Tuesday, August 13, 2019

Michigan State prez Lou Anna Simon--charged with lying to police--gets $2.45 million retirement package!

Lou Anna Simon was president of Michigan State University when the Larry Nassar sex-abuse scandal broke. Nassar, an MSU faculty member and team physician for the Olympics USA gymnastics team, pleaded guilty to sexual abuse charges and will spend the rest of his life in prison.

There is substantial evidence that several senior MSU administrators were aware of what Nassar was doing to young women and did nothing about it. Lou Anna Simon herself faces felony charges for allegedly lying to police about what she knew about Nassar's shenanigans.

Before police discovered that Larry Nasser had been molesting MSU students, President Simon had a good gig. She made $750,000 a year when she resigned as MSU's president in 2018. MSU allowed her to remain on the MSU faculty at the paltry salary of only half a million.

Now, with criminal charges still hanging over her head, Simon is retiring with a nice little parting gift: $2.45 million!

Obviously, the MSU trustees were aware that Simon might be convicted of a felony when they cut the retirement deal, and the separation agreement makes provision for that possibility. If she is convicted, the trustees will take down her official presidential photo. But of course, she will still get to keep the retirement money.

As for victims of Larry Nassar's sexual assaults, MSU has set aside a half-billion dollars to pay claims to an estimated 332 victims. Hey, that's just pocket change for this mega university.  Moody's Investors Service, a credit rating agency, assured investors that "t]he university has the financial strength to absorb the proposed settlement within its strong credit profile." After all, MSU generates more than a quarter of a billion dollars a year in operating revenue and has "ample ability to absorb debt service related to the settlement amount."

One might think Lou Anna Simon's compensation package is an aberration, but it is not.   Simon ranks 44 among the nation's top-paid university presidents. In fact, 17 university presidents make over $1 million a year in total compensation.

You might imagine college presidents as bookish men and women who spend their days strolling through the groves of academe and thinking noble thoughts about the ancient virtues.  But in fact, they are raking in a lot of cash, and many of them are pretty mediocre individuals.

And some of them are not minding the store. Michigan State, Penn State, Baylor, and the University of Southern California are a few of the once noble universities that have been wracked by sexual abuse scandals, which are costing them billions in settlement payouts and attorney fees.

So think about Lou Anna Simon, boys and girls, when you take out student loans to finance your college education. You may be saddled with student debt for the rest of your lives, but the people who run the universities that are taking your money are making out like bandits.

Lou Anna Simon
Photo credit: Cory Morse, Grand Rapids Press







Thursday, August 8, 2019

The Baby Boomers did not ruin America: They too are victims of our bandit economy

This year, for the first time, the Social Security Administration paid out more to retirees than it received in Social Security contributions from working Americans.

That's really bad news; and, as journalist David Shribman recently observed, no one running for President is even talking about this problem.

Some pundits think the Baby Boomers brought this crisis on themselves through greed and improvidence. Lyman Stone, writing for the American Enterprise Institute, began his report on aging with these words: "The Baby Boomers have ruined America."

But that is bullshit.

As Shribman pointed out, the average Social Security check is only $1,413 a month--a chicken shit reward for people who worked 40 years at one of our nation's dead-end jobs.

Nevertheless, social critics say, the Baby Boomers should have been building a nest egg for their golden years, and their median savings only amount to about $100,000. But just how were the Baby Boomers supposed to have saved more money?

When I was a kid, most families were supported by one wage earner. Now almost every family has two people in the workforce. When I was a kid, many students worked their way through college and graduated with no debt. Now the average college student takes six years to get a four-year degree and graduates with $30,000 in student loans. And mom and pop may have taken out a Parent Plus loan to help get their child get through college.

Years ago, many Americans enjoyed good pension plans, but corporate America scrapped those plans and pushed everyone into 401Ks. This move forced workers to put their retirement savings in the stock market. But most Americans do not have the financial sophistication to invest in stocks and bonds. And the average Joe is not doing as well as the investment broker who is "managing" his retirement accounts.

There is a fix for this crisis, and I will tell you what it is. All Americans should be paying Social Security taxes on every dime of their wages, and people enjoying retirement income of half a million dollars or more should not get a Social Security check.

Mitt Romney, the arrogant corporate raider and oily politician from Massachusetts (or is it Utah?) pays a smaller percentage of his income in taxes than the average factory worker. Romney should be paying Social Security taxes to the max. And President Trump, who gets a Social Security check, should maybe send it back to the government.


Mitt can help solve the Social Security crisis.






Wednesday, August 7, 2019

It's a comfort to have a shotgun in the closet: The guv'ment ain't never gonna round up all them guns!

My father came back from World War II with a pocket full of money. He'd been a prisoner of the Japanese for most of the war, and he received three years in back pay when he got back to the States.

