Many small liberal arts colleges are closing: Don't borrow money to attend an institution that is struggling to survive

Many small liberal arts colleges are on the brink of closing, making them a poor risk for people struggling to decide where to get their liberal arts degrees. Last year, one-third of colleges with enrollments below 3,000 students ran operating deficits, which is a very bad sign.

Even these schools' chief financial officers, who have every incentive to paint a rosy picture, are worried. According to the Wall Street Journal, only about half the CFOs at private, nonprofit colleges rated their institutions as being financially stable.

Small liberal arts schools are trying all sorts of strategies to survive. Some, like Holy Cross College in Indiana, have sold real estate to get cash infusions. Others, like Wheelock College in Boston and Shimer College in Chicago, have merged with larger institutions. And some, like Sweet Briar, are sending out distress calls to alumni, hoping cash infusions from wealthy patrons will keep them afloat awhile longer.

But the handwriting has been written on those ivy-covered walls; small liberal arts colleges have no long-term future. Some may limp along by selling real estate or drawing down their endowments, and some may continue to exist in an altered form by merging with stronger institutions. But the small, free-standing, liberal arts college is dead.

What are the implications of this shake up in the higher education industry? First, if you are shopping for a college, do not take out student loans to obtain a liberal arts degree from an obscure, private college that may be extinct before your student loans are repaid. How will you feel if you are still writing monthly student-loan payments ten years after your beloved alma mater closes its doors?

And college administrators and trustees should think about the ethical implications of continuing to recruit students when all the insiders know that their college is on its last legs. Is it morally right for a college with a string of annual budget shortfalls to hire an advertising firm to lure new students?

Of course, small colleges have the right to fight for survival and to try various strategies to meet their operating budgets. But the time must come when terminally ill institutions, like terminally ill hospital patients, must face reality.

A small college can keep itself alive from month to month with regular infusions of student-loan funds and Pell Grant money, just like a comatose patient can live from day to day by being fed intravenously.

But the day finally arrives when it is apparent that a dying institution is only postponing the inevitable by rolling out new schemes to raise cash or lure more students. And that day has come for dozens and dozens of small, private, liberal arts colleges.

Melissa Korn. Some Cash-Strapped Private Colleges Cut Programs, Sell Assets. Wall Street Journal, August 31, 2017.

Rick Seltzer. Shimer Will Become Part of North Central College. Inside Higher Ed, May 27, 2016.

Rick Seltzer. The Future of the Tiny Liberal Arts College. Inside Higher Ed, November 11, 2016.

Charlotte School of Law closed, But Secretary of Education Betsy DeVos has been stingy in granting student-loan relief

Charlotte School of Law closed its doors on August 15, 2017. Thank God!

Before it shut down, CSL was one of the worst law schools in the United States by almost any measure. Based on metrics developed by Law School Transparency, a public interest law-school monitoring organization, 50 percent of CSL's 2014 entering class ran an "extreme" risk of failing the bar exam, and additional 25 percent ran a "very high" risk of failing the exam.

And it fact, less than half of CSL's 2015 graduating class passed the bar. Moreover, less than 25 percent of its 2016 graduates obtained full-time law jobs; and the law school's underemployment rate for that class was 58.8 percent.

Do you want other measures of mediocrity? Not a single CSL graduate in the 2016 graduating class obtained a federal clerkship, which is the most prestigious job a newly graduated attorney can get. The best paying jobs are in large corporate firms; and only 1.5 percent of 2016 graduates landed jobs in large law firms.

And in spite of its monumental mediocrity, Charlotte School of Law--before it shut down--was incredibly expensive. Tuition for the 2017 entering class (had there been one) is $44,284 per year. Law School Transparency estimated the total cost of obtaining a law degree from CSL to be a quarter million dollars!

The ABA put CSL on probation in 2016, and the Obama administration shut off student-loan money in December of last year. Still, the law school lumbered along until its state operating license expired and North Carolina regulators refused to extend it.

Most CSL students took out federal loans to finance their studies and few will be able to pay back their loans. Nevertheless, Betsy DeVos's Department of Education has been stingy in granting loan forgiveness. Only students enrolled on April 12, 2017 or later are eligible to have their student loans forgiven under the closed-school rule.

