Why doesn't Congress do something useful to relieve the student-loan crisis? A couple of modest suggestions

Some famous guy once said that people are prone to see the speck in another person's eye while ignoring the log in their own eye. That observation reminds of our national political scene--nothing but vitriol and no good being done.

But there are several things Congress can do--uncontroversial things in my opinion, which would help relieve the massive student-loan crisis.  For example, Steve Rhode recently wrote an essay on a new California law that requires colleges to give students their transcripts--including students who have unpaid debts to their college.

As Mr. Rhode quoted, the new law (AB-1313) states: "Schools and colleges have threatened to withhold transcripts from students as a debt collection tactic. The practice can cause severe hardship by preventing students from pursuing educational and career opportunities, and it is therefore unfair and contrary to public policy." Does anyone in Congress disagree with that statement?

The law's dictate is quite simple:

Whenever a student transfers from one community college or public or private institution of postsecondary education to another within the state, appropriate records or a copy thereof shall be transferred by the former community college, or college or university upon a request from the student.

Withholding transcripts and diplomas because a former student is indebted to the college is a common practice among the for-profit institutions, which prompts an obvious question. Why are colleges lending money to students in the first place?

There are two answers to that questions. Some for-profit colleges are not content simply to suck up Pell Grant money and federal student-loan money. They want more cash, and many have no qualms about forcing their students to take out loans--often at high interest rates--in order to continue with their studies.

Second, many for-profits have trouble meeting the Fed's 90/10 rule, which requires a for-profit college to receive no more than 90 percent of its operating revenues from federal student-aid money.  One strategy for getting the 10 percent of auxiliary funding that they need is to loan their students money.

California passed a sensible law, and Congress should adopt it so that the law's restrictions apply nationwide. I repeat--does any person in Congress disagree with what the California legislature did?

Just this morning, Steve Rhode  responded to a a man who claimed that his entire Social Security check was garnished by some outfit called Account Control Technology due to an unpaid student-loan debt. As Mr. Rhode pointed out, the Internal Revenue Service cannot deduct more than 15 percent of an individual's Social Security check as a garnishment. So there is a screw-up somewhere for this individual to lose his entire Social Security check.

But why should elderly Americans have any of their Social Security checks garnished due to unpaid student loans? As the General Accountability Office reported some time ago, these garnishments almost always go toward paying accumulated interest and penalties; and the sums collected do nothing to actually pay down the underlying debt. So what's the damn point?

Senators Elizabeth Warren and Clair McCaskill introduced a bill a few years ago to stop the practice of garnishing Social Security checks to collect on defaulted student loans, but the bill went nowhere. Why can't Congress get off its fat ass and pass that bill?

A tribute to Dinky, who gave me a lift in his pea-green Studebaker

Dinky was a classmate of mine at Anadarko high school. He was one of those rare individuals who felt perfectly at home in the world at a young age. He had a wry sense of humor that never deserted him and he never missed an opportunity to meet girls. I remember he joined the First Baptist Church just long enough to go to the Baptist Bible camp at Falls Creek, where he hoped to meet some pretty Baptist girls. What a brilliant idea!

I don't think life was easy for Dinky when he was a kid. He grew up poor in a large family--I don't know how many brothers and sisters he had, but there was a bunch of them. For a time, his family lived in Batesville, a row of run-down rental houses strung out on Highway 281 near the old Wichita Indian Agency. It was not a distinguished neighborhood, but Dinky airily referred to his home as his "Batesville townhouse."

Dinky's parents ran the local office of the Mistletoe Express, which delivered packages and freight to towns across Oklahoma. I didn't know his parents well, but I liked them. They occasionally sponsored dances in the Mistletoe Express warehouse, and they kindly turned off all the lights except for one dim bulb painted red. In my eyes, getting invited to a Mistletoe Express dance outranked a visit to the White House.

As his nickname implied, Dinky was small for his size, but he was a natural athlete. I considered myself too frail to play high school football, but Dinky, who weighed less than I did, was the quarterback. I remember one home game when he was knocked out cold by a beefy lineman from one of our opponent schools--Chickasha maybe or Lawton. He lay inert on the field and Coach Wells hurried out to see if he was seriously injured.

