Tuesday, November 26, 2013

Peace for our time or a historic mistake? The Ivy Leaguers make a deal with Iran and your children will pay the price

World War II was unnecessary, Churchill wrote in The Gathering Storm, the first volume of his history of the Second World War. Had the British and Americans conducted their affairs "with the ordinary consistency and common sense usual in decent households," Church observed, they could have maintained their security without bloodshed.
Prime Minister Neville Chamberlain & Hitler
September 23, 1938
Those of us who read history know that Neville Chamberlain made a groveling peace pact with Hitler in 1938, and less than a year later, England and Germany were at war.  As Churchill put the matter, "You were given the choice between war and dishonour. You chose dishonour and you will have war."

Today, the United States and its passive allies are on the verge of a deal with Iran whereby the United States and the European Union lift their sanctions against Iran and Iran promises not to build a nuclear bomb.

Does anyone believe Iran will cease its efforts to become a nuclear power? I certainly don't.  And Israel, whose life depends upon this issue, doesn't believe it either.  The deal with Iran, Prime Minister Benjamin Netanyahu stated emphatically, is a "historic mistake."

But, like Neville Chamberlain, who believed his deal with Hitler would bring "peace for our time," President Obama believes he has made the Middle East a safer place. Or perhaps he merely believes a deal with Iran will look good on his vita.

America's national affairs are in such disarray that it is embarrassing to contemplate them. Today, the United States begs a mob of Afghan elders to allow us to pour American blood and treasure into a country that has no interest whatsoever in democratic values or human rights.

On the home front, the President has lied repeatedly about the essential features of Obamacare, but he holds average Americans in such contempt that he doesn't bother with a proper apology.  As Churchill said of British politician Stanley Baldwin, "He occasionally stumbled over the truth, but hastily picked himself up and hurried on as if nothing had happened."

As I have said more than once, our country is being run by people who were schooled in the nation's elite colleges and professional schools--institutions which teach nothing more than arrogance, an unseemly obsession with power and recognition, and a studied cynicism toward traditional American values.

How will all this end? Regarding Iran, there are just two possibilities.  Either Iran will become a nuclear power and thereby make the Middle East even more unstable or Israel will launch military strikes in an effort to destroy Iran's nuclear capability.

If Israel acts militarily, you can kiss your 401(k) goodbye along with your draft-age children and grandchildren.

But don't worry about Barack Obama and Secretary of State John Kerry.  However things turn out, there's a book deal for Obama after he steps down from the presidency.  And John Kerry's wealth is well invested.  He will do just fine financially no matter what happens to you and me.


Winston Churchill, The Gathering Storm. Boston: Houghton Mifflin, 1948.

Jodi Rudoren. Israelis See Ticking Clock, and Alternative Approaches, on Iran and Palestinians. New York Times, November 26, 2013, p. A12.

Monday, November 25, 2013

"You can't get there from here": It is very difficult to sue the Department of Education about a disputed student loan

According to urban legend, a traveler asked a Maine farmer for directions to a nearby town. "You can't get there from here," the farmer replied, a cryptic and distinctly unhelpful reply.

 You can't get there from here.
photo credit: treehugger.com
Well if you are a student-loan debtor who believes a  mistake was made about your loan, you are unlikely to get the problem resolved quickly in a court proceeding. In other words, when it comes to suing the federal government about your student-loan debt, "You can't get there from here."

The Wagstaff case: Eight years of fruitless litigation about a student-loan debt

Take the case of Audrey Wagstaff, who took out six federal student loans to attend Our Lady of the Lake University in the early 1990s.  According to the U.S. Department of Education, Ms. Wagstaff didn't make any payments on her loans.  DOE sued her in 1999, dropped the lawsuit, and then began administrative collection efforts against here.  DOE garnished Wagstaff''s wages in order to collect on the loans and applied some offsets to her federal tax refunds.

