Betsy DeVos's colossal mismanagement (and her predecessors), DOE has messed up the Public Service Loan Forgiveness Program (PSLF), thereby telegraphing to 44 million student-loan borrowers that Betsy Devos is either fiendishly devious or spectacularly incompetent.

The PSLF program is not complicated.  Under federal law, student-loan borrowers who work for a qualified employer (governmental agency or non-profit) and make 120 student-loan payments under an approved repayment plan are eligible to have remaining student-loan debt cancelled. (It's a little more complicated than that, but not much.)

Almost 1.2 million borrowers have applied to have their employment certified for PSLF eligibility. More than a quarter million applications were denied. That alone is a startling fact.

But it gets worse. About 28,000 people who are in the PSLF program (or at least believe they are in it) applied to have their student loans forgiven based on their representation that they had made the 120 required student-loan payments. How many people have obtained debt relief so far? Less than 100!

What are we to make of this gigantic snarl?

First, DOE has made the PSLF program needlessly complicated. After all, the government only needs to answer two questions to determine who is eligible for debt relief. Did the applicant work for an approved employer for 10 years? Did the applicant make 120 one-time payments on his or her student loans?

Second, the PSLF program was poorly designed, and DeVos's DOE has reached the startling realization that the program is astonishingly expensive.  In my opinion, DOE is dragging its feet about processing PSLF claims to postpone the reckoning day, when it will have to publicly admit that PSLF is going to cost taxpayers billions of dollars.

The Government Accountability Office (GAO) released a report almost two years ago that concluded DOE had underestimated the cost of various student-loan repayment options. I'm guessing DOE did not figure on the huge debt loads some PSLF applicants were accumulating from going to graduate school: MBA degrees, medical degrees, law degrees, etc.

According to GAO, the average amount of forgiven debt for the first 55 people who received student-loan forgiveness is almost $58,000. If  this average continues to hold, and all 890,000 people whose loans and employment were certified eventually get debt relief, the cost will be $50 billion! Meanwhile, DOE can expect PSLF requests for certification and debt relief to continue being filed into the indefinite future.

No wonder DOE is slow rolling the PSLF loan-forgiveness process.

 References

Stacy Cowley. 28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It. New York Times, September 27, 2018.

Sue Reagan v. Educational Credit Management Corporation: "A camel whose back is already broken"

Sue Reagan is 60-years old and lives in a mobile home on rented land. She has a part-time job but lives near or below the poverty line. She took out student loans to obtain a bachelor's degree in administration of justice and a master's degree in criminology, but that was long ago.

Unable to pay back her student loans under a standard ten-year repayment plan, Reagan signed up for an income-based repayment plan (IBRP). Her income is so low, however--$1,286 a month--that her monthly payments are zero dollars.

Reagan filed for bankruptcy and brought an adversary action to discharge her student loans. She argued that her student loans constituted an undue hardship and that she could not maintain a minimal standard of living and pay back those loans.

Educational Credit Management Corporation, her creditor, filed a motion for summary judgment and asked the bankruptcy court to dismiss Reagan's case without a trial.  ECMC argued that since Reagan's monthly payments were zero dollars, she could not reasonably argue that her student loans constituted an undue hardship or that her loans forced her below a minimal standard of living.

But Bankruptcy Judge Gregory Taddonio disagreed with ECMC and refused to dismiss Reagan's case. In Judge Taddonio's view, it did not matter which debt drove Reagan to the edge of poverty. "If she finds herself financially underwater, the question of which obligation pushed her below the surface matters little. To a camel whose back is already broken, any straw in his pack is unwelcome."

Judge Taddonio looked at Reagan's financial information and noted that her expenses were $119 more than her income, which was less than $1,300 a month. Moreover, her expenses were reasonable--mostly going for basic necessities. Judge Taddonio said he could not identify any expenses that could be trimmed.

So Judge Taddonio allowed Sue Reagan's adversary proceeding to go forward. Will she ultimately prevail?