By the time Coach Wells arrived by his side, Dinky had regained consciousness. His first words were, "How is the crowd taking it, Coach?"

One more clear memory of Dinky. When he was about 15 years old, he acquired an ancient pea-green colored Studebaker and he began driving regularly around town. My God, that was an ugly car! And it spewed out more black smoke than an ocean liner. I don't think Dinky gave a damn about the fact that he didn't have a driver's license. And apparently, the Anadarko police didn't care either.

I lost track of Dinky after we graduated high school, but I saw him years later at our high-school class's annual reunion. We were in our thirties.

"Do you remember that night I picked you up on Central Boulevard?" he asked me. "You were crying and you showed me belt marks on your legs."

I had wiped that night from my memory, but Dinky's question brought it back.  Yes, my father had beaten me with his belt that night and I had run out of our house to get away from him. It was a rainy, cold autumn night, and I was only wearing jeans and a t-shirt. I wasn't even wearing shoes.

Dinky stopped to give me a lift in his pea-green Studebaker. I was shivering and crying, and I remember the car's heater was blowing hot air. I also remember showing Dinky the belt-shaped bruises on my legs and I remember vowing to run away from home--my fool's dream.

I must have been a pathetic sight, but Dinky was sympathetic; and as far as I know, he never told anyone about that night--which I still appreciate.

Years later, thinking about that evening, it occurred to me how old I must have been when my father beat me with his belt. Dinky was driving, so I must have been at least 15-years old. And there I was, barefoot, wet, and coatless; humiliated and crying; rattling on about running away from home.  Dinky--good old Dinky--rescued me in his magical Studebaker.

Thank you, Dinky. I don't know if there is a heaven, but if there is, you will be there. Maybe God will replace the engine on your trusty Studebaker so it won't burn so much oil. Maybe He will give it a paint job. And maybe that will be your job in paradise--rescuing desperate kids.

I myself may never know what heaven looks like, but I feel quite sure it won't look like Anadarko.

A 1950 Studebaker

Feds spend millions on Betsy DeVos' personal security: Do Americans hate her that much?

Politico (Nicole Gaudiano and Caitlin Emma) reported that Education Secretary Betsy DeVos' security detail is projected to cost taxpayers $7.87 million in the coming fiscal year. That's up by about $1.5 million over last year's cost: $6.24 million.

Betsy is protected by the U.S. Marshals Service, which says its job is to "monitor and mitigate threats" to DeVos's personal safety.

Is that cost really necessary? After all, the four previous Education secretaries were content to be protected by the Department of Education's modest security force.

I have a few comments about Secretary DeVos' security detail. First, since DeVos' security costs are going up, that must mean that threats against her are accelerating. If that's true, maybe DeVos and President Trump should ask themselves why so many people are angry with her instead of just hiring more marshals.

Indeed, millions of student-loan borrowers have lots of reasons to be mad at Betsy DeVos: her gross mishandling of the Public Service Loan Forgiveness program, her efforts to water down protections for students who were defrauded by their colleges, and her shameless pandering to the for-profit college industry.

But then Betsy DeVos' heavy security detail is probably not that unusual among the nation's top public officials. I feel sure that most powerful politicians--Republicans and Democrats alike--have bodyguards. Do you think Nancy Pelosi, Chuck Schumer, Lindsey Graham, and Mitch McConnell go to the grocery store unaccompanied?

What a world we live in! Our elected and appointed officials--people we count on to look after the public interest--are being driven around in chauffeured limousines--protected from public contact by tinted glass and armed bodyguards. The only citizens they spend any time with are rich people with big checks in their hands.

So if you want to meet Betsy DeVos, you have two choices. You can become filthy rich and make a big donation to the Republican Party. In gratitude, Betsy might invite you over for cocktails on her yacht, the Seaquest.

If you aren't rich, you won't meet Betsy DeVos unless you throw yourself in front of her limousine and get run down by her chauffeur. Maybe then you and Betsy could have a little chat about your student loans while you're waiting for an ambulance.

