Private liberal arts colleges are discounting tuition by an average of 44 percent--undercutting the credibility of their sticker prices

Rouses Supermarkets, a Louisiana food chain, advertised a wine and spirits sale a few days ago. Three Olives root beer vodka--normally priced at $20 a bottle, was on sale--4 bottles for ten bucks!

Did I rush to my nearest Rouses grocery store to stock up on root beer vodka? No, I did not. Instead I formed a negative opinion of the stuff. I concluded that any vodka that can be purchased on sale for two dollars and fifty cents a bottle is probably not worth $20 a bottle.

Private liberal art colleges are risking their long term viability by slashing their posted tuition prices drastically. Last year, the colleges discounted freshman tuition by an average of 49 percent; and tuition for students as a whole were slashed by an average of 44 percent.

In an informative article for Inside Higher Ed, Rick Seltzer identified  two trends that are driving colleges to heavily discount their tuition prices.  First, students' families need increased levels of financial aid in the wake of the 2008 recession. Second, colleges are heavily competing for students due to a downward demographic trend of fewer college-age students in the population. Ken Redd, research director for the National Association of College and University Business Officers (NACUBO) was quoted as saying he saw nothing on the horizon that would dissipate those trends.

Not surprisingly, small colleges are discounting tuition more heavily than large comprehensive universities.  At the small schools, freshman tuition is being discounted by more than 50 percent.

According to NACUBO's report, tuition discounting is happening even as colleges raise their sticker prices. Unfortunately, for many colleges, this tactic has not increased net revenue. “If you adjust for inflation, many schools are actually seeing real decreases in net tuition revenue,” Mr. Redd said.

Increased tuition discounts is just another sign that private liberal arts colleges are under an existential threat. Several have closed already, and others are taking drastic action to cut their costs.

Holy Cross College in Indiana sold 75 acres of real estate to Notre Dame to bolster its financial picture even as it struggled to quell rumors that it will soon be closing. Wheeling Jesuit University is encouraging faculty members to retire early.  Mills College, a small women's college in California, is laying of faculty members. Mills is running a $9 million deficit on a $57 million operating budget--clearly not sustainable.

At some colleges, administrators are finding that a smaller and smaller percentage of applicants who are admitted actually show up as students.  Mills for example, admitted 1,242 applicants in 2013-2014; and only 217 applicants actually enrolled. In 2015, the enrollment picture was even bleaker: 639 applicants were admitted and only 139 students actually enrolled.

Some small private colleges will survive in spite of the bleak financial picture. Those that have real estate to sell, like Holy Cross, can keep the wolf from the door for a few more years. Colleges that have large endowments can draw down those funds to meet their budgets.

But ultimately, a lot of small liberal arts colleges are going to close. Their target customers won't be hurt by this trend; they will simply enroll at public institutions. But faculty and staff  from closed colleges are going to find it very difficult to find new jobs.

References

Scott Jaschik. 'Financial Emergency' at Mills. Inside Higher Ed, May 17, 2017.

Rick Seltzer. Discounting Keeps Climbing. Inside Higher Ed, May 15, 2017.

Rick Seltzer. Holy Cross College to Sell Land to Notre Dame. Inside Higher Ed, May 15, 2017.

Rick Seltzer. Early Retirements at Wheeling Jesuit. Inside Higher Ed, May 10, 2017.

University of Phoenix graduate got her student loans discharged on the grounds that Phoenix falsely certified she was eligible to receive the loans

 As the Department of Education attests on its own web site, DOE will forgive or cancel student loans under certain circumstances. For example, students are entitled to have their loans forgiven if the school they were attending closes while they were enrolled or shortly after that.   Students can also obtain a discharge if they can show they were induced to take out student loans through fraud. And students are also entitled to have their student loans discharged if the school they attended falsely certified that they were eligible to receive a federal student loan.

Unfortunately, the administrative process for obtaining a loan discharge is not easy to navigate. In fact, one might conclude that DOE sets up roadblocks to prevent student borrowers from getting the releases to which they are legally entitled. Price v. U.S. Department of Education, decided last year, illustrates just how difficult it can be to obtain a loan discharge even when a student is clearly qualified for relief.

Price v. U.S. Department of Education: The facts

Phyllis Price graduated with a degree from the University of Phoenix in 2005. She paid for her studies by taking out student loans, which she consolidated into a single loan for $36,868 bearing interest at 5.3 percent.

Price was 52 years old when she began her studies at the University of Phoenix and had not graduated from high school. A university counselor "instructed her to state on the [admission] application that she had actually finished school and to fill in the year she 'should have graduated.'" Price filled out the forms as she was directed.

Apparently, Price's degree from Phoenix did not benefit her financially. She was working as a contract administrator at the time she began her studies, and she was still doing substantially the same work ten years after obtaining her degree.

Price's first payment on her consolidated loan was due in August 2006. She did not make payments on the loan, and the Department of Education (DOE) declared her in default in October 2007.

In March 2008, Price filed a "False Certification (Ability to Benefit) Loan Discharge Application" in an effort to get her loans discharged. Essentially, she argued that her student loans should be canceled because the University of Phoenix had falsely certified that she was eligible to receive federal student loans for her studies.

American Student Assistance (ASA), DOE's loan servicer, denied Price's application and told her to produce evidence that she did not have a high school diploma. Price produced her high school transcript, which was prominently stamped "DID NOT GRADUATE" and asked for a hearing.

On June 24, 2009, more than a year after Price produced her high school transcript, DOE affirmed ASA's original decision denying her a loan discharge.  On October 1, 2014--more than six years after she filed her discharge application, DOE issued its final decision denying Price's "false certification discharge application."  A short time later, Price received notice that her wages were subject to being garnished for failure to pay back her student loan. Price then brought suit in federal court.

