U.S. colleges are in big financial trouble, and it's their own damn fault

I doubt that many college presidents listen to country music, but perhaps they should.

Country music is full of lyrics about people getting in trouble because they made poor decisions. In Mama Tried, Merle Haggard admits he wouldn't be in jail if he had listened to his mother. And of course, there are hundreds of country songs about guys who lost their marriages because they hung out in honky-tonks with loose women.

American colleges and universities, like country-music singers, have made spectacular mistakes. But unlike the hillbilly bards, college leaders won't admit it.  They just raise tuition and go on wild building sprees. Now they can't pay their bills.

As Jon Marcus wrote for The Hechinger Report, higher education's bad choices left it dangerously vulnerable when the coronavirus pandemic became its black swan.  What did the universities do wrong?

First of all, colleges continued hiring faculty even though they were attracting fewer students. As Marcus pointed out, overall enrollment in American colleges and universities shrank by 12 percent since the last recession (2008-2009), while higher education increased the number of employees by five percent.

In particular, many colleges didn't decrease staffing levels for programs that were in decline. Fewer and fewer students choose education or liberal arts as their major. Still, many institutions did not reduce staff or eliminated majors even though the professors had fewer students to teach.

Second, Marcus correctly noted that the trustees at many universities abdicated their leadership role to be "boosters, cheerleaders, and donors."  Many college boards paid their presidents lavish salaries with overly generous benefits, bonuses, and hefty retirement packages.  For example, Penn State University and Michigan State paid departing presidents millions of dollars in golden-parachute money after they left their positions in the wake of explosive sexual-abuse scandals.

Rather than trimming their financial costs or operating more efficiently, most colleges responded to rising costs by raising tuition, forcing students to take out larger and larger student loans. As students reacted to sticker shock, the colleges switched tactics by offering huge tuition discounts of 50 percent or more to lure students into enrolling.  That didn't work out well for most higher education institutions.  Their tuition discounts didn't reverse their financial woes, and revenues continued to drop.

Now the coronavirus has become an expensive problem for colleges and universities. Many of them will close. But they can't blame COVID-19 for their misfortune. A lot of colleges were "dead men walking" even before the pandemic showed up as a black swan event.

A financial tsunami is coming to sweep away our huckster economy: Time to scramble to high ground

I confess I have always been on the lookout for disaster, and so far, I've never experienced one.

As a practicing lawyer years ago, I was drinking a beer with one of my law partners in a harborside bar in Juneau, Alaska.  We happened to catch a breaking news story on the bar's television about an earthquake out in the Pacific Ocean. The reporter mentioned the possibility of a tsunami hitting Hawaii or some other unspecified place.

I told my associate we were leaving the bar that very minute to find high ground. He could barely conceal his mirth, but I was his senior at our law firm, and he dutifully followed me out the door, leaving his half-consumed beer on the table.

There was no tsunami, it turned out, and I admit that I overreacted. But I had a vision of being buried under a wall of cold Pacific Ocean water pouring through the streets of Juneau. I did not want to die that way.

We know, however, that catastrophes happen from time to time. The Holocaust, for example.  Some people saw it coming and escaped before the Nazis showed up, and some waited until the goons beat down their front door.

In Night, Elie Weisel's personal memoir of the Holocaust, Weisel told the story of Moishe,  a neighbor who lived in Sighet, a Jewish village in Hungary. The Nazis arrested Moishe first be because he was a foreign Jew. The Hungarian police rounded him up with other Jews and shipped them to Poland in cattle cars. There the Gestapo took over and transported the Jews to an extermination site.  The prisoners were then forced to dig their own graves, and then they were shot one by one.   Moishe escaped, however, and came back to Sighet to warn his neighbors about what he had witnessed.

Nobody believed him. It was just too incredible.  The Nazis would never slaughter civilians wholesale, they reasoned. But of course, they were wrong.

On the other hand, some people can see the future clearly in all its horror. William Shirer was a news correspondent in Germany as the Nazis came to power.  Shirer's wife was Austrian, and she gave birth to her first child in a Vienna hospital. As it happened, she was in the maternity ward when the Nazis invaded Austria. A Jewish woman in a room across the hall heard the news and knew what it meant. She jumped out a window, killing herself and her newborn baby.

