Unnecessary roughness: Witholding transcripts, diplomas, and professional licences from students with unpaid bills

Last week, Louisiana legislators passed a bill out of the House Education Committee that would bar colleges from withholding diplomas, transcripts, and grades because of student debt. Representative Julie Emerson from the little town of Carencro sponsored the measure. 

Jim Henderson, President of the University of Louisiana System, praised the bill. "We have a number of more effective tools that we can utilize on student debt," President Henderson said at the legislative hearing on Emerson's bill. In fact, he said, denying grades and transcripts is akin to putting students in a "debtors prison."

Most of Louisiana's private colleges are in New Orleans, and Rep. Aimee Freeman, a New Orleans legislator, managed to exclude private schools from the bill, even though no one from a private college showed up to oppose the measure. "With [private college officials] not here," Freeman said defensively, "I am feeling that I have to offer the amendment."

The practice of withholding grades and diplomas from people who owe their colleges money is only one of many punitive measures against cash-strapped college students. The New York Times carried a story in 2017 about state laws that allow agencies to seize professional licenses from student-loan defaulters. According to Times reporters, 19 states have laws on the books that allow for the revocation or suspension of professional licenses, including the credentials of nurses, teachers, firefighters, attorneys, massage therapists, barbers, psychologists, and real estate brokers.

Senators Elizabeth Warren and Marco Rubio filed a bipartisan bill in 2018 that would prevent states from withholding driver's licenses and professional licenses over unpaid federal loans. The Times quoted Senator Rubio as saying, "It makes no sense to revoke a professional license from someone who is trying to pay their student loans." And Senator Warren called these policies "wrong and counterproductive."

I say Hurray to Representative Julie Emerson of Louisiana and Senators Rubio and Warren for trying to mitigate the harsh and iniquitous treatment of student-loan debtors.  And hurray to UL System President Jim Henderson, who articulated the voice of reason and compassion on behalf of Louisiana college students.

Representative Julie Emerson: Louisiana legislator

Income-Based Repayment Plans for Student Debtors: Flushing Money Down the Toilet

Congress has been dropping "helicopter money" into the national economy--adding significantly to the national debt, which now exceeds $25 trillion.

That's a lot of money for our grandchildren to pay back. My own grandkids are ambivalent about this situation. My four-year-old says he thinks he can do it if his dad will increase his allowance, but my six-year-old doesn't think it's fair for him to pay for his ancestors' wars in the Middle East.

Now let's look at another economic crisis our grandchildren will pay for--the federal student-loan program.

According to the U.S. Department of Education's own numbers, approximately 43 million Americans have student-loan debt totaling $1.5 trillion.  And, if DOE can read its own balance sheet, it will see that it has basically given up on collecting about a third of that debt.

As of the first quarter of this year, 8.1 million student borrowers are in income-driven repayment plans (IDRs). By the very terms of those plans, these borrowers make loan payments based on their income, not the amount they borrowed. Under most of these plans, borrowers at similar income levels make the same sized monthly loan payments regardless of whether they owe $20,000, $50,000, or $100,000.

Virtually everybody in an IDR is making payments so low that the underlying debt grows larger due to accrued interest--interest that is capitalized.  In other words, virtually no one in an IDR is going to pay off his or her student loans.

How much money are we talking about? DOE's recent report tells us that a half-trillion dollars ($507 billion) are owed by people in IDRs.  In fact, 400,000 people in IDRs owe $200,000 or more.  And--inexplicably--300,000 student debtors are in IDRs who owe less than $5,000.

As Education Secretary DeVos publicly acknowledged in late 2018, the federal government carries student-loan debt on its books as performing loans, which a commercial bank could not do. In fact, she made the astonishing admission that outstanding student loans make up 30 percent of all federal assets!

But in fact, at least 8.1 million student loans are not performing. On the contrary, the IDR programs were designed in such a way that borrowers never pay them back.  

Education Secretary Betsy DeVos announced last year that she was hiring McKinsey & Company, a private consulting firm, to determine just how big the student-debt debacle really is.  So far, she has released no report.

But we don't need a high-priced consulting firm to tell us what is going on. The student-loan program is bankrupt. And while Betsy DeVos sails along on her private yacht, DOE lawyers are hounding desperate student-loan borrowers through the bankruptcy courts, demanding that they be put into IDRs. Those IDR plans can last for as long as a quarter of a century, and virtually no one in such a plan will ever pay off their student-loan debt.

