Do you owe a half million dollars in student loan debt? Maybe you won't have to pay it all back

 Get Out of Debt Guy, an online debt counseling site operated by Steve Rhode, recently received a request for advice from Rose, a graduate of St. George University Medical School. Rose now owes more than half a million dollars in student loans.

Rose said the quality of her education was fine but that the medical school misrepresented the cost. School officials told her she could do clinical rotations in her home state of Connecticut. In fact, she was required to do them in five different states, which substantially increased the cost of her studies.

Steve gave Rose some good advice. First, he advised her to file a Borrower Defense to Repayment application with the Department of Education (DOE). If the Department concludes she was a victim of misrepresentation, Rose might get some or all of her federal student loans forgiven. 

Rose's student debt history is somewhat complicated. She has three loans through Navient, two Stafford loans, and one private loan. Steve advised her to obtain the services of a knowledgeable student-debt attorney who could create a comprehensive solution for all her debt. 

Rose's chances of getting debt relief through a borrower defense application are much better under the Biden administration than the previous presidential administration. 

Betsy DeVos, President Trump's Education Secretary, was highly hostile to borrower defense claims. In contrast, Biden's Department of Education (DOE)has forgiven $6 billion in student debt owed by 200,000 borrowers who filed fraud or misrepresentation claims against their schools.  Indeed,  as Steve pointed out, DOE sent Roses' medical school a Notice of Penalty Offenses about a year ago. 

Rose might have another option for getting her student debt under control.  DOE is preparing a new income-based repayment plan (IBRP). If enacted, student borrowers could pay as little as 5 percent of their discretionary income--without regard to how much they borrowed. Moreover, the threshold for determining discretionary income will be 225 percent of the borrower's poverty-level income--up from 150 percent under current IBRPs.

Adam Looney, writing for the Brookings Institution, explained the new IBRP and its impact on borrowers with high levels of graduate-school debt.

[I]ncreases in the generosity of [new] IDR parameters primarily benefit higher-income borrowers with high debt levels. Per CBO estimates, reducing the percentage of income borrowers pay (e.g. from 10% to 5%) and increasing the threshold that defines discretionary income (e.g. from 150% to 225% of poverty) benefits graduate borrowers three times as much as it benefits undergraduate borrowers.

If the Biden administration's munificent new IBRP is enacted, many student debtors will repay only about 50 percent of what they borrowed.

That will be a hell of a deal for people like Rose, who borrowed heavily to fund their graduate studies. 

For taxpayers, however, the deal is not so good. They will wind up subsidizing people who racked up enormous debt to get a graduate education.

St. George Medical School: Kinda pricey

Always Leave a Rat a Way Out: An Old Guy's Misgivings About the War in Ukraine

 When I was a young man practicing law in Alaska, my senior partner gave me some advice I never forgot. Several times during my legal career, I had an opportunity to completely devastate a nefarious party that had pressed a frivolous claim against one of my clients.

"I've got you now," I told myself as I made plans not only to defeat my opponent but to humiliate and destroy him. In these cases, my senior partner always cautioned prudence and restraint. "Richard," he would say, "always leave a rat a way out."

And he was right. I learned that a party pressed to the wall almost always lashes out viciously and behaves recklessly to the detriment of everyone--good guys and bad guys alike.

So far, President Putin's war against Ukraine has not gone well for the Russians. To almost everyone's surprise, Ukraine has beaten back the Russian invasion, inflicting heavy casualties. The Ukrainians have destroyed countless Russian tanks, airplanes, and even the flagship of Russia's Black Sea fleet.  The Ukrainians have been so exhilarated by their battlefield successes that President Zelensky promises to evict the Russians from Crimea, where they have been since 2014 (and centuries before that).

What fun! In America, the elite media crows with delight. How delicious to rub Mr. Putin's face in the mud.  

We should remember, however, what George Orwell said about war. "One of the most horrible features of war," he observed, "is that all the war propaganda, all the screaming and lies and hatred, come invariable from people who are not fighting."

With a few rare exceptions, the reporters who work at the New York Times, Washington Post, and CNBC are not being shot at. If the Ukraine war escalates, their children won't be drafted. Their paychecks, restaurants, and expense accounts won't be affected. The beaches of Martha's Vinyard and the Hamptons will be pristine and peaceful no matter what happens to the Russians and the Ukrainians.

We should remember, however, that Russia is a nuclear power. We may sneer at Putin's threats to unleash tactical nuclear weapons. We may comfort ourselves that Russia is merely a regional power, unlike the mighty United States, which is supposedly the most powerful military power in the world.

Nevertheless, we should always leave a rat a way out. 