For our own sake and the sakes of our family and loved ones, we have a duty not to lull ourselves into complacency during a time when an unthinkable disaster looms on the horizon.  And we are now in such a time.

The hatred toward our President has not abated since the 2016 election. It has intensified. The Democrats and Republicans are at each other's throat, and they've turned a medical pandemic into a political event.

I don't think it will matter who wins the November election. Either way, Americans are screwed. The Federal Reserve Bank is propping up the stock market to postpone an economic calamity, but that can't go on forever. The market will crash soon,  probably in less than a year.

Then we will know who acted wisely as the storm built on the far horizon and who will lose everything. And the people who did this to us--the crooks on Wall Street and their corporate cronies--will still be living large because they know the party is over and are already taking steps to preserve their wealth.

When the economy collapses, the oligarchs will be drinking mai tais in Costa Rica. The rest of us will be scrambling to pay our mortgages--and we will be damned lucky if we don't lose more than our homes.

College students, beware: Do your own COVID-19 safety check before moving into a dormitory this fall

When I was young, I practiced law in Alaska, and many of my clients lived in the Alaska bush--that vast terrain of mountains and tundra that is off the road grid. Consequently, I traveled a lot in small single-engine airplanes. The bush pilots who flew these planes were all young, and many were inexperienced.

I knew nothing about aviation. I figured--incorrectly--that the pilots were the experts and I crawled into many a small, antiquated airplane without a thought about the danger I might be in.

But my senior partner set me straight. "Richard," he said:

You are responsible for your own safety. Before you get in a plane make your own assessment about whether the plane is overloaded or whether flying conditions are less than optimal.  If you don't feel safe, don't get in the airplane.

That was good advice, and I'm passing it on to young people who plan to enroll in college this fall. Every American university has adjusted its curriculum in response to the coronavirus pandemic.  A lot of teaching will be delivered online, through Zoom, or in socially-distanced class spaces.

 But notice how many colleges are assigning students two-to-a-room in campus dormitories, even though we are in the middle of a pandemic.  All across the nation, thousands of young people--not known for social distancing or wearing masks--are going to live together in close quarters for three or four months.  A good many will experiment with weekend binge drinking at the local bars where they stand an excellent chance of contracting COVID-19.

How safe will that environment be? The colleges say they are concerned about your safety, but they desperately need the revenue from dorm rentals because many of the dorms were built with borrowed money.   The universities have got to have students' cash to service that debt.

Before moving into a dormitory, ask yourself these questions:

1) Will you feel safe sharing a dorm room with another student and sharing restrooms and showers with people you don't know?

2) Will you feel safe eating your meals in a communal dining hall?

2) Does it make sense to live on campus when most of your classes will be delivered online or by Zoom, and there will be few if any opportunities to socialize with your peers?

The colleges want students to live on campus because they want your money. But make your own decision about whether it is safe to live in a dorm this fall. You may conclude it is better to find your own housing arrangements or live at home with your parents.  Remember, the coronavirus doesn't care who you are or where you live.

The Cessna 185 Skywagon: Alaska's flying pickup truck

Things fall apart: MBA programs are collapsing across the U.S. Don't get buried in the rubble

COVID-19 is shaking business education to its core, highlighting weaknesses that were already apparent even before the pandemic.  The Wall Street Journal reported yesterday that 100 business schools closed their M.B.A. programs between 2014 and 2018. Nearly half the schools in a professional association of business colleges anticipate enrollment declines this fall.

What happened?

First of all, the M.B.A. degree lost its luster.  When the federal student loan program lifted the borrowing cap on graduate education, universities all over the United States created new programs or jacked up tuition on the ones that already existed. M.B.A. programs became cash cows for colleges that desperately needed to increase their revenues.

People who already had professional degrees in law, medicine or other fields, falsely believed an M.B.A. degree would make them more marketable.   But suddenly it appeared that everyone had an M.B.A. As The Economist observed four years ago, "Simply put, M.B.A.s are no longer rare, and as such are no longer a guarantee for employment."