Statutory and Regulatory Issues Pertinent to Price's case

Under the Federal Family Education Loan Program (FFELP), private lenders make loans to "eligible borrowers" to finance postsecondary studies. The loans are insured by student loan guaranty agencies and reinsured by DOE. Generally, an eligible borrower is someone who has a high school diploma or a GED. 

"However, a 'student who does not have a certificate of graduation from a school providing secondary education, or the recognized equivalent of such certificate,' may qualify for a loan if the school certifies that she has the ability to  benefit from the education it provides." Price v. U.S. Dep't of Educ., 209 F. Supp. 3d 925, 930 (S.D. Tex. 2016) (quoting 20 U.S.C. sec. 1091(d)). 

A school can certify that a student has the ability to benefit from its programs if the student passes an independently administered ATB ("ability to benefit") test.  However, the University of Phoenix did not require Price to take an ATB test.

What is the purpose of the "ability to benefit" rule? Congress adopted "ability to benefit" legislation in 1992, "spurred by public concern over unscrupulous schools exploiting student borrowers who received no benefit from expensive classes of little use." Id. Under federal law (20 U.S.C. sec. 1087(c) (1)), the Department of Education is required to discharge loans taken out by people who were falsely certified as being eligible to receive federal loans by the schools they attended. 

A federal magistrate rules in Price's favor

Price filled out an application to have her loans discharged in 2008, asserting under oath that she did not have a high school diploma at the time she took out federal loans and had not been given an ATB test. End of story, right?

No, DOE refused to discharge her student loans on the grounds that it had no evidence that the University of Phoenix had systematically violated the "ability to benefit" rules. In refusing to forgive Price's loans, a federal magistrate found, DOE violated federal law and DOE's own regulations. In essence, the Magistrate observed, DOE's decision-making process "amounted to a cursory glance at the forest, with no attempt to spot the only tree that mattered."

DOE attempted to defend its decision by offering post hoc rationalizations. In particular, the Department argued that Price obtained a degree from the University of Phoenix and should not be allowed to benefit from that degree without paying for it. But the federal Magistrate rejected that argument, pointing out that Price was entitled to have her loans forgiven whether or not she obtained a degree. 

Furthermore, the Magistrate noted, Price apparently had not benefited from her studies at the University of Phoenix. "Price is doing essentially the same job as before she enrolled, and any psychic benefit from achieving a degree is more than offset by eight years of fending off debt collectors." In any event,  the Magistrate continued, "Congress did not see fit to condition student loan relief upon a showing that the student ultimately failed to graduate." Id. at 934.

Why did DOE deny Price the relief to which she was legally entitled?

Clearly, Price was ill-treated by DOE, which dragged her through a tedious administrative process for six years before ultimately denying her claim.  And, as a federal magistrate concluded, Price was clearly entitled to have her student loans forgiven under federal law and DOE's own regulations.

Why did DOE take the position it did? I can think of only one reason--DOE is so desperate to keep people from getting their loans forgiven that it is willing to ignore federal law. 

DOE is like the fabled Dutch boy with his thumb in the dike. Once a few people are granted relief from their student loans, it will be apparent that millions are entitled to relief. That will lead to a torrent of loan forgiveness, which will cause the federal student loan program to collapse.

References

Price v. U.S. Dep't of Education, 209 Fed. Supp. 3d 925 (S.D. Tex. 2016).

The Protection of Social Security Benefits Restoration Act: Will there be bipartisan support?

Senators Ron Wyden (D-OR) and Sherrod Brown (D-OH) reintroduced the Protection of Social Security Benefits Restoration Act a few days ago. If adopted into law, this bill will stop the federal government from garnishing the Social Security benefits of elderly people who defaulted on their student loans.

This is a good bill, and it deserves bipartisan support.

Late last year, the General Accounting Office released a report on governmental offsets of Social Security benefits. The GAO documented that 173,000 people had their Social Security checks reduced due to defaulted student loans in 2015. This is nearly a five-fold increase from 2002, when only 36,000 people had their Social Security checks reduced for that reason.

Senators Wyden and Brown first introduced this bill in 2015, when it had five additional co-sponsors. This year the bill has 10 additional co-sponsors--all Democrats: Senators Dianne Feinstein (D-CA), Kirsten Gillibrand (D-NY), Patrick Leahy (D-VT), Jim Merkley (D-Or), Bill Nelson (D-FL), Bernie Sanders (D-VT), Elizabeth Warren (D-MA), Sheldon Whitehouse (D-RI), Mazie Hirono (D-HI), and Brian Schatz (D-HI).

Surely this bill will garner widespread support among both Democrats and Republicans. If ever there was a bill that deserves bipartisan support, this is it.

Americans should watch this bill closely to see if it makes its way into law. Any Senator or Congressperson who votes against this bill should be voted out of office. Any federal legislator who tries to delay the bill or prevent it from moving forward should be given the boot.

Admittedly, this bill will only make a small contribution to relieving the suffering of overburdened student-loan debtors. Eight million people have defaulted on their loans and almost 6 million more have been forced into income-driven repayment plans that stretch their payments out for 20 to 25 years. Millions more are not making their loan payments because their loans are in deferment or forbearance.

No reasonable person can argue against passage of the Wyden-Brown bill. If the Protection of Social Security Benefits Restoration Act fails to become law, it will be a sign that our elected representatives cannot work together to solve real and obvious problems, which will mean our country is in real trouble.

Senator Ron Wyden (D-OR)

References

Brown Introduces Bill to Stop Government from Taking Away Social Security Benefits to Pay Off Student Loans. Brown Press Release, May 3, 2017.