Our diplomats and political leaders may consider Ukraine an American playground that can be manipulated like a child's toy. Perhaps they have not read about Stalin's Holodomor or the savagery of the Russians and the Germans in the blood lands of Ukraine and Belarus during the Second World War.

Of course, I'm some old guy living in Flyover Country. What do I know compared to the policymakers and political strategists who got their degrees from Harvard, Yale, and Georgetown?

However, I've done a little reading, and I recall that Hitler woefully underestimated the Russians when he launched Operation Barbarossa in the summer of 1941. The Germans pushed the Russian army back to the outskirts of Leningrad, Stalingrad, and Moscow, but in the end, Russian soldiers showed up in the streets of Berlin in May 1945. I'll bet the Germans wished they had let Russia alone.

And Napolean, one of the world's greatest military strategists, lost his entire army when he foolishly invaded Russia in 1812. By the time that adventure ended, little Nappie had lost ninety percent of his army, with the survivors reduced to cannibalism.

So let the United States strip our nation's arsenals to give high-tech weapons to the Ukrainians.  Let's see how it works out. As for me, I don't want my grandchildren fighting in Europe in a war that got out of control because the western powers didn't leave a rat a way out. 

Let's you and him fight!

I Got a Sweet Deal! Is Biden's new income-driven repayment plan too generous?

 College debtors definitely have a friend in President Biden.  So far, his administration has approved $25 billion in loan forgiveness. In addition, it paused student borrowers' monthly payment obligations until the end of 2022.

More relief is on the way. President Biden announced loan cancelation of up to $20,000 per student borrower.  The Congressional Budget Office predicts the program will cost $400 billion.

And that ain't all. The U.S. Department is working on a more generous income-based repayment plan (IBRP), which--for some borrowers--will amount to a free college education. 

Adam Looney, writing for the Brookings Institution, analyzed Biden's new IBRP; his findings are astonishing. As Mr. Looney explains, undergraduate borrowers can enter into an IBRP that only requires them to pay 5 percent of their annual income over $33,000.         

For example, unmarried college graduates who make $50,000 a year will only be obligated to pay about $70 per month on student loans--regardless of how much they borrowed.

What if the monthly payment isn't enough to cover accruing interest? No problem! The government will forgive the unpaid interest, so loan balances don't grow.

Now that's a sweet deal!

On average, Looney concludes, student borrowers can expect to pay back only 50 cents on every dollar borrowed, and some will never make a single loan payment. 

Looney predicts the new IBRP will lead to increased borrowing. Why? "Because when . . . students are offered a substantial discount by paying with a federal loan, they will borrow billions more each year."

As Looney pointed out in his report, students can take out student loans to cover their tuition and living expenses. Students who receive checks for living expenses can deposit them in their bank accounts, knowing they may not have to pay back their student loans.

As Looney put it, "Some people will use [student] loans like an ATM, which will be costly to taxpayers and is certainly not the intended use of the loans."

Looney also predicts that Biden's incredibly generous IBRP will lead to tuition inflation. 

He thinks the new IBRP will prompt colleges to create new and expensive programs to juice their revenues. "My fear," he wrote, "with regards to overall college costs, is that institutions will have an incentive to create valueless programs and aggressively recruit students into those programs with promises they will be free under an IDRP plan. 

I'm in favor of student-loan relief. Millions of Americans are saddled with crippling debt for college degrees that did not benefit them financially.  Let's give those folks a break.

But President Biden's new IDRP program goes too far. Adam Looney is right: Biden's poorly-designed IBRP will encourage students to borrow more and more money to attend college, knowing they will not be obligated to pay back their loans.

A  student-loan bonanza is coming soon to your hometown.

Consumer Financial Protection Bureau reports that the Federal Student Loan Program is a mess

The Merriam-Webster dictionary defines snafu as "a situation marked by errors or confusion." The word is an acronym for "Situation Normal, All Fouled (or Fucked) Up." 

Earlier this month, the Consumer Financial Protection Bureau issued a report confirming what we already knew:  the federal student program is all f-cked up. The CFPB's publication is titled Supervisory Highlights Student Loan Servicing Special Edition, which doesn't tell you a damn thing about what's in the report. Perhaps that was intentional.

Although the bureaucratic writing style is turgid. The report makes clear that the federal student loan program is spectacularly mismanaged.

Here are some highlights:

The CFPB found that many colleges and universities refuse to release academic transcripts to students who are indebted to their institution.  This practice often makes it impossible for former students to transfer to another school or get a job. The CFPB believes this practice is "abusive under the Consumer Financial Protection Act." Duh!

