Nonsense from Adam Davidson in the New York Times Magazine About the Wisdom of Young Adults Living With Their Parents

Adam Davidson wrote an essay in the Magazine section of the New York Times about young adults who still live with their parents. The percentage of young people who live with Mom an and Dad has been going up--the figure is now 20 percent.  And--according to Davidson-- about 60 percent receive some financial assistance from their parents, much higher than in the past.

Davidson cites Jeffrey Jensen Arnett, a psychologist at Clark University, who coined the phrase "emerging adulthood." According to Arnett, the trend of young people moving back home with their parents is a "rational response to a radically different, confusing postindustrial economy."

For people who graduated from college with a high level of debt and no clear notion of their ultimate vocational goal, it makes sense to move back home with Mom and Dad until they figure things out; at least that's Arnett's reasoning. Davidson cites Arnett saying that "it's the people most actively involved in the struggle, the ones who at times seem totally lost, who are most likely to find their way."

Arnett also cites statistics showing that young people are remarkably optimistic.  According to a poll he conducted, 77 percent of young people still believe they will be better off than their parents!  Thus, in spite of a poor economy, a shortage of good jobs, and (for many) crushing student-loan debt, a lot of young people think things will eventually work out.

Personally, I think this line of reasoning is a lot of horse patootie (a phrase I borrowed from blogger Kathy Schiffer). Adam Davidson and Jeffrey Jensen Arnett can afford to be sanguine about the nation's economic malaise because they have good jobs.  Davidson is writing for the Times and Arnett is a professor and probably tenured.

But young people with college degrees who are forced to live with their parents due to poor job prospects and high levels of student-loan debt are in a scary position. They can't marry, have children, buy a home, or start their careers; in a very real sense they are merely trying to stay afloat financially--they are in survival mode.

I would have liked Davidson's article a lot more if it had displayed a spark of anger about a national economy that is eating the nation's young and about a rapacious higher-education industry that is impoverishing millions of young people with student-loan debt without giving them the skills they need to get well-paying jobs.

And I would have liked the article a lot more if Davidson had had some suggestions for reforming the nation's financial policies and the federal student loan program so that fewer people in their 20s have to live with their parents.  In short--the Davidson article is a puff piece published by a newspaper that pretends to care about people's suffering but is firmly dedicated to the economic status quo. After all, some body's got to buy those expensive watches that the Times Magazine advertises week after week.

References

Adam Davidson. "Hi, Mom. I'm Home!" New York Times Magazine, June 21, 2014, Magazine section, p. 22.

Senators Lamar Alexander and Michel Bennet Propose a Simpler FAFSA form: What a Good Idea!

"Everything should be made as simple as possible," Albert Einstein observed, "but not simpler."  And indeed, simplicity, is a great virtue.  How many of us have struggled with a problem we thought was complicated, only to have an "ah ha" moment when we realized our problem was not as complicated as we first believed.

"Everything should be made as simple as possible, but not simpler."

Senator Lamar and Senator Bennet Have A Good Idea for Streamlining Federal Student Aid Applications

Senator Lamar Alexander of Tennessee and Senator Michael Bennet of Colorado have struck a blow for simplicity in the federal student aid program, a program that is entirely too complicated.   As they explained in an op ed essay in the New York Times earlier this week, the two senators have introduced a bill to reduce the complexity of the standardized federal student aid form, which every college student must fill out to qualify for federal student aid.

Currently, this form, commonly called the FAFSA form, has 108  questions and is 10 pages long. With its attached instructions, the entire form is 82 pages long!

Senators Lamar and Bennet propose to throw this form out, which is so complicated and time-consuming that many students simply forgo applying for federal student aid. 

They want to substitute a form that only has two questions:  What is your family size? What was your household income two years ago?

Senators Lamar and Bennet's proposed legislation would also reduce the number of federal student loan programs to three: one program for undergraduates, another for graduate students, and a third for parents who borrow money to pay for their children's college education .  And, perhaps most importantly, they propose just two repayment options: the standard 10-year repayment plan and an income-based repayment plan.  

Lamar and Bennet's op ed essay did not provide any details about what their income-based repayment plan would look like.  Would it be a variation of President Obama's Pay As You Earn plan, requiring borrowers to pay 10 percent of their discretionary income over 20 years or would it would be a less generous variation?  But the simplicity of having a single income-based repayment plan will reduce the confusion many college-loan borrowers experience when they try to convert their 10-year repayment plans to long-term income-basde repayment plans.

Senators Lamar and Bennet acknowledged the input they got for their reform proposals from Susan Dynarski and Judith Scott-Clayton. Ms. Dynarski is co-author of a provocative Brookings Institution study that recommends payroll deductions as the most efficient way for students to make their loan payments if they are enrolled in income-based repayment plans. (I discussed this proposal in my last blog posting.)

Efficiency-Driven Reforms Are Good But Radical Reforms of the Federal Student Loan Program Are Necessary
Senator Lamar and Senator Bennet have made sensible proposals for improving the way the Federal Student Loan Program Operates. And Susan Dynarski and the Brookings Institution have also made reasonable proposals for collecting student-loan payments from borrowers who participate in income-based repayment programs.  

Without a doubt, these proposals will help make the federal student aid program operate more efficiently. But they won't help bring the federal student loan program under control.  These proposals do nothing to stop the runaway cost of higher education. They do nothing to address the abuses in the for-profit college industry, and they do nothing the ease the strain on millions of student-loan debtors who are already in default. 

We won't be getting serious about addressing the student loan crisis until we amend the bankruptcy laws to allow worthy college-loan debtors to obtain bankruptcy relief, publicize the real student-loan default rate, and rein in the for-profit colleges.  Unless we do these things, other reform proposals will do nothing more than put a band-aid on a gaping wound. 

References

Lamar Alexaner & Michael Bennet. An Answer on a Postcard. New York Times, June 19, 2014, p.  A25.

If You Have a Student Loan, You Should Read Susan Dynarski's Proposal for Having Student Loan Payments Automatically Deducted From Debtors' Pay Checks

Susan Dynarski

If you took out a federal student loan to attend college, you should read Susan Dynarski's op ed essay in last Sunday's New York Times entitled "Finding Shock Absorbers for Student Debt."  Ms. Dynarski explains why two proposals for assisting overburdened student-loan debtors will not be very effective.  And she makes her own proposal for deducting borrowers' monthly student-loan payments directly from borrowers' pay checks.

Reducing Interest Rates on College Loans Won't Give Borrowers Much Relief

Recently, Senator Elizabeth Warren introduced legislation to significantly lower  interest rates on student loans, legislation that President Obama supported. Warren's bill would have covered the cost of lower interest rates by raising taxes on the wealthy. Not surprisingly, Republicans opposed the bill, and it did not get enough votes to move forward.

Ms. Dynarski points out that even a large cut to student-loan interest rates won't have much impact on individual students' monthly loan payments.  Borrowers with $30,000 in student loans (which is the average amount that college graduates owe when they finish their studies) would only see a $44 reduction in their monthly loan payments  if the interest rate on their loans was reduced from 6.5 percent to 3.5 percent--which  is a big reduction.

Thus the recent hype about Senator Elizabeth's failed attempt to pass legislation to reduce interest rate on student loans is a tempest in a teapot.  Even if Senator Warren's bill had bee adopted into law, it would not have given the mass of student-loan debtors much relief.