Senate Democrats Introduce Bill to Stop the Government From Taking Away Social Security Benefits to Pay Off Student Loans. Wyden Press Release, December 10, 2015.

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).

ECMC n v. Acosta-Conniff: Just because you made some bad decisions doesn't disqualify you from discharging your student loans in bankruptcy

Alexandra Acosta-Conniff (Conniff), a single mother of two and an Alabama school teacher, took out student loans to further her education; and she eventually obtained a Ph.D. degree from Auburn University.  She made some payments on her loans, but she put them in deferment for several years due to her low income and her family situation.

Interest accrued on the loans while they were in deferment, and by the time Conniff filed for bankruptcy, her loan balance had grown to $112,000.  In 2013, Conniff filed an adversary action against Educational Credit Management Corporation, seeking to discharge her student loans in bankruptcy.

At the trial on her adversary complaint, Conniff (who argued her case without a lawyer), presented evidence that her expenses slightly exceeded her income and that she was only able to make ends meet by getting financial aid from her parents.

ECMC opposed bankruptcy relief, arguing Conniff should be put into an income-driven repayment plan. ECMC also maintained that Conniff had discretionary income she could devote to making loan payments because she made voluntary payments of $220 a month to her retirement plan.

Judge William Sawyer, an Alabama bankruptcy judge, applied the three-part Brunner test to Conniff's circumstances and concluded that she passed all three parts. First, she was unable to pay off her loans and maintain a minimal standard of living for herself and her children. Second, additional circumstances existed showing that it was unlikely that her financial circumstances would improve during the loan-repayment period. Finally, Judge Sawyer was convinced that Conniff had handled her student loans in good faith.

In deciding Conniff's case, Sawyer, wrote that he was familiar with teachers' pay levels in Alabama, and he considered it unlikely that Conniff's pay as a teacher would increase significantly in the years to come. The judge estimated that Conniff's working life would extend no more than 15 years and that she would be unable to repay her student loans in that time period. Thus, Judge Sawyer discharged Conniff's loans in their entirety.

ECMC appealed to a U.S. District Court, arguing that Judge Sawyer had misapplied the Brunner test. Judge W. Keith Watkins, who heard the appeal, sided with ECMC and specifically found that Conniff failed Brunner's second prong because she had not demonstrated additional circumstances showing that it was unlikely she could repay her student loans in the future.

Essentially, Judge Watkins expressed disapproval of Conniff's decision to obtain a Ph.D. "[Judge Watkins] opined that Conniff has only herself to blame for incurring student debt in the pursuit of multiple degrees that she should have known would not lead to an increase in income sufficient to cover the debt."

Adopting a censorious tone, Judge Watkins said this:

Although [Conniff] is not satisfied with the pay the advanced degrees ultimately have yielded, Conniff chose to earn four degrees, funded primarily by student loans, in her preferred career path of education with a general understanding of the benefits she wold obtain from the degrees versus the costs. She admits specifically that she decided to obtain another student loan to earn her pinnacle Ph.D. in special education and agreed to repay it, knowing how the cost of the Ph.D. compared with the increase in pay it would provide. Conniff finds herself in circumstance largely of her own informed decision-making, which although not dispositive is a consideration.

Conniff, who by now had obtained excellent legal counsel in the person of retired bankruptcy judge Eugene Wedoff, appealed the district court's decision to the Eleventh Circuit Court of Appeals. There, she was more fortunate.  The Eleventh Circuit panel reversed Judge Watkin's opinion and remanded Conniff's case for further consideration.

The Eleventh Circuit specifically disapproved of Judge Watkin's conclusion that Conniff failed the second prong of the Brunner test because she "ha[d] only herself to blame" for her student-loan predicament. In the Eleventh Circuit panel's view, this was the wrong way to interpret Brunner's second prong. Thus, the Eleventh Circuit instructed:

[T]he second prong [of Brunner] is a forward-looking test that focuses on whether a debtor has shown her inability to repay the loan during a significant portion of the repayment period. It does not look backward to assess blame for the student debtor's financial circumstances. Thus, even if the court concludes that a debtor has acted recklessly or foolishly in accumulating her student debt, that does not play into an analysis under the second prong. Nor should it be considered on remand in analysis of that prong. [emphasis supplied] 

The Eleventh Circuit decision (which was not published) is not an outright win for Conniff. She must return to the district court to enable Judge Watkins to reconsider her situation under the Brunner test in accordance with the Eleventh Circuit's directive. But it is a good decision overall, not only for Conniff, but for many other student-loan debtors in bankruptcy.

Let's face it. Millions of distressed student debtors are indebted up to their eyeballs by student loans at least partly because they made some questionable decisions. Perhaps they obtained their degrees from expensive for-profit colleges instead of enrolling in a more reasonably priced public institution. Maybe they chose professions that will not lead to high-paying jobs. Perhaps they changed majors midway through their studies and incurred additional costs.

But the Eleventh Circuit of Appeals has ruled that judges should not examine a debtor's past when determining future ability to repay student loans. The second prong of the Brunner test "is a forward-looking test" and "does not look backward to assess blame." 

Thus, although the Eleventh Circuit's decision in Acosta-Conniff v. ECMC did not rule decisively in favor of cancelling Conniff's debt, she can take comfort from the fact that the lower court will consider her circumstances without blaming her for going to graduate school.

 References

Acosta-Conniff v. ECMC [Educational Credit Management Corporation], 536 B.R. 326 (Bankr. M.D. Ala. 2015), reversed, 550 B.R. 557 (M.D. Ala. 2016), reversed and remanded, No. 16-12884, 2017 U.S. App. LEXIS 6746 (11th Cir. Apr. 19, 2017).

