House version of COVID relief bill modifies 90/10 rule for for-profit colleges. Critics say the change may cause some for-profits to close

 The House of Representatives passed a $1.9 trillion relief bill a few days ago, and the legislation is now before the Senate. House Democrats inserted a provision that would modify  an obscure statute that requires for-profit colleges to obtain at least 10 percent of their revenues from non-federal student aid.

The purpose of the 90/10 rule is to require for-profit colleges to obtain at least a small part of their income from non-federal sources. As a recent paper by the Veterans Education Project noted:

The rationale for the [90/10] policy is that a worthwhile educational provider should be able to attract other sources of revenue beyond federal grants and loans, and that students should be willing to put some of their own money toward their education (i.e., “skin in the game”).

 Or as Representative Bobby Scott (D-Virginia) put it, the rule requires for-profit institutions to “show some semblance of attraction to people.”

Under current law, GI Bill benefits--federal student aid for veterans--are not counted as federal student aid under the 90-10 rule. Thus, for-profits can get 90 percent of their revenue from federal student aid and get additional federal money from veterans' benefits without violating the 90/10 rule. 

The House version of the COVID relief bill would change the way the 90/10 rule is calculated by including veterans benefits as federal student aid.  The Wall Street Journal criticized the measure, pointing out the rule change would cause 87 for-profit schools to fall out of compliance with federal regulations and perhaps close.

I disagree with the Wall Street Journal. For-profit colleges have a long and well-documented history of providing overly-expensive, often substandard services to students.  As the Brookings Institute reported recently, for-profit schools enroll only 10 percent of postsecondary students but account for half of all student loan defaults.

Moreover, on average, for-profits are four times more expensive than community colleges, and black and Latino students are overrepresented in this low-performing education sector. Indeed, some research suggests that a for-profit college education may be no better than no college education at all. 

Tightening the 90/10 rule is a modest reform. All it will do is require for-profits to find more non-federal operating funds than they are required to have now.  

If the Senate includes the modified rule in its version of the COVID legislation, some for-profits may indeed close. We should not mourn their loss.

Rep. Bobby Scott (D. Virginia)

Politicians want $50,000 in student-debt relief: A good idea?

 Top Democrats, led by Senators Chuck Schumer and Elizabeth Warren, are calling on President Joe Biden to forgive student-loan debt up to $50,000 per person. 

According to the plan's proponents, $50,000 in debt relief would wipe out all college-loan debt for 36 million Americans. That would be an impressive achievement.

Moreover, forgiving $50,000 in student debt would particularly benefit women and people of color, who take on more debt on average than men and non-minority students. Under one interpretation of the proposal, parents who took out Parent Plus loans might also get relief.

Without a doubt,  student-loan forgiveness on this scale would be expensive. The federal government would be writing off  $1 trillion in student debt. But, as then Education Secretary Betsy Devos admitted more than two years ago, only one out of four federal-loan borrowers are "paying down both principal and interest" on the loans.  Writing all this debt off in one fell swoop would merely recognize reality.

Some policy experts argue that writing off all student debt--about $1.7 trillion--would be good for the American economy. In a 2018 report, researchers at the Levy Economics Institute of Bard College wrote that wholesale student-loan forgiveness would boost the Gross National Product by $86 billion to $108 billion a year over ten years. Released from their student loans, millions of Americans would see an immediate increase in their disposable income, permitting them to buy homes, save for retirement, purchase consumer goods, and start families.

So what's my take on the Schumer-Warren proposal? I think any action that gives meaningful relief to millions of struggling college borrowers is a good thing.  So if the choice is between the Schumer-Warren plan and no plan, I support the Schumer-Warren initiative.

But wiping $1 trillion of student debt off the government's books is no panacea for the student-loan crisis. 

First, there is the issue of fundamental fairness. Millions of Americans made enormous sacrifices to get through college with no debt--often working at part-time jobs to make ends meet. Millions more lived frugally in the years after graduation to pay off their student loans.

Somehow it seems unjust to reward people that borrowed to attend college when so many people worked extra hard to avoid debt or to pay it off quickly.

Second, for our government to wipe out a trillion dollars in college loans is an implicit admission that the college experience is not worth what the universities are charging. President Biden should not forgive a trillion dollars in student debt without insisting that the universities reform their operations.