President Obama's Pay As You Earn Plan Is Too Cumbersome to Give Borrowers Much Relief

Dynarski also pointed out that the President Obama's Pay As You Earn program, whereby students make student-loan payments based on a percentage of their income, is so cumbersome that a high percentage of borrowers haven't applied for it even though they are behind on their loans or in default. One problem with Pay As You Earn is that the program does not respond quickly enough to borrowers who lose their jobs. A student-loan borrower's monthly loan payments are based on the borrower's previous year's income, so a borrower who is thrown out of work in mid-year would have to wait many months before seeing a reduction in the size of  monthly loan payments.

Dynarksi and the Brookings Institution Propose Automatic Student-Loan Payroll Deductions

Dynarksi proposes an automatic income-based loan repayment program, whereby employers would simply deduct the appropriate college-loan payment from borrowers' paychecks just like they make deductions for federal income tax, Social Security contributions and health insurance.  The borrower's monthly payment would fluctuate as income goes or up or down; and a borrower who is unemployed would pay nothing during the period of unemployment.

Dynarski's plan is a little more complicated than I've explained but not much.  The proposal is set out in detail in a paper released recently by the Brookings Institution, which recommended that an automatic income-based repayment program be the default option for students who take out federal student loans.

Dynarksi's automatic income-based loan repayment plan has many attractive features. First of all, if fully implemented, it would completely eliminate all student-loan defaults.  Any student-loan borrower who is employed would see a payroll deduction for student loans on every paycheck.

Second, an automatic paycheck deduction plan would virtually eliminate the need for loan collection agencies.  The IRS (or perhaps the Department of Education) would in essence by a giant federal student-loan collection agency.

Long-Term Automatic Payroll Deductions for College-Loan Borrowers Is a Sharecropper Plan

What's the downside?

As I've said before, income-based student-loan repayment plans  do nothing to stop the spiraling cost of higher education. Putting millions of students on income-based repayment plans might actually reduce the incentive for colleges an universities to get their costs under control.

Second, and far more ominously, in my opinion, putting students on long-term income-based repayment plans, whereby college-loan payments are automatically deducted from borrowers' paychecks over a period of 20 or 25 years, essentially transforms all young people who borrow money to attend college into a class of sharecroppers who fork over a percentage of their income over the majority of their working lives simply for the privilege of getting a college education.

And this is why I don't like the Dynarski/Brookings Institution proposal.  But my best guess is that something like what Dynarksi and the Brookings Institution have proposed will eventually become the default option for most people who pursue postsecondary education.


References

Susan Dynarski. Finding Shock Absorbers for Student Debt. New York Times, June 15, 2014, Sunday Review Section, p. 8.

Why Humiliate Yourself To Get into an Ivy League College? The Search for a Richer Life

Years ago I had a professor at the University of Texas who hung his college diploma in the guest bathroom of his home--right above the toilet.  As I recall he was a Harvard graduate.

I remember being offended by the gesture, intended I suppose to be ironic. If I had the opportunity to go to Harvard or any Ivy League university, I told myself, I would hang my diploma in a place of honor.

Years later I obtained a doctorate degree from Harvard, one of the stupidest things I ever did. For years I hung my diploma in my office, but today it hangs in a back hallway of my home.  I didn't put my Harvard diploma in an obscure place to be ironic.  I just came to realize how meaningless my Harvard degree really is.

Yesterday, Frank Bruni had an op ed piece in the New York Times about people humiliating themselves in their college admissions essays in order to stand out and perhaps improve their chances of being accepted at an elite college.  One young woman, Bruni wrote, confessed in her essay that she had once urinated on herself rather than interrupt an intellectually stimulating conversation with a teacher. Another young man revealed his disappointment with size of his genitals. Other students enroll in college-application camps, which can cost up to $14,000, where they are taught how to polish their college admissions essays to make them more appealing to Ivy League admissions officers.

Why do young people turn themselves inside out to get into an elite American university--Harvard, Yale, Dartmouth, Brown, Duke, Columbia, etc. I suppose they believe that these institutions hold the key that unlocks the golden door. If only I can get a degree from Harvard, these people tell themselves, I will have a richer life.

But I think many people who hanker to go to an elite college will be disappointed if they actually enroll. For the most part, these institutions are intellectually vapid, surreptitiously  racist, and pathetically provincial in their outlook on the world. They are openly contemptuous of American culture and traditional American values.  The people who run these cesspools of privilege think they embrace diverse philosophies and points of view, yet they harass traditional Christian student groups.  The professors and administrators of these intellectual ghettos think they are guardians of truth and beauty, yet they scorn the very notion that there are universal truths. Indeed, a great many people who inhabit our elitist universities seek nothing more from life than money, power, and public recognition.

If only I could get into Harvard!

Moreover, our elite institutions are not producing people who can analyze and solve problems, as evidenced by the way the Obama administration is running the country. Almost everyone connected withe the present  administration in Washington has a degree from an elite British or American university, and yet it is evident to nearly everyone that these folks do not know what they are doing.

And of course, all these prestigious colleges and universities are outrageously expensive. It will cost you around sixty grand a year to hang out with a bunch of nincompoops.

I was ruminating on Bruni's essay yesterday morning when I walked into my parish church to attend Mass. I saw four nuns of the Missionaries of Charity sitting in the back of the church--sisters of Mother Teresa's order. They are quite distinctive in their white veils with the blue stripes--veils that always remind me of my grandmother's tea towels.

As I looked at these nuns I realized that there is a great gulf between a humiliating life and a life lived in humility. Some people are willing to humiliate themselves in order to get into Harvard or Yale. Others are humble enough to give their lives to God.

And I wondered, as I turned to genuflect before the tabernacle, who has the richer life--the people who dedicate their lives to God or the people who get a degree from Harvard?

References

Frank Bruni. Naked Confessions of the College Bound. New York Times, June 15, 2015, Sunday Review Section, p. 3.

We Don't Need No Stinkin' College Rating System: President Obama's Plan to Rate Colleges on Value Faces Congressional Opposition

President Obama is determined to impose some sort of college rating system on the nation's higher education institutions, even though the higher education community opposes it. And President Obama is also getting blow back from Congress.

Republican Representative Bob Goodlatte of Virginia and Democrat Representative Michael Capuano of Massachusetts introduced a resolution in the House of Representatives opposing Obama's college rating proposal. The resolution states in part:

[T]he Administration's proposal to rate postsecondary institutions through an oversimplified Federal rating system that is not supported by postsecondary institutions, statute, or by the House of Representatives, will lead to less choice, diversity, and innovation, and should be rejected. 

Senator Lamar Alexander has also stated his opposition to the college-rating plan in a speech on the floor of the U.S. Senate. Senator Alexander expressed skepticism that the Department of Education can come up with a reliable and workable rating plan.

I don't know whether Representatives Goodlatte and Capuano are right to conclude that a college-rating system will lead to less diversity and fewer choices in higher education.  But I do think the plan will have no beneficial impact on the spiraling cost of attending college and will add yet another level of bureaucracy to universities that are already bloated with too many administrators.

Don't form a committee on snakes.
Photo credit: NBC News

In my mind, the Department of Education's focus on a college-rating system is a diversion from the urgent task of reforming the federal student loan program.  As Ross Perot once observed, if you see a snake, kill it. Don't form a committee on snakes.

My prediction is this:  President Obama's college-rating proposal is going nowhere.

References

Michael Stratford. Obama defends college rating system amid growing backlash from Capitol Hill. Inside Higher Ed, June 11, 2014.

