Take this student loan and shove it: Will student debtors start making payments on their college loans when the government's payment holiday ends?

When we go on vacation, most of us sleep late, basking in the luxury of rising in the morning whenever we wish.

 Then our vacation ends, and we have to set our alarm clock again. And we find it damned difficult to pop out of bed at 6 AM to get to work on time.

 Something like that will happen when the U.S. Department of Education ends its pause on student loan payments. Student debtors enjoyed a grace period on their loan obligations during the COVID pandemic. They could skip their monthly student loan payments without penalty and spend that extra cash on other things—a new car, maybe.

 Millions of student borrowers benefited from this loan-payment holiday, but nobody knows how many will start making monthly payments again when the holiday comes to an end in February.

According to Politico, Education Department officials have instructed loan services to create a "safety net" for borrowers for the first three months after payment obligations begin:

 Borrowers who miss a payment during the initial 90-day period will not take a hit on their credit reports. Those borrowers will instead be automatically placed in a forbearance and be still considered current on their loans.

Student borrowers will appreciate the safety net, but will they start making their monthly loan payments again when the government's loan-payment pause finally ends?

Even before the pandemic, the default rate on student loans was considerably higher than the default rate on credit cards and car loans.

 And this pattern makes sense. Overburdened debtors who stop making car payments lose their cars. If they quit paying on their credit card balances, their cards get canceled.

 But if student-loan debtors stop making payments on their student loans, nothing happens--at least not immediately. 

 I predict that student loan defaults will spike upward this spring. Millions of student-loan debtors got permission to stop making payments in the spring of 2020, and they will find it challenging to start writing those monthly payments again, even when they are legally obligated to do so. 

To paraphrase a great country singer, I think many college debtors will take their cue from Johnny Paycheck and tell the Department of Education to take their student loans and shove 'em.

Vista College chain closes its campuses and files for bankruptcy in Delaware: Bankruptcy relief for me but not for thee

 Vista College, a chain of for-profit college campuses, closed and went bankrupt a few days ago.  Most Vista campuses are in Texas, but the chain filed its bankruptcy proceedings in Delaware.

Who owns Vista College?

 Education  Futures Group (EFG), a Chicago-based private equity firm, holds a majority interest.  Jim Tolbert, Vista's CEO, owns 16.7 percent.  

EFG's website describes Vista College as "one of the most popular and recognized institutions of higher education in the south-central United States."  Yup. Right up there with Rice, Tulane, and SMU.

Apparently, however, not everyone agrees with EFG's self puffery.  A Texas law firm filed a class-action suit against Vista seeking damages on behalf of approximately 3,000 former Vista students.

Will students get any money out of Vista? I kinda doubt it. I'm sure EFG's lawyers know how to structure a bankruptcy action so that none of Vista's owners will miss any meals.

Vista College is the latest in a string of for-profit schools to go belly up in recent years. As far as I'm concerned, the more for-profits that close, the better.

America doesn't really need a for-profit college sector. We already have a surplus of public and non-profit institutions. Vista's headquarters is in Richardson, Texas, a suburb of Dallas. The Dallas metropolitan area has 38 colleges. Vista has a campus in Beaumont, Texas, home of Lamar University. It also has a campus in El Paso, home of the University of Texas at El Paso, and a campus in College Station, home of Texas A & M.

The for-profits built a niche based on the pitch that they offered online courses for working adults, but that line of patter doesn't work anymore. Public institutions have invested heavily in online learning. Students can now get a bachelor's degree, a master's degree, and even a doctoral degree from a public university without ever going on campus. So why would anyone want to enroll at a for-profit college, which will likely cost more than a similar public school?

The for-profits also tout the fact they offer vocational training, which the public universities don't provide. But publicly funded community colleges now offer vocational and technical programs, and community colleges are cheaper than for-profit schools.

Delaware is a friendly venue for corporations, and I feel sure Vista and its owners will zip right through bankruptcy.  And I'm OK with that.

