Amazon partners with Wells Fargo to peddle private student loans: Say it ain't so, Jeff Bezos

Amazon announced recently that it is partnering with Wells Fargo in the private student-loan business. The plan is for Wells Fargo to offer a slightly discounted interest rate to Amazon Prime Student members on Wells Fargo's private student loans.

 I was sorry to get this news. More than 50 years ago, American businesses discovered that they could rake in more cash from loaning money to their customers than from selling products. Prior to filing bankruptcy, for example, General Motors generated more profits from GMAC, its lending arm, than it did from selling cars.

In fact, the common joke at the time was that GM was not a car manufacturing company; it was a bank that happened to sell cars. And of course that slight change in focus from building quality automobiles to lending money at interest partly explains why GM went bankrupt.

Amazon already sells just about everything in the world. I recently purchased a couple of bags of wood chips for my electric smoker from Amazon; and I bought them cheaper than I could have gotten them at my local grocery store. Amazon's success has made Jeff Bezos, its founder, the third richest man in the world. He's worth about $65 billion.

Do Jeff and Amazon really need to get into the student loan business? Doesn't Jeff have enough money already?

But what is wrong with Amazon getting into the private student loan business, you might ask? What makes peddling student loans different from selling books, CDs, and appliances?

At least three things. First, most banks and lenders require student-loan borrowers to obtain a co-signer who will guarantee repayment of the loan. Thus, when Johnny and Sallie take out private student loans, Mom and Pop are also on the hook. In my opinion, it is reprehensible for banks to force students to get parents or relatives to cosign student loans.

Second, private loans generally carry higher interest rates than federal student loans, and they don't provide alternative payment options if a borrower runs into financial trouble and can't make monthly loan payments.  Without exception, people would be better off borrowing in the federal program than the private program.

Private lenders argue that they provide loans to people who need more money than they can borrow through the federal program.  But in my view, people who can't finance their educational program solely through federal loans are in the wrong program.

Finally, the banks managed to get Congress to revise the Bankruptcy Code in 2005 to make private loans as difficult to discharge in bankruptcy as federal loans. Senator Joe Biden was the chief architect of that sweetheart deal for the banks.

So if you take out a student loan from Wells Fargo and suffer a financial catastrophe, you will find it virtually impossible to discharge your Wells Fargo loan in bankruptcy. This is another good reason not to take out a private student loan.

In sum, the private student loan business is a sleazy industry. And so I ask again: Jeff Bezos, don't you have enough money already? Does Amazon really need to associate itself with the unsavory commerce in private student loans?

Jeff Bezos: Say it ain't so, Jeff

References

Ann Carne. Student Loan Co-Signers Face Tangled Path to a Release. New York Times, July 10, 2015. http://www.nytimes.com/2015/07/11/your-money/student-loan-co-signers-face-a-tangled-path-to-a-release.html

Karen Silke Carty. 7 Reasons GM is Headed to Bankruptcy. ABC News. Accessible at http://abcnews.go.com/Business/story?id=7721675&page=1

Annamaria Andriotis. Amazon tiptoes into the banking business through student loans. Wall Street Journal, July 21, 2016. Accessible at http://www.wsj.com/articles/amazon-tip-toes-into-banking-business-1469093403

Sirota, David. Joe Biden Backed Bills to Make It Harder For Americans To Reduce Their Student Debt. International Business Times, September 15 , 2015. Accessible: http://www.ibtimes.com/joe-biden-backed-bills-make-it-harder-americans-reduce-their-student-debt-2094664

A California court strikes an education provider's mandatory arbitration clause as being unconscionable: Magno v. The College Netwwork, Inc.

For years, for-profit colleges have required students to sign mandatory arbitration clauses as part of their student enrollment documents. These clauses prohibit students from suing the institutions they attended for fraud or misrepresentation. Instead, the clauses force students to arbitrate their claims in a forum that is often more favorable for the college than for the aggrieved student.

The Department of Education recently criticized this practice and is working on some regulations that will prohibit or sharply limit the ability of colleges to stick arbitration clauses in their enrollment documents. Last May, University of Phoenix  announced that it will abandon its practice of requiring students to sign arbitration agreements.

Magno v. The College Network, Inc.