Who knows? ECMC's motion to dismiss was merely the first of many arguments ECMC will make to defeat Reagan's attempt to shed her student loans. And ECMC has unlimited resources. It can hound Reagan for years right up to the Third Circuit Court of Appeals.

But Reagan's initial victory is heartening, a sign perhaps that the federal bankruptcy judges have begun to acknowledge that the federal student loan program has destroyed the lives of millions of people, most of whom deserve bankruptcy relief.

College students spend more time working than attending classes but they're still forced to take out student loans

Many years ago, when I was a first-year law student at University of Texas, Professor Robert Hamilton, my law instructor, told our class of first-year students not to work while in law school. Working part-time, Professor Hamilton said, would distract us from our studies and degrade the quality of our law-school experience.

I remember thinking that was good advice for people from wealthy families, but it wouldn't work for me. I began working 20 hours a week at the Texas Attorney General's Office just as soon a finished my first year of classes; and I also got a work-study job at the law school.

In those hoary old days, students could actually work their way through college and even law school. My law-school tuition was only $1,000 a year, and by working part time, I graduated from law school with no debt.

Today, students are still working while in college, but their part-time jobs don't begin to cover the cost of tuition. Thus, even working students take out loans.

According to a recent HSBC report, 85 percent of current college students are working part-time jobs. In fact, they spend far more time working than attending classes or studying. On average, students work 4.5 hours a day, almost twice as much time as they spend in classes.

But those part-time jobs working as waiters, pizza cooks, rental-car agents, etc. hardly cover basic living expenses--food, shelter, cell phone, car insurances, etc. And so most students are borrowing to pay tuition. In 2017, college graduates finished their studies owing an average of almost $40,000. And that doesn't include credit card debt, averaging about $4,000.

A perception still exists that going to college and professional school is a time of awakening intellect when students develop personal and vocational identities sitting at the feet of wise and learned scholars. But that time is long gone--if it ever existed.

Today, students are stressed out by their college experience. Six out of ten report feeling anxious about financial concerns either frequently or all the time. And women report more financial anxiety than men.

Going to college now is like running a gauntlet between rows of vicious bureaucrats and money lenders trying to beat the student down. Some people survive the experience relatively unscathed and go one to get jobs that allow them to pay back modest of amounts of student debt.

But a growing number of young people finish their post-secondary studies worse off than before they first enrolled. They borrow far too much money and graduate with no skills and no idea what they want to do for a living. In some instances, students' parents get sucked into the maw of college debt, taking out Parent PLUS loans they can't pay back.

Indebted college graduates who don't find good jobs are often forced to obtain economic hardship deferments on their student loans, excusing them from making payments while the interest accrues. Others get pushed into 20- and 25-year repayment plans that are structured so that their debt keeps growing even if they faithfully make their monthly payments. And about one million people a year simply default on their loans--essentially committing financial suicide.

The higher education flacks say over and over that a college education is a ticket to a good job and a middle class lifestyle.  And for some people that's true. But its not true for everybody.

For millions of people, their college experience is nothing but a scam, and this is disproportionately true for women, minorities, and people from low-income families.

Going to college is like running the gauntlet

Department of Education's New Report on Student-Loan Casualties: A Dr. Strangelove Moment

You remember that great scene from the movie Dr. Strangelove.  U.S. President Muffley (played by Peter Sellers) worries about the consequences of nuclear war with Russia. "You're talking about mass murder," President Muffley muses.

But General Turgidson (played by George C. Scott) is not concerned. "I'm not saying we wouldn't get our hair mussed. But I do say no more than ten to twenty million killed, tops."

Betsy DeVos is our modern day General Turgidson. The student loan program is shattering the lives of about 20 million Americans.  But in DeVos' mind, that's a small price to pay for a program that enriches her buddies in the for-profit college industry.

And so without further ado, I will summarize the Department of Education's most recent report on the student-loan debacle.

Income-Driven Repayment Plans. As DOE reports, more and more distressed student borrowers are being herded into income-driven repayment plans (IDRPs). As of June, 7.1 million people are enrolled in IDRPs, a 20 percent increase from just a year ago.

