Small colleges and for-profits are closing at an accelerating rate: Do Not Resuscitate

Resuscitate: to bring (someone who is unconscious, not breathing, or close to death) back to a conscious or active state again.

Merriam-Webster Dictionary 

Two sectors of the higher education are under extreme stress: for-profit institutions and small liberal arts colleges. In both sectors, schools are closing or downsizing at an accelerating rate.

In the last two weeks alone, Dowling College and St. Catharine College announced they are closing. Grace University, an interdenominational school in Nebraska, is raising tuition and cutting salaries to deal with financial problems; and for-profit Brown Mackie College announced that it is closing 22 of its 26 campuses over the next few years and will not accept any new students.

These failing colleges and universities are the educational equivalent of terminally ill patients. They see death approaching, but they deal with their mortality in different ways. Some failing colleges shut down in an orderly fashion and make arrangements for their current students to complete their programs at other institutions. Others refuse to accept the inevitable and search desperately for a survival strategy.

For example, Sweet Briar College in Virginia announced it was closing more than a year ago, but new leadership and some moneyed alumni rushed in to keep it open. But this year, Sweet Briar only enrolled 24 freshmen.

Likewise, although Dowling College announced its closure, it is now trying to partner with Global University Systems, "an educational investment firm" that has multiple partnerships with universities in England, Canada and the U.S. Personally, I can't see how this new relationship will have any bearing on Dowling's future.

In my view, all these faltering for-profits and struggling private colleges should close their doors with dignity once they have explored all reasonable strategies for remaining viable  Most of them are on life support--existing from month to month on infusions of student-loan money. It is irresponsible for failing institutions to continue recruiting students when trustees and administrators know these students will be going into debt to obtain an education from a college that will be closing in the very near future.

References

Candice Ferette and John Hildebrtand. Dowling, still officially open, can award degrees over summer. Newsday, June 14, 2016. Accessible at http://www.newsday.com/long-island/education/dowling-still-officially-open-can-award-degrees-over-summer-1.11916403

Emily Nohr. Grace University will raise tuition, cut baseball and softball, reduce salaries to cope with financial problems. Omaha World-Herald, June 14, 2016.  Accessble at http://www.omaha.com/news/education/grace-university-will-raise-tuition-cut-baseball-and-softball-reduce/article_499c0d2c-325d-11e6-84e8-17b1280538f5.html

Ashley A. Smith. Decreases in enrollment lead to Brown Mackie closing. Inside Higher Ed, June 15, 2016.  Accessible at https://www.insidehighered.com/news/2016/06/15/decreases-enrollment-lead-brown-mackie-closing

Another Small Private Closes Its Doors. Inside Higher Ed, June 1, 2016. Accesible at https://www.insidehighered.com/quicktakes/2016/06/01/another-small-private-closes-its-doors-dowling-college?utm_source=Inside+Higher+Ed&utm_campaign=a0fafeb056-DNU20160601&utm_medium=email&utm_term=0_1fcbc04421-a0fafeb056-198564813

Paul Fain. The Department and St. Catharine.  Inside Higher Ed, June 2, 2016. Accessible at https://www.insidehighered.com/news/2016/06/02/small-private-college-closes-blames-education-department-sanction?utm_source=Inside+Higher+Ed&utm_campaign=3d1c6eed79-DNU20160602&utm_medium=email&utm_term=0_1fcbc04421-3d1c6eed79-198565653

Rick Seltzer. Sweet Briar falls short of initial enrollment target, but leaders remain optimistic. Inside Higher Ed. May 5, 2016. Accessible at https://www.insidehighered.com/news/2016/05/05/sweet-briar-falls-short-initial-enrollment-target-leaders-remain-optimistic

Kellie Woodhouse. Closures to Triple. Inside Higher Education, September 28, 2015. Accessile at https://www.insidehighered.com/news/2015/09/28/moodys-predicts-college-closures-triple-2017

Lee Gardner. Where Does the Regional State University Go From Here? Partners 4 Affordable Excellence. May 22, 2016http://partners4edu.org/regional-state-university-go/

PAYE and REPAYE: Long-term student loan repayment plans are a bad option for older student-loan debtors

You can be young without money, but you can't be old without it.

Tennessee Williams

President Obama's Department of Education is pushing distressed student-loan debtors into long-term income-based repayment plans. Five million people are in them now, and DOE hopes to enroll two million more by the end of next year.  Without a doubt, DOE will reach this goal. In fact, I predict at least 10 million people will be enrolled in long-term repayment plans within four years.