The Department also has a "borrower defense" process, whereby students can seek student-loan forgiveness if they can show they were defrauded by the institution they attended. More than 500 former CSL students have filed those claims, but DeVos put the borrower-defense regulations on hold. As of July 2016, DeVos's DOE had not approve any borrower-defense claims.

What a mess!

In my mind, there is only one fair remedy for all the people who took out student loans to attend CSL and failed to get jobs that paid well enough to pay back their loans.  Secretary DeVos should forgive student-loan debt for everyone who took out student loans to attend Charlotte School of Law.

But that would not be fair, DeVos might respond. After all, at least a few people graduated from CSL and got good law jobs.  Yes, but not many.  The administrative cost of sorting out who benefited and who failed to benefit doesn't justify the effort.

Everyone who attended this crummy law school should get 100 percent debt relief.  Unfortunately, that's not going to happen.  And there are several more bottom-tier law schools that are still operating and still raking in federal student-loan money.

Photo credit: abovethelaw.com

References

Andrew Kreighbaum, As Charlotte Law makes closure official, Education Department sets loan discharge rules. Inside Higher ED, August 25, 2017.

Andrew Kreighbaum, The Slow Death of a For-Profit Law School. Inside Higher Ed, August 16, 2017.

Why don't Antifa thugs turn their rage against over-priced colleges? Because they're idiots!

American college campuses are now infected with a new virus: Antifa--short for anti-fascist. What is Antifa? Basically, it is a loosely organized movement of young people who call themselves anti-fascists but engage in fascist tactics to disrupt any  expression that is not politically correct.

Not all Antifa thugs are college students, but who can tell? Antifa adherents have a penchant for wearing black masks and black clothing that make them difficult to identify. Without a doubt, however, Antifa has a presence at a lot of American universities where they have rioted to keep conservatives from speaking on campus. And Antifa showed up in Charlottesville, Virginia, home of the University of Virginia, to clash with white supremacists over a Civil War statue.

Clearly, Antifa followers are idiots. Instead of harassing Ann Coulter or defacing Confederate statues, why don't they attack real repression, by which I mean the overpriced colleges and universities that harbor these lunatic anarchists?

After all, it's American colleges, not dead Confederate generals, that are oppressing American young people. Collectively, more than 40 million people now owe $1.4 trillion in student loans, and about 20 million of them will never pay back what they owe.

James Howard Kunstler had it right when he wrote recently that "if the campus Left had any tactical brains, they’d stop marching around in black uniforms and instead organize a mass renunciation of college loan debt."

And of course, college administrators love the Antifa movement. They like it when the little kiddies obsess on Robert E. Lee and Ann Coulter and not their student loans.

How many of these idiots have student loans?

References

Lisa Baumann and Sarah Rankin, What is 'antifa?' Virginia clashes bring attention to anti-fascist movement. Chicago Tribune, August 16, 2017.

Debra Heine, Ann Coulter cancels Berkeley speech amid antifa threats, PJ Media, April 26, 2017.

James Howard Kunstler, When the Butterfly Flaps Its Wings. Clusterfuck Nation, August 28, 2017.

The proliferation of expensive Executive MBA programs: All sizzle and no steak?

Private liberal arts colleges are under severe financial stress, and many are struggling to lure undergraduates through their doors. Mom and Dad are increasingly unwilling to pay $50,000 a year for their children to attend obscure run-of-the-mill liberal arts colleges.  After weighing the cost and benefits of a private college education, enrolling at a nearby public university often looks like the best option.

To attract new revenues, a lot of private liberal arts colleges are investing heavily in graduate education. They are finding that many young professionals are willing to pay big bucks for graduate degrees, particularly the MBA. Moreover, in the past at least, employers have been willing to pay tuition costs for promising mid-level managerial employees to get MBA degrees.

To tap this market, colleges began rolling out executive MBA programs (EMBA). Most of these programs have two attractive features: 1) Classes are offered in intense weekend sessions, allowing students to continue working full time. 2) Many EMBA programs include international experiences, such as a two-week excursion to China, that expose students to the world of international business. Generally, the EMBAs include some razzle dazzle like catered lunches for weekend classes and upscale classroom settings.

And the colleges price their EMBA programs as high as the market would bear. Even MBA programs at public universities have become shockingly expensive. And, to wring out every last dime from the MBA market, universities all over the country began ramping up off-campus EMBA programs to tap urban markets, and they also rolled out online programs, which can be delivered inexpensively to large numbers of students.