Betsy's yacht

America is a two-headed snake and both heads are venomous: Nasty politics will destroy us all

My friend David, a herpetologist, recently returned from a research expedition in India where he discovered a two-headed snake. David identified the snake as a banded krait, a venomous creature common in India and Southeast Asia.  The krait's bite is quite lethal, generally killing the victim in less than eight hours. When a banded krait has two heads, both heads are venomous.

A two-headed snake! How does that work?  Not very well.

David told me that both heads have independent executive powers, although one head usually dominates the other. The two heads sometimes disagree about what direction to take and they often fight with each other for food. Because the two heads don't get along well together, they usually die quite soon if left in the wild.

It seems to me that America has become a two-headed snake. Conservatives dominate in the South, the Midwest, and the Rocky Mountain West. Liberals dominate on both coasts and in the large cities--Chicago, Houston, Denver, etc.

At the margins at least, conservatives and liberals hate each other. Liberals are outraged at the election of Donald Trump to the presidency, and some will stop at nothing to overturn the election results. If the Democrats can't impeach him based on the Mueller report, they will try to impeach him for a phone call to Ukraine. If that doesn't work, new justifications will pop into Adam Schiff's head and will continue popping into his head until Trump is out of office.

Meanwhile, legislatures in conservative states are trying to diminish a woman's right to have an abortion, passing laws that may very well be unconstitutional.  And Trump's education secretary, Betsy DeVos, has angered so many people with her reckless and heartless administration of the student-loan program that she needs a personal-security detail that costs the taxpayers $21,000 a day.

Our nation's politics are insane, and we are more politically divided now than at any time since the Civil War. Of course, America has seen nasty politics before: the Know-Nothing party of the 1850s, the rising of the Ku Klux Klan in the 1920s, and the McCarthy era.  But these demented episodes were short because Americans of goodwill came to their senses. But I see no end to our present political madness.

If Trump is re-elected, his enemies in the Democratic Party will continue to undermine him and plot for new ways to impeach him. If a Democrat is elected and some of the candidates' spending schemes are enacted into law, the nation will quickly go bankrupt and the stock market will plummet so far and so fast that 1929 will look like a Methodist picnic by comparison.

Meanwhile, Russia, China, North Korea, and Iran are watching our political antics like a bunch of kids eating popcorn during a Three Stooges movie. They can see we are self-destructing, and it must be fun for them to watch.

American politics has become a venomous, two-headed snake. Our elected leaders are so bent on crushing their political enemies that they are willing to wreck the national economy just to harm their foes. And make no mistake: our nasty politics will destroy us all--no matter which venomous head prevails over the other.

Puerto Rico bankruptcy plan will cut pensions for some retired public employees: The bell tolls for you, dude!

According to the New York Times, a federal oversight board has issued a plan to deal with Puerto Rico's financial collapse. In addition to giving the territory's bondholders a "haircut," the board proposes to cut pension obligations to retired public employees. "Their pensions would be cut on a sliding scale," the Times reported.  "The biggest pensions would be reduced by, at most, 8.5 percent, and the smallest pensions would not be cut at all."

Puerto Rico scrapped its defined-benefits pension program years ago, forcing all public employees into defined-contribution plans similar to 401(k) plans. In the future, all of Puerto Rico's public employees will be in retirement plans that are subject to the vagaries of the stock market.

If we don't live in Puerto Rico, why should we care? Because Puerto Rico's pension meltdown is a movie that will soon be coming to your town. Nationwide, the Wall Street Journal reported recently, the states' public pension funds "have less than 73 percent of what they need to fund future pension obligations to public workers."

Some state pension funds are worse off than others. Three states--Kentucky, Illinois, and New Jersey--have less than 40 percent of what they need to fund future pension obligations.  New York and California are also woefully underfunded.  And Texas, which sends me a pension check every month, would be less than 40 percent funded if it adjusted its investment expectations to a realistic level.

What's going to happen? First of all, one by one, the states will abandon defined-benefits pension plans and put all public employees into 401(k) type plans that offer no certainty about retirement income.

And--in many states--retired public employees will start seeing cuts in their retirement income, just as Puerto Rico's retired employees are probably going to experience. For now, at least, Puerto Rico's federal oversight board proposes to cut the biggest pensions the most and to leave modest pensions untouched.