Last month, a California appellate court invalidated the arbitration clause in a purchase agreement offered by The College Network, Inc., an education provider based in Indiana but operating in California.  Entitled Magno v. The College Network, Inc., the decision strikes a strong blow against a practice that has sharply limited the ability of college students to sue their for-profit colleges when they are hoodwinked by aggressive and misleading college recruiters.

Here are the facts of the case as outlined by the California Court of Appeals for the Fourth Appellate District:

Bernadette Magno, Rosanna Garcia, and Sheree Rudio were Licensed Vocational Nurses (LVNs) in California who sought to become Registered Nurses. A recruiting representative for The College Network Incorporated (TCN) encouraged the three to enroll in TCN's partnership with Indiana State University (ISU) and California State University (CSU). The recruiter told them they could complete much of the necessary coursework for a B.S. degree in Nursing through ISU's distance-learning program and complete their clinical training with CSU.

Magno and her companions signed up for the program, but they found out later that ISU had suspended its LVN to B.S. nursing program. They sued TCN in a California court for violation of California consumer-protection laws. They alleged that TCN concealed important information and falsely represented that enrolling in the TCN program would qualify them to enter ISU's nursing program.

TCN responded to the suit by asking a California trial court to compel the plaintiffs to arbitrate their claims in accordance with an arbitration clause in the purchase agreement each of them had signed. That agreement required Magno and her co-plaintiffs to arbitrate their claims in Indiana before an arbitrator chosen by TCN.

Fortunately, the trial court denied TCN's request, and the trial court's decision was upheld on appeal. The appellate court acknowledged that arbitration clauses are generally favored as a way to settle disputes.  Nevertheless, arbitration agreements will be struck down if they were both procedurally and substantively unconscionable.

The arbitration clause was procedurally unconscionable

As the court explained, an arbitration agreement is procedurally unconscionable if the weaker party lacks the ability to negotiate and has no meaningful choice but to sign the agreement or if the disadvantaged party was surprised by the arbitration clause.

In the California court's opinion, the arbitration clause was procedurally unconscionable
in both regards. "Plaintiffs were young, were rushed through the signing process, had no ability to negotiate, did not see the arbitration language 'buried on the back of the preprinted carbon paper forms,' and did not separately initial the arbitration clause."

Moreover, the plaintiffs testified that they were not sophisticated and that TCN's recruiter told them "how everything would be fine and to simply sign here and there." In addition, the recruiter told the plaintiffs they would get a discount if they signed right away. And the plaintiffs also testified that they were unaware of the arbitration clause until after they filed suit.

Based on this evidence, the appellate flatly court ruled that the arbitration clause was procedurally unconscionable. "The arbitration agreement is an adhesion contract; it lies within a standardized form drafted and imposed by a party with superior bargaining strength, leaving Plaintiffs with only the option of adhering to the contract or rejecting it."

The arbitration clause was substantively unconscionable

The court then looked at the language of the arbitration clause and found it to be substantively unconscionable as well because the clause was "unreasonably favorable to the more powerful party." First of all, the court pointed out, the clause required the plaintiffs, who were all California residents, to arbitrate their dispute with TCN in Indiana. This, in the court's view, was substantively unconscionable. After all, TCN solicited the  plaintiffs' business in California, and plaintiffs would not have reasonably expected to be forced to arbitrate their disputes with TCN in Indiana.

Nor was the clause less pernicious because it permitted the plaintiffs to participate in the arbitration by phone or video. This forced Magno and her co-plaintiffs to "choose whether to incur significant expenses to pursue their claims in an unreasonable forum or to appear remotely, foregoing the ability to testify in person, while TCN, a company that solicited business in California, participates in proceedings in its own backyard."

Also unconscionable in the court's opinion was the provision that TCN got to unilaterally choose the arbitrator. Although plaintiffs were permitted to withhold their consent to TCN's choice so long as consent was "not unreasonably withheld," that did not alter the fact that TCN had the unilateral right to select the arbitrator.

Finally, the appellate court pointed out that the arbitration clause required the plaintiffs to present their claims within one year, while California consumer protection laws gave plaintiffs much longer to present their claims. In the court's opinion, this was yet another indication that the clause was substantively unconscionable.

Conclusion: The Magno opinion is a win for the good guys

Magno v. The College Network, Inc. is a win for the good guys. All over the United States, for-profit colleges have forced students to waive their right to file lawsuits for fraud or misrepresentation by forcing them to arbitrate their claims in forums generally more favorable to the colleges.