Second, as enrollments began to decline in the U.S. market, many business schools began aggressively recruiting international students.  Last year, 40 percent of business-school applicants were from overseas.  Foreign students were especially welcome because they often paid full tuition--no scholarships or grants for those folks.

But foreign-student enrollment has slipped.  The coronavirus has made international students wary of studying in the United States. And no doubt the Asians have figured out that M.B.A. programs at the elite schools are too expensive.

Third, second- and third-tier universities created online M.B.A. programs, diluting the prestige of M.B.A. degrees.  Although a handful of schools have maintained their prestige and allure--Harvard, Yale, Stanford,  etc.--people with online M.B.A.s from second-rank schools discovered that employers were not impressed.

I sympathize with working adults who took two years off from working to obtain an expensive M.B.A. degree. I did much the same thing when I went to Harvard to get a doctorate in education policy.  I was out of the job market for three years and learned almost nothing.

The M.B.A. boom is being seen now for what it often is--a big scam by universities eager to boost their revenues.

So--if you feel stuck in your present job and think you can make yourself more marketable by going to business school, think again.

How much money will you need to borrow to finance your studies? What will you gain from leaving your job for two years to take classes? If you opt for an online degree from a lackluster school, what will that be worth to you when you put that M.B.A. degree on your vita?

If you decide--against my advice--to enroll in an M.B.A. program, at least remember this. Business schools need you a hell of a lot more than you need them.  Don't pay full freight to get a graduate degree in business. Make the bastards give you a grant or a scholarship.

It's Awful Quiet Out There in the American Economy: Is It Time for Americans to Circle the Wagons?

I grew up when western TV series dominated the airwaves: Gunsmoke, Have Gun Will Travel, Bonanza, etc. My childhood was one long cowboy show punctuated by irritating interruptions to eat and go to school.

How many times did I see that hackneyed scene of the settlers with their wagons in a circle, preparing to fend off an Indian attack?  Often the hero of the episode—Ward Bond maybe—would stand behind the wagon barricade staring into the darkness. He would hear a bird call—Native Americans signaling each other!

Then a trusted sidekick would say, "It's awful quiet out there." And the hero always responded laconically by saying, "Yeah, too quiet." And when dawn broke, all the Indians in Christendom would come howling down on the beleaguered settlers. Fortunately, the cavalry always galloped to the rescue just before the commercial break. "We're saved!"

Well, it's awful quiet out there in the American economy.  Life seems chaotic if you watch cable news—all those video clips of people rioting and burning down the cities. But who wants to watch that stuff? 

The stock market is doing fine, and millions of Americans are getting regular handouts from the government—payroll-protection checks, enhanced unemployment benefits, student loans. Tax breaks for the wealthy and food stamps for the poor. What could be lovelier?

But maybe it's too quiet. Why is gold drifting toward $2,000 an ounce while 10-year treasury notes earn only one-half of one percent interest? Why are people buying guns who never bought guns before? Why are people hoarding ammunition?  Why have Americans developed a sudden interest in growing their own food?

Even our television commercials are signaling that we have reason to worry. When we watch television, what do we see? William Devane at a country estate peddling gold. Tom Selleck trying to persuade elderly people to take out reverse mortgages. Joe Namath, hawking health insurance for people on Medicare. 'Get the healthcare coverage you deserve,' Namath tells us.

That's it exactly. Americans are afraid we are going to get what we deserve. We'll get what we deserve for electing thugs to public office. We'll get what we deserve for allowing our universities to become criminal rackets. We'll get what we deserve for mucking up our health care system and for creating an economy that silently eats away at the middle class.

Yes, it's too quiet. Ward Bond would tell us it's time to circle the wagons. And we know, as we await the catastrophe, that the cavalry isn't coming to our rescue this time.

Is it time to circle the wagons?

Rubash v. U.S. Department of Education: 60-year-old law-school graduate unable to shed student debt in bankruptcy

Peter Rubash is a sixty-year-old graduate of Duquesne University School of Law. He practiced law for a time but lost his job and eventually went to work as a project manager for a public agency.

In 2018, Mr. Rubash filed an adversary action in a Pennsylvania bankruptcy court, seeking to discharge approximately $230,000 in student loans. According to a medical expert, Rubash was depressed.