But in their greed, the colleges may have killed the goose that laid those golden eggs. Some employers have concluded that the extravagant cost of EMBA programs is not justified and are pulling back from funding EMBA programs for their employees. And students are becoming more sensitive to price. LSU's EMBA program, for example, may be more prestigious than ones offered by Louisiana's regional institutions, but the regional degrees are much cheaper.

In short, I think American businesses and business employees have figured out that EMBA programs are all sizzle and no steak.  One of my young relatives just finished an EMBA program that included a China excursion, and he told me that his professors often did not know as much about the subject they were teaching as he did. He was grateful that his employer paid for his degree because, in his opinion, the degree was not worth the cost.

And I know an attorney who thought he could enhance his marketability by adding an MBA to his JD. He borrowed money to get his MBA credential, and now he regrets that decision.

It is hard to know how to advise a young person who wants to obtain a post-graduate degree in order to land a better paying job. When I was young, getting a law degree was a no brainer; a JD degree from a reputable law school was a ticket to a good career. Now there are thousands of law school graduates who have six-figure student-loan debt and no job.

I think MBA graduates are beginning to experience the same disappointment with their graduate degrees that JD graduates have been experiencing for the last 10 years. Unfortunately, graduate education is not opening the door to opportunity for many bright young Americans; it is only leading to mountains of student-loan debt.

Where's the beef?

References

Rick Seltzer. Deans see challenges for off-campus E.M.B.A. programs in the United States. Inside Higher ED, August 24, 2017.

Rick Seltzer. Marygrove College to end undergraduate programs after fall semester. Inside Higher ED, August 10, 2017.

The Unfortunate Case of Mark Tetzlaff, a law school graduate with more than a quarter million dollars in student loans. Bankruptcy is the only reasonable option.

One would have to have a stone-cold heart (or no heart at all) not to feel some sympathy for Mark Tetzlaff.  Tetzlaff obtained a law degree from Florida Coastal School of Law in 2005, but so far at least, he has been unable to pass a bar exam.

In 2012, Tetzlaff filed an adversary proceeding in a Wisconsin bankruptcy court, seeking to discharge more than a quarter of a million dollars in student loans.  Tetzlaff had actually paid off his law-school debt but he had incurred $260,000 in student loans to pursue various other degrees.

During his adversary proceeding, Tetzlaff tried to explain why he had been unable to find steady employment. "He introduced evidence showing that he is a recovering alcoholic, that he has been convicted of several misdemeanor offenses and that these convictions have hindered his ability to find a job." Tetzlaff v. Educational Credit Management Corporation, 521 B.R. 875, 877-878 (E.D. Wis. 2014), aff'd, 794 F.3d 756 (7th Cir. 2015). He also introduced evidence from a psychiatrist that he suffered from narcissistic personality disorder, anxiety and depression.

In addition, Tetzlaff attempted to introduce testimony from a forensic psychologist that he had serious memory problems that prevented him from passing the bar. He also had a vocational counselor lined up to testify that his memory problems were serious enough to hinder him from finding a well-paying job.

An unsympathetic  bankruptcy judge refused to allow Tetzlaff's forensic psychologist and vocational counselor to testify because Tetzlaff he had not disclosed these witnesses by the deadline established in the court's pretrial order. But the judge allowed Educational Credit Management Corporation, Tetzlaff's student-loan creditor, to introduce its own forensic psychologist to testify.

ECMC's psychologist tested Tetzlaff to determine whether he was feigning his psychological symptoms. Not surprisingly ECMC's hired gun concluded that Tetzlaff was a malingerer and that he was feigning his symptoms.

The judge herself concluded that Tetzlaff had not made good faith efforts to find a job and that most of "[Tetzlaff's] energy over the last several years has been directed at making excuses for his failure . . . rather than securing employment." Id. at 880. Accordingly, the judge refused to discharge Tetzlaff's student loans.

Tetzlaff appealed the bankruptcy court's decision to a federal district court, which upheld the bankruptcy judge's decision. And he appealed again to the Seventh Circuit Court of Appeals, which also upheld the bankruptcy judge. And then he sought review by the US Supreme Court, which refused to hear his appeal.