References

Ferguson, Adam. When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany. New York: Public Affairs Publishing (2010) (originally published in 1975).

Betsy DeVos sued for seizing student borrowers' paychecks in violation of the CARES Act: "We don't care. We don't have to."

Betsy DeVos, President Trump's Education Secretary, doesn't just think she's above the law. She IS above the law.

A few days ago, the National Consumer Law Center filed a class-action suit against Betsy DeVos and the U.S. Department of Education asking a federal judge to stop DeVos and DOE from garnishing student borrowers' paycheck in violation of the CARES Act.

Congress passed the CARES Act, you may recall, in response to the coronavirus pandemic, and the law explicitly put a temporary moratorium on collection efforts against student debtors who are in default.

According to the NCLC, the Department of Education, either directly or indirectly, kept on garnishing paychecks in defiance of federal law.  Elizabeth Barber, the lead plaintiff, makes $12.89 per hour working as a home health care aide. She says DOE garnished her paycheck, even though the CARES Act gave her a six-month reprieve from making student-loan payments.

This isn't the first time DeVos and her DOE cowboys have been accused of ignoring the law. Just last fall, Judge Sallie Kim held DeVos and the Department of Education in contempt for failing to stop collection efforts against student borrowers who had attended one of the Corinthian Colleges.  Judge Kim had enjoined DOE from trying to collect from those students, but the agency did not abide by her order. Judge Kim fined DOE $100,000 for its wrongful collection efforts.

DeVos reminds me of Ernestine, Lily Thomlin's telephone-operator character in those Saturday Night Life sketches from the 1970s.  When people complained about their telephone service, Ernestine's response was, "We don't care. We don't have to. We're the phone company."

Betsy DeVos apparently doesn't care about downtrodden student-loan debtors. When participants in the Public Service Loan Forgiveness Program applied for student-debt relief, her agency denied 99 percent of the applications.

And now, NCLC says, DeVos and DOE have violated the CARES Act, continuing to collect on student-loan defaulters in open violation of a law that Congress passed less than two months ago.

I don't get it. DeVos is either astonishingly incompetent, or she just doesn't give a damn.

We don't care. We don't have to. We're the Department of Education.

Angry students sue more than 50 colleges after instruction goes on line in response to the coronavirus

A bunch of black swans showed up this spring, and they landed on top of every college administration building in America.

Last March, virtually every postsecondary institution shut down in response to the coronavirus pandemic. Students who lived in campus dorms were told to scram.  Face-to-face instruction screeched to a halt, and the colleges began teaching their students online. The departing students lost access to professors, libraries, and college recreational facilities.

Most universities refunded dorm fees and student meal plans on a  proportional basis. But the universities didn't refund tuition, arguing that students are still getting fair value because their classes are continuing online.

The students aren't buying it. So far, students have sued more than 50 colleges demanding to get their tuition money back. Online instruction is inferior to interacting with professors in a real classroom, they maintain. And of course, they are right.

The colleges respond, with some justification, that they did not anticipate the coronavirus pandemic and are doing the best they can under the circumstances.   "Faculty and staff are literally working around the clock," Peter McDonough, a lawyer for a college trade group, argued defensively.

I sympathize with the colleges, but I can say with authority that professors don't work around the clock on anything.  If they claim to be working 24/7, they mean they're working 24 hours in a seven-day week.

And if the universities claim their distance-learning format is equal to face-to-face teaching, they are not telling the truth.  A few professors are tech-savvy and can quickly shift to online education, but a lot of them can't.

In any event, America's elite private schools have justified their nosebleed tuition by professing to offer small class sizes and ample opportunities to personally interact with their professors.  They can't credibly change their story now and claim that their online instruction justifies tuition at $50,000 a year.

Regardless of whether colleges win these lawsuits, they will be severely stressed financially in the coming months. One study predicts that four-year colleges could lose up to 20 percent of their fall enrollment. Any small private school that loses 20 percent of its students this fall will be closed by May.

If you are a professor who works at a small private college, it is time to formulate a Plan B. What will you do if your school shuts down and you are thrown out of work?

