Bernie Sanders' proposal for free tutiiton at public universities could actually save taxpayers money. So why don't we do that?

Bernie Sanders has proposed free tuition at all American public universities. Let's look at that proposal and also examine the reasons why Bernie's scheme will never be implemented, even though it would cost taxpayers less money than they are spending now on student financial aid.

According to Catharine Hill, president of Vassar College, free tuition at the nation's public universities would cost about $70 billion, which is a lot of money.

But the federal government will distribute almost $35 billion  this year in Pell Grant funding to low-income students. If Congress closed the Pell Grant program and simply provided free tuition at public universities, half of the estimated cost of Sanders' plan would be covered by the switch.

Where would the other $35 billion come from?

In addition to Pell Grants, the federal government operates the federal student loan program, which will distribute more than $100 billion a year in college-loan money. About a third of that sum will be lost due to defaults It would actually be cheaper to provide every American with free tuition at a public university than to operate the federal student-loan program at $100 billion a year and the Pell Grant programs at $35 billion.  In fact, this change would save the federal government about $65 billion a year.

Why then don't we adopt Bernie Sanders' proposal?  Three reasons:

1) The for-profit college industry would collapse. Currently, the for-profit colleges get about 25 percent of all federal student-aid money. If the government stopped subsidizing the for-profit college sector, the for-profits would be forced to close because they get 80 to 90 percent of their operating revenues from federal funds. In fact, offering free tuition at public universities in lieu of the current student-aid system would shut down the for-profit college industry almost overnight.

This sleazy sector of higher education will never allow Bernie Sanders' plan to be operationalized. The for-profit colleges have made strategic political contributions to key congresspeople, and they own most of the lobbyists in Washington. For this reason, Bernie's free-tuition program is already dead.

2) Nonselective private colleges would collapse.  Bernie's free-tuition plan would also kill the nondescript private colleges. Why would anyone attend Malloy University on Long Island, Cabrini College in Philadelphia, or Pine Manor College in Boston if they could go to a state university for free? This sector of higher education will surely do everything it can to make sure Bernie's pipe dream never  becomes a reality.

3) Elite colleges and universities would suffer. Free tuition to attend a public university would not mean the death of Harvard, Yale, Vassar, Dartmouth, and the other elite private colleges. Most of them have large endowments that would keep them afloat even if the federal student-aid program was closed. Moreover, there will always be wealthy families willing to pay almost any amount of money for their children to attend an Ivy League school, even if the public universities were free.

Nevertheless, the Harvards and the Yales do quite well under the status quo. They certainly get a hefty financial boost from Pell Grant money and federal student-loan revenues.  Having a federal cash infusion allows then to jack up their tuition, because they know students will simply borrow more money to cover tuition hikes. When Catharine Hill of Vassar spoke out against Bernie Sanders' free-college plan in the New York Times yesterday, she was speaking not just for Vassar but for all the elite colleges.

Conclusion: Bernie's Free-Tuition plan is Dead On Arrival

In short, Bernie Sander's proposal to give everyone a free undergraduate education at a public college or university is DOA.  The for-profit college industry  and the non-profit private universities simply will not allow it.  These two groups own Congress, and they like the status quo.

Bernie's College-For-All plan: DOA

References

American Council on Education. The Status of Federal Student Aid Programs. Washington, DC: Author, 2015. Accessible at: https://www.acenet.edu/news-room/Documents/The-Status-of-Federal-Student-Aid-Programs.pdf

David Halperin. The Perfect Lobby: How One Industry Captured Washington, DC. The Nation, April 3, 2014. Accessible at:  https://www.thenation.com/article/perfect-lobby-how-one-industry-captured-washington-dc/

Catharine Hill. Free Tuition Is Not the Answer. New York Times, November 30, 2015, p. A23. Accessible at: http://www.nytimes.com/2015/11/30/opinion/free-tuition-is-not-the-answer.html?_r=0

"This is Not a Day Care. It's a University!" by Everett Piper, president of Oklahoma Wesleyan University (worth reading)

Hello, dear readers:

Please read this brief message from Dr. Everett Piper, President of Oklahoma Wesleyan University.  I find it remarkable for two reasons:

1) This message was written by the president of a relatively obscure university in Oklahoma; and it should have been written by the president of Yale,  University of Missouri or Dartmouth or by the president of any of a couple of dozen elite universities where students have professed the infantile view that they are entitled to be protected from unwelcome ideas.