To advance this goal, the Obama administration launched two new income-based repayment programs: PAYE and REPAYE. These are the most generous of the government's eight income-based repayment plans. PAYE and REPAYE allow debtors to make payments equal to ten percent of their adjusted gross income for 20 years. At the end of that time, any unpaid debt is forgiven, although debtors may be forced to pay federal income tax on the forgiven portion of their loans.

As I have argued repeatedly, long-term income-based repayment plans are nothing more than a cynical scheme to hide the magnitude of the student-loan crisis.  By lowering monthly payments, the Feds hope to keep the student-loan default rate down even though most people in these programs are making payments so low that they will never pay off their student loans.

Nevertheless, I understand why debtors are signing up for these plans. If they've had their loans in deferment for any considerable length of time, their loan balances will have ballooned to double the amount they borrowed or more because of accrued interest. Once that happens, they will never be able to pay off their student loans over the conventional 10--year repayment term.  In short, people with large loan balances and low-paying jobs have no choice--they are forced to enter 20- or 25-year repayment plans in order to avoid default.  

But long-term repayment plans are a terrible option for older student-loan debtors. People in their forties, fifties and sixties need to maximize their retirement savings in order to be able to retire with dignity; and most of them of them can't do that if they are making student-loan payments equal to  10 or 15 percent of their annual income.

In fact, the evidence is mounting that the baby boomer generation is not ready for retirement; and millions are facing dire poverty if they lose their jobs. A recent article in the Star Tribune reported that two thirds of households in the 55-64 age group have savings that equal less than their annual income and one third have no savings at all.

According to the National Institute on Retirement Security, the median retirement account savings among households in the 55-64 age range is only $14,500! Due to the recent recession and stagnant wages, millions of Americans have been forced to cash out their retirement accounts just to meet daily living expenses. More than 40 percent of Americans have elected to take Social Security benefits early in recent years because they need the cash, even though early participation reduces annual benefits by 25 percent.

Obviously, the last thing financially strapped Americans need as they grow older is a 20-year obligation to contribute a percentage of their income to pay off student loans.  Although long-term repayment plans can be defended for people who enroll in them when they are young, they are a disaster for people who sign up for PAYE or REPAYE or the six other income-based repayment plans when they are in their forties or even older.

But the government  and the student-loan creditors insist on pushing student-loan debtors into these plans regardless of their age.  For example, in the Halverson case, decided in 2009, Educational Credit Management Corporation argued that Steven Halverson should enter a 25-year income-based retirement plan even though he was 65 years old, had chronic health problems, and had an income of only about $13 an hour.  (Fortunately, a Minnesota bankruptcy judge was sympathetic to Mr. Halverson's plight and discharged his student-loan debt.)

And in the Stevenson case, a Massachusetts bankruptcy judge insisted that a woman in her fifties sign up for a long-term income-based repayment plan even though she had a record of homelessness and was living on only $1,000 a month.

Perhaps most famously, ECMC hounded Janet Roth through the courts all the way to the Ninth Circuit Bankruptcy Appellate Panel, heartlessly arguing that Roth should be on an income-based repayment plan to pay off more than $90,000 in student-loan debt even though she was 68 years old, had  chronic health problems and was living entirely off her Social Security income of $780 a month.

As a matter of public policy, the federal government simply must stop pressuring student-loan debtors who are in their forties or older into long-term repayment plans because this practice is making it impossible for these people to prepare for retirement.

We should occasionally remind ourselves why the federal student-loan program was inaugerated in the first place. The program's sole purpose is to enable people to get postsecondary education that will improve their lives.  

But for millions of Americans, the federal student-loan program has driven them to the brink of indigence. And if they are forced to make loan payments until they are in their sixties, their seventies, or their eighties, we will have created a class of elderly debtors who will spend their final years in poverty and want.  

In short, no one who is 40 years old or older should be forced into a 20- or 25-year student-loan repayment plan,  No one.  Older student-loan debtors who are otherwise eligible for bankruptcy relief should be able to shed their student-loan debt in the bankruptcy courts rather than be saddled with monthly student loan payments that will extend into their retirement years.