Student borrowers in IDRPs are America's new serfs. They pay a percentage of their income for 20 or 25 years to repay the student loans they took on to attend some raggedy-ass college that didn't prepare them for a job.

Of course, IDRP monthly payments are generally low. In fact, IDRP participants who live below the poverty line make monthly payments of zero. But virtually everyone in these plans--7.1 million suckers--will die without ever paying back their loans. In fact, for most of them, their loan balances are going up with each passing month due to unpaid accruing interest.

Borrower Defense to Repayment. According to DOE, 166,000 student borrowers filed so-called "borrower defense" claims. These claimants are seeking loan forgiveness on the grounds they were defrauded by the colleges they attended. Thousands of these claims were filed by people who attended just two for-profit institutions that went bankrupt: Corinthian Colleges and ITT Tech.

As of June 30, two thirds of these claims are still pending, and only 80 percent of the processed claims were approved.  Meanwhile, borrowers who have pending claims are still obligated to make their monthly loan payments.

Delinquency Rates. Delinquency rates are down slightly, DOE assures us, but almost a quarter million borrowers defaulted on their student loans during the third quarter of this year.  That's 2755 people going into default every day.  A high percentage of these defaulters attended for-profit colleges. But apparently those casualties are acceptable to Betsy DeVos.

Public Service Loan Forgiveness Program.

Hundreds of thousands of student debtors have taken jobs in the public sector in belief that their student loans would be forgiven after 10 years under the Public Service Loan Forgiveness Program (PSLF). It now seems they were deluded.

PSLF was enacted by Congress in October 2007, so the first people entitled to PSLF relief became eligible in October 2017. So far, 28,000 people have applied for PSLF relief, but only 300 claims have been approved and only 96 people have actually had their loans forgiven!

If Betsy DeVos and her gang of former for-profit-college hacks continue to refuse to implement PSLF in good faith, hundreds of thousands of college borrowers who relied on PSLF will suffer incalculable hardship.  For example, thousands of people have graduated from third- and fourth-tier law schools with six-figure debt, and they can't find law jobs in the private sector that pay enough to service their student-loan obligations. As Paul Campos pointed out in his book Don't Go to Law School (Unless), PSLF is these people's only viable option for paying off their law-school loans.

Conclusion: The Student Loan Program is in Fine Shape: "10 to 20 Million Casualties, Tops!"

DOE's own data shows us that the federal student loan program is a disaster: high default rates, income-driven repayment plans that don't allow people to pay off their loans,  borrower-defense rules that DOE administers incompetently, and a PSLF program that DOE refuses to implement in good faith. Meanwhile, the for-profit gang is getting rich.

Literally, there are at least 20 million casualties. Betsy DeVos must think 20 million casualties is acceptable, but I do not. Why don't our  politicians--Republicans and Democrats-- begin to behave like grownups and impeach Betsy DeVos, who is running DOE like a character in Dr. Strangelove.

10 to 20 million casualties--tops!

ECMC screws up: Couldn't prove Mr. Rowe owed on his daughter's student loan

Educational Credit Management Corporation [ECMC]  is the Department of Education's premier student-loan debt collector.

ECMC has appeared in literally hundreds of student-loan bankruptcy cases, and it knows all the legal tricks for defeating a student-loan borrower's efforts to discharge student loans in bankruptcy. And most of the time ECMC wins its cases.

But not always.

 Last June, Judge Catherine Furay, a Wisconsin bankruptcy judge, ruled in favor of Thomas Rowe, who sought to discharge a student loan he said he didn't owe. ECMC claimed Rowe signed a student loan on behalf of his daughter. Rowe said he didn't sign the loan and that any signature appearing on the loan document must be a forgery.

Rowe declared bankruptcy and filed an adversary proceeding to discharge the student loan ECMC claimed he owed. A trial date was set, but neither Rowe nor ECMC filed the disputed loan document with the court.