2) President Piper writes concise and clear declaratory sentences, and that is quite rare among academic administrators today.

Enjoy! You can find President Piper's message at this web site address: http://www.okwu.edu/blog/2015/11/this-is-not-a-day-care-its-a-university/

This is Not a Day Care. It’s a University!

Dr. Everett Piper, President

Oklahoma Wesleyan University

This past week, I actually had a student come forward after a university chapel service and complain because he felt “victimized” by a sermon on the topic of 1 Corinthians 13. It appears that this young scholar felt offended because a homily on love made him feel bad for not showing love! In his mind, the speaker was wrong for making him, and his peers, feel uncomfortable.

I’m not making this up. Our culture has actually taught our kids to be this self-absorbed and narcissistic! Any time their feelings are hurt, they are the victims! Anyone who dares challenge them and, thus, makes them “feel bad” about themselves, is a “hater,” a “bigot,” an “oppressor,” and a “victimizer.”

I have a message for this young man and all others who care to listen. That feeling of discomfort you have after listening to a sermon is called a conscience! An altar call is supposed to make you feel bad! It is supposed to make you feel guilty! The goal of many a good sermon is to get you to confess your sins—not coddle you in your selfishness. The primary objective of the Church and the Christian faith is your confession, not your self-actualization!

So here’s my advice:

If you want the chaplain to tell you you’re a victim rather than tell you that you need virtue, this may not be the university you’re looking for. If you want to complain about a sermon that makes you feel less than loving for not showing love, this might be the wrong place.

If you’re more interested in playing the “hater” card than you are in confessing your own hate; if you want to arrogantly lecture, rather than humbly learn; if you don’t want to feel guilt in your soul when you are guilty of sin; if you want to be enabled rather than confronted, there are many universities across the land (in Missouri and elsewhere) that will give you exactly what you want, but Oklahoma Wesleyan isn’t one of them.

At OKWU, we teach you to be selfless rather than self-centered. We are more interested in you practicing personal forgiveness than political revenge. We want you to model interpersonal reconciliation rather than foment personal conflict. We believe the content of your character is more important than the color of your skin. We don’t believe that you have been victimized every time you feel guilty and we don’t issue “trigger warnings” before altar calls.

Oklahoma Wesleyan is not a “safe place”, but rather, a place to learn: to learn that life isn’t about you, but about others; that the bad feeling you have while listening to a sermon is called guilt; that the way to address it is to repent of everything that’s wrong with you rather than blame others for everything that’s wrong with them. This is a place where you will quickly learn that you need to grow up!

This is not a day care. This is a university!

Catharine Hill, president of Vassar College, shovels horse manure in the New York Times about rising college costs

Catharine Hill dumped a load of horse manure on the op ed pages of the New York Times today, which is a good place to put it. In an essay expressing opposition to free college tuition, she made three bogus points:

1) College costs have gone up because state governments provide less funding to higher education than they once did.
2) Although the cost of going to college has gotten more expensive, it is still a good investment because college graduates make more on average than people who don't have college degrees.
3) The way to address the rising tide of student-loan indebtedness is better counseling and long-term repayment plans.

Let's look at Hill's three points.

First, declining state support for higher education has little to do with Vassar, which is a private institution. It costs a quarter million dollars to attend Vassar for four years, and that cost can't be explained by declining financial support from state governments.

