"Luxury" apartments for college students: How will the kids pay the rent?

Bloomberg Businessweek carried a story recently about the emergence of luxury housing for college students. In recent years, real estate developers have been building "amenity-rich luxury apartments" near universities. These new apartment complexes are very attractive to students, especially when compared to the often run-down dormitories that the universities operate.

But these so-called luxury apartments are expensive, and they've contributed to the rising cost of student housing. As Bloomberg writer Ali Breland reported, "the estimated cost of on- and off-campus room and board at a four-year public university climbed by more than 82 percent, adjusted for inflation." During the same time period, rents across the nation as a whole only rose 19 percent.

How are students paying for their fancy digs? Many of them are paying the rent with student loans. The average college graduate now leaves school with $35,000 in student debt, and for many students, a significant chunk of that money was spent on housing.

So what's the problem?

First of all, a lot of students are taking out student loans for housing they really can't afford. When their student-loan bills come due, a lot of them will wish they had lived more modestly while they were working on their degrees in medieval literature.

Second, by borrowing money to pay for "luxury" living, students are living a lifestyle they can't sustain after they finish their studies and go looking for a job. It is hard for college students to accept the reality that their standard of living will go down once they've obtained their college degrees.

The upscale student-housing boom imposes a cost on college communities as well.  A lot of this so-called luxury student housing isn't luxurious at all.  Student-housing complexes may have swimming pools, clubhouses, and shiny appliances, but many of them are shoddily constructed, with plastic interior doors and particle-board cabinets.

I live just a few blocks from some of these student-oriented apartment complexes, and even the newer ones are beginning to look the worse for wear.  The day is fast approaching when these faux-luxury apartment buildings will just be slums.

But the real estate developers don't care. These complexes are being packaged and sold to investors as commercial real-estate-backed securities--very similar to the mortgage-backed securities that were being peddled before the housing crisis of 2008.

In my view, the luxury student-housing boom is a bubble. Too many of them are being built. No wonder the default rate on student-oriented housing mortgages has rocketed up to 9 percent!

Luxury student housing: Living the good life while still in college

Oklahoma State University's great snowball riot of 1968: A tale of my misspent youth

When I think back

On all the crap I learned in high school

It's a wonder

I can think at all.

Paul Simon

I graduated from Oklahoma State University almost 50 years ago, and I can say with no exaggeration that I didn't learn a goddamn thing.

But I had one thrilling experience at OSU, which I am going to tell you about. During my sophomore year, I had a friend named Paul who was a radio-television major and worked as a DJ in the evenings at the campus radio station.

One snowy night during the winter of 1968, Paul made an on-air announcement that the Sigma Nu fraternity house had challenged Scott Hall, a men's dorm, to a snowball fight. This simple statement--totally false--electrified the OSU campus.

Like most male OSU undergraduates, I was a GDI--a goddamn independent; I hated the fraternity boys, with their starched oxford-cloth shirts, their pretty girlfriends, and the nice cars their parents gave them. A chance to throw snowballs at these arrogant, rich boys? Who could say no?

Shortly after Paul made his bogus announcement, phone calls came flooding into the radio station. Someone from Bennett Hall said the dorm was pledging 50 men to the snowball fight.  The Sigma Chi fraternity reported that its entire membership was headed to the Sigma Nu house to join the fight.

I recall looking out the window of my dorm room and seeing my friends streaming out the door, scrambling into their winter coats as they ran toward fraternity row. Obviously, I had to be there.

Within a few minutes, I had joined a mob of GDIs in the university's formal gardens. It was like the battle scene in Dr. Zivago, when the Red Guards stormed over the ice to fight the White Russians. Hundreds of young men, wild with excitement, were charging toward the Sigma Nu house.

And then we threw some snowballs. In about 15 minutes we had broken out most of the windows on the front side of the Sigma Nu house. The Sigma Nus tried to defend their turf, aided by their allies from other fraternities. But we had them outnumbered. They was a riot goin' on!

Meanwhile, Paul, still broadcasting from the radio station, decided to report the fracas over the state newswire service. That report alerted the Oklahoma Highway Patrol, and the state troopers called for police backup from the surrounding towns of northcentral Oklahoma.  

After all, why should college kids have all the fun?

Oklahoma's law enforcement community had always suspected that OSU was a nest of commie sympathizers and Russian stooges, and this riot proved that their suspicions were right.  Patrol cars rolled in from all directions, and every officer was equipped with a sawed-off shotgun and plenty of double-ought buckshot. 

Who knew what glittering opportunities awaited the cops when they got to the OSU campus? If they were lucky, maybe they'd get a chance to kill a few anarchists.

And so--about an hour after the snowball fight began, the state troopers had formed a skirmish line in front of the Sigma Nu house. Some pompous Highway Patrol guy with a buzz haircut and a bullhorn told the independents they would be arrested if they didn't disperse immediately.

For a few minutes, we paid no attention to this warning, and I myself threw a snowball at the guy with the bullhorn. But the GDIs were no fools. We knew the Oklahoma Highway Patrol was not to be messed with. And so we melted away through OSU's beloved formal gardens--which we had dishonored by our lawlessness--and slunk back to our cell-like dorm rooms.

That evening in February 1968 was my most memorable experience from my OSU years. I still recall the satisfying sound of breaking glass after I lobbed an iceball at the Sigma Nu house--my feeble contribution to class warfare.

I am older today of course. But I only reside about half a mile from LSU's Sigma Nu house. If conditions were just right and snow fell on Baton Rouge, and if I were to receive a call to storm fraternity row, well I might just join the fray.

Oklahoma State University's formal gardens--sullied by lawlessness

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

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.

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.

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?

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).