What reforms are most urgent. In my view, colleges should stop grinding out expensive and often worthless graduate degrees. When Congress passed the GRAD Plus Act, it allowed people to borrow the entire cost of graduated education, no matter what the price.  As we might have expected, universities raised the price of their graduate degrees. They ginned out new programs: MBAs, Master's degrees in public administration, graduate degrees in gender and ethnic studies, and so on.

Second, we need to close down the Parent PLUS program, which has driven millions of moms and pops to the verge of poverty by taking out loans for their children's education that they can't discharge in bankruptcy.

In my view, it would be wiser to loosen the restrictions on bankruptcy relief for overburdened student debtors. People who took out student loans and obtained good jobs with their college degrees should pay back their loans. People whose lives were ruined by student debt could get a fresh start in the bankruptcy courts.

Surely all Americans can agree that postsecondary education should improve the quality of people's lives. College degrees that leave people with no job and massive student debt should not be subsidized by the federal government.

Let's forgive $1 trillion in student debt: The rubes will love us for it!

The real estate bubble: Think of your home as a shelter, not an investment

 Real estate in my little corner of Flyover Country is "on a hot streak." In Baton Rouge, housing sales rose 12 percent last year, and prices shot up by 7 percent. 

Everywhere, Baton Rouge builders are scrambling to meet the demand for new houses, new condos, new apartments.  Thousands of apartment buildings are under construction in the Mississippi River floodplain, where land is relatively cheap; and new subdivisions of starter homes are springing up like dandelions.

Everyone is jumping into the housing market. And why not? Interest rates on a 30-year loan are below 3 percent! You'd be crazy not to buy a new home or snap up some rental housing as an investment.

But wait a minute. Louisiana actually lost population last year. So who is going to buy the new starter homes down by the River levee? Who is going to rent all those new apartments?

And when we take a closer look at the real estate boom in my hometown, it begins to look a little less rosy. In the zip codes that border the Mississippi River, home prices actually went down. 

If we take a deep breath and search for reality, we see that real estate across the U.S. is in a bubble--very much like the bubble that led to the home-mortgage crisis in 2008-2009.  Artificially low interest rates have juiced home sales in some parts of the country, but real estate languishes in the nation's urban centers.

Houston, for example, has a magnificent skyline, but a lot of skyscrapers have empty space. Houston's office-vacancy rate was 24 percent last year. According to Bloomberg, business tenants vacated a net 3.2 million square feet of Houston properties in 2020. Meanwhile, 3.1 million square feet of "new top-tier space [is] set to be completed over the next 18 months."

Downtown Houston has thousands of townhomes and condominiums occupied by people who work in Houston's office towers. But people are working at home these days. Many businesses have concluded that they don't need to cram their employees into skyscrapers.  Folks can work from home.

And if you work from home, you don't need to live in a crowded city. You don't need to pay sky-high property taxes. You don't need to send your kids to crummy schools.  Suddenly, the suburbs are looking better and better.  Maybe it wouldn't be so bad living next door to Ozzie and Harriet.

Housing prices are up because interest rates are at a historic low. But interest rates won't remain low forever. Builders are constructing cookie-cutter housing projects at a dizzying pace, but it is not clear who will live in these new homes.

Now is not the time to speculate in real estate.  Now is a good time to stop thinking of your home as an investment and begin thinking about it as shelter for your family. 

Ozzie and Harriet's home: Did Ricky mow the lawn?

What will happen to you if you take out student loans to get a liberal arts degree and can't find a job?

 Late last year, the University of Vermont announced it will shut down two dozen academic programs with low enrollment. 

Geology, religion, and Asian studies are on the chopping block, along with several language programs--Greek, Latin, and German.  At least three departments will close: Religion, Classics, and Geology. Some minors are being eliminated--Theatre and Vermont Studies.

All across the country, universities are shrinking or closing their liberal arts programs because fewer students major in those disciplines. Young people sense they are in a bleak job market, and many are shifting to more vocation-directed academic majors.

Indeed, Jeffrey Selingo and Matt Sigelman, writing in the Wall Street Journal, report that entry-level college graduate jobs have fallen 45 percent in recent years.  Many graduates will be forced into "lifeboat jobs," where they will be underemployed both in terms of salary and vocational development. 

"[T]hose who graduate into underemployment are five times more likely to remain stuck in mismatched jobs after five years compared with those who start in a college-level job," Selingo and Sigelman warn.