Second, yes it is true that people who graduate from college earn more money on average than people who don't. But that doesn't justify skyrocketing college costs. Many college graduates attended relatively inexpensive state colleges. For those people, their increased earning potential justified the expense of going to college. But people who get liberal arts degrees from elite private colleges like Vassar often take on unmanageable student-loan debt. Many of them would have been better off going to an institution like Sam Houston State University in Huntsville, Texas, than borrowing money to listen to postmodern screeching by Vassar professors.

Finally, Hill's suggestion for handling the student-loan crisis is pure horse manure, and it isn't even fresh.  Hill recommends"better counseling," longer repayment periods and income-based repayment plans as the way to help students manage their crushing student-debt loads. Of course,this is exactly what the Obama administration is saying, along with higher education's professional organizations and sycophantic policy think tanks like the Brookings Institution.

Come on, Catharine. Come clean. Why don't you tell us the real reason you are opposed to free college tuition? You are opposed to it because the feds can't possibly provide free tuition for students to attend overpriced joints like Vassar. And a comprehensive  federal program offering free tuition would mean less money for elite colleges. You would prefer the status quo, whereby the exclusive colleges get the benefit of Pell grants and federal student loans--federal money you cannot operate without.

In fact, you reveal your true motivations in the last few paragraphs of your essay. "Without federal loan programs, many students could attend only schools that their families could afford from their current income or savings."  That's right, Catharine. You want students to attend colleges they can't afford. Otherwise, they might have to enroll at the University of Connecticut or Florida State. The horror! The horror!

Frankly, I would have expected more from Catharine Hill. After all she is an economist. Surely she knows that most of the people who sign up for 25-year repayment plans will never pay off their student-loan balances because their income-based loan payments won't be large enough to cover accruing interest. Surely she understands that making people pay for their college education over a majority of their working lives does not make economic sense.

But Catharine doesn't care. She just wants to keep the federal money rolling in so that places like Vassar, Yale, and Dartmouth can pay the professors and administrators more than they are worth to teach arrogant students who think they are smarter than the faculty and are probably correct.

And once a year, these condescending institutions have a dress-up day when the faculty wear medieval clothing and hand out bits of paper they insist on calling diplomas to the dunderheads who went hopelessly into debt for the privilege of wearing a t-shirt emblazoned with the name of some fancy college like Vassar.

Horse manure from Catharine Hill, president of Vassar

References

Catharine Hill. Free Tuition Is Not the Answer. New York Times, November 30, 2015, p. A23. Accessible at: http://www.nytimes.com/2015/11/30/opinion/free-tuition-is-not-the-answer.html?_r=0

Liz Kelly, a school teacher, owes $410,000 in student loans--most of it accumulated interest. Will she ever pay it back?

Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.

Albert Einstein 

Liz Kelly, a 48-year old school teacher, owes the federal government $410,000 in student loans, which she will never pay back. How did that happen?

The New York Times article chronicled Kelly's story in this Sunday's Business Section, but the Times didn't adequately explain how Kelly got into this jam. My commentary for today is a forensic commentary on Kelly's situation.

Compound interest. As the Times story reported, Kelly didn't borrow $410,000 to finance her studies. She actually borrowed less than $150,000. Two thirds of her total debt is accumulated interest.

Albert Einstein observed that "[c]ompound interest is the eighth wonder of the world. He who understands it, earns it . . . he who doesn't . . . pays it." As Liz Kelly's story illustrates, most people don't understand Einstein's simple observation about compound interest any better than they understand his theory of relativity.

Over the years, Kelly took out student loans to pay for her undergraduate education, graduate studies, child care and living expenses. She also borrowed money to get a law degree, which she did not complete, and a Ph.D. from Texas A & M, which she also did not complete.

