President Obama's Proposed College Rating Plan is a Non-Starter: Colleges Should Prepare for More Bureaucracy and Higher Costs

"When someone describes himself as a Christian businessman," my former law partner once observed, "I put my hand over my wallet."

I feel the same way when President Obama announces a new plan to help the middle class. When the President proposes to do something nice for average Americans, I get nervous.

And what is President Obama's latest proposal to help the middle class? According to a White House press release, President Obama wants to implement a college rating plan "to Make College More Affordable" and "A Better Bargain for the Middle Class."

That's right. Having mucked up health care, the President now plans to screw up higher education even more than it is already screwed up.

President Obama wants to help the
middle class. No, really!

Although the details aren't yet clear, the President's new system "will measure college performance through a new rating system so students and families have the information to select schools that provide the best value."  This new rating system, the White House assures us,  will "incentivize [sic]colleges to provide better value by improving performance, lowering costs, and investing in student access and success."

What's the President's ultimate goal? I think it is to shift federal aid money to certain favored institutions.  The press release says the Department of Education ultimately plans to give more federal student aid to colleges that provide the best value. According to the White House press release, students attending high-performing colleges would receive larger Pell Grants and more affordable student loans than students attending lower-ranked institutions.

So how will the President's latest grandiose scheme roll out?  This is my prediction:

1) First, DOE will vet its proposed college-rating regulations with higher education's powerful constituencies: the for-profit colleges;  elite schools like Harvard, Yale, and Stanford; and the Historically Black Colleges and Universities (HBCUs).  These groups will have their lobbyists and lawyers weigh in and make sure the new regulations won't hurt them. DOE will acquiesce to all these groups' demands.

2) Next, President Obama will sign executive orders and DOE will promulgate administrative regulations that will implement the President's new college-rating system.  All this will be accomplished without Congressional approval because Congress would never approve this hare-brained scheme.

3) Colleges will hire consultants and low-level bureaucrats to comply with the new rating system without changing the way they do business.  College costs will not go down. On the contrary, tuition will continue to rise faster than the rate of inflation just as it has for the last 30 years.

If President Obama and Secretary of Education Arne Duncan were serious about lowering college costs and providing a "better bargain for the middle class," they would kick the for-profit colleges out of the federal student aid program. The for-profits educate about 11 percent of all post-secondary students, but they get 25 percent of all the federal student aid money--about $35 billion a year.  They have highest student-loan default rates in the industry and low student-completion rates.

If the federal government shifted that $35 billion from the for-profit sector to community colleges, think what could be accomplished. Community colleges could educate the same groups of students now going to for-profit colleges for much less money.

But President Obama won't stand up to the for-profit college industry.  That would be too hard.  No, he would rather impose another level of bureaucratic reporting on colleges and universities that are already over-regulated.  That's President Obama's big plan to make college more affordable for the middle class.

References

White House Press Release. FACT SHEET on the President's Plan to Make College More Affordable: A Better Bargain for the Middle Class. August 22, 2013.

President Obama Did Not Tell the Truth About the Affordable Care Act: Where Was the President Educated?

Justice Ruth Ginsburg
It's OK to scam the rubes (wink!)

In Gratz v. Bollinger, the Supreme Court overturned an affirmative action program at the University of Michigan that used a point system to benefit minority applicants to the university.  In the majority opinion's view, the University of Michigan had unlawfully discriminated against white applicants in violation of the Equal Protection Clause.

In a remarkable display of cynicism, Justice Ruth Bader Ginsburg dissented. She argued that the Court should allow American universities to discriminate based on race because they would do it anyway, even if they had to lie about it.

Here is what she said:

One can reasonably anticipate . . . that colleges and universities will seek to maintain their minority enrollment--and the networks and opportunities thereby opened to minority graduates--whether or not they can do so in full candor through adoption of affirmative action plans of the kind here at issue. Without recourse to such plans, institutions of higher education may resort to camouflage. . . . If honesty is the best policy, surely Michigan's accurately described, fully disclosed College affirmative action program is preferable to achieving similar numbers through winks, nods, and disguises. (emphasis supplied)

What an astonishing thing for a Supreme Court Justice to write. In her view, college administrators are so lacking in integrity that they will lie in order to achieve their desired social goals, even if their tactics violate the law.