ECMC [Educational Credit Management Corporation v. Acosta Conniff], No. 16-12884, 2017 U.S. App. LEXIS 6746 (11th Cir. Apr. 19, 2017) (unpublished opinion).

ECMC [Educational Credit Management Corporation] v. Acosta-Conniff, 550 B.R. 557 (M.D. Ala. 2016), reversed and remanded, No. 16-12884, 2017 U.S. App. LEXIS 6746 (11th Cir. Apr. 19, 2017).

Richard Fossey & Robert C. Cloud. Tidings of Comfort and Joy: In an Astonishingly Compassionate Decision, a a Bankruptcy Judge Discharge the Student Loans of an Alabama School Teacher Who Acted as Her Own Attorney. Teachers College Record, July 20, 2015. ID Number: 18040.

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The Opioid Epidemic and The Student Loan Crisis: Is there a link?

James Howard Kunstler wrote one of his best essays recently about America's opioid epidemic, and he began with this observation:

 While the news waves groan with stories about "America's Opioid Epidemic," you may discern that there is little effort to actually understand what's behind it, namely the fact that life in the United States has become unspeakably depressing, empty, and purposeless for a large class of citizens.

Kunstler went on to describe life in small towns and rural America: the empty store fronts, abandoned houses, neglected fields, and "the parasitical national chain stores like tumors at the edge of every town."

Kunstler also commented on people's physical appearance in backwater America: "prematurely old, fattened and sickened by bad food made to look and taste irresistible to con those sick in despair." And he described how many people living in the forgotten America spend their time: "trash television, addictive computer games, and their own family melodramas concocted to give some narrative meaning to lives otherwise bereft of event or effort."

There are no jobs in flyover America. No wonder opioid addiction has become epidemic in the old American heartland. No wonder death rates are going up for working-class white Americans--spiked by suicide, alcohol and drug addiction.

I myself come from the desperate heartland Kunstler described. Anadarko, Oklahoma, county seat of Caddo County, made the news awhile back due to four youth suicides in quick succession--all accomplished with guns. Caddo County, shaped liked the state of Utah, can easily be spotted on the New York Times map showing where drug deaths are highest in the United States. Appalachia, eastern Oklahoma, the upper Rio Grande Valley, and yes--Caddo County have the nation's highest death rates caused by drugs.

Why? Kunstler puts his finger on it: "These are the people who have suffered their economic and social roles in life to be stolen from them. They do not work at things that matter.They have no prospect for a better life . . . ."

Now here is the point I wish to make. These Americans, who now live in despair, once hoped for a better life. There was a spark of buoyancy and optimism in these people when they were young. They believed then--and were incessantly encouraged to believe--that education would improve their economic situation. If they just obtained a degree from an overpriced, dodgy for-profit college or a technical certificate from a mediocre trade school, or maybe a bachelor's degree from the obscure liberal arts college down the road--they would spring into the middle class.

Postsecondary education, these pathetic fools believed, would deliver them into ranch-style homes, perhaps with a swimming pool in the backyard; into better automobiles, into intact and healthy families that would put their children into good schools.

And so these suckers took out student loans to pay for bogus educational experiences, often not knowing the interest rate on the money they borrowed or the payment terms. Without realizing it, they signed covenants not to sue--covenants written in type so small and expressed in language so obscure they did not realize they were signing away their right to sue for fraud even as they were being defrauded.

And a great many people who embarked on these quixotic educational adventures did not finish the educational programs they started, or they finished them and found the degrees or certificates they acquired did not lead to good jobs. So they stopped paying on their loans and were put into default.

And then the loan collectors arrived--reptilian agencies like Educational Credit Management Corporation or Navient Solutions.  The debt collectors add interest and penalties to the amount the poor saps borrowed, and all of a sudden, they owe twice what they borrowed, or maybe three times what they borrowed. Or maybe even four times what they borrowed.

Does this scenario--repeated millions of time across America over the last 25 years--drive people to despair? Does it drive them to drug addiction, to alcoholism, to suicide?

Of course not.

And even if it does, who the hell cares?

Drug Deaths in 2014

References

James Howard Kunstler. The National Blues. Clusterfuck Nation, April 28, 2017.

Sarah Kaplan.'It has brought us to our knees': Small Okla. town reeling from suicide epidemic. Washington Post, January 25, 2016.

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014. 

Gina Kolata and Sarah Cohen. Drug Overdoses Propel Rise in Mortality Rates of Young Whites. New York Times, January 16, 2016.

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. 

Haeyoun Park and Matthew Bloch. How the Epidemic of Drug Overdose Deaths Ripples Across America. New York Times, January 19, 2017.

A Holy Cross Vice President writes confidential email hinting that the college may close and mistakenly sends it to the entire student body: Oops!

Kelly Jordan, Vice President for Student Affairs at Holy Cross College in Indiana, sent a confidential email to a boarding school administrator last April, hinting that Holy Cross may soon be closing. Kelly told his correspondent that he might "spend the better part of the coming school year closing down the college."

Unfortunately for Vice President Jordan--and for Holy Cross, for that matter--Jordan's email was mistakenly sent out to the entire student body. Oops! The South Bend Tribune, a local newspaper, picked up the story; and now the whole world knows that the future of Holy Cross is in doubt.

Father David Tyson, interim president of Holy Cross, sent out the usual damage-control email message, assuring students that "I look forward to classes beginning in August and working with the faculty and students to create a bright future for the college that fully reflects the Holy Cross mission."

Note that Father Tyson did not contradict VP Jordan's message that Holy Cross might soon be shutting down.