House Resolution Strongly supporting the quality and value of diversity and innovation in the Nation's higher education institutions and strongly disagreeing with the President's proposal to create and administer a Postsecondary Institution Rating System. [Introduced by Reps. Goodlatte and Capuano on June 10, 2014]

Is Senator Elizabeth Warren a Paper Tiger? Her Bill to Lower Interest Rates Was a Non-Starter

A lot of people think Senator Elizabeth Warren is a fierce advocate for college-loan debtors, a feisty bulldog who strives mightily to get some relief for the millions of young Americans who are burdened with crushing student loans. I once thought so myself.

But I've become skeptical.  So far,Warren's basic thrust has been to advocate for lower interest rates on federal student loans. Lower interest rates will give college-loan borrowers some relief, of course; but lower interest rates will do nothing to stop the spiraling cost of higher education--which has forced students to borrow more and more money every year in order to attend college. 

And lowering interest rates will do nothing to clean up the fraud and abuse in the for-profit college industry--a problem that Warren says little about.

Earlier this week, Warren's bill to lower student-loan interest rates failed in the U.S. Senate, killed by the Republicans.  The bill never had a chance of passing because it included a provision to raise taxes on the wealthy--something Republicans would never vote for.

And of course Warren knew that. Basically the bill was a cynical attempt to paint the Democratic Party as the friend of indebted college students while embarrassing the Republicans by portraying them as hardhearted protectors of the rich.

All fine theater of course, but did anything get accomplished? No--not a damn thing.

I realize of course that getting real student-loan reforms through Congress will be difficult. The for-profit industry and its lobbyists are very powerful; and the for-profits make strategic contributions to key legislators like Speaker of the House John Boehner.

But Warren could render real service simply by publicizing just how bad the student-loan mess is.  She should demand, for example, that the Department of Education release information about the true default rate--not the watered-down rate that it publishes every October.

In addition, she could team up with outgoing Senator Tom Harkin and publicize how the for--profit colleges are exploiting low-income and minority students.

She could advocate for a reform of the Bankruptcy Code so that millions of insolvent student-loan debtors could discharge their loans in the bankruptcy courts.

But no--she is content to sponsor legislation that she knows will go nowhere simply to embarrass the Republicans.

I suspect that Senator Warren's core constituency in Massachusetts--all those corpulent, self-satisfied and arrogant colleges like Harvard, Boston University, Brandeis, etc. etc.--are quite happy to see their senator engage in sound and fury regarding the student loan program. They know Senator Warren's bombast will never lead to any legislation that would threaten their interests.

So just keep yakking, Elizabeth; go right on yakking.

References

Julie Hirschfield Davis. In School Speech, Obama Deplores Blocking of Student Debt Bill. New York Times, June 12, 2014, p. A20.

Like a Secret Drunk Who Hides A Bottle of Bourbon in His Office Drawer, The Higher Education Industry is Addicted to Student Loans But Won't Admit It

Almost everyone agrees that Alcoholics Anonymous has the best treatment program for alcoholics. AA's simple 12-step program is followed by alcoholics all over the United States, and AA's method for treating alcoholics has been adapted for other addictions as well--including the addiction to drugs.

Perhaps the higher education industry should adopt an AA-style 12-step program to treat its addiction to the federal student loan program.  After all, higher education's dependence on federal student aid money really is an addiction. For-profit colleges in particular could not survive a week without regular infusions of federal cash.

Drinking problem? What drinking problem?
photo credit: twentytwowords.com

But the Obama administration and Arne Duncan's Department of Education treat the student-loan mess as if it were just an irritating  problem and not a full-blown crisis.  It's like Aunt Sally's tolerance for Uncle Ed's drinking binges--she just smiles while reassuring herself that Ed maybe drinks just a wee bit too much.

And President Obama's announcement to expand the Pay As You Earn program shows us that he is in denial about the magnitude of the student-loan crisis.  His administration's decision to expand the program, like its decision to continue strengthening the regulation of the for-profit industry, shows that President Obama and Arne Duncan know that the student-loan mess is serious.  But they want to address the problem like Aunt Sally deals with Uncle Ed's drinking--they just want to water down the whiskey.

Let's face it, in spite of the New York Times' sycophantic praise, Pay As You Earn is nothing more than a plan to stretch students' 10-year student-loan repayment obligations to 20 years.  Yes, this will reduce borrowers' monthly payments, which will give college-loan debtors some short-term relief; but borrowers will be paying on their loans for a majority of their working lives. Is that a real solution?

Second, although I haven't seen any financial analysis to back me up on this observation, I suspect a lot of people who elect the government's income-based repayment options for paying back their loans  won't be making payments large enough to reduce the principal on their debt.  When their loan obligations are discharged after 20 years, millions of people will still owe as much as they borrowed. How can that be a good thing?

So let's look at that 12-step plan.

Step number one is to admit that you have a problem and are powerless to control it.  The Feds could follow that first step by releasing the real student-loan default rate--not that phony three-year rate it releases every October.  According to DOE's latest report, about 15 percent of  recent debtors defaulted within three years of beginning their loan repayment phase; for students who attended for-profit colleges, the rate is 21 percent.

Those numbers are bad but they dramatically understate the true default rate.  Many for-profits, community colleges and some traditional four-year schools have hired so-called "default prevention" firms to contact distressed student borrowers and encourage them to sign up for economic hardship deferments.  Students who obtain these deferments--which are quite easy to get--are not counted as defaulters even though they are not making loan payments.

Just facing up to the reality of how many millions of people are not paying back their loans would be an admission that the student-loan program is out of control.  That's step number 1 of the AA's 12-step plan.

Another important step in AA's 12-step program is to make amends to the people you have injured. I believe that is step number 9.

And of course the Obama administration, Congress and the nation's colleges and universities haven't made amends to the people who have been hurt by the student-loan program.  And until they make amends they haven't done what is necessary to break the higher education industry's dependence on federal student aid money.

What should be done?  As I have tirelessly advocated, Congress needs to amend the Bankruptcy Code to allow insolvent student-loan debtors to discharge their  student loans in bankruptcy so long as they file in good faith.

Second, the federal government should stop garnishing the Social Security checks of elderly student-loan debtors who defaulted on their loans.

And third, the for-profit college industry needs to be shut down.

Of course none of these things are going to happen.  Our government will continue to hide the true magnitude of the student-loan default rate, and it will continue to let millions of people suffer who have no reasonable hope of ever paying off their student loans.

And just like Uncle Ed, who drinks in secret, our nation's colleges and universities will continue abusing students by forcing them to borrow more and more money.  Eventually, Uncle Ed will kill himself from excessive drinking. And eventually, higher education's addiction to federal student aid will destroy the integrity of our nation's colleges and universities, which were once the envy of the world.

No one knows just how Uncle Ed will die--liver disease or a fatal car accident.  And no one knows just how low American higher education will go in terms of its degradation.  But the future is bleak for both of them.

References

Student Borrowers and the Economy. New York Times, June 11, 2014, p. A20.

Bowdoin College Casts Out a Christian Prayer Group: In the Coming Years, Catholics Will Be Pushed Out of the Universities and Public Life

The New York Times carried a front page story today about a decision by Bowdoin College to withdraw recognition of a Christian prayer group as an official student organization.

And what did the Christians do to cause Bowdoin to cast them into the outer darkness? The group refused to allow non-Christians to be appointed as their organizational leaders.

Bowdoin is one of many so-called elite colleges and universities around the country that are withdrawing recognition to Christian student groups, which generally means these groups will be denied access to facilities and services that are open to other student groups--the local S & M club for example.  Vanderbilt has done the same thing, along with Tufts, State University of New York at Buffalo and Hastings Law School in California.