And Justice Ginsburg did not condemn such behavior. Implicitly at least, Justice Ginsburg endorsed the view that the end justifies the means.  Affirmative action is so worthwhile, she apparently believes, that it is OK for college officials to engage in subterfuge--to camouflage their activities, to advance their goals through "winks, nods, and disguises."

President Obama, we now know, shares Justice Ginsburg's views about honesty. Universal health care is such a good thing, he believes, that it is permissible to lie repeatedly about how the new health care law actually works.

I'm part Cherokee (wink!)

Where did Justice Ginsburg and President Obama develop such cynical views about honesty and the law? Well they were both educated at Harvard Law School and both served on the Harvard Law Review. (Justice Ginsburg transferred from Harvard to Columbia Law School before she graduated.) Perhaps Harvard infected them with the elitist view that it is OK to scam the rubes.  After all, it is the elites--people like Ruth and Barack--who know what is best for people.

And if a Harvard Law Professor (Elizabeth Warren) wants to claim she's an American Indian, that's OK too. It is important for Harvard to claim it has a Native American law professor, whether or not it's true.

Harvard's motto is Veritas--the Latin word for truth.  In light of the leaders Harvard has produced in recent years, perhaps its motto should be tweaked a bit.  How about "Veritas (wink)".



Veritas (wink!)

References

Gratz v. Bollinger, 539 U.S. 244 (2003).

"Naked to mine enemies": A modest proposal to help destitute student-loan debtors get attorneys to represent them in bankruptcy court

A great many destitute student-loan debtors file for bankruptcy without the aid of an attorney. This is not surprising since the only reason these poor people are in a bankruptcy court is because they're broke.

For example, Janet Roth, whose case I discussed in an earlier blog, appeared before the Ninth Circuit's Bankruptcy Appellate Panel without a lawyer.  At the time of the bankruptcy proceedings, Ms. Roth was living on her monthly Social Security check--only $774 a month. Obviously, she had no money to pay an attorney to  represent her in bankruptcy.



Bankrupt student-loan debtors need lawyers
Photo credit: carinsurancecomparison.org

On the other hand, student-loan creditors--agencies like Educational Credit Management Corporation and Sallie Mae--always appear in bankruptcy court with excellent attorneys. The creditors' lawyers know bankruptcy law inside and out, and they typically argue that the poor saps who enter bankruptcy are not entitled to a discharge of their student-loan debts. I don't know how these lawyers sleep at night, but I hope they sleep badly.

This inequity of legal resources obviously works to the student-loan debtor's disadvantage. Indeed, a study by Pardo and Lacy (2009) found that student-loan debtors got better outcomes in bankruptcy if they were represented by experienced bankruptcy lawyers.

Occasionally, indigent student-loan debtors obtain informal legal support from attorneys or non-lawyers with bankruptcy expertise. These people may "ghost write"  a debtor's pleadings without formally representing the debtor in court.

But some courts frown on this practice. In a bankruptcy decision filed this year, a federal court in Virginia strongly condemned the practice of ghost writing. "The Court emphasizes that the practice of ghost-writing is in no way permissible in the Eastern District of Virginia, or any federal court for that matter," the court wrote. In the court's view, such conduct amounted to "the unauthorized practice of law" (Greene v. U.S. Department of Education, 2013, *26-27).

I would like to make a modest proposal for getting better legal representation for bankrupt student-loan debtors. Currently, the law schools are turning out far more lawyers than the job market needs. In fact, a few law schools have been sued by their alumni for allegedly making false representations about their  graduates' job prospects.

Why don't these law schools organize legal aid clinics that specialize in representing bankrupt student-loan debtors?  There are certainly enough unemployed lawyers to staff these clinics. The clinics would employ lawyers who would otherwise be unemployed and give them some legal experience that would later help them obtain permanent employment.

Law schools might consider the sponsorship of legal aid clinics for student-loan debtors as a sort of penance for their hubris.  It is now well established that third- and fourth-tier law schools charged high tuition rates to students who had only dim prospects of ever getting jobs that would pay well enough to allow them to comfortably pay back their student loans. Wouldn't it be a good thing for these law schools to do something positive to ease the plight of overburdened student-loan debtors?