And if you are a student who plans to enroll at a small, private school this fall, you too need a Plan B. You need to find out what your institution's financial situation is. You do not want to take out student loans to pay tuition to attend a college that may close before you graduate.

The black swan: Coming soon to a campus near you

Rodger Love v. U.S. Department of Education: Betsy DeVos wears no clothes (metaphorically speaking)

According to Urban Dictionary, "The Emperor Wears No Clothes," is a phrase "often used in political or social contexts for any obvious truth denied by the majority despite the evidence of their eyes, especially when proclaimed by the government."

This metaphor came to mind as I read the adversary complaint filed in Love v. U.S. Department of Education.  Rodger Love is asking a Kansas bankruptcy court to discharge his student loans--both federal and private.

As Mr. Love said in his complaint, he "has no hope of paying back the loans, and they have created a noose around [his] neck for the remainder of his economically productive years."

Mr. Love is clearly right. He is 47 years old. Although he is employed full-time, he "does not anticipate receiving substantial raises or promotions in the future." Nevertheless, Love is saddled with $167,000 in student loan debt, apparently to study at Washburn University, where he did not obtain a degree.

He now owes far more than he actually borrowed.  Love took out $29,000 in federal loans and $68,000 in private loans--totally just $97,000. The balance of his debt--about $70,000--is mostly accumulated interest.

Indubitably, Betsy DeVos's Department of Education will oppose a student-loan discharge for Mr. Love. DOE will probably argue that Mr. Love has not done enough to maximize his income--no matter what he has done to improve his financial circumstances. 

If Mr. Love eats a hamburger at McDonald's twice a month, DOE will say he hasn't been frugal.  And no matter what the court records reveal, DOE will almost certainly argue that Mr. Love has not handled his student loans in good faith.

But that will be government bullshit, already packaged in DOE lawyers' canned legal briefs.

I'll bet you dollars to donuts that DOE will tell the bankruptcy judge that Mr. Love should sign up for a 25-year repayment plan.  But, as he pointed out in his complaint, he will be 72 years old before he finishes a 25-year plan.  And since the payments won't cover accruing interest, he will owe more than he owes right now when the plan terminates in 2045.  And whatever amount is forgiven will be taxable to him as earned income.

That's nuts. Why does DOE continue, year after year, to oppose bankruptcy relief for student-loan debtors who are clearly at the end of their rope?

One reason.  DOE forces desperate debtors into long-term repayment plans so it can pretend that mountains of student debt are loans in good standing. But that is not true. Billions of dollars in outstanding student loans is not collectable.

If Education Secretary Betsy Devos believes DOE's opposition to student-loan bankruptcy helps maintain the solvency of the federal student loan program, she is the emperor who wears no clothes.  That stance defies the naked truth, which is this: Forty-five million Americans have outstanding student loans, and at least half of it will never be paid back.

References

Love v. U.S. Department of Education, Case No. 13-41680 (Bankr. D. Kan. Jan. 28, 2020) (complaint).

Hey, Betsy--put some clothes on!

Hyperinflation is coming to the United States: You're not going to like it

In olden times, middle-class people had checking accounts; and they kept close track of their account balances. No one wanted to inadvertently write a "hot" check that would "bounce" back to them. Oh, the shame! The embarrassment!

Those days are gone. Today, many Americans don't pay much attention to their checking account balances. If they don't have money in their account to buy a suitcase of Miller Lite, they just put their purchase on a credit card.

That's basically what our government is doing. The national debt tripled between 2008 and 2019 and reached about $20 trillion when Trump came into office.

By the third year of Trump's term in office, the national debt had risen to $22 trillion. Last summer, Congress passed a two-year deficit budget at a time when America had a booming economy with historically low unemployment.

Then came the coronavirus pandemic, and our government whipped up more than $2 trillion to deal with that. State and local governments are running massive deficits because tax revenues are down, and the Democrats want to dole out another $1 trillion to send to the states.

So that brings the national debt to what--$24 trillion? Folks, we can never pay back this money, and no one believes we can.

If the federal government can't pay its debts—and it can't—it only has two choices: It can default on its obligations or inflate the money supply.  It will choose inflation, and the consequences won't be pretty.

Inflation, the wise economists tell us, is a way for the rich to steal from the poor. When hyperinflation starts, the people who will be hurt are the elderly living on fixed incomes and young people whose wages won't be enough to pay for the inflated price of necessities like food and rent.