But many of Vista's former students will find themselves with a mountain of student-loan debt and no credential.  Can they file for bankruptcy in Delaware and get the same cozy treatment that bankrupt corporations get?

No, they cannot. Texas students can file an adversary proceeding in a Texas bankruptcy court in an effort to get their federal student loans discharged.

But lawyers for the Department of Education or one of its debt-collection agencies will show up to fight a bankruptcy discharge of student debt.

In other words, the bankruptcy process works better for for-profit colleges than it does for their students. For a for-profit college, bankruptcy is relatively painless. But a for-profit college student will find it virtually impossible to get free of student loans that were taken out to attend a for-profit college--even one that is owned by a private equity firm and goes bust in mid-semester.

Baylor University Loses Its Way: Low-Income Parents Take Out Loans So Their Kids Can Attend a Pricey School

Baylor University, a Baptist institution located in Waco, Texas, is a well-respected school. Over the years, it has risen steadily in the college ratings and now ranks among the top 100 American universities.

But Baylor is expensive--tuition and fees are about $50,000 a year. Low-income students can take out federal loans, but these loans are capped and do not cover the total cost of going to Baylor. 

So--according to the Wall Street Journal--Baylor has encouraged low-income families to take out Parent Plus loans. In fact, almost half the families that take out these loans are poor.

From Baylor's perspective, the Parent Plus program is a money tree. There is no cap on these loans, and Baylor gets its money upfront. If parents can't pay off these loans, that's their problem. 

As the Wall Street Journal revealed, many Baylor parents aren't paying back their Parent Plus loans. Only 28 percent paid down any of their loans after two years in repayment. In 2018 and 2019, Baylor parents collectively owed 74 percent of what they borrowed ten years after beginning repayment.

Baylor says it does not pressure families to take out Parent Plus loans. In a written statement, a Baylor spokesman said, "We have never strong-armed students to [make] a decision for/against Baylor, as we respect the significance of making a college choice." What the hell does that mean?

Linda Livingstone, Baylor's president, admits that Parent Plus loans are a problem. "My heart goes out to families that are in that situation," she said.  "We are working very, very hard to ensure that we don't see that so much going forward."

I'm not knocking Baylor. It's a fine school. But the fact remains that Baylor and many other universities are relying more and more on Parent Plus loans for their revenue. 

These loans bear a relatively high interest rate--6.28 percent, and they can be pretty large. Parents of 2018 and 2019 Baylor graduates borrowed a median amount of $59,000.  The Wall Street Journal reported that a school bus driver took out $57,000 in Parent Plus loans so her daughter could attend Baylor.

Low-income parents jeopardize their own financial security when they take out Parent Plus loans to finance their children's college education.  And Parent Plus loans, like student loans their children take out, are almost impossible to discharge in bankruptcy.

That's not right. Congress should shut down the Parent Plus program. 

Baylor president Linda Livingstone and spouse:
"My heart goes out to families that are in that situation."

No reply: What to do when the corporate office won't respond to your complaint

This happened once before

When I cam to your door

No reply

They said it wasn't you

But I saw you peep through your window

                                                                                                                        The Beatles 

Have you ever tried to resolve a dispute with a corporate entity: a bank, a car rental agency, a credit card company? How did it turn out? Most times--I'm guessing--you just gave up without getting your problem solved.

A couple of years ago, Chase Bank flagged a fraudulent transfer out of my checking account.  Three thousand dollars of my money slipped into the account of a stranger through Chase's Zelle digital payment network.

Chase admitted that the transfer was unauthorized and that I was not at fault. But it refused to return my money. The word came down from on high: Once money is transferred through Zelle, it cannot be recovered.

My wife and I happened to be Chase Private Clients at the time because we had some retirement savings with Chase. Made no difference. 

I emailed the Chase broker, who was supposedly handling my money. He called me on the phone and asked me not to communicate with him by email because it could cause him problems with the SEC.

I made numerous phone calls to Chase representatives, and I spoke to a different person every time I called. No satisfaction.

Then I switched tactics. I made a phone call to the Consumer Financial Protection Bureau. To my surprise, someone answered my phone, took my complaint, and assured me that Chase would be notified that same day.