Her graduate studies enabled her to postpone making payments on her loans, but she continued borrowing more money; and the interest on her loans continued to accrue. Some of her loans accrued interest at 8. 25 percent--a pretty high interest rate. When her total indebtedness reached $260,000, she consolidated her student loans at 7 percent interest--still pretty high.

Over a period of 25 years, Kelly received a series of forbearances or deferments, and she never made a single payment on her loans. Thus, it is easy to understand how the total amount of her indebtedness tripled over the amount she borrowed.  In fact, as the Times pointed out, the annual cost of interest on her unpaid student loans is now larger than the total amount she borrowed for her undergraduate education!

Back in the old days, when people received interest on their savings, most people understood the principle of compound interest. People knew, for example, that money saved at 7 percent interest doubled in 10 years, and that money saved at 10 percent interest doubled in 7 years.

But no one gets interest on their savings any more, and perhaps that explains why many student-loan borrowers don't understand that their total indebtedness grows every year their loans are in deferment. Certainly Liz Kelly didn't understand this. The Times reported that she was shocked to learn that she owed $410,000.

No cap on student loans.  Although Kelly never made a single payment on her student loans, the federal government continued to loan her money. In fact, in 2011, she borrowed about $7,500 to pursue a Ph.D. in education, even though her total indebtedness at that time was more than a third of a million dollars and she had made no loan payments.

As the Times writer succinctly observed:

A private sector lender approached by a potential borrower with no assets, a modest income, and $350,000 in debt who had never made a payment on that loan in over 20 years would not, presumably, lend that person an addition $7,800. But that is exactly what the federal government did for Ms. Kelly. Legally it could do nothing else.

Obviously, a federal student-loan system that works this way is dysfunctional, irrational, and unsustainable. The feds should have shut off the student-loan spigot long before Kelly borrowed money to get a Ph.D.

The Charade of Income-Based Repayment Plans. If Kelly had accumulated $410,000 in consumer debt or a home mortgage, she could discharge the debt in bankruptcy. But discharging a student loan in bankruptcy is very hard to do. Indeed, Kelly might find it very difficult to meet the so-called "good faith" prong of the three-part Brunner test. After all, she continued taking out student loans over a period of 20 years and never made any loan payments.

Kelly's only reasonable escape from her predicament is to enroll in the federal government's loan forgiveness program, which would allow her to make payments based on a percentage of her income for a period of 10 years so long as she works in an approved public-service job. As a school teacher, she should easily qualify for this program.

But as Kelly herself pointed out, her monthly loan payments under such a plan would not even cover accumulating interest on the $410,000 she owes. At the end of her 10-year repayment program, her total indebtedness would be larger than it is now--easily a half million. That amount would be forgiven, leaving the taxpayers on the hook.

In fact, Kelly's situation is a perfect illustration for the argument that income-based repayment programs are not a solution to the student-loan crisis. Most people who participate in them--about 4 million people--will not pay down the principal on their loans.  Income-based repayment plans are really just a penance for borrowing too much money--say one Our Father and three Hail Marys and go and sin no more.

Conclusion

The Times story on Liz Kelly concluded with the observation that Kelly's story is unusual, but that's not really true. As the Times itself observed in a recent editorial, 10 million people have either defaulted on their loans or are in delinquency. The Consumer Financial Protection Bureau reported in 2013 that 9 million people were not making payments on their student loans because they had obtained a forbearance or deferment. And about 4 million people are in income-based repayment plans.

Thus, at least 23 million people have loans in the repayment phase who are not making standard loan payments. So what should we do?

1) First, the federal government should not loan people more money if they are not making payments on the money they already borrowed. No one did Liz Kelly any favors by loaning her an additional $7,500 when she had already accumulated indebtedness of $350,000 and didn't have a prayer of ever paying it back.

2) There needs to be some cap on the amount of money people can borrow from the federal student-loan program. I'm not prepared to say what the cap should be, but surely it is bad public policy to lend money so that people can accumulate multiple degrees that do not further their financial prospects.