Should students stop majoring in the liberal arts? Not necessarily, Selingo and Siegelman argue. Instead, they give this advice:

None of this requires abandoning the liberal arts or social sciences; it's just a matter of ensuring that students also acquire marketable skills. English departments don't need to teach computer programming, but they should show students how to develop writing and critical thinking skills in ways that resonate with employers. And they should help students to acquire more technical skills, whether on campus, through internships or through the growing array of online  options.

With all due respect to Mr. Selingo and Mr. Sigelman, I am deeply skeptical of the proposition that liberal arts departments can make their academic programs more vocationally driven. 

Does anyone think a medieval-history professor will adjust his teaching style to help students acquire more technical skills?  I doubt it.

And how will sociology, political science, and religion departments develop internship programs that help students find jobs after graduation? I don't see it happening.

It is no good to say liberal arts departments can adjust their academic programs to make them more job-relevant. Students won't buy that line.  They know that a degree in liberal arts probably won't lead to a good job. That's why more and more of them are majoring in business.

Brutally put, it is madness for young people to take out six-figure student loans to get degrees in history, religion, political science, ethnic studies, or sociology.  In today's economy, an individual who takes out student loans to earn a bachelor's degree must immediately find a good job.  

What will happen to you if you borrow $100,000 to get a humanities degree and can't find employment? You will be forced to apply for an economic hardship deferment to get short-term relief from making your monthly loan payments.

But while you are skipping those payments, interest is accruing on your student loans. That interest gets capitalized so that your loan balance increases.

At some point, your student loan debt will become unmanageable, and then your only option will be to sign up for an income-based repayment plan that stretches out your loan obligations for a quarter of a century.  

And that will give you plenty of time to ruminate about the stupid decision you made when you were 18 years old to major in sociology with a minor in Vermont Studies.

Will this guy teach you critical thinking skills?

Young v. Grand Canyon University: Eleventh Circuit rules doctoral student is not compelled to arbitrate his claim against a for-profit university

 Donrich Young enrolled in a doctoral program at Grand Canyon University based on his understanding that he could finish the program by taking 60 credit hours. However, he didn't complete his degree in 60 hours and was forced to pay for three additional research-continuation courses.

Young sued Grand Canyon for breach of contract, intentional misrepresentation, and violations of the Arizona Consumer Fraud Act. But Young had signed an arbitration agreement that forced him to arbitrate his claims rather than file a lawsuit.

An Obama-era federal regulation prohibited for-profit colleges from requiring their students to arbitrate their disputes. Grand Canyon argued for a tortured interpretation of this rule, and it convinced a federal judge to buy it.  Thus, the court dismissed Young's lawsuit and required him to arbitrate his beef with Grand Canyon.

On appeal, however, the Eleventh Circuit reversed. It began by stating that the regulation was "poorly written." Nevertheless, in the appellate court's view, the regulatory language clearly prohibited Grand Canyon from forcing Young to arbitrate his breach-of-contract and misrepresentation claims.

Indeed, in the Eleventh Circuit's view, "common sense" confirmed that Young's interpretation of the regulation was correct.

We need not dwell on the Eleventh Circuit's analysis of regulatory language. The critical point is this: Obama-era regulations prohibited for-profit schools from enforcing arbitration clauses that bar students from suing for breach-of-contract or misrepresentation.

Unfortunately, Education Secretary Betsy DeVos rolled back the Obama rules to allow for-profit schools to force their students to sign arbitration agreements. As David Halperin wrote last July:

Predatory schools love forced arbitration — a secret proceeding with a paid corporate rent-a-judge — and class action bans, because those things make it harder for a ripped off student to obtain a lawyer, afford a legal process, get justice before an impartial decision-maker, and create precedents and expose information that could help future students.

It will be interesting to see whether President Biden will reinstate the ban on arbitration clauses that the Obama administration commendably instituted.  Let us hope so because mandatory arbitration has been the chief way that unscrupulous for-profit colleges have protected themselves from being sued by their students for fraud and misrepresentation.

References

David Halperin. 

For-Profit Colleges Race To Block Students From Suing Them. Republic Report, Jul 20, 2020.  https://www.republicreport.org/2020/for-profit-colleges-race-to-block-students-from-suing-them/.

Young v. Grand Canyon University, 980 F.3d 814 (11th Cir. 2020).

When did university book stores become T-shirt shops?

 I live about a mile from the Barne & Noble bookstore, the official bookstore for Louisiana State University. Yesterday, I walked over for a cup of hot chocolate at the bookstore's Starbucks coffee shop.