One of the first things my father did when he returned to Oklahoma was to buy a Browning automatic shotgun, a beautiful gun with a dark walnut stock and the famous Browning humpback design. He promptly took up quail hunting and it became his only recreation.

Quail were in abundance in northwestern Oklahoma during the 1940s. The quail hunters had all gone off to war, and the countryside had been depopulated during the Great Depression when a lot of my father's relatives became Okies and went to California down old Route 66. There were literally millions of bobwhite quail in the brushy country on the Kansas border, and you could kick up a hundred or more just by wading into a random plum thicket.

My father was a minimalist when it came to upland game hunting. No fancy Gortex rain gear, no Orvis sportswear, no pricey equipment from Cabella's. When my dad went quail hunting, he took his shotgun and a cardboard box, which contained a cheap, faded hunting vest and two or three boxes of shotgun shells.

When I was about twelve I began to go quail hunting with my father, and I saved up my paper-route money and bought my own shotgun--a used Remington Model 11, another beautiful firearm made in the pattern of my father's Browning. I kept my shotgun in the closet with my Dad's.

For my dad and me, shotguns were not weapons; they were sporting goods--something like a fishing rod or golf clubs. Many of my teenage friends had shotguns, and it never occurred to any of them to take a gun into a school and start shooting people.

But times have changed, and now people can buy assault rifles with extra-large magazines. And these guns are fairly cheap. You can purchase a new assault rifle for anywhere between $500 to $1500. And the sporting goods stores sell assault-rifle ammunition in plastic tubs that hold a couple hundred rounds.

Now the politicians are talking about a nationwide gun buyback program designed to get firearms out of private hands--assault rifles mostly. Senator Joe Biden and some other presidential contenders endorse this idea.

I hate to be the one to break it to you, Senator Biden, but the guvment ain't never going to get all them guns out of people's closets. We now have more guns in the United States than we have people. There's a gun for everybody, even the little babies and toddlers.  And people are not going to give those guns to the federal government.

Senator Joe, Beto O'Rourke and Senator Warren might get people to sell their dusty old shotguns rusting away in the attic: their bolt-action .410s, their single-shot, 16 gauge Savages. But if they bought an assault rifle or a 9 mm pistol, they are going to keep it.

And any politician who does not understand that is not smart enough to be President.

The Browning automatic shotgun: A beautiful thing to behold


Note: The title of this essay was partly inspired by a passage from a book by James Howard Kunstler.

Monday, August 5, 2019

The Baby Boomers are Toast: Massive Suffering is Right Around the Corner

I never liked the term "Baby Boomer"--an infantilizing appellation if ever there was one.

I am a Baby Boomer myself, having been born in 1948, almost exactly three years after my father was liberated from a Japanese prison camp in Korea. My birthday, August 9, marked the third anniversary of the day Nagasaki was obliterated by an atomic bomb. And my birthday also fell on the sixth anniversary of the day the Nazis killed St. Edith Stein at Auschwitz.

I was raised to believe that life for my generation would be better than it was for my parents' generation. And for a long time, that expectation looked like it would be fulfilled. My father owned one suit. When I practiced law, I owned seven. My parents' house had one bathroom. For years, I have lived in houses that have two or even three bathrooms.

But when I reached my 50s, I could see that my generation's rise to greater prosperity had stalled. My father and my wife's father retired when they were in their mid-50s. I will retire at the age of 71; and my closest friends, all in their early 70s, are still working.

And many of my contemporaries are frightened. One-third of senior Americans live entirely on Social Security, and the average payout is only $1,220 a month. That's 19 million retirees living near or below the poverty line.

The experts say people need to have $1 million in savings to retire, but most don't have near that amount. And even if they did, how would they invest that money? This morning, the interest rate on the 10-year note dropped to 1.75 percent--1.75 percent! So if you invested your million dollars in Treasury notes, you would have an income of $17,500 a year.

So my generation is still in the stock market--a rigged casino where the croupier (Goldman Sachs and their cronies) can push the hidden button under the roulette table any time they want to make the stock market go up or down. We all know this is going to end badly.

Incredibly, many people my age still have student loans hanging over their heads--loans they will never repay. The federal government is pushing millions of distressed debtors into 25-year income-driven repayment plans that are designed never to be paid off.

More and more television advertising is targeted toward seniors--new medications, financial services, reverse mortgages, etc. All these commercials show prosperous, silvered-haired couples in radiant health, and the wife always looks about 15 years younger than the husband. These couples are shown surfing, skiing, hiking, and fishing with their adorable grandchildren off the docks of their lakeside retirement homes.