Holy Cross is clearly in trouble. Its former president stepped down earlier this spring along with three of its five vice presidents. The college is quite small--only about 500 students; and the future of many small liberal arts colleges is uncertain.  Less than a year ago, two small Catholic colleges announced they were closing: St. Catharine College in Kentucky and St. Joseph's College in Indiana.

Most small liberal arts colleges depend heavily on tuition revenue, and a lot of them are having trouble attracting students. The National Association for College Admission Counseling recently published a list of colleges that still have room for incoming freshmen or transfer students in their fall 2017 classes. As of early this month, there were more than 500 colleges and universities on that list.  A majority of those schools were private liberal arts colleges with less than 5,000 students.  Seventy-seven of those schools had 1,000 students or less.

A lot of small liberal arts colleges are fighting to survive; and many will fail over the next two or three years. Holy Cross's recent embarrassment raises questions about how college administrators should deal with their own institutions' struggles.

Obviously, small-college administrators should do everything they can to attract new students and revenues. But there comes a time when college leaders need to ask themselves if they have a moral obligation to shut down rather than attract more new students into an institution that is on the road to closure.

If so, when should students and staff be told? I can't answer that question, but for Holy Cross the question is moot thanks to the fact that a confidential email message went public.

Photo credit: South Bend Tribune

References

College Openings Update: Options for Qualified Students. National Association for College Admission Counseling (n.d.).

Margaret Fosmoe. Holy Cross VP paints bleak future for college in emails mistakenly sent to students.  South Bend Tribune, May 6, 2017.

Scott Jaschik.  College Will Suspend Operations. Inside Higher ED, February 7, 2017.

Scott Jaschik. 350 Colleges Still Have Room for New Undergrads. Inside Higher ED, May 4, 2017.

Emily Tate. College VP Sends Email on Possible Closure. Inside Higher Ed, May 8, 2017.

Millennials now outnumber Baby Boomers and they believe student loans should be forgiven: Politicians take note

 Gordon Long authored an essay for MATASII.com (reposted on the Zero Hedge blog site) that contains some profound observations about the Millennial generation. As Long points out, Millennials now surpass Baby Boomers as the nation's largest generation. In 2015, there were 74.9 Baby Boomers (ages 51-69), while there were 75.4 million Millennials (ages 18-34). And of course, Baby Boomers will shrink as a percentage of the nation's entire population as they grow older and die.

Gordon argues that Millennials have a larger sense of entitlement than Baby Boomers, who, after all, were raised by people from the notoriously self-reliant Greatest Generation. My late parents, for example, lived through the Great Depression and World War II, and they didn't believe anyone was entitled to anything; and I suppose some of that philosophy was passed on to me.  My children are Millennials; and I think they believe that everyone living in a prosperous society is entitled to health care and a basic level of education. If so, I agree with them.

Gordon made two observations about Millennials that have important political implications. First, millennials make about 20 percent less than the Baby Boomers did at their age--they are poorer as a whole than my generation was when we were young.

Second, a lot of Millennials believe student loans should be forgiven. And why shouldn't they hold that view? After all, I paid a pittance for a fine law degree when I was young and immediately got a well-paying job. Millions of Millennials are burdened with student loans and are struggling to find good jobs in a weak job market.

Long believes the Millennials' support for Bernie Sanders during the 2016 presidential election can be largely explained by Bernie's impassioned call for a free college education for everyone. This is a very appealing proposal to a generation of Americans who hold billions of dollars in student debt.

So what are the political implications of Long's observations? Simply this: the Millennials will not put up with the status quo in terms of the federal student program. Our political and media elites seem to think young Americans will continue borrowing more and more money for postsecondary education and will be content to enter into income-driven repayment plans that last as long as a quarter of a century. But the elites are delusional.

In the next presidential election and every election thereafter, the Millennials and the generations coming after them will flock to any candidate who calls for student loan forgiveness and free postsecondary education. They will become one-issue voters.

So far at least, President Trump and Secretary of Education Betsy DeVos are tone deaf to the student loan crisis. The Department of Education is mishandling the Public Service Loan Forgiveness program, and it nullified a decision by the Obama administration to ban student loan collection agencies from slapping huge penalties on student borrowers who defaulted on their loans. Apparently, DeVos is seeking advice from the for-profit college industry rather than the student debtors who were victimized by that industry.

The student loan crisis grows worse by the month, and the politicians who step forward with solutions will win the vote of the Millennials and a lot of other Americans. If our current President doesn't understand that, he will be a one-termer.

References

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

Steve Rhode. Public Service Loan Forgiveness Program Teeters With Unmitigated Disaster. Personal Finance Syndication Network, PFSyn.com, May 2, 2017.

Editorial, The Wrong Move on Student Loans. New York Times, April 76, 2017.

Senator Elizabeth Warren and Senate progressives should press for hearings on Educational Credit Management Corporation and the student loan crisis

Senator Elizabeth Warren has had a brilliant career. She grew up in Oklahoma, went to law school, and wound up on the Harvard Law School faculty. Now she is in the U.S. Senate, and pundits say she may run for President in 2020. Impressive!

Somewhere along the way, Senator Warren represented that she had Cherokee blood, although she never provided a shred of evidence to support that assertion. Her claim may have been a factor in getting that cushy Harvard Law School job. But Harvard says no, and Harvard always tells the truth.

Nevertheless, Harvard Law School claimed it had a Native American professor while Warren was on the faculty, without identifying who it was. (To be fair, it may have been Alan Dershowitz).

If Warren misrepresented her heritage to advance her career, we can't be too hard on her. Higher education is a rough business, and Warren certainly played the game better than I did. And, as the song goes that Willie Nelson made famous, Liz only did what she had to do.