Germany suffered hyperinflation in the 1920s as it struggled to pay war reparations to the Allied powers after World War I.  The German government responded to this onerous burden by printing more money. This triggered hyperinflation that soon drove the value of the German mark to virtually zero. The mark became worth so little that people had to carry baskets of paper currency to pay for their daily needs.

Historians tell us that this period of hyperinflation destroyed the German economy, causing massive hardship for the German people, whose lives devolved into a day-to-day struggle for food. The anger and bitterness that resulted laid the groundwork for Nazism.

Adam Ferguson wrote a book about Germany's inflationary period titled When Money Dies. Ferguson warns us about the existential danger of hyperinflation. "The question to be asked," Ferguson wrote, "is how inflation, however caused, affects a nation: its government, its people, its officials, and its society."

If the experience of Germany is anything to go by, Ferguson cautioned, "then the collapse of a national currency unleashes such greed, violence, unhappiness, and hatred, largely bred from fear, as no society can survive uncrippled and unchanged." In Germany, racial passions were unleashed, and nihilistic sexuality prevailed in 1920s Berlin.

Already, our national politicians make hysterical and groundless charges of racism against their political opponents. State and local governments refuse to abide by federal immigration law even as they demand more federal money to prop up their sagging budgets.  Our elite intellectuals have cast off almost all sexual norms and obsess on transgender bathrooms.

Is contemporary America exactly like Germany in the 1920s? Of course not. But like 1920s Germany, our government is running up debt that it can't repay. Will this lead to a 21^st century Hitler?  Probably not, but our future is definitely going to be unpleasant.

Massive student-loan forgiveness is now a mainstream idea: Even Al Jazeera is on board

Around 45 million Americans owe a total of $1.6 trillion in student loans, and approximately 20 million of those debtors are not paying them back.  Betsy DeVos, President Trump's Education Secretary, admitted more than a year ago that only one out of four student borrowers was paying down principal and interest on their federal loans. "In the commercial world," DeVos observed, "no bank regulator would allow this portfolio to be valued at full, face value."  

So why not just forgive all this festering debt--debt that is preventing struggling Americans from buying homes, having children, or saving for their retirement?

That notion is now a mainstream idea in American politics. Senator Bernie Sanders got the ball rolling when he called for wiping out all this debt.  Senator Elizabeth Warren proposed something slightly less radical--forgiving student debt up to $50,000.  And Joe Biden, the Democrats' presumptive nominee for the Presidency, wants to forgive all debt owed by individuals who attended a public university or a historically black college (HBCU).

Even Al Jazeera, an Arabic-focused news organization, based in Qatar, wants to forgive all federal student loan debt.  America is experiencing its worst economic crisis since the 1930s, Al Jazeera reporters pointed out, and the U.S. needs to prioritize relief  for "people, not profit." Al Jazeera calls for canceling all student loan debt, which would "help those hit hard by the coronavirus pandemic to "rebuild their futures."

Writing off all federal student debt is not a crazy idea, especially, as I just said, a bunch of it isn't being paid back anyway. But does Congress have the political will to do it? I don't think so.

After all, the straightforward solution to this crisis would be to simply allow overwhelmed debtors to discharge their student loans in bankruptcy. Bills have been introduced in Congress that would accomplish just that, but those bills have gotten nowhere. 

I've said this before, and I will repeat it. Congress should allow insolvent Americans to file for bankruptcy and discharge their student loans like any other consumer debt: credit cards, car loans, and business obligations. 

And all Congress needs to do to accomplish this sweeping reform is to remove two words from the U.S. Bankruptcy Code: "undue hardship." It is the "undue hardship" language, after all, that the federal courts have interpreted so harshly, and which has denied bankruptcy relief to millions of honest student-loan debtors.

Of course, if Congress abolished the "undue hardship" standard, it would need to appoint a lot more bankruptcy judges to deal with a torrent of bankruptcy filings. And the judges would need to make sure that people who have the financial wherewithal to repay their loans don't fraudulently apply for bankruptcy relief.

In my view, calls to wipe out all student debt are irresponsible because politicians know this is never going to happen. Bankruptcy reform provides an orderly and fair way to give unfortunate student debtors a fresh start while guarding against fraud.