But we all know those advertisements are a lie. The reality is this: millions of baby boomers are going to live out their last years in starkly reduced circumstances. In short, the baby boomers are toast.
Put your retirement savings in the stock market. What have you got to lose?







Friday, August 2, 2019

Lone Star Blues: Vera Thomas is 60 years old and suffers from diabetic neuropathy, but she lost her bid to discharge student loans in bankruptcy

Vera Thomas is more than 60 years old and suffers from diabetic neuropathy, "a degenerative condition that causes pain in her lower extremities." Unemployed and suffering from a chronic illness, she filed for bankruptcy in 2017 in the hope that she could discharge her student loans in bankruptcy. 

 At the time of her bankruptcy proceedings, Thomas was living in dire poverty. Her monthly income was less than $200 a month and she was surviving on "a combination of public assistance and private charity." 

How much did Ms. Thomas owe on her student loans? She borrowed $7,000 back in 2012 and she used her loan money to attend community college for two semesters. Thomas didn't return for a third semester, and she only paid loan payments totally less than $85. 

Judge Harlin Hale, aTexas bankruptcy judge, applied the three-part Brunner test to determine whether Thomas would suffer an "undue hardship" if forced to pay off her student loans. Part one required her to show that she could not pay back her student loans and maintain a minimal standard of living. Thomas clearly met this part of the test.

Brunner's second part required Thomas to establish that circumstances beyond her control made it unlikely that she would ever be able to repay her student loans. The U.S. Department of Education argued that Thomas could not meet this part of the Brunner test and Judge Hale agreed. In spite of her debilitating illness,  he concluded, Thomas could not show that she was "completely incapable of employment now or in the future." Surely there was some sedentary work she was capable of doing, Judge Hale reasoned.

In short, Judge Hale denied Thomas's request for bankruptcy relief from her student loans. He expressed sympathy for Ms. Thomas's situation, but he said that during his entire time on the bench, he had never granted student-loan bankruptcy relief over the objection of the lender (the U.S. Department of Education or its contracted debt collectors).

Thomas appealed to a U.S. District Court, which affirmed Judge Hale's decision; and then she appealed to the Fifth Circuit Court of Appeals. Two public interest groups came to her aid by filing an amicus brief. The National Consumer Bankruptcy Rights Center and the National Association of Consumer Bankruptcy Attorneys argued that the Brunner test was no longer an appropriate standard for determining whether a student-loan debtor is entitled to bankruptcy relief and should be overruled. 

But the Fifth Circuit refused to abandon the Brunner test or even to soften the way it is interpreted.  Unless the Supreme Court or an en banc panel of the Fifth Circuit overrules Brunner, the Fifth Circuit panel stated, it was bound by that decision.

The Fifth Circuit decision  implicitly acknowledged that the federal student-loan program poses an enormous public-policy problem, but in the court’s view, it was not the judiciary’s job to fix it: "[T]he fact that student loans are now mountainous in quantity poses systematic issues far beyond the capacity or authority of courts, which can only interpret the written law. . . Ultimate policy issues raised by Ms. Thomas and the amicus are for Congress, not the courts."


So what does the future hold for Vera Thomas? Her student-loan debt is undoubtedly far larger today than it was when she initially borrowed $7,000 to enroll at a community college back in 2012. Over the years, interest has accrued and perhaps penalties and fees. In the aftermath of the Fifth Circuit's decision, it seems likely that Vera Thomas’s only viable option is to sign up for an income-driven repayment plan, which will terminate when she is 85 years old. 



References

Thomas v. U.S. Department of Education, No 18-11091 (5th Cir. July 30, 2019).

Tuesday, July 30, 2019

The Student Loan Crisis: If you aren't concerned, you're not paying attention

Joseph Kennedy, it is said, got out of the stock market after a shoeshine boy gave him a stock tip. When a shoeshine boy is in the stock market, Kennedy reasoned, it is time to get out. And thus Joe Kennedy, JFK's father and a very wealthy man, got out of the market before the 1929 crash.

Signs are all around us that the federal student-loan program is deep underwater, but the nation's colleges and universities keep chugging along like the federal gravy train will keep spewing money forever.

Already a lot of small, obscure liberal arts colleges are shutting down.  But the public universities and the elite private colleges are as heedless of this trend as a herd of wildebeests who keep galloping along while lions pull down the weaker animals at the back of the herd.

So here are some "shoeshine boy" signs of a looming calamity:

The College Board reported that 29 percent of student debtors were in income-driven repayment plans (IDRs)in 2018 and that the amount these people owed constituted almost half of all the student-loan money in repayment.

Think about that. If half of the outstanding student debt is being serviced by borrowers in income-based plans, that means half of the debt is not being paid back.