The coming public pension meltdown, like the coming student-loan meltdown, will affect the entire nation. But what did we expect? Some retired public employees are getting pension checks that total a quarter-of-a-million dollars a year. And some pension plans allow public employees to retire with full benefits at the age of 55 or even younger.

As Jonathan Swift observed, "When a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully." Right now, the news media is concentrated on such weighty matters as President Trump's lousy hurricane predictions. But when the nation's retired public employees go to their mailboxes and find they have smaller pension checks than they received the month before--the public mind will concentrate wonderfully.

And then, my friends, we will see real trouble.

Shenk v. U.S. Department of Education: A bankruptcy judge denies student-loan discharge to 59-year-old army veteran

As John Lennon famously observed, "Life is what happens to you while you are busy making other plans." Certainly, Mr. Shenk, a military veteran, had other plans for his life other than filing for bankruptcy at the age of 59 in an effort to discharge $110,000 in student loans.

Timothy Shenk served 13 years in the U.S. Army (infantryman in the 82nd Airborne Division).  He then enlisted in the National Guard in order to obtain the 20 years of military service that would make him eligible for full retirement. That was a good plan.

Shenk also planned to become a teacher and he obtained a bachelor's degree from SUNY Cortland in 1999.  He then worked on a master's degree program in Adolescent Education, and he completed all the course work to obtain his degree.  That also was a good plan.

Unfortunately, Shenk had unpaid student loans, and SUNY Cortland refused to award him his diploma. In addition, the university had a five-year time frame to meet program requirements and that time period elapsed years ago.  Consequently, Mr. Shenk will never receive the degree he worked for, even though he met all program requirements.

Shenk married when he was a young man and he and his wife had four children. But the marriage ended in divorce, and he became liable for public assistance payments made to his ex-wife. By the time he filed for bankruptcy, he had paid off most of that obligation, which is commendable.

Bankruptcy Judge Margaret Cangilos-Ruiz expressed some sympathy for Mr. Shenk. She pointed out that his graduate studies were interrupted because the State of New York called him back for active military service after the terrorist attack on the World Trade Center in 2001. "The bitter irony is that when ordered by the Governor, [Shenk] assisted New York State at a time of dire need only later to have the State refuse to confer the degree that may have put him on a financial path to pay what he owed."

Nevertheless, Judge Cangilos-Ruiz denied Shenk's request for a student-loan discharge on the grounds that he did not meet the stringent standards of the three-part Brunner test.  He was unemployed at the time of the bankruptcy proceedings and he could not pay back his student loans and maintain a minimal standard of living. Thus he met Brunner's first requirement.  But the judge believed Shenk's financial circumstances would likely improve. He was employable, the judge pointed out, and he would soon be eligible for a small military pension and Social Security benefits.  The judge also said that Shenk failed Brunner's good-faith test because he had made no payments on his student loans over a number of years.

I think Judge Cangilos-Ruiz erred when she refused to discharge Mr. Shenk's student loans. First of all, universities should not be allowed to withhold a diploma simply because the would-be graduate has unpaid student loans. Such a policy amounts to putting student borrowers in debtor's prison--they cannot pay back their debts because their credentials are being withheld.

Moreover, Judge Cangilos-Ruiz denied Mr. Shenk a discharge partly due to the fact that he would eventually receive Social Security benefits and a modest military pension. In my view, no one who is nearing retirement age should be required to devote one penny of meager retirement income to paying back student loans.

In short, the equities of this case favored Mr. Shenk. Perhaps he made some mistakes in planning his finances but he served his country for 20 years in the U.S. military and he worked to obtain a graduate degree that his university refused to give him.

In any event, Mr. Shenk will probably never be able to repay $110,000 in student-loan debt. His only recourse now is to sign up for a long-term income-based repayment plan that could stretch out for as long as 25 years--when he will be 85 years old!

Isn't it ironic that presidential candidates are calling for a college education to be free to everyone while a man who served his country for 20 years is burdened by enormous student-loan debt? Thanks for your service, Mr. Shenk.

References

Shenk v. U.S. Department of Education, 603 B.R. 671 (Bankr. N.D.N.Y. 2019).