Not all of these arbitration clauses are as unfair as the one TCN was cramming down students' throats, but most are fundamentally unfair. The Magno decision is good ammunition for students who attended for-profit colleges and wish to sue the institutions they attended for fraud or misrepresentation under state consumer-protection laws.

References

Magno v. The College Network, Inc.. (Cal. Ct. App. 2016). Accessible at http://caselaw.findlaw.com/ca-court-of-appeal/1741812.html

U.S. Department of Education. U.S. Department of Education Takes Further Steps to Protect Students from Predatory Higher Education Institutions. March 11, 2016. Accessible at http://www.ed.gov/news/press-releases/us-department-education-takes-further-steps-protect-students-predatory-higher-education-institutions?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=

News Release. Apollo Education Group to Eliminate Mandatory Arbitration Clauses. May 19, 2016.
Accessible at http://phx.corporate-ir.net/phoenix.zhtml?c=79624&p=irol-newsArticle&ID=2169809

Susan Dynarski's Fix for the Student Loan Crisis: Simplistic, Dangerous, and Ineffective

Susan Dynarski published an essay recently in the Business section of the Sunday Times with the provocative title of "America Can Fix Its Student Loan Crisis. Ask Australia." Her prescription is simplistic, dangerous, and ineffective.

Essentially, Dynarski recommends putting American student borrowers into income-based, long-term repayment plans. She doesn't say how long, but she wrote approvingly of the English system--which, she attests, gives students 30 years to pay off their loans.

She also recommends putting student borrowers into a payroll withholding system whereby
debtors have their monthly loan payments deducted from their paychecks based on a percentage of their income.  When borrowers' incomes go up, their payments would be larger; if their incomes go down, their payments would be reduced as well.

Dynarski's proposal is very close to what the Obama administration is already doing--pushing millions of student borrowers into income-based repayment plans that stretch out over 20 or 25 years.

Dynarski says long-term student-loan repayment plans make sense because college graduates benefit from their college experience over their entire lives. "A core principle of finance is that the length of debt payments should align with the life of the asset," she writes didactically. "We pay for cars over five years and homes over 30 years because homes last a lot longer than cars." Likewise, Dynarski reasons, "[a]n education pays off over a lifetime, so it makes sense that student loans should be paid off over a long term."

Dynarski urges the United States to follow the example of those savvy Europeans, who give students longer to pay off their student loans than we do here in the U.S. "All the international student loan experts I have spoken with are shocked by how little time American students are given to pay off their student loans," she informs us. Shocked!

Simplistic

Dynarski's simplistic proposal is based on erroneous premises.  First of all, contrary to Dynarski's view, many student borrowers do not have college experiences that benefit them over a lifetime. Students who borrow to attend for-profit colleges and have substandard experiences don't receive a lifetime of benefits. Perhaps that is why almost half of a recent cohort of students  who attended for-profit colleges defaulted within five years. People who drop out of college before graduating don't receive a lifetime of benefits either, although they may acquire a lifetime of debt.

And many people who borrow money to obtain liberal arts degrees are not receiving much benefit. I for one received almost no benefit from the sociology degree I obtained from Oklahoma State University many years ago. But at least I didn't borrow money to pay for it.

People who borrow $100,000 or more to get degrees in sociology, history, women's studies, religious studies, etc. generally are paying far more than their degrees are worth.  In fact, 45 percent of recent graduates take jobs that don't even require a college degree.  And in the workplace as a whole, about a third of college graduates are in jobs that don't require a college education.

Moreover, Dynarski's comparison between American college financing and Europe is not very useful. As she herself points out, higher education in many European countries is free, and most European countries have a bigger social safety net for their citizens than the U.S. does. It is one thing to pay on student loans for 20 years if health care is free and an old-age pension is assured. It is quite another thing for people to pay on their student loans over a majority of their working lives while saving for retirement and paying for health insurance.

Ineffective

If we think about Dynarski's proposal for just a few moments, we can see how ineffective it is for solving the student loan crisis. American higher education is the most expensive in the world, and stretching out students' loan repayments for 25 or 30 years will do nothing to get those costs under control. In fact, the reason so many higher education insiders favor long-term income-based repayment plans is because it enables them to continue jacking up tuition prices.