Then we have the Government Accountability Office's report that one-third of a sample of people in IDRs say that they have no income but actually have annual incomes of at least $45,000.  These folks are paying zero on their student loans but aren't counted as defaulters.

And then we have Education Secretary Betsy DeVos's candid admission that only one out of four student borrowers is paying down interest and principal on their student loans and that 43 percent of all student loans are "in distress."

Senator Bernie Sanders wants to forgive all student debt, and perhaps that's a good idea. After all, what's $1.6 trillion among friends? But we can't wipe out all that debt without cleaning up the corrupt and mismanaged college industry. Will Bernie shut down the sleazy for-profit colleges? Will he put an end to a tenure system that gives mediocre professors lifetime job security? Will he insist on closing third-tier law schools and redundant regional universities? I seriously doubt it.

If you are a fortunate adult who has no student-loan debt, you can gaze on the coming disaster with benign equanimity. And if you are a university administrator pulling down 200 K a year, what do you care? The bubble probably won't burst until after you're drawing your generous pension.

But for the nation as a whole, the student-loan crisis is a calamity, which has destroyed the integrity of our once fine colleges and universities while plunging millions of saps to the "ragged edge of poverty."

Wildebeests: Don't look back, the lions are gaining on us







Saturday, July 27, 2019

Student Loan Assistance Companies on Notice Now for Inflating Repayment Plans to Get $0 Payments: Essay by Steve Rhode





Written by Steve Rhode (originally published in Get Out of Debt Guy on July 26, 2019)
A long implemented trick by some student loan assistance companies has been to tell consumers they can inflate the number of people they support in order to reduce the monthly payment on Income-Drive Repayment (IDR) Plans.
Consumers have reported and I’ve covered stories where sales representatives of student loan assistance companies, sometimes pretending to be only “document preparation” companies, have said things like:
  • If you give someone a ride to work you can count them as a dependent towards reducing your student loan payments.
  • How many people regularly hang out at your house? You can count them as people you support.
  • Do you have any roommates because you can count them as dependents?
  • How many people do you buy presents for?
A brave inside tipster (send in your tips heretold me, “In order to make the sale, sales agents would falsely increase family sizes on government documents in order to deceptively get clients reduced or free monthly payments on their Federal student loan payments.”
Consumers fell for this false inflation of family size either out of blind faith the company they hired to lower their student loan payments actually knew what they were talking about, or they just wanted a lower payment.
The problem with this strategy is it is based entirely on a mountain of lies on a federal form. And the reality has always existed that either the government was going to ask for documentation before eventually forgiving loans in an IDR plan or monthly payments were going to explode when the actual proof was requested to verify family size.
Now imagine what will happen when the proof is demanded to support the IDR and you can only provide the required proof for three people and you’ve been claiming 15. Now there is a red flag.

The Jig is Up

Just recently the United States Government Accountability Office (GAO) submitted a report titled – “Education Needs to Verify Borrowers’ Information for Income-Driven Repayment Plans.”
Here is what the GAO investigation found:
“GAO identified indicators of potential fraud or error in income and family size information for borrowers with approved Income-Driven Repayment (IDR) plans. IDR plans base monthly payments on a borrower’s income and family size, extend repayment periods from the standard 10 years to up to 25 years, and forgive remaining balances at the end of that period.
• Zero income. About 95,100 IDR plans were held by borrowers who reported zero income yet potentially earned enough wages to make monthly student loan payments. This analysis is based on wage data from the National Directory of New Hires (NDNH), a federal dataset that contains quarterly wage data for newly hired and existing employees. According to GAO’s analysis, 34 percent of these plans were held by borrowers who had estimated annual wages of $45,000 or more, including some with estimated annual wages of $100,000 or more. Borrowers with these 95,100 IDR plans owed nearly $4 billion in outstanding Direct Loans as of September 2017.
• Family size. About 40,900 IDR plans were approved based on family sizes of nine or more, which were atypical for IDR plans. Almost 1,200 of these 40,900 plans were approved based on family sizes of 16 or more, including two plans for different borrowers that were approved using a family size of 93. Borrowers with atypical family sizes of nine or more owed almost $2.1 billion in outstanding Direct Loans as of September 2017.
These results indicate some borrowers may have misrepresented or erroneously reported their income or family size. Because income and family size are used to determine IDR monthly payments, fraud or errors in this information can result in the Department of Education (Education) losing thousands of dollars of loan repayments per borrower each year and potentially increasing the ultimate cost of loan forgiveness. Where appropriate, GAO is referring these results to Education for further investigation.”
And as hard as Education has pushed back on forgiving loans under the Public Service Loan Forgiveness program, I can only imagine what will happen when these fraudulent IDR plans come up for forgiveness and are denied.
The consumers will be on the hook for the fraud and the student loan assistance and document preparation companies will be long gone.