But Warren is a senator now, and she has an obligation to do some good for the American people. She claims to be an advocate for distressed student-loan debtors, but what has she done for them?

She's written letters to the Department of Education and spouted a lot of nonsense about the "obscene" profits the government makes off the student-loan program. More substantively, she co-sponsored a bill in 2015 to protect seniors from having their Social Security checks garnished, but the bill never became law.

In my view, Senator Warren could do more to address the student loan crisis than file bills and write letters. Specifically, she should join with other progressives in the Senate and press for Senate hearings on the student loan guaranty agencies and Educational Credit Management Corporation in particular. ECMC is perhaps the federal government's most ruthless debt collector and has amassed a billion dollars in unrestricted assets, at least partly from hounding destitute student debtors.

In the Bruner-Halteman case, for example, ECMC garnished the wages of a bankrupt Starbucks employee 37 times in violation of the Bankruptcy Code's automatic stay provision. A Texas bankruptcy slapped ECMC with $74,000 in punitive damages.

And in the Hann case, ECMC continued trying to collect on a woman's student loans even though a bankruptcy court had discharged those loans on the grounds that she had paid them off.  ECMC only got stung with a small penalty for that misbehavior.

Rafael Pardo and the Century Foundation both established that the federal government is paying ECMC's attorney fees, and ECMC is using its attorneys to ground down overburdened student borrowers in the bankruptcy courts. Many of these destitute people don't have the money to hire a lawyer, but ECMC is paying its lawyers as much as $300 an hour.

The public has no idea what ECMC has been up to, and Senate hearings could shine some light on this sleazy organization. How much is ECMC paying its CEO, Jan Hines, and its other senior executives? What is ECMC doing with its wealth? Why does the Department of Education pay ECMC's attorney fees to engage in what Rafael Pardo described as "pollutive litigation"?

Senator Warren could do a great deal of good if she would use her powers of persuasion to get the Senate Banking Committee to hold hearings on ECMC's shady activities. In fact, if Senator Warren got the opportunity to ask ECMC executives some tough questions, I'll bet she could bring this rotten outfit down.

Senator Warren needs to accomplish something tangible to address the student loan crisis if she wants people to regard her as a consumers' advocate. If she doesn't accomplish something soon, Americans will be forced to conclude she is not really a progressive, just as we know she's not really a Cherokee.

How much does ECMC pay its CEO, Jan Hines?

References

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

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

John Hechinger. Taxpayers Fund $454,000 Pay for Collector Chasing Student Loans. Bloomberg.com, May 15, 2013.

Joshua Hicks. Did Elizabeth Warren check the Native American box when she "applied" to Harvard and Penn? Washington Post, September 28, 2012.

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014.

Rafael Pardo. The Undue Hardship Thicket: On Access to Justice, Procedural Noncompliance, and Pollutive Litigation in Bankruptcy. 66 Florida Law Review 2101 (2014).

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. 

Brian Walsh. Elizabeth Warren is Rewriting American History. U.S. News & World Report, April 22, 2014.

The Department of Education Fumbles the Public Service Loan Forgiveness Program

The Public Service Loan Forgiveness Program: The Best Option for Student borrowers With Six-Figure Debt

A few years ago, law professor Paul Campos wrote an advice book for people thinking about going to law school. If you borrow a lot of money to go to a second- or third-tier law school and graduate in the bottom half of your class, Campos warned, you probably won't make enough money to pay back your loans.

In such event, Campos advised, your only viable option is to get a job in the public sector and enroll in the Public Service Loan Forgiveness Program (PSLF). If you go that route, you will make monthly payments on your student loans for ten years based on a percentage of your income. When you've made 120 payments, the balance of your loan debt will be forgiven.

Campos's advice is good for anyone who is buried by student loans. If you racked up $100,000 or more in student loans and can't find a good job in the private sector, the PSLF program may be your only viable option. It is the financial equivalent of the last train out of Paris in the movie Casa Blanca. If Rick doesn't get on that train before the Nazis arrive, he's doomed.

The Department of Education Fumbles the PSLF Program: Is Betsy DeVos Out of Her Element?

Congress created the PSLF program in 2007, and the Department of Education has been promoting it ever since. DOE has instructed  PSLF participants to send their Employment Certification Forms (ECF) to FedLoan Servicing, DOE's approved PSLF processor, on an annual basis to verify they are in fact employed by a public service organization. More than half a million people are enrolled in the PSLF program, confident that their indebtedness will be cancelled after 10 years of public service employment..

But now it seems DOE may be reneging on its PSLF obligations. The American Bar Association sued DOE for not living up to its PSLF commitments, and DOE recently answered that law suit. In essence, DOE denied it had any obligation to honor FedLoan Servicing's decision to certify public service employment.

This is shocking. As Steve Rhode said in his blog about this development, "People who have worked ten years in jobs assuming their loans would be forgiven are potentially going to get some nasty surprises."

I don't know what to make of DOE's response to the ABA's lawsuit. If the PSLF program collapses, Betsy DeVos's credibility as the Secretary of Education, already compromised by her ties to the for-profit industry, will be completely destroyed.

To paraphrase  Walter Sobchak's remark to Donny in The Big Lebowski, "Betsy, you may be out of your element." DOE may come to its senses and straighten out the PSLF mess; in fact, I think that will probably happen.  But the political consequences of this episode will reverberate for a long time.

"Donny, you're out of your element."

References

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

Steve Rhode. Public Service Loan Forgiveness Program Teeters With Unmitigated Disaster. Personal Finance Syndication Network, PFSyn.com, May 2, 2017.