Edith Stein
Later St. Teresa Benedicta of the Cross
(Did not attend Bowdoin)

What happened to the constitutional right to freedom of religion, you may be asking? Didn't the Supreme Court rule in Widmar v. Vincent that a state university could not deny recognition to a Christian student group if it recognized other student organizations?

Unfortunately, the Supreme Court overturned Widmar v. Vincent as a constitutional  precedent, although the Court did not have the courage or the intellectual honesty to say so.  In Christian Legal Society v. Martinez, as cynical a piece of sophistry as anything the Court ever wrote, Justice Ruth Ginsberg upheld a decision by Hastings Law School to deny recognition to the Christian Legal Society because the CLS limited its members to Christians who agreed to abide by traditional Christian beliefs about sexual morality.

Justice Ginsberg said that Hastings had a compelling governmental interest in enforcing an open-to-all-comers policy for all student groups and could deny recognition to any student group that refused to comply. CLS denied membership to anyone who did not commit to the Christian standard of sexual morality, which prohibits all sexual activity outside the relationship of marriage between a woman and a man.

The bottom line is this: According to the morality that prevails at some of America's most prestigious (and expensive) colleges, Christian groups discriminate against people who do not adhere to Christian sexual values.  Thus they should be kicked off campus. In the postmodern academic mind, Christian students who hold traditional religious beliefs about sexual morality are reprehensible--as reprehensible, I suppose as racists.

The universities' anti-Christian policies are not expressly aimed at Catholics.  So far, from what I can gather, it has been evangelical Protestant groups that have been exiled.  But Catholic student organizations are as vulnerable as Protestant groups to expulsion.  Catholics believe, after all, in Christ's real presence in the Eucharist--a belief not held by Protestants. Catholic will never allow a Protestant or non-Catholic to be a leader of a Catholic student organization.

And--under Justice Ginsberg's wacky reasoning, a Catholic student organization that refused to allow an abortion advocate to be an elected leader would also fall afoul of the CLS v. Martinez ruling.

So Catholic student groups are going to be pushed off college campuses. In fact, I'm sure that has already begun happening.

What does this mean? Three things I think:

First of all, the decision by Bowdoin, Tufts, Vanderbilt and other elitist institutions to censor Christian student groups demonstrates just how shallow, vacuous and intellectually dishonest our nation's colleges and universities have become. Based on no basis other than the fashions of the day,  colleges and universities that Americans once trusted to preserve and pass on our nation's cultural and religious heritage have declared that Christianity--or at least traditional forms of Christianity--is a shameful cult that does not deserve to even have a presence on an American college campus.

Of course, the new campus groupthink won't have any effect on the mainstream Protestant organizations--the Methodists, Episcopalians, and the Disciples of Christ.  Those folks don't have any firm religious convictions; their doctrine changes with the whims of the New York Times editorial page. As long as they keep their Times subscription current and do what the Times editorial-page writers tell them to do, they will be fine.

But if you are a Catholic, a Mormon, a Muslim, or a Southern Baptist, then you are a bigot in the minds of many campus administrators; and it will be the job of the university to re-educate you--just as China re-educated its dissidents during the Cultural Revolution.

But at least the Chinese didn't require its nonconformists to pay outrageous tuition to brain wash you.  The rural re-education camps were free!

Second,the higher education communities' accelerating trend into mendacity, deceit, and sophistry will push faithful Catholics out of the nation's leading universities and out of the professions, which have shown a distressing trend to censor Christian views.  The day will come when law, medicine, education, counseling, and academia in general will be closed to anyone who professes a belief in the doctrines and tenets of the Catholic faith.

And third, I think Catholics and evangelical Protestants will grow closer as the kulterkampe expands its reach and America's intellectual elites become bolder in their bigotry.  Personally, I have a growing admiration for our Protestant brothers and sisters who have taken their place in the front lines in the fight against abortion. And I believe evangelical Protestants are looking more tolerantly toward Catholicism.

Now may be an opportunity for Catholics to reach out and evangelize the evangelical Protestants. I think we might be surprised by how receptive they are to our Catholic faith.

Certainly, as evangelical Protestants and Catholics go down into the catacombs together, we will have plenty of time to contemplate the Gospel and to ask ourselves what God requires of us as the Postmodern Age sweeps aside the culture, the traditions and the moral principles that are the bedrock of Western Civilization.

And while we are down in those catacombs, let us mediate on the life of St. Edith Stein, who was a great intellectual who held two doctoral degrees and has been named a Doctor of the Catholic Church.  If Edith were alive today, her views would not be welcome at Bowdoin.  I don't think Bowdoin would gas her as the Nazis did at Auschwitz; but  in the coming years, who knows how far the new anti-Christian bigotry will go?

References

 Michael Paulson. Colleges and Evangelicals Collide on Bias Policy. New York Times, June 10, 2014, p. 1.

For what we have done to you, we are truly sorry: The Baby Boomers should apologize to the Millennial Generation for the student-loan mess

Frank Bruni wrote a long op ed essay in yesterday's Sunday Times about the wrongs the Baby Boomers have committed against the Millennial generation.   According to Bruni, the Baby Boomers are leaving today's youth with towering problems: climate change, a sick economy, and a mounting national debt. Bruni quotes former governor and U.S. Senator Bob Kerrey as saying the nation is spending too much on the last generation (Medicare, Social Security, and Veterans' benefits) and not enough on the next one.

Dear Millennnials: We're Sorry for the Student Loan Crisis (burp)!

Kerrey is right of course, and so is Bruni. The Baby Boomers have bequeathed the young people of our nation with a host of problems--problems that are only going to get worse because this generation doesn't have the courage or integrity to face them.

Bruni's op ed essay was in harmony with an editorial that appeared in the same issue of the Times entitled "Starting Out Behind." The Times points out that young people are graduating from college with massive indebtedness only to face a sickly job market.  Unemployment among people in their early 20s is higher than the national average, and underemployment (those people who are unemployed, employed part-time or who have given up looking for work) is very high--16.8 percent.

The Times editorial quoted statistics showing that 44 percent of today's college graduates hold jobs that do not require a college education.  There was a time, the Times observed, when people working in jobs that did not require a college degree made decent money--tradespeople like plumbers and electricians, union workers, etc. Today, a lot of college-educated young people are working as waitresses, bar tenders and store clerks.

Perhaps the most disturbing bit of data the Times mentioned is the fact that more than half of young adults (55 percent) still live with their parents. Nobody wants to see that number go higher.

The Times editorial did not mention the burgeoning student-loan indebtedness that is crushing this nation's young adults. And this is odd, because  of all the problems this generation passed on to the Millennial generation, the federal student-loan mess is the most egregious and the easiest one to fix.

Addressing climate change,  the national debt, and our sickly national economy are complicated problems with no easy or certain solution. But we could easily do some things to ease the burden of student-loan indebtedness on our nation's young people; and we could do these things today.  Here are a few things we could do that would be helpful:

1) The federal government could remove any higher education institution from the federal student loan program that does not freeze tuition and fees at current levels.   In essence, our government would be telling the nation's porky colleges and universities that the party is over.

2) Congress could amend the Bankruptcy Code to allow insolvent student-loan debtors to discharge their loans in the bankruptcy courts so long as they file for bankruptcy in good faith.

3) The Obama Administration could instruct the Internal Revenue Service to stop garnishing the Social Security checks of elderly people who defaulted on their college loans.

4) Congress could easily shut down the private student-loan industry by making it easier for distressed debtors to discharge their private student loans in bankruptcy.

5) Congress could shut down the for-profit college industry, which has the highest student-loan default rates and which is riddled with fraud and abuse,  simply by making all for-profit colleges ineligible to participate in the federal student aid program.