Like driving into a CAT 5 hurricane, the Department of Education is taking the student-loan program toward catastrophe

I lived in Houston when Hurricane Rita hit the Gulf Coast in 2005. Weather forecasters predicted that Rita would make landfall in Galveston Bay and that Galveston and towns south of Houston would suffer massive flooding and wind damage. The hurricane predictors also warned that parts of Houston would flood.

Responding to these warnings, hundreds of thousands of people--perhaps a million--fled Greater Houston in every direction. Some Houstonians traveled west toward San Antonio on I-10, some drove up I-45 toward Dallas, and others evacuated to the east on I-10.

My wife and I decided to head east toward Baton Rouge, where we could shelter with family. But we miscalculated. Our major mistake was to evacuate too late. As we drove east on I-10, we discovered that the highway was clogged with cars as were all auxiliary routes and surface roads.

Moreover, as we listened to our car radio, we heard the hurricane experts change their prediction about where Rita would make shore. It would not batter Galveston, they said; it would make landfall in southwestern Louisiana near the town of Cameron.

After about an hour on the road, my wife and I reached these conclusions. First, we would not reach Baton Rouge before Rita made landfall because the Interstate was fast turning into a parking lot. Second, we would run out of gas before reaching our destination and become stranded on the highway. And third--and perhaps most importantly--we were driving straight into the storm!

So we turned around and headed home to Houston. We arrived at a deserted city, but the Alabama Ice House was open and serving cold, draft beer to a small group of patrons. I still remember the taste of my ice-cold Red Stripe, served by a bartender who didn't give a damn about hurricanes. In the end, we suffered no damage from Rita.

After that experience, I vowed to pay closer attention to oncoming storm and evacuate early if I had any indication that a hurricane was headed my way.

The federal student-loan program is the economic equivalence of a CAT 5 hurricane hovering just offshore of our national consciousness. Education Secretary Betsy DeVos has described the program as a looming thunderstorm but she seems intent on driving straight into it.

As everyone knows from listening to the media, 45 million Americans have outstanding student loans that now total $1.6 billion. As DeVos has publicly admitted, more than 40 percent of those loans are "in distress" and only about one debtor in four is paying back both principal and interest on this debt.

More specifically, we know that 7.3 million college borrowers are in income-driven repayment plans that are designed so that people will never pay off their loans. More than 5 million people are in default, and another 6 million have loans in deferment or forbearance.

That's 18 million people whose total indebtedness grows larger by the month. Very few of these 18 million souls will ever pay back their student loans.

What is the U.S. Department doing about it? As I said, Betsy DeVos is driving full speed into the storm.  She refuses to grant significant debt relief to the people who signed up for the Public Service Loan Forgiveness Program--granting only about 1 percent of the applications.

And DeVos's DOE is doing everything it can to deny distressed student-loan debtors relief in the bankruptcy courts. DOE or its hired gunslinger, Educational Credit Management Corporation, fight nearly every student debtor who attempts to discharge student loans by filing for bankruptcy.

DeVos is also slowing down and complicating the process whereby college borrowers can have their student loans forgiven on the grounds that their college or school defrauded them.

Is the student-loan program in a bubble similar to the housing bubble of 2008? Yes, it is. In fact, when the student-loan bubble bursts, the suffering will be greater than the home-mortgage disaster.

The Democrats are "woke" about this crisis and Senators Warren and Sanders propose massive debt relief.  As I have said in a previous commentary, I am OK with their proposals; but politically that is not likely to happen.

As I have been saying for a quarter-century (yes, really), the best solution to this train wreck is to allow insolvent student-loan debtors to discharge their loans in bankruptcy. The Democrats have introduced legislation to accomplish this, and several Democratic presidential candidates are among the bill's co-sponsors.

But that bill is going nowhere, in spite of the fact that the Democrats hold the House of Representatives.  So we have two political parties that are ignoring the hurricane warnings. The Democrats decry the situation without doing anything about it in Congress, and the Republicans are racing to the center of the storm, oblivious to the human disaster that is building like a tropical depression in the Gulf of Mexico.

This will not end well for anyone.