In 2005, Wagstaff sued DOE under the Fair Debt Collection Practices Act, alleging DOE's collection practices violated the Act.  A federal court dismissed her case, and she appealed.  In 2007, the Fifth Circuit Court of Appeals affirmed the dismissal, ruling that the Department of Education is not subject to the Fair Debt Collection Practices Act.

Undaunted, Wagstaff sued in a Texas state court. DOE transferred the case to federal court, where she was dismissed again.  She appealed to the Fifth Circuit, which ruled again that Wagstaff did not have a case.

In 2011, Wagstaff sued yet again, this time in the U.S. Court of Federal Claims. The Department of Education tried to get this suit dismissed as well, and the Court of Federal Claims dismissed all her constitutional claims and statutory civil rights claims.

But the court did not dismiss all of Wagstaff's claims.  The court concluded that Wagstaff had properly pleaded a claim of "illegal exaction" against the government, which the court had jurisdiction to hear. In addition, the court ruled that she had brought her claim within the six-year limitation period for bringing claims against the government, so it allowed her lawsuit to proceed.

In the end, however, Wagstaff lost her case. On July 13, 2013, the U.S. Court of Federal Claims ruled that DOE had correctly calculated Wagstaff's student-loan debt. "There is no evidence to suggest the Government behaved unlawfully," the court ruled, and "the Government has properly supported its assertion that the promissory notes were valid . . ." (p. 765).

What does the Wagstaff litigation mean for the rest of us?

Audrey Wagstaff may not be a sympathetic plaintiff.  According to the Department of Education, she had never made a single payment on her six student loans. Nevertheless, her experience in federal court gives all of us some things to ponder.

First of all, if a student-loan debtor has a dispute about the amount of money owed, it is best to try to resolve the dispute as quickly and as  informally as possible.  According to the 2013 Court of Federal Claims opinion, Mrs. Wagstaff only borrowed about $17,000.  But interest and penalties accrued over the years, and by the time the Court of Federal Claims ruled in 2013, the amount she owed had more than doubled to $36,000.

Second, the Fifth Circuit ruled conclusively that the federal government is not subject to the Fair Debt Collection Practices Act and cannot be sued for unfair debt collection practices under that law. But shouldn't the federal government be subject to the same restraints that apply to other debt collectors? After all, six million people have defaulted on federal student loans; and the Department of Education, acting through private agencies, may be the largest debt collector in the world.

Third, Ms. Wagstaff was compelled to bring her claims of unfair debt collection against the feds within six years, but there is no time constraint on the government suing Ms. Wagstaff.  Shouldn't the same six-year statute of limitations that applies to student-loan debtors also apply to the Department of Education?

Finally, if someone has an unfair debt collection claim against the federal government that pertains to a student loan, shouldn't that person be able to litigate the claim in a federal district court in the debtor's home state rather than being forced to sue in the U.S. Court of Federal Claims?

In my opinion, student loan debtors who are unable to resolve disputes about their loans at the administrative level should have easy access to the federal courts to litigate their claims, and the federal government should be under the same constraints against unfair debt-collection practices that apply to private debt collectors.

Do you think anyone in Congress is interested in making the Department of Education subject to the Fair Debt Collection Practices Act? Do you think anyone in Congress is interested in putting a six-year statute of limitation on the federal government's efforts to collect on student-loan debt? Do you think the Obama administration is interested in either of these issues?

No, Congress and the Obama administration have absolutely no interest in giving basic consumer protections to the millions of  distressed student-loan debtors. Consequently, these people are suffering in silence, unable to pay back their loans, unable to discharge them in bankruptcy, and unable to start their lives afresh.


Wagstaff v. United States, 111 Fed. Cl. 754 (2013).

Wagstaff v. United States, 105 Fed. Cl. 99 (2012).

Wagstaff v. United States, 366 Fed. Appx. 564 (5th Cir. 2010).

Wagstaff v. United States, 509 F.3d   661 (5th Cir. 2007).

Sunday, November 24, 2013

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.


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.

Wednesday, November 20, 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!)


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

Tuesday, November 19, 2013

"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?


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