Wild Pigs and Lazy Tenured Professors: Very Difficult to Trap or Eradicate

Texas is infested with feral hogs—2.5 million of them, according to a recent New York Times story. In some parts of Texas, wild pigs outnumber people. And they can show up when you least expect them. A few years ago, a captured hog escaped from a trailer and plowed through a Whataburger restaurant.

These pigs are nasty creatures. They dig up crops, destroy fences, and drive out more desirable wildlife. They can be big—400 pounds or more; and they can be dangerous. If you corner a feral hog or get between a sow and her piglets, you can get hurt.

Unfortunately, feral pigs are very hard to eradicate. They are nocturnal animals seldom seen during daylight hours. They are extremely wily and quite suspicious of baited traps.  Texas passed legislation permitting people to hunt them at night and even to shoot them from helicopters; but so far the pig population just keeps growing larger. 

The more I learn about feral hogs the more struck I am by the similarities between wild pigs and the unproductive tenured professors who prowl our nation’s university campuses. Like feral

hogs, unproductive tenured professors are generally reclusive creatures who are seldom seen. Nevertheless, although they shun human contact, lazy professors, like wild pigs, can be dangerous if confronted or cornered. And, very much like feral hogs, lazy tenured professors do pretty much whatever they please. Like wild pigs, they snuff along from one academic year to the next, skulking through the academic underbrush and doing the minimum amount of work required to avoid post-tenure review.

It is time for the higher education community to confront the lazy tenured professor--the academic equivalent of a wild Texas hog. It is not fair for America’s college students to take out student loans for their education while universities harbor slothful professors who avoid students, don’t publish, and do little productive work. Anyone who has taught in a public university knows that the unproductive faculty member—protected by tenure—is a serious problem that academia as a whole is afraid to face.

Perhaps higher education could take some lessons from the feral hog experts—who are doing their best to reduce the population of wild pigs. First, the experts say, communities have to admit they have a problem. As Brett Johnson, an urban biologist with the Texas Parks and Wildlife Department, noted a few years ago, some towns refuse to acknowledge they have a problem with feral hogs and are “sweeping it under the rug.” That is a mistake, Johnson said. “Once [feral hogs] get a foothold, the chance of getting control of the problem becomes really difficult,”

Second, the feral hog experts stress, it is important for communities to work together. Sergeant Mike Bedrich, a suburban public safety officer in the Dallas-Fort Worth area, pointed out awhile back that feral hogs cross community boundaries. “Those hogs are traveling back and forth between all of those areas,” Bedrich said, which means catching the hogs must be a collaborative effort. If one town has an aggressive hog control program and the neighboring town does not, “then you haven’t really dealt with the problem.”

Finally, the feral hog experts emphasize, the people trying to trap wild hogs must be as cunning as their prey. For example, the Fort Worth Nature Center uses traps to get rid of its porky interlopers. As the Fort Worth Star-Telegram explained in a 2010 article, the Nature Center’s staff lets the hogs “become comfortable entering the traps in the hope that more will follow.” Robert Denkhaus, the Center’s natural resource manager, stressed that it is very important not to spring the trap too soon. “If the trigger goes too quick and [the animal] gets away, that pig just learned what a trap is,” Denkhaus said.

So what can higher education learn from the feral hog experts? First, like Texas towns annoyed by wild pigs, we in the academic community must admit that lazy tenured professors are a serious problem. Most colleges and universities have a significant number of unproductive faculty members and they contribute to driving up the cost of higher education.

Second, everyone in the academic community must work together to identify and confront the lazy tenured professor. It is not just the provost’s job to maintain academic standards. All professors must do their part to hold their colleagues accountable. That means the departmental compensation committee must stop giving unproductive professors a satisfactory rating when they make their merit pay recommendations.

And—like feral hog trappers, department chairs and college deans must become wilier in documenting the lazy professor’s shortcomings. At a minimum, that means college administrators must stop taking lazy professors' annual activity reports at face value. A professor may list an impressive number of committee assignments on his or her annual activity report. But did the professor attend any committee meetings or do any productive work? 

 And college administrators need to scrutinize publication records with a bit of skepticism. That one-page article in the annual newsletter of the Oklahoma Association of Medieval Literature Professors —is that really a peer-reviewed scholarly publication? And the book that a faculty member miraculously produces from a dust-covered dissertation—was it published by a reputable academic publishing house or was it ginned out by a vanity press?

I write this not as a university administrator but as a tenured professor myself. Higher education in the United States is under a severe financial strain. Professors in some states are already experiencing salary cuts, furloughs, and layoffs. It is in the interest of everyone in the higher education community—administrators, faculty members and staff—to operate our institutions with maximum efficiency. There is no room in today’s universities for unproductive professors, whether tenured or untenured.

Of course, we shouldn’t take the feral hog analogy too far. Lazy faculty members and wild pigs are not entirely similar. For one thing, feral hogs are incredibly fertile; a sow can produce two litters of piglets in twelve months, and each litter can have as many as ten piglets. Our nation's lazy professors don't have that kind of energy.

You're paying 60 grand a year to be taught by this guy?

References

Gene Hall. Feral hog uninvited guest at South Texas Whataburger. Texas Agriculture Talks, September 29, 2011.

B. Hanna. Feral hogs prove to be a nuisance across Tarrant County. Fort Worth Star-Telegram, January 27, 2011.

Mark Mapston. Feral hogs in Texas. College Station, TX: Texas A & M University.

Kate Murphy. A Plan to Poison the Wild Hogs of Texas. New York Times, April 29, 2017. 

Parents Plus Loans can be a nightmare: "Teach your children well . . ."

Teach your children well,

Their father's hell did slowly go by.

Teach the Children Well

Lyrics by Graham Nash

More than three million parents have taken out student loans for their children's college education. Eleven percent are in default, and another 180,000 are delinquent in their payments.