Of course none of these things are going to happen.  So far, the Obama administration, which is fully aware of the magnitude of the student-loan crisis, can think of nothing better to do than extend students' loan repayment period from 10 years to 20 or 25 years.  Not very bold or creative in my opinion.

But Frank Bruni is right: the Baby Boomers generation owes the Millennial generation an apology.  But it should apologize for more than global warning and the national debt; it should say it is sorry for corrupting higher education with a corpulent and abusive federal student loan program that has put this nation's young people in debt to the tune of $1.2 trillion.

References

Frank Bruni. Dear Millennials, We're Sorry. New York Times, June 8, 2014, Sunday Review Section, p. 3.

Editorial. Starting Out Behind. New York Times, June 8, 2014, Sunday Review Section, p. 10.

Workin' for the Man: President Obama's Disasterous Plan to Expand Income-Based Repayment Programs for Student Loan Debtors

Tomorrow, President Obama is expected to announce an expansion of his "Pay as You Earn" income-based repayment program for student loan debtors. This program,  which Obama initiated by executive action in 2011, allows student-loan debtors to pay roughly 10 percent of their income on their loans for a period of 20 years.  (The exact formula is a bit more complicated that.)  At the end of the 20-year repayment period, any unpaid loan balance will be forgiven.



Passing the student-loan mess on to the next president

Pay as You Earn is popular with student debtors because it is more generous than the other income-based repayment (IBRP) options. One major program requires debtors to pay 15 percent of their income over a period of 25 years.

But a lot of student debtors don't qualify for Pay As You Earn under present regulations. According to the New York Times, Obama plans to extend eligibility to an additional 5 million student-loan borrowers, including those who took out loans before October 2007. 

Is Pay As You Earn a good thing for the nation's distressed student-loan debtors. Yes it is--at least in the short term. For people struggling to pay mountains of debt under the standard 10-year repayment plan, Pas As You Earn will lower monthly payments substantially.  People who are currently paying 15 percent of their income under a 25-year IBRP will be delighted to switch to Obama's more generous Pay As-You Earn program.  People who are unemployed or underemployed will be particularly grateful, because if their income falls below the official poverty level, they won't have to make any monthly payments at all.

Is there a down side to Pay As You Earn? You bet.

First of all, all the income-base repayment plans remove all incentives for student borrowers to limit the amount of money they borrow. If their loan payments are based on their income and not the amount they borrow, then there is no reason not to borrow as much money as you can.

Second, Pay As You Earn and other IBRPs do nothing to slow the burgeoning cost of going to college.  Colleges have no incentive to keep their costs down, because they know students will simply borrow more money to cover tuition hikes.  What do colleges care if their graduates are making student-loan payments for 20 years?

Third--and most significantly, these long-term repayment plans are going to fundamentally change the way Americans view postsecondary education and the world of work. There was a time when low-income individuals worked their way through college, graduated with no debt, and entered the workforce determined to buy homes, start families, and begin the confident climb up the economic ladder.

Now, 18- and 19-year olds are going to begin college knowing that they will pay for their postsecondary education by donating some percentage of their income to the federal government over the majority of their working lives.  In essence, they will become indentured servants for the government--sharecroppers if you will.

I think this arrangement will foster cynicism among the young, because they will realize on some level that they have been forced into unreasonable levels of indebtedness because colleges refuse to control their costs. They will see university presidents like NYU's John Sexton make outrageous amounts of money while they sign up for long-term college-loan repayment plans that they will not pay off until they are in their 40s and 50s.

And, since they won't have to pay anything under Pay As You Earn if they are unemployed or live below the poverty level, I think many of them will postpone going to work. Many will figure that it makes sense to travel or take low-wage jobs in exotic locales rather than seek more remunerative employment. And the incentive to work "off the books" will increase, because people in IBRPS who enter the cash economy will not only avoid paying taxes and making Social Security contributions, they will avoid making student-loan payments as well.

Moreover, once these college-going young people figure out that their payments will be based on their incomes and not the amount they borrow, they will borrow as much as they can.

I appreciate the President's efforts to provide overburdened college-loan debtors some immediate relief by offering plans to lower monthly loan payments while extending the loan repayment period. Unfortunately, in the long run, the results will be catastrophic.

In reality, President Obama is simply passing the student-loan mess on to the next president to deal with.  Millions of people may see their student-loan payments go down in the short-term, but they will be significantly extending the length of their loan repayment period. Most Pay-As-You-Earn participants --I predict--won't be making loan payments large enough to cover accruing interest  or pay down the principal on their notes--which means they won't really be paying their loans back at all. 

And meantime--total student-loan indebtedness--now more than $1 trillion dollars--will continue to grow and grow.


References

Jackie Calmes. Obama Plans Steps to Ease Student Debt. New York Times, June 8, 2014, p. 17.

Transparency--The Last Refuge of a Scoundrel: New York University's Abu Dhabi Construction Scandal

Patriotism, Samuel Johnson remarked, is the last refuge of a scoundrel. But times have changed. Today,self-proclaimed "transparency" is the last refuge of the scoundrel--or at least of scoundrel universities.

Earlier this month, the New York Times broke the story of labor abuses during the construction of New York University's Abu Dhabi campus.  According to the Times, construction workers were required to pay hiring bonuses to get jobs, forced to work long overtime hours in order to obtain the wages they were promised, and crammed into substandard housing--sometimes 15 workers to a room.  Immigrant workers' passports were confiscated, and striking workers were arrested and beaten.

Transparency--the queen of virtues

New York University apologized immediately after the scandal broke, probably pulling a template apology from its public relations department files.  But it never took responsibility for what occurred.  In fact, NYU President John Sexton tried to distance the university from the scandal by claiming that the construction company, not NYU, was responsible for working conditions during the Abu Dhabi construction.

A few days later, NYU held its first graduation ceremony on its Abu Dhabi campus, and Bill Clinton showed up to give the commencement address.  Did he reproach NYU for the labor scandal? No he did not.

This is what Clinton said:

When this story came out, instead of going into immediate denial, the university did something which reflects the values you have been taught here . . . The university, and the government, promised to look into the charges, to do it quickly, to do it honestly and, most importantly, among all the world's skeptics, to do it transparently and if the charges were well founded, to take appropriate, remedial action promptly.

Ah, transparency!  The new queen of virtues.

But then, only a couple of days later, the New York Times reported that the construction company that built NYU's Abu Dhabi campus and apparently abused its construction workers, is run by Khaldoon Khalifa Al Mubarark, a member of NYU's boad of trustees!

So NYU President John Sexton was not being transparent when he suggested that NYU was not directly involved in the Abu Dhabi construction project.  In fact, the construction company's chief executive was sitting on NYU's board.

This is not the first time NYU has been caught being less than transparent. Remember when Senator Charles Grassley tried to get NYU documents pertaining to the low-interest loans it was giving favored administrators? NYU employees finally let Senator Grassley's staffers look at some pertinent documents but they would not permit any documents to be copied or allow Grassley's people to keep any documents for further review.

Some transparency!  Let's face it--New York University, which pays President John Sexton an obscene salary and has a board of trustees packed with Wall Street insiders, is about as transparent as a Louisiana crawfish pond.

Which is fine.  Let NYU run itself any way it chooses.  If it wants to pay its president $1.5 million a year, dispense exit bonuses to guys like Jacob Lew, and give low-interest loans to help insiders buy second homes--I say go right ahead.  But let's kick this renegade institution out of the Federal Student Loan program.


References

Clinton Lauds N.Y.U. Graduates, and Inquiry, in Speech. New York Times, May 25, 2014.