References

Greene v. United States Department of Education, 2013 U.S. Dist. LEXIS 143678 (E.D. Va. Oct. 1 2013)

In re Roth, 490 B.R. 908 (9th Cir. BAP 2013).

Raphael Pardo & Michelle Lacey. The Real Student-Loan Scandal: Undue Hardship Litigation. 83 American Bankruptcy Law Journal 179 (2009). The American Bankruptcy Law Journal

Educational Credit Management Corporation makes good money chasing destitute student-loan debtors: The Obama Administration should take action

Richard Boyle, CEO of ECMC
He made $1.1 million in 2010

Educational Credit Management Corporation is a nonprofit company that collects on defaulted student loans for the federal government. Just because it is nonprofit, however, doesn't mean its employees don't make a lot of money. According to a news story posted on Bloomberg.com, Richard Boyle, ECMC's chief executive officer, made $1.1 million in 2010.

Other ECMC employees are also making good money.  Dave Hawn, ECMC's chief operating officer, made about half a million dollars in 2010. Joshua Mandelman, an ECMC debt collector, made $454,000. And ECMC directors also do pretty well. According to the Bloomberg story, they make as much as $90,000 a year.

How does ECMC make its money? It gets a small fee for helping distressed student-loan borrowers avoid default. But it makes much more money when it collects money from student borrowers who defaulted. By law, ECMC (and other similar companies) "can receive as much as 37 percent of a borrower's entire loan amount, half in collection costs and half in taxpayer-funded commissions" (Bloomberg.com).

What a sleazy business.  People are getting rich chasing down student-loan defaulters, many of whom are unemployed and destitute.

But perhaps the most disturbing aspect of ECMC's business is the position it takes when student-loan debtors file for bankruptcy. In several cases, ECMC has argued that bankrupt student-loan debtors should not have their loans discharged in bankruptcy. Instead, ECMC has argued, these debtors should be placed in income-based repayment plans that can last as long as 25 years.

Roth case: Elderly woman with health problems seeks bankruptcy relief from student loans

For example, in a recent case, Janet Roth, a 64-year old woman, filed for bankruptcy, seeking to discharge $95,000 in student loan debt.  Actually, she only borrowed $33,000, but her debt tripled due to fees and accrued interest.

At the time of the bankruptcy proceedings, Roth was unemployed and living entirely on her monthly Social Security check--only $774.  In addition, she suffered from several serious health conditions, including diabetes, macular degeneration, and depression.

Now most people would think that Ms. Roth was a good candidate for bankruptcy. But in court proceedings, ECMC challenged her request for bankruptcy relief from her student loans. ECMC argued she should have signed up for a 25-year income-based repayment plan, a plan that would have ended when she was almost 90 years old!

Fortunately, the Bankruptcy Appellate Panel for the Ninth Circuit Court of Appeals was sympathetic to Ms. Roth's plight. The court said Ms. Roth had acted in good faith regarding her student-loan obligations, and it discharged her of the debt.

Can you imagine? A company run by a guy who makes more than a million dollars a year argued that an elderly woman with health issues and living on her Social Security check should make monthly payments on her student loans for 25 years! These ECMC guys make Ebenezer Scrooge look like Mother Teresa.

Want another example? In In re Stevenson (2011), an elderly woman with a history of homelessness  and who was living on less than $1,000 a month, was denied relief from her student-loan debt by a bankruptcy court in Massachusetts. ECMC opposed her effort to have her student loans discharged, and a court essentially forced Ms. Stevenson into a 25-year income-based repayment plan. Like Ms. Roth, Ms. Stevenson will be nearly 90 years old when her student-loan debt is discharged.

And take a look at the Krieger case. In Krieger v. Educational Credit Management Corporation (2013), ECMC opposed the discharge of a 53 year old woman's student-loan debt even though she was unemployed and had never made more than $12,000 a year during her entire working life.

President Obama Should Take Executive Action to Aid Elderly Student Loan Debtors

Ms. Roth, Ms. Stevenson and Ms. Krieger are not alone. According to a report prepared for the Federal Reserve Bank of New York, about five percent of people who are behind on their student-loan payments are 60 years old or older. Undoubtedly, many of these people are living almost solely on their Social Security checks or are destitute.