Second, CFPB criticizes student-loan servicers for bungling the administration of income-based repayment plans. Many borrowers in IBRPs are kicked out of these programs because they failed to certify their annual income annually. Those borrowers are then required to get recertified.

CFPB  accused student-loan servicers of improperly denying borrowers' applications to get reinstated in an IBRP. "Examiners found that servicers engaged in a deceptive act or practice by providing consumers with a misleading denial reason after they submitted an IDR recertification application."

For example, servicers sometimes don't tell borrowers they must certify their income when they were not in an IBRP. Then they refuse to reinstate those borrowers because they didn't provide their income information.

CFPB also accused servicers of giving parent borrowers inaccurate information about their eligibility for an IBRPeligibility.

In short, the CFPB scolded for-profit colleges for withholding academic transcripts and student-loan services for spectacular mismanagement of income-based repayment plans.

Tellingly, the CFPB did not identify a single malefactor or suggest even one substantive action to correct the problems it identified. Instead, it ended its report with this pathetic and syntax-tangled sentence:

Regardless, where the Bureau identifies violations of Federal consumer financial law, it intends to continue to exercise all of its authorities to ensure that servicers and loan holders make consumers whole.

How reassuring! 

Why didn't the CFPB propose that Congress pass a law that would make it illegal for a college to withhold academic transcripts from students, regardless of the reason?

Why didn't the CFPB call for the Department of Education to collaborate with the Internal Revenue Service to determine the annual income of students in IBRPs? It makes no sense for loan servicers to keep borrowers out of IBRPs because they didn't certify their income when the government can quickly determine annual income by looking at borrowers' annual federal income tax returns.

For some reason, the Department of Education and the CFPB would rather keep the student loan program in a snafu condition than take reasonable steps to make it operate more efficiently.

Snafu

Flagship Universities Are Enrolling More Out-of-State Students: That May Be A Good Thing

 Aaron Klein, writing for Brookings Mountain West, reported recently that public flagship universities admit more out-of-state students now than they did twenty years ago.

Klein's research revealed that the share of out-of-state students at the states' premier universities went up an average of 55 percent between 2002 and 2022.  At some flagship universities, 20 percent of their students are non-residents.

What accounts for this trend? Klein posits that the flagships are enrolling more out-of-state students because they can charge those students a higher tuition rate. Indeed that partly explains the phenomenon.

 He also points out that most out-of-state students must take out higher student-loan amounts to pay out-of-state tuition. Thus, the flagships' tendency to enroll more outer-state students who pay higher tuition prices contributes to rising levels of student debt.

Also, Klein notes, many in-state students who are pushed out of their flagship universities to make room for more out-of-state students may elect to enroll at less-prestigious regional universities, which Klein points out, may lower their lifetime earnings.  If so, that is unfortunate.

Nevertheless, generating more tuition revenue isn't the only reason that flagship universities are recruiting out-of-state students. As Klein observed, recruiting students is a zero-sum game.  Fewer students are going to college than just a few years ago, and universities across the U.S. desperately compete to attract enough students to keep their enrollments up. 

Thus, flagship schools are luring more out-of-state students because they need them to maintain optimum enrollment levels.  They particularly want to attract out-of-state students with impressive GPAs and ACT/SAT scores.

To attract these students, the flagships frequently offer generous scholarships to out-of-state students. In fact, high academic achievers might be able to attend an out-of-state flagship for less money than if they had enrolled at a school in their home state.

I recently talked to a man whose granddaughter had a perfect ACT score and a stellar academic record at a prestigious high school. She received no scholarship offers from Louisiana State University but got a beautiful offer to enroll at Auburn University in Alabama.

For this student, going to school in Alabama was cheaper than attending LSU. Thus, she enrolled at Auburn.

This is my point. Students with impressive academic records and dazzling standardized test scores should apply for admission to flagship universities outside their home state. They may find that studying at an out-of-state flagship is cheaper than attending an in-state school.

In addition, there can be enormous intangible benefits to enrolling at a college outside one's home state. I'll give my own experience as an example.

I grew up in rural Oklahoma and got a bachelor's degree from Oklahoma State University in the small Oklahoma town of Stillwater. Later, I went to graduate school at the University of Texas in Austin.

Not only did I receive an excellent education at UT, but I also immersed myself in Austin's music scene. I was introduced to the history and literature of the South and the Southwest. I even discovered new cuisines: Tex-Mex, Czech kolaches, and Texas barbecue.

My Texas educational experience opened up opportunities I would have never had if I had stayed in the state where I grew up.  I shudder to think what my life would have been if I had not gone to Texas.