Judge Furay ordered the parties to file briefs on the burden of proof and concluded the burden was on ECMC to prove Rowe owed on the student loan. Since ECMC did not produce the loan document, Judge Furay discharged the debt.

What the hell happened?

How could ECMC,, the most sophisticated student-loan debt collector in the entire United States, not produce the primary document showing Rowe had taken out a student loan?

I can think of only two plausible explanations. First, ECMC may have had the loan document in its possession but didn't produce it because the document would show Rowe was right-- he hadn't signed the loan agreement.

Second, the loan document may have gotten lost as ownership of the underlying debt passed from one financial agency to another.

Here is the lesson I take away from the Rowe case. If you are a student-loan debtor being pursued by the U.S. Department of Education or one of  DOE's debt collectors, demand to see the documents showing you owe on the student loan.

 Most times, the creditor will have the loan document, but not always.  And, as Judge Furay ruled, the burden is on the creditor to show a loan is owed.

And so I extend my hearty congratulations to Thomas Rowe, who defeated ECMC, the most ruthless student-loan debt collector in the business. Thanks to Judge Furay's decision, Mr. Rowe can tell ECMC to go suck an egg.

References

Rowe v. Educational Credit Management Corporation, No. 17-0033-cf ( Bankr. W.D. Wis. June 28, 2018) (unpublished).

LGBTQ Student Organizations and the Equal Access Act: Betsy DeVos Has No Power to Restrict the Protections of the EAA

By Richard Fossey & Todd A. DeMitchell 

Originally posted at Berkley Forum, the blog site for Georgetown University's Center For Religion, Peace and World Affairs.

In 1984, Congress passed the Equal Access Act, which prohibits secondary schools that receive federal funds from discriminating against non-curriculum-related student groups based on their political, philosophical, or religious viewpoint. Thus, if a high school permits any non-curriculum-related student group to use its school facilities, it must allow other student groups equal access, without regard to the group’s viewpoint.

In adopting the EAA, Congress intended to advance the right of Christian student groups to use school facilities during non-instructional hours; and it clearly accomplished that goal. In Board of Education v. Mergens, a 1990 opinion, the United States Supreme Court upheld the constitutionality of the EAA, rejecting a school district’s argument that the Act violated the Establishment Clause.

Litigation Involving Gay Student Groups Seeking to Exercise Their Rights Under the EAA

Not long after the law was passed, LGBTQ student groups, which sometimes called themselves Gay Straight Alliances (GSA), sought the same rights as religious groups under the EAA, and a few school districts refused to recognize them. The GSAs sued in federal court, and they almost always won.

For example, a California school district argued that a GSA would introduce discussions of sexuality that were age inappropriate and would disrupt the school environment. A federal court rejected that argument, noting that a student club that focuses on sexuality might actually prevent school disruptions that can take place when students are harassed based on sexual orientation.

Likewise, a Kentucky school district maintained that it was legally entitled to shut down a GSA because the school board’s recognition of the group had triggered a boycott by anti-gay students. But a federal court disagreed. To allow disruptive anti-gay students to nullify the GSA’s legal right to meet, the court ruled, would amount to a “heckler’s veto” of constitutionally protected speech.

Ten years ago, we analyzed all published court decisions involving GSAs seeking to exercise their rights under the EAA, and we identified only one decision in which a federal court allowed a school district to ban a GSA while recognizing other student clubs. In Caudillo v. Lubbock Independent School District, a Texas school district refused to recognize a gay student group and the group filed suit. A federal district court upheld the school district’s decision on the grounds that the gay student group had created a web site with links to other web sites that the judge ruled were obscene.

Since our article was published, there have been a few more lawsuits filed by GSAs seeking recognition from school districts under the EAA, and they have generally prevailed. For example, in a 2016 case, a Florida school district refused to recognize a GSA organized by middle-school students on the grounds the EAA applied only to secondary schools and the district’s middle school was not a secondary school. The Eleventh Circuit Court of Appeals rejected that argument, ruling emphatically that a middle school is a secondary school subject to the EAA.