While the barista was constructing my cocoa (a laborious business), I contemplated the murals above the counter. Overhead, I saw some of the great English-language authors: Faulkner, Hardy, Joyce, Kipling, Melville, Nabakov, Shaw, Whitman, and others. 

I found myself wondering whether Barnes & Noble sold any books by the authors who are celebrated at Starbucks.  It is a college bookstore, after all.

So I went upstairs to the store's tiny "fiction and literature" section and looked for works by these famous writers.  Most of them I couldn't find: no Kipling, no Nabakov, no Whitman. 

I did see some comic books, however, in a section titled "graphic novels."  And I saw a hell of a lot of  $20 LSU T-shirts, $70 LSU sweatshirts, and hundreds of LSU ballcaps, selling for $25 a pop.

I also saw $9 LSU wine glasses and $27 LSU waterbottles. And I saw a pile of stuffed animals depicting Mike, the LSU tiger mascot.

In fact, as I scanned both floors of LSU's bookstore, I realized that Barnes & Noble's campus address isn't a bookstore at all; it's a T-shirt shop.  Yes, it sells some textbooks in an obscure corner, but most of the space is dedicated to overpriced souvenirs. 

I am not saying LSU students should be reading the authors who are memorialized at the Starbooks coffee shop.  I've read some Faulkner, some George Bernard Shaw, some of Henry James's excruciatingly dull novels. In my opinion, students can skip all that.

But I find it unsettling to see LSU students swiping their credit cards to buy exorbitantly priced junk and $5 lattes. Why? Because I know many of these students are purchasing that stuff with their student-loan money. 

If these students graduate and can't find good jobs--and many of them won't--what will be their best option? For millions, it will be to sign up for a 25-year income-based repayment plan. That's a high price to pay for an LSU T-shirt.

Preparing for an academic career? Better have Plan B in your back pocket

As reported by the Star Tribune a couple of weeks ago, the University of Minnesota will not accept new students into many of its liberal arts programs in the fall of 2021.

The university is stopping admission in twelve programs, including history, political science, theater arts, and gender studies. New enrollments will be limited in 15 other programs.  No program outside the university's college of liberal arts will be affected.

Universities across the nation are making similar decisions--cutting or reducing programs in languishing liberal arts disciplines.

Interest in the traditional fields of liberal arts has been declining for decades, and job opportunities in these disciplines have dwindled.

I recall sitting in Professor William Stott's graduate-level American Studies class at the University of Texas more than 30 years ago. Professor Stott handed out the vitae of about a dozen candidates for a history professor's job at UT. Every applicant had a Ph.D. from an Ivy League school: Harvard, Yale, Brown, etc.

Dr. Stott didn't have to say anything to make his point. How can you compete with a Harvard Ph.D. holder for a professor's position with your doctorate from a less prestigious public university?

I took the hint and went to law school. And I have never been sorry.

Without question, there will be fewer faculty positions for liberal arts professors in the years to come.  Many of these positions are in second- and third-tier liberal arts colleges that are experiencing enrollment declines--especially those located in the Northeast and the Mid-Atlantic states.  

If you take out student loans to get a Ph.D. in history or political science, you will find yourself in serious trouble if you can't find a position in your chosen field.

You may think a Ph.D. will get you an excellent job of some kind, even if you can't find one in academia. But you may be wrong. Employers may be reluctant to hire an employee with a doctorate in medieval history, thinking that such a person is overqualified or will be unhappy working in a mundane bureaucratic job.

Paul Campos, writing about the job market for lawyers in his brilliant little book Don't Go to Law School (Unless), advised law students with mediocre grades at bottom-tier law schools to consider cutting their losses dropping out before graduating:

 [G]iven the state of the legal market, most people at most law schools who find themselves in the bottom half of their class after the first year would be better off dropping out.

As bad as it would be to have student loans and no degree, he pointed out, it might be worse to take out more loans to get a J.D. and then be unable to find a job.

These are volatile and unstable times for American higher education--especially graduate education. Don't be lured into an expensive master's program or doctoral program with a vague sense that another university degree will somehow improve your job prospects.

You could be wrong--terribly wrong. And if you wind up with a graduate degree, no job, and six-figure student-loan debt, you will have doomed your financial future and perhaps the future of your family. 

A cushy professor's job: You probably won't get one.