Then I filed a complaint with the Federal Banking Commission and the Louisiana Banking Commission. I also discovered I could file a lawsuit against Chase in a Louisiana small claims court. The cost? Only $25, and I could file it electronically from my home computer.

I was typing up my lawsuit when a Chase representative from "Corporate" called.  His voice sounded like James Earl Jones--in other words--the voice of God.

"Mr. Fossey," he intoned in a deep, stentorian voice,  "we are going to return your money."

We all know that big, multinational corporations have insulated themselves from their customers. You simply can't get through to someone who has the authority to fix your problem.

Here's what you need to do:

1) Be dignified. Don't curse, yell, or threaten the human-robot you talk with on the phone. 

2) Be patient and persistent and keep records of your communications.

3) File complaints with any federal or state agency with regulatory authority over the corporation that is stonewalling you.

4) As a last resort, sue the offending party in small claims court. 

I haven't actually had to file a small claims suit against a corporate entity. So far, I have gotten my disputes settled through persistence. But I think it can be a handy tool for confronting a recalcitrant corporation.

You can represent yourself in small claims court. You don't need a lawyer. And in Louisiana, you can sue a corporation doing business in the state through the Secretary of State's Office. Your state probably has a similar process for getting service on corporations.

Our soulless corporations get more greedy, more arrogant, and more indifferent to their customers with each passing day. If you get stiffed by one, you should fight back.

"Mr. Fossey, thou shall get thy money back."

 

Storino v. New York University: 1984 comes to NYU

Marc Santonocito, Ashley Storino, and Elnaz Pourasgari--all students at New York University--did some bad, bad things! 

During the summer of 2020, they attended some parties without wearing COVID masks. Oh, the horror! The horror!

All three miscreants enrolled at NYU for the 2020 fall semester, but they were soon charged with engaging in behavior that "endanger[ed] or compromise[d] the health, safety or well-being" of the university community. 

Somehow NYU obtained evidence from social media about the trio's summer activities. A New York court summarized NYU's case against them, and I warn you, it is shocking!

Each [student]was captured in at least one photo on social media depicting them unmasked and in physical contact with other individuals who were also not wearing masks: Santonocito arm in arm with other unmasked individuals, Storino cheek to cheek with other unmasked individuals, and Pourasgari touching the face of another unmasked individual.

After appearing at virtual hearings, all three students were suspended from NYU  for the 2020 fall semester.  They sued, and a New York trial court ordered NYU to re-enroll them. 

In the trial court's opinion, NYU's actions were "arbitrary, capricious, and an abuse of discretion." The trial court ruled that a university cannot impose the harsh penalty of suspension unless it gives them "clear, unambiguous and full pre-conduct notice" that their summer behavior could result in discipline.

NYU appealed, and an appellate court reversed the trial court and upheld the three students' suspension.  The appellate court ruled that the notices NYU gave the students were clear enough to put them on notice that they might be canned if they attended parties in the summer without wearing masks.

I have two problems with the appellate court's opinion:

First, I don't believe students should be suspended from their studies for attending a summer party without wearing a mask.  In my opinion, students should be free from university surveillance when they are on their summer holidays.

Second, I think NYU's penalties were too harsh. 

After all, NYU required all students to submit a negative COVID test as a condition of enrollment for the 2020 fall semester. Thus, NYU surely knew that none of the three students had contracted COVID over the summer. So why kick them out of school?

NYU is one of the most expensive universities in the world. It costs about $80,000 a year to study there. One might think its highly-paid administrators would have a decent respect for their students' privacy--at least during their summer vacations. 

The Storino case reminds me of George Orwell's 1984. In that novel, Big Brother was spying on people 24 hours a day.  Have we come to such a pass in the United States?

I acknowledge that the COVID pandemic is a serious matter. Everyone--including college students--should take precautions to prevent the spread of the coronavirus. 