Ariel Kaminer.  N.Y.U. Impeding Compensation Inquiry, Senator Says. New York Times, July 10,2013.  Accessible at: http://www.nytimes.com/2013/07/11/nyregion/nyu-accused-of-impeding-compensation-inquiry.html?_r=0

Andrew Ross Sorkin. N.Y.U. Crisis in Abu Dhabi Stretches to Wall Street. New York Times, May 26, 2014.

Obama's College Rating System: Why Do Something Simple and Effective When You Can Do Something Complicated and Futile?

President Obama Wants to Institute a College-Rating System to Help Bring Down the Cost of Higher Education. Is This a Good Idea?

President Obama wants to create a college-rating system to help prospective students make better choices about where to attend college.  Obama's proposed rating system will consider a number of factors--cost of tuition, graduates' average debt load,  post-graduate earnings, etc.--which will all be weighed with the goal of identifying which colleges provide the best value for students' tuition dollars.

University of Houston's Renu Khator: This woman needs a performance bonus!

According to a New York Times story, Obama's proposed rating system would not rank institutions numerically. Rather, colleges and universities would be given grades like "excellent," "good," "fair," or "poor."

Not surprisingly, many higher education leaders are opposed to President Obama's initiative. Most of them want nothing to do with a college-rating system designed by the U.S. Department of Education.  The New York Times quoted the reaction of several university presidents to Obama's college-rating proposal, who described it  variously as  "clueless," simplistic, and "wrongheaded."

Personally, I have no sympathy for the college presidents on this issue.  Colleges and universities have been jacking up tuition for years at twice the annual rate of inflation, and Americans have wracked up more than $1.2 trillion in outstanding college-loan debt. I commend President Obama for trying to reverse this trend.

But will a complicated, federally designed college-rating system do anything to stop the upward spiral of rising college costs? I doubt it. 

In a way, Obama's college-rating initiative is like the Clery Act, which Congress passed in 1990 to give parents and prospective students more information about crime activity in and around the nation's colleges and universities.  The Clery Act requires higher education institutions to collect and publicly report on various categories of crime in their campus communities.

Unfortunately, there is little evidence that the Clery Act has had much impact on college students' awareness of campus crime.  One study reported that only 10 percent of students considered campus crime statistics when making decisions about where to attend college.

Two authors who surveyed research and commentary on the Clery Act concluded: "It is clear that students remain unaware of the [Clery] Act"  and do not use the information contained in their institutions' annual campus crime reports (Gregory & Janosik, 2002, p. 46). It seems likely that more students choose their universities based on varsity-football rankings than on the crime statistics that higher education institutions are required by federal law to compile and publicize.

Why Not Attack College Costs and Rising Student Indebtedness Head On?

To his credit, President Obama recognizes that soaring tuition costs and rising student indebtedness have reached crisis proportions. As Cecilia Munoz, one of Obama's top advisers put it, "This is a system which perpetuates itself, and is moving in a direction which is unsustainable to the American people." 

Nevertheless, it seems unlikely that  President Obama's federal college-rating system will have any significant impact on rising college costs and rising student indebtedness. On the contrary, Obama's initiative will probably increase administrative costs at colleges and universities because they will be required to hire more bureaucrats to deal with the college-rating regulations.

Shut down the for-profit college industry. Instead of dealing with rising college costs and student indebtedness indirectly, why not tackle the problem head on? For example, we know that for-profit colleges have the highest tuition rates, the highest student-loan default rates and the highest dropout rates of any sector of the higher education industry.  Moreover, although they enroll only about 11 percent of all post-secondary students, they soak up a quarter of all the federal student-aid money.

Why not simply kick the for-profit colleges out of the federal student loan program altogether? The money saved--more than $30 billion annually--could be directed to public community colleges, which can offer post-secondary education at a far more reasonable price.

Shut down the private student-loan industry. We also know that rising tuition is made possible in part by a thriving private student-loan business.  Professional schools in particular could not set tuition rates at their current high levels if it were not for the fact that students have access to a private student-loan market to pay their tuition bills.

Why not shut down the private student-loan industry?  And how could that be done? Simply by repealing the 2005 revision to the U.S. Bankruptcy Code that makes private student loans almost impossible to discharge in bankruptcy.  If the banks knew that insolvent student-loan debtors could discharge their loans in bankruptcy as easily as they could discharge other unsecured loans, the private-loan industry would shut down almost overnight.

Force colleges and universities to cap tuition and executive compensation as a condition of participating in the federal student loan program.  Finally, all colleges and universities should be required to cap tuition, fees, and executive compensation at current levels as a condition of participating in the federal student loan program.

The value of capping college tuition and fees should be obvious. Telling colleges they must freeze tuition and fees at current levels in order to receive federal student-aid money would force higher education to immediately rein in costs.

And capping executive compensation is also important Let's face it, many college and university presidents make obscene amounts of money and their total compensation packages are often not publicly disclosed.  No institution participating in the federal student loan program should be allowed to do what New York University has done--give low-interest loans to favored employees to buy second homes or pay its president a "length of service" bonus of $2.5 million.

No institution that receives federal student aid money should do what the University of Houston did, which was to pay its Chancellor, Renu Khator, a salary of $700,000 a year plus an additional $200,000 a year in deferred compensation along with a $100,000 a year retention bonus and a contingent bonus of $50,000 a year dependent on performance. 

Don't you think that's ridiculous?  Chancellor Khator makes a million dollars a year in total compensation (plus free housing), and then she gets an additional $50,000 incentive for superior performance? So what's Ms. Khator telling the University of Houston? I'll do a pretty good job for a million bucks a year, but for an additional $50 grand performance bonus, I'll do a super job!

These three actions--shutting down the for-profit college industry, shutting down the private student-loan business, and forcing colleges and universities to cap tuition and executive compensation--would help stop the spiral of rising college costs and growing student indebtedness. All three actions would be simple to implement and all would have an immediate effect on the cost of higher education.

On the other hand, President Obama's proposed federal college-rating system will do absolutely nothing to rein in the cost of higher education or reverse the trend of rising student-loan indebtedness. The time for tinkering with this problem is over.  Only drastic action will restore fiscal sanity to American higher education.


References

Dennis E. Gregory & Steven M. Janosik. The Clery Act: How Effective Is It? Perceptions From the Field--The Current State of the Research and Recommendations for Improvement. Stetson Law Review, 32, 7-58 (2002).

Renee C. Lee. UH gives Khator big bucks to stay. Houston Chronicle, December 21, 2012. Available at: http://www.chron.com/news/houston-texas/houston/article/UH-gives-Khator-big-bucks-to-stay-4139696.php

Michael D. Shear. Colleges Rattled as Obama Presses Rating System. New York Times, May 26, 2014, p. 1.

Don't Mess With the Man: Occupy Wall Street Activist Cecily McMillan Gets Three Months In Jail

I lived in Alaska for nine years, a state that takes its wildlife very seriously.  If you were accused of bank robbery or murder, you could expect justice.  But heaven help you if you shot a moose out of season!

Cecily McMillan

America's elitist colleges have a similar scheme of skewed values. Our elitist institutions encourage students to focus on trivial issues.  When Dartmouth students took over the college president's office to demand gender-neutral bathrooms, Dartmouth treated them with utmost respect. Likewise, our elitist colleges are happy to entertain bizarre student demands to put warning labels on great works of literature.  Warning! The Adventures of Huckleberry Finn contains racist language!

Why do colleges put up with such mindless student antics? Because they don't want students to start thinking about true injustices: the cost of tuition, the out-of-control student loan program, the economic injustice perpetrated by the corporate banks and our federal financial policies.