References

Bob Brenzing. AP Poll: Many take Social Security before full retirement, May 26, 2016.Fox News 17. Accessible at http://fox17online.com/2016/05/26/ap-poll-many-take-social-security-before-full-retirement/

 Michael Greenstone and Adam Looney. The Uncomfortable Truth About American Wages. Brooking Institution, October 23, 2012. Accessible at http://www.brookings.edu/research/opinions/2012/10/22-wages-greenstone-looney

Katy Read. The real story about retirement: Millions of baby boomers face financial crisis.  Star Tribune, Ocrober 21, 2015.  Accessible at http://www.startribune.com/the-real-story-about-retirement-millions-of-baby-boomers-face-financial-crisis/334718191/

Roth v. Educational Credit Management Corporation, 490 B.R. 908 (9th Cir. BAP  2013). 

Stevenson v. Educational Credit Management Corporation, 463 B.R. 586 (Bankr. D. Mass. 2011).

John F. Wasik. Social Security At 62? Let's Run the Numbers. New York Times, May 14, 2014. http://www.nytimes.com/2014/05/15/business/retirementspecial/social-security-at-62-lets-run-the-numbers.html

The Student Loan Crisis and the Democratic Party Platform: Key Reform Proposals Would Entice Young Voters to vote for Hillary

Hillary Clinton has a problem with young  voters. They went 3 or 4 to 1 for Bernie Sanders in the various Democratic primaries this spring. Why did young voters go to Bernie, and how can Hillary win them over?

The Democratic Party insiders--dinosaurs like Nancy Pelosi, Harry Reid, Debbie Wasserman Schultz, Charles Schumer, etc--don't realize it but the number one domestic policy issue in the United States today is the student loan crisis.  Approximately 43 million Americans are carrying $1.3 trillion in student-loan debt, and at least half of them can't pay it back.

As the Wall Street Journal reported in April, about 40 percent of college-loan borrowers in the repayment phase aren't making their monthly loan payments.  And five million people are enrolled in various income-based repayment programs. Most debtors in these programs are making payments so low that the payments don't cover accruing interest. In reality then, most people in income-based repayment plans will never pay off their loan balances.

Bernie Sanders signaled that he understands the scope of the problem when he proposed a free college education at a public college for every American.  By making that pledge, he turned millions of young Americans into single-issue voters.

Hillary could attract millions of Bernie supporters by adding these  planks to the Democratic Party platform:

• Free college education at a public college or university (as Bernie proposed).
• Eliminating the tax penalty for people who successfully complete long-term repayment plans but who have a loan balance when they've  completed their repayment terms.
• Stopping the garnishment of Social Security checks for elderly student-loan defaulters.
• Forcing the for-profits to stop putting mandatory arbitration clauses in student enrollment documents.
• Repealing the provision of the 2005 Bankruptcy Reform Act that virtually eliminated bankruptcy relief for people who took out student loans from private lenders.

If Hillary and her handlers are smart, they will adopt these ideas. I hope Bernie refuses to endorse Hillary until she endorses at least some of them. If Bernie can pressure Hillary to make a commitment to solve the student-loan crisis, his campaign for the presidency will not have been in vain. But if the presidential race between Trump and Hillary rolls toward election day without any serious discussion of the student-loan crisis, then this country is in huuuge trouble.

References

Josh Mitchell. More Than 40% of Student Borrowers Aren’t Making Payments. Wall Street Journal, April 7 2015. Accessible at http://www.wsj.com/articles/more-than-40-of-student-borrowers-arent-making-payments-1459971348 

How many college graduates have jobs that don't require a college degree? You might be surprised.

Last April, the Federal Reserve Bank of New York released an analysis of labor-market conditions for college graduates. Here is what it found:

• In 2015, almost 45 percent of recent college graduates (graduates aged 22 through 27) were working in jobs that do not require a college degree.

• Around 35 percent of all graduates (graduates aged 22 through 65) were holding down jobs that don't require a college education.

• Wages for recent college graduates have remained relatively flat from 1990 to 2015.

So what do these numbers mean for young Americans?

College is not a good bet for everyone. First, although the college industry and their advocates (Brookings Institution, etc.) like to remind us that people who graduate from college make more money over their lifetimes than people who only have high school diplomas, going to college is not a good bet for everyone.

As the New York Fed has shown us, darn near half of recent college graduates are working in jobs they could have gotten without going to college. Of course many recent graduates will eventually find jobs that require a college degree. But even among the college-educated population as a whole, about one third of college graduates are working in jobs that do not require a college education.

 The payoff for getting a college degree is not as good as it once was. Second, wages for college graduates have remained about the same for the past 25 years--about $45,000 in constant 2015 dollars. But the cost of going to college has tripled over the last quarter of a century. That's why about two thirds of college graduates leave school with college-loan debt.