Over the years, Tetzlaff has taken the bar exam at least five times--twice in Illinois and three times in Wisconsin. He failed the exam all five times.  In July 1917, he sued the Illinois Board of Admissions, demanding extra time to take the bar exam along with the right to consult written materials and to take the test in a semi-private room free of distractions.  Tetzlaff claims he is entitled to these "reasonable accommodations" under the Americans with Disabilities Act.

Tetzlaff is now in his late fifties. Twelve years after graduating from law school, he still cannot practice law. Somewhere along his life's journey, he also picked up an MA degree and an MBA; and he is currently pursuing a LLM degree from Temple Law School.

What are we to make of this saga?

First, I believe the bankruptcy court was wrong to deny Tetzlaff a discharge of his student loans. Tetzlaff graduated from a bottom-tier law school, which has very low admission standards. It should not be surprising that he failed the bar exam multiple times. Numerous graduates of Florida Coastal School of Law have failed the bar.  And, as Paul Campos pointed out in his book Don't Go To Law School (Unless), many people who graduate from mediocre law schools will never earn an income that will justify the enormous debt load they take on to get their JD degrees.

Second, I understand why the bankruptcy judge refused to allow a couple of Mr. Tetzlaff's witnesses to testify. Parties to litigation are expected to comply with pretrial orders; and apparently Tetzlaff was granted several extensions to list his expert witnesses before the judge ruled that she would not hear their testimony.

But what kind of justice system do we have that permits a well-heeled creditor like Educational Credit Management Corporation to bring in paid experts to testify that a distressed student-loan debtor is a malingerer? Expert witnesses are hired for one purpose and one purpose only--to help their clients win their cases. ECMC is hounding student debtors in bankruptcy courts all over the United States, and it has almost unlimited resources to hire experts to testify against people who are penniless. Is that fair?

Finally, Mr. Tetzlaff's story illustrates the crazy system of higher education we have constructed in this country that allows an individual to borrow money to obtain multiple degrees when it is clear that this money will never be paid back. Mr. Tetzlaff is a case in point. According to news accounts, he has four academic degrees--a J.D., an MA, an MA, and a BBA--and is pursuing a fifth degree--an LLM.

Let us face facts. Bankruptcy relief is the only sensible option for someone like Mr. Tetzlaff. Even if he eventually passes a bar exam and practices law, it is highly unlikely that he will ever pay back $260,000 in student loans (along with accruing interest).

Mark Tetzlaff (seated on the left) (photo credit Bruce Vielmetti, Milwaukee Journal Sentinel)

References

Mike Brown.  Student Loan Plaintiff Mark Tetzlaff Sues Illinois Board of Admissions to the Bar. Lendedu.com, July 31, 2017.

Tetzlaff v. Educational Credit Management Corporation, 521 B.R. 875, 880 (E.D. Wis. 2014), aff'd, 794 F.3d 756 (7th Cir. 2015).

Tetzlaff v. Educational Credit Management Corporation, 794 F.3d 756 (7th Cir. 2015),  cert. denied, 2016 U.S. LEXIS 61 (U.S. Jan. 11, 2015).

Bruce Vielmetti. Waukesha man sues for double the time, and an open book, to take Illinois bar exam. Milwaukee Journal Sentinel, July 26, 2017.

William Vogeler. Law Graduate Sues for Open-Book Bar Exam. findlaw.com, July 27, 2017.

Patricia McDade owes one third of a millon dollars in student loans, which she cannot discharge in bankruptcy

Patricia McDade owes one third of a million dollars in student loans, which she cannot discharge in bankruptcy. In a recent decision, Bankruptcy Judge Patrick M. Flatley ruled that McDade could make payments on her enormous debt and still maintain a decent standard of living.

"McDade has not demonstrated that she is unable to maintain a minimal standard of living while repaying at least some portion of her student loans," Judge Flatley wrote. Therefore, in Judge Flatley's opinion,  McDade did not meet her burden of showing that she would suffer "an undue hardship" if she was required to pay back her loans.

Judge Flatley made a mistake. Patricia McDade is 46 years old, and her student loan debt amounts to $333,000 (including $6,000 for her children's education). Although her annual salary was $63,000 at the time of her adversary proceeding, she represented that she was in danger of losing her job. There is no way Ms. McDade can pay back a third of a million dollars in student loans and maintain a decent standard of living, even if she remains permanently employed at her current salary.