3) We've got to face the fact that income-based repayment plans--favored by the Obama administration, the New York Times, and the Brookings Institution--are not a solution to the student-loan crisis. Surely it is pointless to put Kelly on a ten-year income-based repayment plan that won't even pay the interest on her indebtedness.

As unpalatable as it is for politicians and the higher education community to admit, bankruptcy is the only humane option for people like Liz Kelly.  Did she make some big mistakes in managing her financial affairs? Yes. But the federal government and several universities allowed her to make those mistakes; and the universities received the benefit of Kelly's tuition money.

No--we need to face this plain and simple fact: Kelly will never pay off that $410,000. And putting her in a long-term income-based repayment plan is nothing more than a strategy to avoid facing reality, which is this: the federal student loan program is out of control.

Compound interest: The eighth wonder of the world

References

Kevin Carey. (2015, November 29). Lend With a Smile, Collect With a Fist. New York Times, Sunday Business Section, 1. Accessible at: http://www.nytimes.com/2015/11/29/upshot/student-debt-in-america-lend-with-a-smile-collect-with-a-fist.html?_r=0

Editorial, "Why Student Debtors Go Unrescued." New York Times, October 7, 2015, A 26. Accessible at: http://www.nytimes.com/2015/10/07/opinion/why-student-debtors-go-unrescued.html

Rohit Chopra. A closer look at the trillion. Consumer Financial Protection Bureau, August 5, 2013.  Accessible at: http://www.consumerfinance.gov/blog/a-closer-look-at-the-trillion/

What do Barack Obama, Marco Rubio, Mitt Romney and Debbie Wasserman Schultz have in common? They all received political contributions from Dade Medical College or affiliates. Dade's former CEO has been charged with making illegal campaign contributions

What do Barack Obama, Marco Rubio, Mitt Romney, and Debbie Wasserman Schultz have in common? All four received political contributions from Dade Medical College or someone affiliated with DMC.  Ernesto Perez, the college's former CEO, was recently charged with making illegal political contributions. Indeed, the Miami Herald ran a photo of Perez being handcuffed earlier this month.

Perez had a remarkable career in higher education. Although he is a high-school dropout and convicted criminal, that did not stop him from founding a medical college that trained nurses and had five campuses.

Dade Medical College or people affiliated with it made three quarters of a million dollars in political contributions over the years, and two Florida legislators were on its payroll. It is closed now, and its 2000 students have been left in the lurch. Most of them have student loans that still have to be paid back.

Americans should thank the writers of the Miami Herald and Michael Vasquez in particular for relentless and hard-hitting reporting about DMC and the for-profit college industry in Florida. As the Herald series of corruption in the Florida for-profit college industry revealed, a ton of Florida legislators received political contributions from the industry, helping it to flourish. In fact, 18 percent of all postsecondary students in Florida attend a for-profit, far higher than the national average--about 12 percent.

Another individual who has written great stuff on the for-profits is David Halperin, who has shown a spotlight on the way the for-profits have bought influence with legislators at both the state and national level.

If you want to understand how the for-profit college industry manages to prosper in spite of low graduation rates, high dropout rates, and high student-loan default rates, read Halperin's work in Huffington Post and the Miami Herald articles on corruption in the Florida for-profit industry. The for-profits have hired lobbyists and made strategic campaign contributions to nearly every legislator who has the power to help or hurt them. And millions of naive students have been injured by this pernicious industry.