But universities have a responsibility to treat their students with compassion and to enforce their student-conduct rules with moderation and restraint. In my view, NYU acted arrogantly and heartlessly when it suspended Marc Santonocito, Ashley Storino, and Elnaz Pourasgari.

References

Storino v. New York University, 193 A.D.3d 436 (N.Y. App. Div. 2021).

Millions of Americans are going to die poor: Something to talk about at the Jackson Hole Economic Symposium

 About six months ago, I received a letter from the Social Security Administration informing me that it had miscalculated the amount of my monthly Security check for the past six years. I had been overpaid, the feds said, and it would not send me any more monthly checks until it collected the entire amount the government said I owed.

Meanwhile, a Baton Rouge strip club received a Payroll Protection check for more than a million dollars. And the press reported that more than a thousand Louisiana prisoners received enhanced unemployment checks totaling $6.2 million. 

I will survive the loss of a couple of Social Security checks, but not every elderly pensioner could take the hit.  For me, this incident is just another sign that our government does not care about the elderly.  

The U.S. Department of Education, for example, garnishes the Social Security checks of thousands of elderly student-loan defaulters, driving many of them below the poverty line. Congress could pass a bill to stop this cruel practice, but apparently, it is too busy to address this outrage.

A great many Americans are entering old age with no savings, no pensions, and no assets.  These people will die poor.

And it is going to get worse. Inflation is on the rise, and inflation--it is often observed--is one way the rich rob the poor, including poor people who are elderly.

Jerome Powell and Janet Yellen assure us that the recent uptick in inflation is transitory, but that's bullshit. Our national debt is $29 trillion, and yet the government keeps printing money. The price for just about everything is going up--including food. Five bucks for a loaf of bread?

In one of his plays, Tennessee Williams observed that you can be old or you can be poor, but you can't be both. Unfortunately, that's not true. America is about to see millions of impoverished old people as inflation heats up.  

How much time did the financial fat cats spend talking about poverty at the Jackson Hole Economic Symposium last August?  I would guess not much.  After all, there aren't many poor people in Jackson Hole.

I have a suggestion for next year's economic summit meeting. Instead of holding it in Jackson Hole, book it in Anadarko, Oklahoma--my hometown.  Lot's of poor people there. 

But attendees should book their reservations early. The Budget Inn has only a limited number of rooms, and it would be unseemly for Paul Krugman, Janet Yellen, and Jerome Powell to bunk together.

Anadarko's Miller Theater: A great venue for next year's Economic Symposium

"Only pay for what you need": College students are paying for products or services they don't need

 Perhaps the most inane car insurance commercial ever aired is one by Liberty Mutual: "Only pay for what you need." 

Apparently, Liberty Mutual wants auto drivers to believe that it is the only insurance company that allows customers to buy car insurance tailored to their needs.  But doesn't every insurer do that?

Nevertheless, the slogan makes sense. No one should be forced to purchase services they don't need.  

But college students pay for things they don't want or need every time they pay their tuition bills.  That's a significant reason why tuition has gone up more than the rate of inflation for the past 25 years.

Let's take Louisiana State University, for example. A full-time undergraduate student will pay about $4,000 in tuition to attend LSU this fall. But  LSU also tacks on various required fees that bring the total cost to almost $6000. In other words, LSU's fees represent about a third of a student's total bill. 

LSU's website lists 41 separate fees that the university charges students in addition to tuition. Of course, some of these fees only apply to graduate students.  Law students and veterinary students pay fees that don't apply to undergraduates. And some of the fees are optional.

Nevertheless, required fees amount to a considerable chunk of change. All LSU's full-time undergraduates must pay a "Student Excellence Fee" and an "Academic Excellence Fee" that total $1,500 a semester.

The days are over when college tuition basically covered the cost of academic programs and a modest administrative staff. Today, universities are as large as midsize American cities.  Major universities pay a lot of money for campus police forces, medical facilities, mental health services, diversity officers, and platoons of attorneys who handle everything from sexual assault complaints to intellectual property deals.

And the students are paying for all of this--mostly with federal student loans. Surely there is a better--and cheaper--way for America to run its colleges and universities.