Judge Flatley did not specify how much of McDade's student loan debt was accrued interest, but she undoubtedly borrowed far less than $327,000. In fact, McDade argued that the accrued interest on her debt should be discharged even if her underlying loans were not forgiven. But Judge Flatley rejected that argument.

I think Judge Flatley suspected that some of Ms. McDade's expenses were excessive. He pointed out that her expenses rose 20 percent over a ten-month period and that the increase coincided with a pay raise she got at her job. And in fact, she listed a couple of arguably questionable expenses: a $486 monthly car payment and charitable contributions totally $525 a month. She also listed expenses related to her adult daughter.

But McDade was driving a 2014 Jeep Patriot--a very modest car. No bankruptcy court has said student-loan debtors are required to drive a junker in order to qualify for bankruptcy. And if some of McDade's expenses were excessive--the charitable contributions, for example--Judge Flatley might have granted her a partial discharge to compensate for the excessive expenditures. This is what Judge Pappas did in the McDowell case. (Ms. McDowell had purchased a motorcycle.)

Undoubtedly, Ms. McDade can keep her head above water financially if she enters an income-driven repayment plan (IDR) that will require her to make relatively modest monthly payments.  If she goes that route, however, her payments almost certainly will be insufficient to cover accruing interest on her enormous student-loan debt. And an IDR will require her to make monthly payments for 20 or even 25 years.

Ms. McDade may have made some mistakes in the way she handled her student loans, but denying her bankruptcy relief will not accomplish anything useful. She will probably wind up making monthly payments under an IDR until she reaches retirement age, and these payments will hinder her ability to buy a home or save for her retirement.

In fact, Patricia McDade is one of many student-loan debtors who have entered bankruptcy court owing far more than they borrowed due to accrued interest and fees. In my view, it is not in the public interest to shove all these unfortunate individuals into IDRs just to maintain the fiction that the loans aren't in default.

For all practical purposes, Ms. McDade's student loans are in default, and they will remain in default even if she enters an IDR and faithfully makes monthly payments for the next quarter century.

Photo credit: lend.edu

References

McDade v. Direct Subsidized Consolidated Loan, Case No. 15-bk-52, Adv. Proc. No. 15-ap-27 (Bankr. N.D. Va. 2017).

McDowell v. Educational Credit Management Corporation, Bankruptcy Case No. 10–40845–JDPAdv. Proceeding No. 14–08005–JDP, 2016 WL 2603552 (Bankr. D. Idaho 2016).

Columbia rolls out one-year master's program in data journalism that costs $147,000: An Ivy League school stoops to flim-flam

Columbia University is an Ivy League school with one of the top journalism programs in the country. Perhaps that is why Columbia thinks it can get away with rolling out a new one-year master's degree program that will cost students $147,000 (including living expenses).

Why would anyone invest $147,000 for a one-year program in journalism when the job market for journalists is shrinking and the annual median wage for journalists is less than $40,000?

Giannina Segnini, the director of Columbia's Cadillac program in data journalism, argues that the Trump presidency justifies both the new degree and apparently its cost:

Journalists are facing the challenge of covering one of the most unusual and unreliable governments in modern history: President Trump disseminates lies, twisted facts, and changes in policy in real time through his Twitter account . . . . Despite--or perhaps because of--all of this, investigative journalism is flourishing.

But of course it is the elite American universities that are disseminating lies, twisting facts, and changing policies to justify their obscene tuition prices. Thus far, the law schools have been the chief offenders. The average JD graduate enters a stagnant job market with $140,000 in student-loan debt. Law school tuition prices simply cannot be justified

Now a journalism school is getting in on the flim-flam game--pitching a degree in "data journalism" at an inflated price.

Of course anyone who falls for this pitch is a complete fool, and everyone knows that a fool can practice journalism without a master's degree from Columbia. 


References

Preston Cooper, Columbia University Uses Trump To Sell $100,000 Journalism Degrees, Forbes.com, August 10, 2017.

Nick Roll, $147,000 for a One-Year Master's? In Journalism? Inside Higher ED, August 11, 2017.

Giannina Segnini, Data Empowers Journalism Independence in Trump's Era, Columbia Journalism Review, August 3, 2017.