Debbie Wasserman Schultz: A bleeding heart liberal
who takes political contributions from the for-profit college industry

References

Francisco Alvarado. Dade Medical College Has Powerful Friends but Struggling Students.  Broward/Palm Beach  New Times, August 29, 2013.  Accessible at: http://www.browardpalmbeach.com/2013-08-29/news/dade-medical-college-has-powerful-friends-but-struggling-students/

Patricia Born & Jay Weaver. Homestead mayor's ties to downtown redeveloper probed. Miami Herald, June 8, 2013. Accessible at: http://www.miamiherald.com/2013/06/08/v-fullstory/3441091/homestead-mayors-ties-to-downtown.html

Read more here: http://www.miamiherald.com/2013/06/08/v-fullstory/3441091/homestead-mayors-ties-to-downtown.html#storylink=cpy

Dade Medical College.  Ernesto Perez to be Honored at SFBJ CEO Awards. 2013. Accessible at: http://www.dademedical.edu/rightnow/ernestoperezbehonoredsfbjceoawards

Kelly Field, "U.S. Has Forgiven Loans of More Than 3,000 Ex-Corinthian Students, Chronicle of Higher Education, September 3, 2015. Accessible at: http://chronicle.com/article/US-Has-Forgiven-Loans-of/232855/?cid=pm&utm_source=pm&utm_medium=en

Fred Grimm. Before his fall, Ernesto Perez bought himself lots of friends. Miami  Herald, November 4, 2015. Accessible at: http://www.miamiherald.com/news/local/news-columns-blogs/fred-grimm/article42988848.html

David Halperin. Exposed: For-Profit Colleges' Blueprint for Blocking Obama Regulations. Huffington Post, May 5, 2014. Accessible at: http://www.huffingtonpost.com/davidhalperin/exposed-for-profit-colleg_b_5256688.html

David Halperin. For-Profit Colleges Spend Big on Lobbyists to Fight Obama Regulation. Huffington Post, April 28, 2015. Accessible at: http://www.huffingtonpost.com/davidhalperin/for-profit-colleges-spend_b_5221407.html

David Halperin. For-Profit College Lobbyist Explains Decades of Fraud as Humanitarian Mission. Huffington Post, September 23, 2015. Accessible at: http://www.huffingtonpost.com/davidhalperin/for-profit-college-lobbyi_b_8184952.html

David Halperin. The Perfect Lobby: How One Industry Captured Washington, DC. The Nation, April 3, 2014. Accessible at:  https://www.thenation.com/article/perfect-lobby-how-one-industry-captured-washington-dc/

Read more here: http://www.miamiherald.com/news/local/news-columns-blogs/fred-grimm/article42988848.html#storylink=David Halperin. $33 Million Per Year of Your Tax Money to For-Profit College Whose CEO Hid Criminal Record. Huffington Post, October 21, 2013. Accessible at: http://www.huffingtonpost.com/davidhalperin/33-million-per-year-of-yo_b_4136451.ht

David Halperin. Which For-Profit Lobbyist Are You? Huffington Post, March 28, 2014.  Accessible at: http://www.huffingtonpost.com/davidhalperin/which-for-profit-college_b_5040172.html

Michael Vasquez. Amid criminal charges, CEO of Dade Medical Ccollege Resigns. Miami Herald, October 23, 2013. Accessible at: http://www.miamiherald.com/2013/10/23/3706821/ernesto-perez-resigns-as-head.html

David Halperin. $33 Million Per Year of Your Tax Money to For-Profit College Whose CEO Hid Criminal Record. Huffington Post, October 21, 2013. Accessible at: http://www.huffingtonpost.com/davidhalperin/33-million-per-year-of-yo_b_4136451.html

Dade Medical College owner turns himself in. Miami Herald, November 3, 2015. Accessible at: http://www.miamiherald.com/news/local/education/article42643344.html

Michael Vasquez. Amid criminal charges, CEO of Dade Medical College Resigns. Miami Herald, October 23, 2013. Accessible at: http://www.miamiherald.com/2013/10/23/3706821/ernesto-perez-resigns-as-head.html

Michael Vasquez and Christina Veiga. A for-profit empire, Dade Medical College, tumbles down. Miami Herald, October 30, 2015. Accessible at: http://www.miamiherald.com/news/local/community/miami-dade/article41967387.html

Going out of Business Sale!! Prices Slashed!! Everything Must Go!! Colleges that heavily discount student tuition are teetering on the brink of closure

According to a survey conducted by the National Association of College and University Business Officers, private colleges discounted their tuition prices for first year students by an average of 48 percent in 2014. Think of it: on average, a private college now charges only about half its tuition sticker price to its freshman class.