And Dynarski's plan takes no account of accruing interest.  Borrowers who make small monthly loan payments due to their low salaries won't be paying off interest as it accrues. Most Americans who enter these plans will never pay off their loan balances even if they faithfully make their monthly loan payments for 300 consecutive months.  Isn't it also a core principle of finance that people should actually pay off their loans?

Dangerous

Finally, Dynarkski's proposal is simply dangerous to the long-term well being of Americans who go to college.  Basically, she is proposing a special tax that everyone who borrows to attend college must pay over the majority of their working lives. Student loan payments will just be another deduction from people's paychecks--like federal income tax withholding and Social Security contributions.

Essentially, Dynarski is proposing a modern-day sharecropper system very much like the one that prevailed in the American South prior to World War II. The sharecropper system of the 1930s required tenant farmers to pay a portion of their crops to Southern plantation owners; the modern system forces college students to pay a portion of their future wages to the government over a majority of their working lives.

Both sharecropper systems are unjust: and Dynarski, by pitching the new sharecropper system in the Business section of the  New York Times, has become an apologist for exploitation.

References

Mathew Boesler. More College Grads Finding Work, But Not in the Best Jobs. Bloomberg.com, April 7, 2016. Accessible at http://www.bloomberg.com/news/articles/2016-04-07/more-college-grads-finding-work-but-not-in-the-best-jobs

Susan Dynarski. American Can Fix Its Student Loan Crisis. Ask Australia. New York Times, July 10, 2016. Business  Section, p. 6.

The Labor Market for Recent College Graduates. Federal Reserve Bank of New York, 2016. Accessible at https://www.newyorkfed.org/research/college-labor-market/index.html

Adam Looney & Constantine Yannelis, A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising default rates. Washington, DC: Brookings Institution (2015). Accessible at: http://www.brookings.edu/about/projects/bpea/papers/2015/looney-yannelis-student-loan-defaults

More than a third of college graduates say they would not have attended college had they known what it would cost: Buyer's Remorse

Jessica Dickler reported recently on a survey of college graduates conducted by Citizens Bank. According to Dickler, the survey found that 36 percent of the students surveyed said they would not have attended college had they known what it would cost them. And half said they regretted the amount of indebtedness they incurred to get their college degrees.

Even more startling, the survey found that 60 percent of college graduates had no idea when their loans would be paid off and a third didn't know the interest rate they were paying.

In addition, the same survey found that recent graduates are devoting about 20 percent of their salaries to student-loan payments and that most recent graduates expect to be paying on their student loans until they are in their 40s.  As a consequence, survey respondents reported, they have limited amounts of money to spend on travel, housing, eating out, and entertainment.

I wonder if Citizens Bank will rethink its student-loan policy based on the results of its survey. It was Citizens, you may recall, that loaned $161,000 to Lorelei Decena so she could attend an unaccredited medical school in Africa. Decena successfully discharged her debt to Citizens based on the fact that the school she attended was not on the U.S. Department of Education's approved list of schools

Do you suppose Decena took Citizens' survey? If so, was she was one of the 36 percent who said they regretted their college experience?

References

Decena v. Citizens Bank, 549 B.R. 11 (Bankr. E.D.N.Y. 2016).

Jessica Dickler. Buyer's College buyer's remorse is real. CNBC News, April 7, 2016. Accessible at http://www.cnbc.com/2016/04/07/college-buyers-remorse-is-real.html

Jessica Dickler. College costs are out of control. CNBc News, July 16, 2016. Accessible at http://www.cnbc.com/2016/07/12/college-costs-are-out-of-control.html

Citizens Bank. Millennial College Graduates with Student Loans Now Spending Nearly One-Fifth of Their Annual Salaries on Student Loan Repayments. April 7, 2016. Accessible at http://investor.citizensbank.com/about-us/newsroom/latest-news/2016/2016-04-07-140336028.aspx

Nicholas Dirks, UC Berkeley Chancellor, under investigation for "alleged misuse of public funds, personal use of campus fitness trainer"

The University of California rolls through scandals like a great battleship being assaulted by BB guns. Nothing seems to scathe it.

The University of California: The Teflon University System

Or--to switch my metaphor--the University of California might be called the ultimate teflon university system. Scandal slides right off it like a burned fried egg in a teflon-coated pan. Remember the UC Davis pepper-spray incident when campus police officers assaulted passive students with pepper spray--a weapon the officers weren't even authorized to use?