Attending college is the first opportunity most young people have to begin exploring the world. My advice is to leave your home state to get your college degree--especially if you can get a scholarship that makes an out-of-state university affordable.

Why does it take students six years to complete a four-year degree?

 In the early 90s, I was program director for a specially-designed higher education institute at Louisiana State University. I designed the program for senior-level Chinese college administrators. In my hubris, I wanted to introduce my Asian audience to American higher education--the envy of the world.

One of the LSU presenters, an enrollment-management specialist, said that LSU's six-year graduation rate for bachelor's degrees was about fifty percent. The university had a plan, the speaker told the audience, to get the six-year rate up to 60 percent.

I'll never forget the collective gasp that came from the Chinese administrators. One of them spoke up. In China, he said, the four-year graduation rate was 95 percent--about twice as high as LSU's four-year rate. I realized right then that LSU had nothing valuable to teach the Chinese. And I also knew that the Chinese had discovered that too. 

Why the hell does it take so many American college students six years to get a four-year college degree? After all, that's not their expectation. As a Hechinger Report article pointed out, ninety percent of college freshmen believe they will finish college in four years. The reality, however, is that less than half of college students will get their bachelor's degree in four years.

Some commentators speculate that colleges are moving the finish line for graduation to collect more tuition. There may be some truth to that. After all, American universities now measure their completion rates based on six years of enrollment, not four. By adding more course requirements and bureaucratic red tape, the colleges have made it more difficult for students to plan a schedule that will get them a bachelor's degree in four years.

Nevertheless, other factors are in play that help explain why it takes millions of Americans six years to get a bachelor's degree. Thanks to the federal student-loan program, students can finance not only their tuition with borrowed money but they can also pay their living expenses as well.

Low-income students qualify for Pell grants--up to almost $6,500 a year.  Louisiana also doles out so-called TOPS awards to students with good high school GPAs and ACT scores. However, the qualifications are meager; a kid with a 2.5 GPA and an ACT score of only 20 qualifies for a TOPS scholarship.

And a college student may pick up additional scholarships or grant money. In case you haven't heard, universities are emphasizing diversity, equity, and inclusion, and students of color and students from disadvantaged backgrounds might qualify for targeted financial assistance.

In fact, many young people can put together financial packages that allow them to live quite comfortably as college students--perhaps better than they lived at home when they were in high school.  

Using student-loan funds, Pell Grant money, and other financial aid, students can move into luxury student apartments, dine out in restaurants, and maybe even put a downpayment down on a car.

In short, many students are "living their best lives" while in college. If so, why would they want to leave a campus environment, go to work, and start paying off their student loans? Why not stretch out their college career from four years to six?

Luxury student housing: Why graduate and go to work?

The Student Loan Program Is Designed to Shovel Federal Money to Colleges at Students' Expense

Years ago, I traveled through central Uganda in a Land Rover, accompanied by a native guide. As we came around a curve in the road, we surprised a large troop of baboons.  

All the baboons ran away. Large and small, the whole group fled into the woods. All but one.

The largest baboon was reclining against a tree when we appeared, and he stayed put. He was not afraid of us and wanted us to know it.

My guide stopped our vehicle so that we could observe this human-sized creature. The baboon stood up and slowly walked to my side of the Land Rover. My window was open, and soon he was standing only inches from me.

My guide had bought a bunch of Ugandan bananas (very tasty), and I offered one to the baboon. He stared directly into my eyes for a few seconds, which made me extremely uneasy. Finally, he grabbed the banana from my hand and walked away without the slightest sign of gratitude.

"I just did a stupid thing," I admitted to my guide, and he agreed. "Yes, Mr. Fossey, that was stupid."

Our federal government is doing stupid things with the student-loan program. Today, 45 million Americans hold student debt totaling $1.7 trillion, and millions of borrowers are in income-based repayment plans that last as long as a quarter of a century. The prime beneficiaries of all this largesse are colleges and universities. 

Have the colleges used this money wisely? No, they haven't. They raise tuition rates year after year because they know that students will take out ever-larger loans to pay their tuition bills.  They roll out expensive graduate programs that don't lead to good jobs. They overpay their administrators, who proliferate like feral hogs.

In essence, the feds have been feeding bananas to baboons. 

Although the colleges rake in billions of dollars each year from the student-loan program, they have nothing to say about its flaws. The presidents of the nation's most prestigious universities haven't endorsed bankruptcy relief for distressed student debtors. They haven't spoken out about the rapacious for-profit college industry. They've not criticized the Department of Education for garnishing elderly student debtors' Social Security checks.

Why haven't college leaders called for reforming the student-loan program? Because they don't give a damn. 

They just want their bananas.

Give me that goddamn banana.