And the discount rate is going up. Inside Higher Ed reported that the discount rate has risen 20 percent in just seven years: from 39 percent in 2007 to 48 percent last year.

Moreover, at many schools, nearly everyone gets a discount. As explained by Inside Higher Ed, 69 percent of the colleges surveyed by NACUBO offered discounts to 90 percent or more of their students last year.

As many experts have pointed out, heavily discounting tuition rates is not sustainable. In fact, heavy discount rates are a sure sign that a college is in trouble. Sweetbriar College, for example, which closed (and then reopened) last year, was discounting its tuition price by 62 percent, but still couldn't attract enough students to keep its doors open.

 NACUBO's survey determined that almost 10 percent of private colleges discounted their tuition prices by an astounding 60 percent, surely a bad sign for all the colleges that discount at that level. “If your discount rate is at 60 percent, that's a very dangerous warning sign,” observed David Breneman, former Dean of the University of Virginia's school of education (as quoted in Inside Higher Ed).  “If you were any other business of any other sort [you wouldn’t] think you were in a very good position.”

What does this mean for higher education in general? At least three things:

1) First, a liberal arts education at a non-elite private college is not worth what colleges have been charging, and everyone knows it.

2) Second, heavy discounts are destroying colleges' credibility.  When 90 percent of students are getting a discount and when discount rates average nearly 50 percent, everyone know that colleges have posted deceptive sticker prices for their tuition. They've become like Texas fireworks peddlers: "Buy 1 and get 6 free!"

3) Third, a lot of small, nondescript private colleges will close in the coming years. A Moody's report on colleges' financial viability predicted that college closures will triple by 2015, which would mean about 15 colleges will close that year. But surely that figure is too conservative.

Personally, I think we will see many private liberal arts schools closing in the coming years. The economics of getting a liberal arts degree from an obscure private college just don't make sense anymore. In fact, if it weren't for the federal student loan program, which is propping up the private-college sector, half of them would be closed already.

Discounting college tuition prices: Buy 1, Get 6 free!

References

Kelly Woodhouse. (2015, November 25). Discount Much? Inside Higher Ed. Accessible at: https://www.insidehighered.com/news/2015/11/25/what-it-might-mean-when-colleges-discount-rate-tops-60-percent?utm_source=Inside+Higher+Ed&utm_campaign=389f6fe14e-DNU20151125&utm_medium=email&utm_term=0_1fcbc04421-389f6fe14e-198565653

Dade Medical College is closing and its former CEO is charged with making illegal campaign contributions: All its former students should have their federal student loans forgiven

Dade Medical College, a Florida for-profit institution that trains medical professionals, is closing. Its former CEO, Ernesto Perez, is a high-school dropout and former rock musician who at one time made a salary of $431,000 a year; and the college collected $100 million in federal student aid money over a three-year period.

DMC students, however, didn't do so well. According to the Miami Herald, DMC's  Hollywood (Florida) campus had a pass rate of only 13 percent on the 2014 Florida nurses' exam.

And DMC surely benefited from strategic political contributions. David Halperin, writing for Huffington Post article, wrote:

Perez and his wife have given at least $100,000 to political candidates and PACs, with recipients including Barack Obama, Mitt Romney, Senators Marco Rubio (R-FL), Bill Nelson (D-FL), Harry Reid (D-NV), and Robert Menendez (D-NJ), Reps. Debbie Wasserman Schultz (D-FL) and Joe Garcia (D-FL) . . . .