No big deal. UC simply got out its checkbook as if it were a middle-class householder paying the monthly bills. Around 20 or so assaulted students sued, but UC settled with them for a million bucks-mere pocket change. It even paid off one of the assaulting police officers who filed a disability claim, based on the stress he said he experienced from pepper spraying students.

Hey, that's only fair. If UC is going to pay off the victims of violence, it should compensate the perpetrators as well.

Then the Sacramento Bee reported that no fewer than nine UC campus chancellors were getting outside money from sitting on various corporate boards. Did anyone get fired for that embarrassment? Naah.

And then Sujit Choudhry, the Dean of the Berkeley Law School, was accused of sexually harassing a subordinate.  He stepped down from his deanship but retained his tenured professor's salary--more than a quarter of a million dollars a year.

Space doesn't permit a review of UC Davis Chancellor Linda Katehi's various scandals. She is apparently on paid leave as the University sorts out nepotism allegations. But she's still getting paid, God bless her.

Allegations Against UC Berkeley Chancellor Nicholas Dirks: A Nonstarter

And now Nicholas Dirks, Chancellor of UC's flagship Berkeley campus, is being investigated for allegedly misusing public funds. As the Los Angeles Times reported it, a whistleblower accused Chancellor Dirks of getting free services from a campus fitness trainer. In addition, Dirks's wife, a tenured history professor, took the trainer with her on a trip to India. There are also questions about a $700,000 fence constructed around Dirks's residence--installed to protect him from student protesters.

In my view, the allegations against Dirks are a tempest in a teapot. Getting free use of a campus fitness trainer is no big deal. The director of the UC Berkeley recreational center approved the arrangement, which the director compared to getting free tickets to a varsity football game.

The same trainer accompanied Dirks's wife on a trip to India, but apparently the Berkeley Alumni Association paid for this perk, so no public funds were involved.

As for spending 700 grand to build a fence around Chancellor Dirks's house, I say what the hell. If the project complied with University spending regulations--and it probably did--no wrongdoing occurred. I doubt any of the allegations against Chancellor Dirks are serious enough to get him fired.

UC Berkeley Chancellor Nicholas Dirks: University President as Potentate

On the other hand, Chancellor Dirks is very well paid. He makes a half million a year, gets free housing and a generous car allowance. Can't the guy pay the cost of a personal fitness trainer?

Likewise, why is someone picking up the tab for Janaki Bakhle, Dirks's wife, to take Dirks's personal trainer with her on a trip to India? After all, Bakhle is a humble history professor. Where does she get off traveling the globe with a personal trainer paid for by the alumni association?

And let's face it; $700,000 is a lot of money to put a security fence around Dirks's personal residence. Berkeley's campus police defended the expense as a money saver. According to the UC cops, having a fence around the chancellor's house saves the university $360,000 a year in security costs.

But that defense is laughable. Was UC Berkeley really spending more than a third of a million dollars a year to protect Dirks's house?

The allegations against Dirks are a window into the world of a mega university president. These people no longer serve primarily as academic leaders. In their new role, they are more like a viceroy overseeing a British colony.  They get paid extravagant salaries, which are often padded with outside income and special perks like life insurance, car allowances, and palatial housing. They travel the world in private jets, hobnobbing with the global elites.

Meanwhile, if recent news reports are to be believed, a large number of college students aren't getting enough to eat.  Students borrow more and more every year to attend college and then graduate into a job market that puts nearly half of new graduates into jobs that do not even require a college degree. No wonder a large percentage of them regret ever going to college.

But Chancellor Dirks and his tenured wife are doing fine, thank you very much. And if the students get restless and protest escalating college costs, Dirks knows he can rest secure behind his $700,000 security fence.