Congress created the Parent Plus program in 1980, which allows parents to obtain student loans to supplement the loans their children take out to finance their college studies. As Josh Mitchell reported in the Wall Street Journal last week, outstanding indebtedness on Parent Plus loans now tops $77 billion. 

The government issues Parent Plus loans with little regard to whether the parents can pay them back. Many parents who take out Parent Plus loans have subprime credit scores, which means they run a high risk of default. As Mitchell pointed out,  the Parent Plus default rate is higher than the home mortgage default rate during the 2008 housing crisis.

Without question, Parent Plus loans are being issued recklessly. "This credit is being extended on terms that specifically, willfully ignore their ability to repay," a spokesperson for Harvard Law School's Legal Services Center charged. "You can't avoid that we're targeting high-cost, high-dollar-amount loans to people who we know can't afford them."

To its credit, the Obama administration recognized that lending standards for Parent Plus loans were too lax. In 2011, the Department of Education introduced modest underwriting rules to prevent parents with low credit ratings from taking out Parent Plus loans.

But the higher education industry protested, arguing that tighter underwriting standards for Parent Plus loans would reduce college access for low-income and minority students. In response to this pressure, the Department of Education withdrew the new rules.

Obviously, people who are taking out student loans for their children are older; two thirds of Parent Plus borrowers are between the ages of 50 and 64. Many of them have student loans of their own. Some parents took out Parent Plus loans expecting their children to get good jobs and take over the loan payments.  But sometimes that doesn't happen, and the parents find themselves responsible for paying off loans they can't afford to repay.

Parents who default on Parent Plus loans risk having their income-tax refunds seized and their Social Security checks garnished. And bankruptcy is rarely an option. Parents who default on their children's student loans will find it difficult to discharge those loans in bankruptcy even if they are unemployed or in ill health.

In an NPR podcast, Michelle Singletary, a finance columnist, pointed out that many parents take out Parent Plus loans to help their children attend expensive colleges their families can't afford. It is difficult, Singletary acknowledged, for parents to tell their children that a particular elite college is simply out of financial reach.

The child might say, "But this is my dream college." If that happens, Singletary advised, the parent must have the wisdom and fortitude to say, "Honey, you need to find another dream."

Or, as songwriter Graham Nash might put it, "Teach your children well" regarding their college choices because if you borrow money for your child to go to college and can't pay it back, you will enter financial hell, a hell that will go by slowly.

References

Tom Ashbrook. Parents On the Hook for Student Loans. NPR Onpoint (podcast), April 26, 2017.

Josh Mitchell. The U.S. Makes It Easy for Parents to Get College Loans--Repaying Them Is Another Story. Wall Street Journal, April 24, 2017. 

Note: Quotations in this essay come from the sources cited in the reference list.

Whittier Law School is closing: "They shoot horses,don't they?"

Whittier Law School is closing. And well it should.

Whittier Law School, which a Daily Caller writer described as "one of America’s crappiest law schools," has a crummy record by almost any measurement. In 2016, 174 Whittier graduates took the California Bar Exam, and only 40 passed. That's a 22 percent pass rate, compared to a 62 percent pass rate among California law-school graduates as a whole.

And Whittier Law graduates are having a hell of a time finding jobs as lawyers. Less than 30 percent of Whittier's class of 2016 landed long-term jobs as attorneys ten months after graduating, according to an article published in abovethelaw.com. And only 2 percent found jobs in large law firms, which generally pay the highest salaries.

Yet, in spite of low employment rates and  a dismal bar-passage record, Whittier charges its students a lot of money. It cost $45,000 a year to attend Whittier Law School in 2016, not including books and living expenses. On average, Whittier's 2016 graduates left school owing $179,000 in student-loan debt.

Clearly it was time to put Whittier Law School out of its misery before it attracted another class of students who would graduate with massive debt and little chance of getting an attorney's job that would pay enough to justify $179,000 in student loans.

Of course, the law-school faculty objected. In fact some of them filed a lawsuit in an unsuccessful effort to persuade a judge to stop the law school from closing.

Law-school dissenters even trotted out that old bromide about the law school's commitment to diversity. The law school's web site avowed that it sought to provide "a high quality education to students of diverse backgrounds and abilities--students who might not otherwise have been able to receive a legal education and who are now serving justice and enterprise around the world."

What a load of bull!

It is true that U.S. News & World Report recently ranked Whittier as the nation's second most diverse law school. A majority of its students are nonwhite and a majority are women. But a law school that leaves its graduates with an average of $179,000 in student loans and little prospect of a lawyer's job is not doing anything positive toward promoting diversity.

I commend the Whittier Board of Trustees for having the courage to close Whittier Law School. Other universities need to do the same--at least two dozen by my reading of data compiled by Law School Transparency.

There are simply not enough law jobs for people who graduate from second- and third-tier law schools, and the cost of attending these schools is more likely to leave graduates with a lifetime of indebtedness than a lucrative career as an attorney.

After all, as Jane Fonda's character said in an old movie about endurance dancing, "They shoot horses, don't they?"

"They shoot horses, don't they?"

References

Sonali Kohli, Rosanna Xia, and Teresa Watanabe. Whittier Law School is closing, due in part to low studentachievement. Los Angeles Times, April 20, 2017.

Elizabeth Olsen. Whittier LawSchool Says It Will Shut Down. New York Times, April 19, 2017.

Eric Owens. FINALLY! One ofAmerica's Crappiest Law Schools Is Closing Its Doors. Daily Caller, April 23, 2017.

Staci Zaretsky. Whittier Law School Will Close, Leaving Disaster In Its Wake. abovethelaw, April 20, 2017.