Surely, elderly student-loan defaulters are entitled to some relief. Unfortunately, their Social Security checks are subject to garnishment, and some of them are running into opposition when they file for bankruptcy.

President Obama likes to get things done through executive orders.  So how about this for a plan? President Obama should direct all student-loan collection agencies not to oppose elderly people's efforts to discharge their student loans in bankruptcy.  And he should stop the garnishment of elderly people's Social Security checks for the purpose of collecting on student loans.

President Obama can talk all he wants about how he wants to ease the burden on people who borrow money to attend college. But there are things he can do--simple things--that would ease the burden on elderly student-loan defaulters. So why doesn't he take action?

References

John Hechinger. Taxpayers Fund $454,000 Pay for Collector Chasing Student Loans. Bloomberg.com, May 15, 2013. Accessible at: http://www.bloomberg.com/news/2012-05-15/taxpayers-fund-454-000-pay-for-collector-chasing-student-loans.html

Brown, M., Haughwout, A., Lee, D., Mabutas, M., and van der Klaauw, W. (2012). Grading student loans. New York: Federal Reserve Bank of New York. Accessible at: http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html

Krieger v. Educational Credit Management Corporation, 713 F.3d 882 (7th Cir. 2013).

Lockhart v. United States, 546 U.S. 142, 126 S. Ct. 699 (2005).

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). 

Gore Vidal bequeathed his entire estate to Harvard University, but he died anyway.

Gore Vidal died in 2012, leaving his entire estate to Harvard University. I'm sure he received a nice thank-you note. Harvard knows how to charm the suckers.

I know. I once received a letter from Harvard confirming my appointment as a teaching assistant. I think it was signed by the Provost. It came on fine stationery and closed with the words, "Your most obedient servant."  Of course the job only paid $300 a month, less than my family's monthly health health insurance bill. But a  letter from some Harvard muckety muck signed "Your most obedient servant" meant more to me then than a living wage. I kept the letter for years.

According to the New York Times, Vidal died in his home at age 86, tormented by alcoholism, incontinence, and dementia. Apparently, no one in his life meant more to him than Harvard, which gets the royalties from Vidal's book sales plus his $37 million estate.

But why give the money to Harvard, which after all has loads of money. Perhaps Gore Vidal sought to buy immortality. As one of his friends said in the New York Times story, "Gore was clearly

Gore Vidal in 2009
Photo credit: Wikipedia

uncomfortable talking about a wold without Gore Vidal. Nothing above immortality and world domination would ever be enough for him."

But a $37 million bequest to Harvard won't buy immortality. And Neither will Vidal's 25 novels.  Even literary giants die and their reputations fade into obscurity. Remember Norman Mailer, super egotist and winner of two Pulitzer Prizes? How many people read Armies of the Night last year do you suppose?

We all creep toward death, most of us in obscurity. I have no money to give to Harvard and wouldn't give it if I had.  Harvard figured that out years ago and stopped sending me its glossy Harvard magazine. I will never be rich, never be famous, never be powerful.

But I am comforted at this time in my life by my wife and family--comforts Mr. Vidal apparently never had, although he had a long time companion he loved very much. I am grateful for my small home in a friendly Southern town, by the beauty of South Louisiana's swamps and bayous, and by the mild and temperate sun that shines most days throughout our Southern winters.

And I am comforted by my faith.  I feel sure a priest will give me last rites in my final hours. I know I will have a funeral Mass at Christ the King Church on the LSU campus; and I am confident that at least some of my grandchildren will attend.  And surely someone will write my name in the Book of Remembrance and will pray for my soul now and then.

And in my remaining years, God will strengthen me with the Mass, with Christ's body and blood. And when bitter memories and regrets sweep over me, I am reassured by God's forgiveness.

I am sorry  Gore Vidal did not have these comforts in his final years. It made me sad to learn that this famous and dazzlingly creative man felt compelled in the last year of his life to make the pathetic gesture of giving the fruits of his life's work to a soulless university he never attended.

References

Tim Teeman. A Final Plot Twist. New York Times, November 10, 2013, Style Section, p. 1.