Nicholas Dirks: Potentate of UC Berkeley

References

Nanette Aimov. UC Berkely law dean Choudhry resigns amid harassment scandal. San Francisco Chronicle, March 20, 2016. Accessible at http://www.sfgate.com/education/article/UC-Berkeley-law-dean-resigns-amid-harassment-6882570.php

Jessica Dickler. College costs are out of control. CNBC, July 13, 2016. Accessible at http://www.cnbc.com/2016/07/12/college-costs-are-out-of-control.html

Conor Friedersdorf. A costly suspension for UC Dav's embatled chancellor. Atlantic, April 28, 2016. http://www.theatlantic.com/politics/archive/2016/04/a-100k-suspension-for-uc-davis-embattled-chancellor/480300/

Larry Gordon (2012, September 13). UC to pay settlement in Davis pepper spray case. Los Angeles Times (online edition). http://articles.latimes.com/2012/sep/13/local/la-me-uc-pepper-spray-20120914

Steve Gorman. University of California cop who pepper sprayed student protesters awarded $38,000. Reuters, October 23. Accessible at: http://usnews.nbcnews.com/_news/2013/10/23/21105239-university-of-california-cop-who-pepper-sprayed-student-protesters-awarded-38000

Diana Lambert and Alexei Koseff. UC Davis chancellor apologizes, will donate textbook stock to student scholarships. Sacramento Bee, March 4, 2016. Accessible at http://www.sacbee.com/news/investigations/the-public-eye/article64041327.html

Teresa Watanabe. UC Berkeley chancellor under investigation for alleged misuse of public funds, personal use of campus fitness trainer. Los Angeles Times, July 14, 2016. Accessible at http://www.latimes.com/local/education/la-me-ln-berkeley-chancellor-probe-20160712-snap-story.html

Message to Distressed Student-Loan Debtors: Don't Give Up! Change is In the Wind

Don't give up
'cause you have friends
Don't give up
You're not the only one
Don't give up
No reason to be ashamed
Don't give up
You still have us
Don't give up now
We're proud of who you are
Don't give up
You know it's never been easy
Don't give up
'cause I believe there's a place
There's a place where we belong

Don't Give Up

Lyrics by Kate Bush & Peter Gabriel 

If you are overwhelmed by your student-loan debt, discouraged, and don't know where to turn, take my advice. Go to your refrigerator, pop the cap off a Shiner, and then listen to Don't Give Up, written by Peter Gabriel and Kate Bush. Several artists have sung the song, but I prefer Willie Nelson's version.

Some of the lyrics prompt me to reflect on the millions of Americans who are burdened by their unpayable student loans. "Don't give up," Willie tells us. "No reason to be ashamed." You still have your friends.

And I personally believe that change is in the wind regarding the federal student loan program. I think the magnitude of the student-loan disaster has grown so enormous that the federal government can't ignore it.  I see faint signs that help is on the way.

Why do I think this?

First, the Department of Education is finally moving forward on banning mandatory arbitration clauses in student-enrollment contracts at the for-profit colleges. If DOE follows through, students who were defrauded by their colleges can sue and can even join class actions. This is a good sign, and could mark the beginning of the end for the rapacious for-profit college industry. 

Second, Hillary essentially embraced Bernie Sanders's call for free college education at public universities this week (with some qualifications). This is also a good sign, because no scheme to offer free tuition is workable without massive reform of the federal student-loan program.

Third, and more importantly, Hillary called for a 3-month hiatus on student-loan payments while students refinance their loans to take advantage of lower interest rates. Once the federal government begins a wholesale effort to refinance millions of loans,  it will be apparent to everyone that the student-loan program is a train wreck. Broad relief could emerge from Hillary's idea.

Fourth, the bankruptcy courts are beginning to remember their purpose, which is to offer a fresh start to honest but unfortunate debtors. The recent cases are all over the place, with some courts still issuing callous decisions. But there are a lot of good decisions: Roth, Hedlund, Krieger, Abney, McDowell, Fern, etc.

Fifth, the Department of Education issued an important letter in July, 2015 outlining when it would not oppose bankruptcy discharge for student-loan debtors. DOE said creditors should consider the cost of opposing bankruptcy discharges, whether or not they think a debtor can show undue hardship if forced to repay student loans.

So far, this letter has been largely ignored. In my opinion, DOE did not act in harmony with the letter when it opposed bankruptcy discharge in the Abney case out of Missouri.  But DOE is now on record that it recognizes a variety of circumstances when a bankruptcy discharge is appropriate for some student loan debtors.

Richard Precht used that letter to his advantage in a Virginia bankruptcy decision earlier this year. He presented the letter to a very receptive Virginia bankruptcy judge, and DOE agreed not to oppose a discharge of Precht's debt. 