Can Betsy DeVos Diminish LGBTQ Students’ Rights under EAA?

Betsy DeVos, President Trump’s Secretary of Education, has diminished the U.S. Department of Education’s role in protecting the civil rights of LGBTQ students. As the Brookings Institution reported, DeVos has consistently declined to say whether DOE will protect LGBTQ students from discrimination. Earlier this year, the Department’s Office of Civil Rights announced it would stop accepting complaints about transgender students not having access to school bathrooms that match their gender identity. Is it possible DeVos might restrict LGBTQ students’ legal right to form GSAs in public high schools?

We do not believe DeVos can water down the EAA’s protections for GSAs, even if she tries to do so. The EAA is a federal statute that Congress is unlikely to repeal or amend, and federal courts are virtually unanimous in holding that the EAA guarantees the right of GSAs to organize in all public high schools where other non-curriculum related groups have formed.

Perhaps more importantly, the EAA has been in place for 34 years, and few school districts have refused to abide by its provisions. All across the United States, conservative Christian student groups and GSAs have met on high school campuses with little or no friction, and most school authorities are more than willing to allow GSAs to organize and meet.

In short, Betsy DeVos may reduce DOE’s role in protecting the civil rights of LGBTQ students, but she cannot extinguish their legal right to form GSAs in public high schools. Happily, the federal courts will stop her if she tries.

Wildfires ravage California and student debtors groan under mountains of debt. Meanwhile scholars debate transphobia

More than 5,000 wildfires burned in California this summer, incinerating more than 1 million acres of forests and several thousand homes.  For Californians, 2018 is truly the year of the holocaust fire.

Approximately 45 million Americans groan under the burden of $1.5 trillion in outstanding student loans. As one dentist has demonstrated, it is now possible for a person to accumulate $1 million in student-loan debt. For millions of people, student loans have incinerated their financial future--a holocaust of another kind.

Meanwhile American scholars debate this important issue: Is the acronym 'TERF' a transphobic slur?

If you don't know what TERF means, you're probably a misogynistic bastard, and  you're definitely uncool.  So I will tell you. TERF is the acronym for "trans-exclusionary radical feminist." As Colleen Flaherty explained in Inside Higher Ed, the term describes "a subgroup of feminists who believe that the interests of cisgender women (those who are born with vaginas) don't necessarily intersect with those of transgender women (primarily those born with penises)."

Here's the nut of the debate. Some feminists believe that the experience of having lived as a male for some time is important to feminist discourse, "but some trans scholars and allies say that notion is of itself transphobic, since it means that trans women are somehow different from women, or that they're not women at all."

As Inside Higher Ed informs me, Rachel McKinnon, an assistant professor of philosophy at the College of Charleston, argues that TERF is "a modern form of propaganda where so-called trans-exclusionary radical feminists (TERFs) are engaged in a political project to deny that trans women are women--and thereby to exclude trans women from women-only spaces, services, and protections."

This is all inside baseball to me. Nevertheless, as I read the Inside Higher Ed article about this debate, I became curious about the College of Charleston, where Professor McKinnon teaches. I learned that C of C is a public institution of about 11,000 students located in Charleston, South Carolina. The college accepts almost 4 out of 5 applicants for admission and it costs a South Carolina student about $29,000 a year to study there (tuition, room and board).

An out-of-state student, however, will pay considerably more to study at C of C: about $49,000 a year. So a Californian who enrolls at the College of  Charleston to study TERF bigotry with Professor McKinnon would have to borrow a considerable amount of money--at least $200,000--to get a 4-year degree.

Would that be a good investment? You can answer the question for yourself. As for me, I question whether scholarly debates about trans-exclusionary radical feminism is a good use of public money in these unquiet times when 5,000 wildfires blaze in California, 72,000 people died from opioid overdoses last year, and millions of  Americans struggle to pay their student loans.

Professor Rachel McKinnon speaks out against TERFs