No--when students protest about important things, the authorities come down hard. Remember the Occupy Wall Street protesters at UC Davis awhile back?  UC Davis police pepper-sprayed students sitting passively on a sidewalk.  Don't mess with Wall Street!

And Cecily McMillan, a graduate student at the New School, was recently sentenced to three months in jail for allegedly assaulting a police officer during an Occupy Wall Street demonstration in New York City.  Ms. McMillan denied the charge, saying that she was only defending herself against a police officer who grabbed her breast. Personally, I think her only crime was to challenge the economic order in an Occupy Wall Street demonstration.  She should have barricaded herself in a college president's office demanding an end to "abilityism."  The college president would probably have served her coffee!



Cecily McMillan

Yes, college presidents and professors will talk with students for hours about the rights of transgender students to go to the bathroom, whether the college endowment fund should divest itself of coal-company stocks, or whether warning labels should be placed on The Great Gatsby. But don't ask them about bloated tuition costs, excessive executive-compensation packages, or the ties between academia and the finance industry.  If you ask difficult questions, you are liable to get pepper sprayed.

References

James C. McKinley Jr. Despite Calls for Release, Activist in Occupy Case Gets Three Months. New York Times, May 20, 2014.

Jennifer Medina. Warning: The Literary Canon Could Make Students Squirm. New York Times, May 18, 2014. p. 1.

NYU's Abu Dhabi Labor Scandal: President John Sexton Should Compensate Exploited Workers From His Own Funds

Yesterday's New York Times reported on New York University's labor scandal in connection with the construction of its new campus at Abu Dhabi.  According to the Times, construction workers, who were largely recruited from East Asia, were crammed into overcrowded living quarters, deprived of their passports, and required to work overtime in order to achieve the wages they had been promised.

Photo credit Sergey Ponomarev for The New York Times       

If the Times report is correct, workers were not paid in accordance with NYU's "statement of labor values, "  which it issued as an explicit assurance that the Abu Dhabi campus would be constructed under fair labor standards. NYU responded to the Times story with a stock apology, but it made no promise to make things right. 

But an apology is not enough. NYU, which has one of the most highly-paid presidents in the country and which charges its students more than $60,000 a year for tuition, room and board, should tap its own resources to compensate workers who were exploited during the construction of NYU's Abu Dhabi campus.

Or better yet, President Sexton should dig into his own pockets to compensate the wronged construction workers.  He is due to get a $2.5 million "length of service" bonus next year, which he really does not need.  After all, President Sexton will receive $800,000 annually for the rest of his life when he retires from NYU.  And he is currently being paid more than $1 million a month to be NYU's CEO.

If President Sexton's $2.5 million bonus were divided among the 6,000 construction workers who were employed on the Abu Dhabi project, each worker would receive a little more than $400.  Four hundred dollars doesn't seem like much to  most Americans, but it represents about a month's wages to the Abu Dhabi construction workers. 

Having President Sexton help pay to make things right seems fair to me.  The construction of NYU's Abu Dhabi campus was an act of hubris and pride on President Sexton's part.  Giving up his extravagant bonus to help right the wrongs in Abu Dhabi would be a humble gesture, and  a touch of humility would do John Sexton good.

References

Ariel Kaminer. N.Y.U. Apologizes to Any Workers Mistreated on Its Abu Dhabi Campus. New York Times, May 20, 2014, p A16.

The Abu Dhabi Scandal: New York University Should Be Kicked Out of the Federal Student Loan Program

Today's New York Times carried a front-page story about New York University's recently constructed campus in Abu Dhabi.  According to the Times, the campus was built by immigrant laborers who worked under harsh conditions for salaries of as little as $272 a month.

Photo credit: NYU Photo Bureau

  

New York University pledged that the Abu Dhabi campus would be built by construction workers who would work under humane conditions and receive fair wages; but apparently that did not happen.  As many as 15 workers lived in tiny rooms, and apparently they were not paid the wages that had been promised to them.  When workers went on strike, the police were called in; and some of the workers were beaten.

New York University is a private institution with extremely high tuition--about $64,000 a year for tuition, room and board.  NYU students graduate with some of the highest student-loan debt levels in the country.  In 2010, NYU students graduated with a total of $659 million in student loans. That's right--nearly two-thirds of a billion!

Nevertheless, John Sexton, NYU's president, is compensated at an obscene level; and the university operates as if it should be answerable to nobody. And when I say obscene--I mean obscene.  President Sexton makes almost $1.5 million per year and is guaranteed a "length of service" bonus of $2.5 million.  When he retires--supposedly in 2016--he will receive annual retirement income of $800,000 a year.  Oh yeah--and he also get an apartment near Washington Square.

Here are a few other recent stories of unseemly behavior by this behemoth institution.

•  According to a recent news story, the university provides a luxury apartment for scholar Henry Louis Gates at below-market rent. Professor Gates is not even employed by NYU; he works at Harvard.

• NYU paid Jacob Lew, now Secretary of the Treasury, an exit bonus of several hundred thousand dollars when Lew left NYU to go to work in private industry.

• NYU gave President Sexton and other favored faculty members low interest loans to purchase second homes. For example, a former law school dean and his wife used a NYU loan to buy a 65-acre estate in Connecticut. 

NYU has the right to operate as it wishes and to disregard its many critics.  The governing board has paid no attention to a vote of no confidence in Sexton's leadership that the Arts & Science faculty issued in 2013.

But does NYU deserve to participate in the Federal student loan program, which is financed by American taxpayers, when it shows so little regard to financial propriety?

I don't think so.  If it wants to pay its president more than $1 million a year and start a high-profile campus in the Middle East, let it do so.  But NYU should not benefit from a federal student loan program that was intended to provide broader access to higher education--not subsidize a lavish and unseemly enterprise.

References

Jake Flanagin. The Expensive Romance of NYU. Atlantic, August 13, 2013. Available at: http://www.theatlantic.com/national/archive/2013/08/the-expensive-romance-of-nyu/278904/

Ariel Kaminer &  Alain Delaquieriere. N.Y.U. Gives Its Stars Loans for Summer Homes. New York Times, June 17,2013.

Ariel Kaminer & Sean O'Driscoll. Worker's at N.Y.U.'s Abu Dhabi Site Face Harsh Conditions. New York Times, May 19, 2014, p. 1.

Abby Ohlheiser. John Sexton will officially leave NYU in 2016. The Wire, August 14, 2013. Available at: http://www.thewire.com/national/2013/08/john-sexton-will-officially-leave-nyu-2016/68346/

Bruce Wright, Harvard Prof. Henry Louis Gates Gets Unreal Housing Perks from NYU. Boston.com, May 17, 2014. Available at: http://www.boston.com/news/nation/2014/05/17/harvard-prof-henry-louis-gates-gets-unreal-housing-perks-from-nyu/pXTFg7YDd3BMSekltbQ4tI/story.html

"Be sure To drink your Ovaltine": Inside Higher Ed partners with a Inceptia, a "debt prevention" company, to produce a tepid booklet of bromides on the student loan crisis

"Be sure to drink your Ovaltine"

Remember the Olvatine scene from the movie The Christmas Story? Ralphie Parker, an avid fan of the Little Orphan Annie radio program, writes to the program's sponsor and asks for a "Little Orphan Annie Decoder Ring."

When the  "Little Orphan Annie" program comes on the air, Ralphie anxiously uses the ring to decode Little Orphan Annie's secret message to  radio listeners. Ralphie thinks the message might have something to do with one of Little Orphan Annie's adventures.