I acknowledge that all these signs of hope are faint and that a lot of misery lies ahead for millions of college borrowers who now hold about $1.5 trillion in student-loan debt.

But this catastrophe will someday come to an end--it can't go on forever. I recall my father, who was captured by the Japanese on the Bataan Peninsula during World War II ad endured the living hell of a Japanese prison camp from April 1942 until August 1945.

Two thirds of the men who were captured with my father did not survive the war. Some were murdered, some starved to death, and a few committed suicide. But my father survived, and the war ended.

Likewise, the federal student-loan program will eventually collapse, and millions of deserving college borrowers will get relief.  So, remember Willie's advice: Don't give up. 

And keep a six-pack of Shiner on hand  in your refrigerator. (My advice, not Willie's, but I'm sure he would agree.)

Don't give up: You've still got your friends

References

Stephanie Saul and Matt Flegenheimer. Hillary Clinton Embraces Ideas From Bernie Sanders's College Tuition Plan. New York Times, July 6, 2016. Accessible at http://www.nytimes.com/2016/07/07/us/politics/hillary-clinton-bernie-sanders-education.html?_r=0

Anne Gearan and Abby Phillip. Clinton to propose 3-month hiatus for repayment of  student loans. Washington Post, July 5, 2016. Accessible at https://www.washingtonpost.com/news/post-politics/wp/2016/07/05/clinton-to-propose-3-month-hiatus-for-repayment-of-student-loans/?hpid=hp_special-topic-chain_clinton-loans-11pm%3Ahomepage%2Fstory

Hillary embraces Bernie Sanders' plan for a free college education: God bless Senator Sanders

You did it! You did it! You said that you would do it, And indeed you did. I thought that you would rue it; I doubted you'd do it. But now I must admit it That succeed you did. 

                                                         lyrics from My Fair Lady

Hillary Clinton announced this week that she favors a tuition-free college education at in-state public colleges for all families with annual incomes up to $125,000. As the New York Times correctly noted, by taking that step, Hillary "largely embraced" Bernie Sanders's core position about a free college education at public institutions for all Americans.

God bless Bernie Sanders! As the Democratic primary season ground on, attacks by Hillary's supporters became more and more vicious. Froma Harrup insinuated he was a racist, Barney Frank accused him of McCarthyism, and a New York Times reporter suggested he was a sexist.  I think someone in the Clinton camp would have accused him of antisemitism were it not for the fact that he is Jewish.

All shameful poppycock. But doughty Bernie went the distance, and the Democratic Party has essentially adopted one of his core campaign issues.

What does this mean?

If Clinton is elected President, which seems likely, Congress will be forced to grapple with real reform for the federal student-loan program.  Clinton crossed the Rubicon when she endorsed Bernie's free-college tuition proposal. There is no going back. And by calling for a 3-month moratorium on student-loan payments to allow college borrowers to refinance their college loans, Clinton has forced the Democratic Party and the American public to face the fact that the student loan program is a train wreck.

As Winston Churchill said after the battle for Egypt, "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

A calamity has descended on American higher education. In the coming years, the for-profit sector will collapse,dozens of  small liberal arts colleges will close, and millions of Americans will be forced into 20-and 25-year repayment plans. The student-loan program as we now know it will unravel.

It's going to be ugly, but at least Hillary's two recent pronouncements about higher education finance are an acknowledgement that we have to embrace radical change. And we can thank Senator Bernie Sanders of Vermont for pushing America's most important domestic policy issue to the front and center of American politics.

And let us not forget what I have been arguing for 20 years: There is no way out of this morass without allowing millions of student borrowers to shed their student loans in bankruptcy.

References

Stephanie Saul and Matt Flegenheimer. Hillary Clinton Embraces Ideas From Bernie Sanders's College Tuition Plan. New York Times, July 6, 2016. Accessible at http://www.nytimes.com/2016/07/07/us/politics/hillary-clinton-bernie-sanders-education.html?_r=0

Anne Gearan and Abby Phillip. Clinton to propose 3-month hiatus for repayment of  student loans. Washington Post, July 5, 2016. Accessible at https://www.washingtonpost.com/news/post-politics/wp/2016/07/05/clinton-to-propose-3-month-hiatus-for-repayment-of-student-loans/?hpid=hp_special-topic-chain_clinton-loans-11pm%3Ahomepage%2Fstory