Thus, you may still need to go to college to earn a decent income, but a larger share of that income is going to go to servicing student loans.  In other words, recent college graduates are not as well off financially as their counterparts were 1990 because a majority of them are graduating with a significant amount of debt.

The case for a free college education gets stronger and stronger. People laughed at Bernie Sanders when he argued for a free college education from a public college for anyone who wants one. But, as I have repeatedly pointed out, Bernie's plan would actually cost less than the current federal loan program, because millions of people aren't paying off their loans.

Now Bernie is gone--swept away in the California primary election, and the higher education community can look at this idea afresh without fear of undermining their favorite presidential candidate--Hillary Clinton.

And lo and behold, the Brookings Institution published a paper today by a couple of croakers named Morley Winograd and Michael Hais that suggests free college might be a good thing.

And it would be a good thing. Certainly offering a free college education would be better than Hilary's scheme to pump billions of dollars more into a higher education system that is corrupt, obsolete, inefficient, and horribly overpriced.

References

The Labor Market for Recent College Graduates. Federal Reserve Bank f New York, 2016. Accessible at https://www.newyorkfed.org/research/college-labor-market/index.html

Mathew Boesler. More College Grads Finding Work, But Not in the Best Jobs. Bloomberg.com, April 7, 2016. Accessible at http://www.bloomberg.com/news/articles/2016-04-07/more-college-grads-finding-work-but-not-in-the-best-jobs

Morley Winograd and Michael Hais. The Democrats' Generation Gap. Brookings Institution, Jun 3, 2016. Accessible at http://www.brookings.edu/blogs/fixgov/posts/2016/06/03-millennials-democrats-election-2016-winograd-hais?utm_campaign=Brookings+Brief&utm_source=hs_email&utm_medium=email&utm_content=30380706&_hsenc=p2ANqtz-8kyQSbZyUfxh-t2hnsxhvRRXvUp2j0eORShy09EK-7-HQpeIdEwoZaQ1CXQ3fR5CAxWRHk2cBWPTT6cCkIOO74q4BLUw&_hsmi=30380706

 Morley Winograd and Michael Hais. The Democrats' Generation Gap, Mike and Morley web site, June 6, 2016. http://www.mikeandmorley.com/the_democrats_generation_gap


Morley Winograd and Michael Hais recommend free college in a Brookings paper less than 24 hours after Bernie Sanders lost the California primary



The Brookings Institution is a cowardly, sniffling organization committed to preserving the status quo in higher education. And here is another indication of that.

On June 8, the morning after Hillary beat Bernie in California, Brookings posted an essay by Morley Winograd and Michael Hais about how the Democrats can win back  the young voters who went for Bernie Sanders over Hillary by 3 or 4 to 1. 

In case you haven't heard of them, Morley Winograd and Michael Hais are two old coots who profess to be experts on the millennial generation. Judging by their photos, Winograd and Hais are not millennials themselves, but they have written some books about millennials and that makes them experts.

In their essay for Brookings, Winograd and Hais cooed approvingly about Hillary's stand on the student-loan crisis:  "[Hillary] has already spoken out forcefully on the need to lift the burden of student debt from this generation," the authors wrote. They note that sheendorses the idea of allowing college-loan borrowers to refinance their loans and she favors loan forgiveness for people who were defrauded by "unscrupulous lenders or schools." 

Big friggin' deal. Allowing distressed debtors to refinance their loans will not solve the student loan crisis. There are 43 million people with outstanding college-loan debt, and most have signed multiple promissory notes. There must be at least 200 million individual debt instruments floating around--maybe twice that many.  Is the federal government really going to refinance all those loans at lower interest rates? In your dreams, Mike and Morley.

And as for the notion that defrauded students should have their loans forgiven, I've got news for you, Mike and Morley. The Department of Education already has a debt forgiveness program in place. The problem is that the process is so cumbersome that very few loans have actually been forgiven.

But here's the money quote.  Mike and Morley recommend a free college education for everybody.
 "[M]illennials and the generations that come after them should be able to get their higher education debt free," Winograd and Hais wrote, "because that’s the level of education they—and America—will need to be successful both in today’s economy and in the years ahead."

Hey, that's exactly what Bernie Sanders said at his first debate with Hillary last fall. If this is such a good idea, why didn't Mike and Morley, the so-called millennial experts, suggest it sooner? Why didn't Hillary endorse this idea? And, more to the point of this commentary, why didn't the Brookings Institution publicize this idea before the California primary rather than after the votes were counted and Bernie was defeated?