According to the expert, Rubash's "occupational failure as [a] lawyer and his resulting debt have caused, or at the very least, exacerbated his psychological dysfunction." The expert also said that Rubash was underemployed in his present position and was unlikely to obtain "suitable employment consistent with [his] education and past levels of employment" (p. 2).

The U.S. Department of Education opposed Rubash's effort to shed his student-loan debt in bankruptcy. DOE argued that Rubash earned enough money to make payments on his college loans.  The agency

presented a long-term income-based repayment plan (IBR) that would require Rubash to pay $838 a month.

Judge Carlota Bohm, who decided Mr. Rubash's case, agreed with DOE and refused to discharge Rubash's student loans. Rubash earned about $49,000, the judge pointed out, and he received additional income as a consultant.  In Judge Bohm's opinion, Rubash could make payments of $838 a month and still maintain a minimal standard of living. (Judge Bohm's decision did not specify the repayment period--probably 20 or 25 years.)

Judge Bohn justified her decision by citing ample citations to case law. But let's think a little bit more about Mr. Rubash's situation.

Rubash obtained his bachelor's degree 38 years ago and probably got his law degree within three or four years after getting his undergraduate degree.  He's 60 years old now.  If he enters into a 25-year IBR plan, he will be 85 before he finishes his repayment obligations.  That means he will make his last student-loan payment 63 years after he graduated from college.

Somehow, our society has got to come to terms with the fact that millions of people have taken out student loans to obtain undergraduate degrees and professional degrees that are not worth what they paid for them. I don't know what Mr. Rubash paid to attend law school at Duquesne, but today the tuition price is $46,000 a year.

 Thousands of law-school graduates have taken out six-figure loans to get J.D. degrees only to enter a saturated job market.  We've got to come up with a better way of addressing this problem than 25-year income-based repayment plans.

References

Rubash v. U.S. Department of Education, Bankruptcy No. 18-20449 CMBA Adversary No. 18-2028-CMB, 2020 WL 2554234 (Bankr. W. D. Pa. May 19, 2020).

Portland protesters: Are student loans and a crummy job market driving the anger?

Like many Americans, I have been surprised by the intensity of the Black-Lives-Matter protests that take place nightly in Portland, Oregon. Why Portland?

USA Today speculated yesterday that Oregon's racist past is fueling the city's protests.  As the newspaper pointed out, Oregon's territorial constitution, adopted in 1857, barred people of color from entering Oregon Territory.  And Oregon had a very active Ku Klux Klan during the early 1920s, as USA Today noted.

But I don't think Oregon's "dark history" of racism explains the violence in Portland's streets.  Portland is, after all, one of the most progressive cities in America. US News and World Report recently listed Portland as one of the nation's top ten best cities.

And no one can accuse Portland's politicians of being racist. The city's progressive political scene is so famous that the television series Portlandia lampooned it for eight seasons.

Nor is Portland torn by racial strife. Portland is a mostly white city in a primarily white state.  Only two percent of Oregon's population is Black, and only about one in twenty Portland residents is African American.  Compare that ratio to Baton Rouge, where I live. My city is 52 percent African American, and no one is rioting.

Watching the Portland protests night after night, I have been struck by the fact that most of the protesters are young, white people. I find myself wondering whether these enraged wokesters have college degrees, whether they have good jobs, and whether they have student-loan debt.

We know that millions of Americans are burdened by student loans that hinder them from getting married, buying homes, or saving for retirement.  And we know that a majority of these debtors are not paying down their loans.  Education Secretary Betsy DeVos admitted as much almost two years ago.

I'm guessing that a lot of the people who are protesting on Portland's streets have student-loan debt that is completely unmanageable. Although the demonstrators may have college degrees, those degrees did not lead to good jobs for many of them.

I am not questioning the sincerity of people who have taken to the streets of Portland this summer. I am sure most of them are genuinely disturbed by racism and economic injustice.

But I wonder: How many people who are throwing bricks and bottles at the police would stay in their homes at night, munch on popcorn and watch a Netflix movie if they believed they were financially secure, had a good job, and were not weighed down by student loans.

Portland protesters: most are young and white