Miami Herald writer Fred Grimm reported that Perez and his associates made $750,000 in political contributions. And a couple of Florida state legislators were actually on DMC's payroll. Indeed, Perez was recently charged with making illegal campaign contributions

What is going to happen to DMC's 2000 students, most of whom took out student loans to finance their studies? The U.S.  Department of Education has a program in place whereby students can have their federal loans forgiven if their institution closes before they complete their studies. There is also a loan forgiveness program for students who were defrauded by the educational institution they attended.

But these programs are cumbersome. Only a small fraction of  Corinthian Colleges' former students have obtained relief from their student loans, even though Corinthian recently filed for bankruptcy and is being investigated by several states' attorneys general for misrepresentations and other improprieties. Corinthian has 350,000 former students, but as of September only about 3,000 of them have had their student loans forgiven.

It is probably true that some people actually benefited from attending Ernesto Perez's medical college. After all, a small percentage of DMC students who took the nursing exam actually passed it.

But surely most DMC students have a good argument that their student loans should be forgiven. So why should DMC students have to file individual claims to have their loan obligations wiped out?

Given what we know about this tawdry institution, it does not seem fair to require all of DMC's former students to go through an elaborate administrative process in order to have  their student loans forgiven.  No--DOE should wipe the slate clean for everyone who took out a federal student loan to attend Dade Medical College.

Ernesto Perez in court
photo credit: Al Diaz, Miami Herald

References

Francisco Alvarado. Dade Medical College Has Powerful Friends but Struggling Students.  Broward/Palm Beach  New Times, August 29, 2013.  Accessible at: http://www.browardpalmbeach.com/2013-08-29/news/dade-medical-college-has-powerful-friends-but-struggling-students/

Patricia Born & Jay Weaver. Homestead mayor's ties to downtown redeveloper probed. Miami Herald, June 8, 2013. Accessible at: http://www.miamiherald.com/2013/06/08/v-fullstory/3441091/homestead-mayors-ties-to-downtown.html

Read more here: http://www.miamiherald.com/2013/06/08/v-fullstory/3441091/homestead-mayors-ties-to-downtown.html#storylink=cpy

Dade Medical College.  Ernesto Perez to be Honored at SFBJ CEO Awards. 2013. Accessible at: http://www.dademedical.edu/rightnow/ernestoperezbehonoredsfbjceoawards

Kelly Field, "U.S. Has Forgiven Loans of More Than 3,000 Ex-Corinthian Students, Chronicle of Higher Education, September 3, 2015. Accessible at: http://chronicle.com/article/US-Has-Forgiven-Loans-of/232855/?cid=pm&utm_source=pm&utm_medium=en

Fred Grimm. Before his fall, Ernesto Perez bought himself lots of friends. Miami  Herald, November 4, 2015. Accessible at: http://www.miamiherald.com/news/local/news-columns-blogs/fred-grimm/article42988848.html

Read more here: http://www.miamiherald.com/news/local/news-columns-blogs/fred-grimm/article42988848.html#storylink=cpy

David Halperin. $33 Million Per Year of Your Tax Money to For-Profit College Whose CEO Hid Criminal Record. Huffington Post, October 21, 2013. Accessible at: http://www.huffingtonpost.com/davidhalperin/33-million-per-year-of-yo_b_4136451.html

Michael Vasquez. Amid criminal charges, CEO of Dade Medical Ccollege Resigns. Miami Herald, October 23, 2013. Accessible at: http://www.miamiherald.com/2013/10/23/3706821/ernesto-perez-resigns-as-head.html

Dade Medical College owner turns himself in. Miami Herald, November 3, 2015. Accessible at: http://www.miamiherald.com/news/local/education/article42643344.html

Michael Vasquez and Christina Veiga. A for-profit empire, Dade Medical College, tumbles down. Miami Herald, October 30, 2015. Accessible at: http://www.miamiherald.com/news/local/community/miami-dade/article41967387.html