I'll tell you why--because Hillary, the Brookings Institution, and the Democratic Party are committed to the status quo in higher education. If Americans could get a free college education from a public college in the same way they get a free high school education, the for-profit colleges would shut down almost overnight and the elite private colleges would be forced to slash their tuition rates.

Hillary is not going to let that happen. She and Bill have made too much money off the higher education industry, and so have Democratic Party insiders like Debbie Wasserman Schultz.  That's why Mike and Morley's whispered suggestion about a free college education didn't surface until after Hillary had defeated Bernie. And my prediction is this: the Brookings Institute will never allow this very good idea to be floated again in any of its publications.

Morley Winograd & Mihael Hais: Experts on millennials

 Note: The Winograd and Hais essay is dated June 3, 2016, but it first appeared for public viewing on the Brookings web site on June 8, 2016. The same essay appeared on the Mike and Morley web site on June 6. 

References

Morley Winograd and Michael Hais. The Democrats' Generation Gap. Brookings Institution, Jun 3, 2016. Accessible at http://www.brookings.edu/blogs/fixgov/posts/2016/06/03-millennials-democrats-election-2016-winograd-hais?utm_campaign=Brookings+Brief&utm_source=hs_email&utm_medium=email&utm_content=30380706&_hsenc=p2ANqtz-8kyQSbZyUfxh-t2hnsxhvRRXvUp2j0eORShy09EK-7-HQpeIdEwoZaQ1CXQ3fR5CAxWRHk2cBWPTT6cCkIOO74q4BLUw&_hsmi=30380706

 Morley Winograd and Michael Hais. The Democrats' Generation Gap, Mike and Morley web site, June 6, 2016. http://www.mikeandmorley.com/the_democrats_generation_gap


Someone needs to wake George Will and tell him Ronald Reagan is dead

They tell the story in England of a British politician who dreamt he was addressing the House of Lords. When he awakened, he found that indeed he was!

Today I read the Review section in the Sunday Times and the Opinion section of my local newspaper. I had the feeling all the political pundits are asleep or that they're living in the 1980s.  In the Times, Timothy Egan wrote a rambling and largely incoherent essay about Bernie Sanders. Egan said Bernie's plan for a free college education and universal health care "are no more thought out than a bumper sticker."

Egan's observations are so false as to be almost libelous. Sanders' health care plan and his higher-education proposal are quite sound, and both are less expensive and more egalitarian than Obamacare and our federal student-loan nightmare.

In my local paper, George Will dismissed the rise of Trump and Sanders as "political silliness," and lumped them both with the simplistic socialist politicians of Great Britain.  Will  derided supporters of both candidates, calling them Trumpkins and Sandernistas.

I am astonished by the near unanimity among political columnists on both the right and the left regarding the upcoming presidential election. Almost with one voice, they ridicule both Trump and Sanders--basically implying by their arguments that Americans would be better off if Crooked Hillary became President

Some write from a conservative perspective and some call themselves liberals, but almost all of them share one thing in common--their columns appear under photographs of themselves that are about 20 years out of date.

Indeed all these people are from another era--from a time when the oligarchs had Americans convinced that our politicians were aligned into two political parties based on political principles. But of course we all know now that the Democratic-Republican divide was a charade--just a puppet show to amuse the rubes while politicians on both sides of the aisle lined their own pockets.

But the saps woke up. Some threw their support behind Trump, and some went to Sanders. Now the media elites are hysterical, writing mad drivel that cannot be identified by ideology. Froma Harrop insinuates Bernie Sanders is a racist, and Bill O'Reilly ridicules Bernie as doddering Socialist. Or is the other way around?

All these people--Froma Harrop, George Will, Timothy Egan, Frank Bruni, Steve and Cokie Roberts, Paul Krugman, Maureen Dowd, etc.--need to  wake up and join the 21st century. The peasants are rising, and their fury will not be assuaged by stale prose written by people who come across like eccentric  nursing-home inmates writing letters to the local newspaper.

I hate to break it to you, George, but Ronald Reagan is dead.

References

Timothy Egan. Bernie's Last Stand. New York Times, June 5, 2016, Review Section, p. 2. Accessible at http://www.nytimes.com/2016/06/05/opinion/sunday/bernies-last-stand.html?_r=0

George Will. Britain, too, is infected with political silliness. Baton Rouge Advocate, June 5, 2016, p. 7B. Also accessible in the Washington Post at https://www.washingtonpost.com/opinions/britain-too-is-infected-with-political-silliness/2016/06/03/77560a20-28e8-11e6-b989-4e5479715b54_story.html