But he is wrong.  When he finishes decoding the message, the disillusioned Ralphie finds that it just an advertisement for the program's sponsor. "Be sure to drink your Ovaltine."

"A crummy commercial?" Ralphie wails. "Son of a bitch!"

I felt a bit like Ralphie when I looked at the online collection of Inside Higher Ed articles that Inside Higher Ed produced recently on the future of student loans.  I was expecting some hard hitting pieces on the student loan crisis. But what I found was a booklet of tepid pieces that was produced in partnership with Inceptia, a nonprofit company that cryptically describes itself as a "leader in default prevention and financial education solutions."

What does Inceptia do to prevent student loan defaults? I'm not sure, but I'll bet its activities include contacting students who are at risk of default and encouraging them to sign up for economic hardship deferments. Senator Tom Harkin's committee report on the for-profit loan industry pointed out that putting at-risk students into economic hardship deferments is good for the colleges because those students will not be counted as people who default on their loans within three years of beginning repayment--even though they are not making payments on their loans. And if those students officially default after DOE's three-year default measurement period expires--who cares? 

Inceptia is a unit of the National Student Loan Program (formerly the Nebraska Student Loan Program), which is located in Lincoln, Nebraska.  Randy Heesacker, Inceptia's CEO, is well paid.  I couldn't find out his current income, but I found the Nebraska Student Loan Program's 2011 federal tax return.  According to that tax filing, Heesacker received total compensation of $378,457 when he was CEO of the Nebraska Student Loan Program (including bonuses and deferred compensation).

Does that sound like an extravagant salary for a non-profit oranization's employee?  Don't worry.  The Nebraska Student Loan Program's tax return assured the IRS that "[o]utside legal counsel undertakes a comprehensive evaluation of the compensation and benefit packages for officers and other affected employees of the organization, comparing the same relevant industry and other market comparables."

Oh, that's a relief.

And if Heesacker made $378,457 in 2011 as CEO of the Nebraska Student Loan Program, what do you think he's making now as CEO of Inceptia?  

I think it is a safe bet that the articles Inside Higher Ed chose for its online booklet were acceptable to Inceptia.  And not surprisingly, most of the articles quoted various student-loan organizations that basically support the status quo.

One writer advocated larger Pell Grants. Someone argued for lower interest rates on student loans.  And one organization wants lending standards loosened for Parent PLUS loans. 

No one in the  Inside Higher ED's collection of articles advocated for revising the bankruptcy laws to make it easier for distressed student-loan debtors to discharge their loans in bankruptcy. No one recommended elimination of the Bankruptcy Code provision that makes private student loans very difficult to discharge in the bankruptcy courts.

No one recommended tighter restrictions on the for-profit college industry or regulations to stop abusive collection practices or the garnishment of of Social Security checks.

No--almost everyone who participates in the public conversation about the future of the student loan program is an insider--an organization that benefits directly or indirectly from the $100 billion that the federal government spends each year to subsidize the higher education industry, which has been raising the cost of attending college every year for the past 30 years.

I'm sorry Inside Higher Ed and Inceptia--your vision of the future of student loans is not sustainable.

Someday--and I hope that day comes soon--we will have to introduce radical remedies for the student loan mess.  Those remedies--to be effective--will have to include bankruptcy relief for distressed student loan debtors, strict regulation of for-profit colleges, and a candid reporting on what the student-loan default rates really are.

 References

Inside Higher Ed (with support from Inceptia). The Future of Student Loans: A Selection of Higher Ed Articles and Essays. May 2014.

It Seemed Like a Good Idea at the Time: Student-Loan Forgiveness Programs are Making the Student Loan Crisis Worse

The federal government's student-loan forgiveness programs--like  Germany's decision to invade Russia in 1941--must have seemed like a good idea at the time.

After all, millions of college students are burdened by crushing student loans, the student-loan default rate creeps ever upward, and many college graduates have not gotten jobs that pay well enough to service their student-loan debt.

So why not create some programs that will lower student borrowers' monthly loan payments?

  And so the government created two programs that are essentially student-loan forgiveness programs. One program allows people who take public service jobs to make loan payments based on a percentage of their income for ten years. At the end of the ten-year period, the balance of their loans are forgiven.


Germany invaded Russia in the summer of 1941
It seemed like a good idea at the time.

The other program--income-based repayment plans (IBRPs) --allows borrowers to make monthly student-loan payments based on a percentage of their income for 20 or 25 years (there are several variations). Just as with the public-service loan forgiveness plans, student-loan debtors will see the balance of their loans forgiven at the end of the repayment period.

The attractiveness of these programs for student-loan borrowers is obvious. They see their monthly payments go down, which may keep many student-loan debtors from going into default.

Currently, about 1.3 million borrowers are enrolled in public-service loan forgiveness plans, and about the same number are enrolled in IBRPS. 

But here is the downside.  None of these programs contain provisions to discourage students from borrowing more money than necessary.  In fact--since the monthly payments are based on a percentage of borrowers' income and not the amount borrowed, the programs contain a perverse incentive to borrow as much as possible.  As a result, many of the people making income-based loan payments will never pay back even a portion of their loans.

Here are a couple of examples--one taken from a Wall Street Journal article and one taken from a New York Times story--that illustrate the problem.

Haley Schafer borrowed $312,000 to attend veterinary school in the Caribbean, even though the job market for veterinarians in the United States is terrible  Schafer got a job making about $60,000 a year, not nearly enough to comfortably pay back her student loans under the standard 10-year repayment plan.

So Schafer signed up for a 25-year income-based repayment plan that lowered her monthly loan payments to about $400 a month. Unfortunately,  her monthly payments aren't large enough to cover accruing interest on her loans.  The New York Times estimated that her loan balance will continue to grow, and when she finishes her 25-year repayment plan her loan balance will be more than twice the amount that she borrowed--$650,000!

And that's Haley Schafer's story. Now let's hear about Max Norris, a public-service attorney who borrowed $172,000 to go to University of California's Hastings College of Law.  Under the public-service student-loan forgiveness plan, he only pays $420 a month on his loan balance, not enough to cover accruing interest.

Norris's loan balance will be forgiven after 10  years. Assuming Norris stays in public service and gets annual raises of 4 percent, the government will forgive $225,000 in student-loan indebtedness--more than Norris borrowed!

In other words, the federal government is giving Morris a 100 percent subsidy to go to law school, even though the market is flooded with lawyers. In fact there are currently two law-school graduates for every new legal job.

Surely, anyone can see that it makes no sense for the federal government to permit people to borrow $100,000 or more to train people for professions that are already overcrowded and then allow them to make loan payments that are so small that the payments don't cover the accruing interest.

But that is what our federal government is doing.  

And, although these programs may help keep the student-loan default rate down, they are actually making the student loan-crisis worse.  Not only do we have 7 million people who stopped making loan payments and are in default, we have another 9 million who aren't making payments because they received an economic hardship deferment or are entitled to some other form of forbearance.  And then we have 2.5 million people who are making loan payments based not on the amount they borrowed but on their income, which means most will never pay off the principal of their loans.

In short--the number of people who will never pay off their student loans is in the millions--many, many millions.

References

Josh Mitchell. Student-Debt Forgiveness Plans Skyrocket, Raising Fears Over Costs, Higher Tuition. Wall Street Journal, April 22, 2014.

David Segal. High Debt and Falling Demand Trap New Vets. New York Times, February 23, 2013. Available at: http://www.nytimes.com/2013/02/24/business/high-debt-and-falling-demand-trap-new-veterinarians.html?_r=0