Three quarters of a million student borrowers have filed "borrower defense" claims against colleges: They want their student loans canceled

 Dahn Shaulis posted a provocative commentary yesterday on Higher Education Inquirer. He reported on the recent settlement of Sweet v. Cardona, a class-action lawsuit accusing the U.S. Department of Education of mishandling borrower defense claims. 

In essence, the plaintiffs claimed they took out federal student loans to attend schools that misrepresented their offerings or violated various state laws.  As Shaulis pointed out, nearly all the schools affected by the lawsuit are for-profit colleges.

Under the settlement terms, DOE will cancel federal student-loan debt owed by 200,000 borrowers. The cost: about $6 billion. This is in addition to the $ 7.9 billion in loan relief to 690,000 students under the terms of earlier borrower-defense settlements.

Fourteen billion dollars in canceled loans owed by 890,000 students: that's a lot of misconduct. Which schools have been named by students filing borrower defense claims?

DOE attached an appendix to its announcement of the Sweet litigation listing more than 150 schools. The list of accused malefactors--almost all for-profit institutions--includes a for-profit law school and a for-profit Caribbean medical school.

As we might expect, the word has gotten out among student borrowers that President Biden's DOE is much more receptive to borrower defense claims than President Trump's callous crew.  As Mr. Shaulis reported, there are now 750,000 pending borrower defense claims, and they keep rolling in at the rate of 16,000 a month.

I'm all in favor of DOE's generosity toward students who took out federal loans to attend for-profit institutions and didn't get their money's worth. I have no sympathy for the for-profit colleges, many of which are owned by private equity funds that don't give a flip about the quality of education their institutions deliver.

Nevertheless, it is not feasible for DOE to continue entering into large borrower-defense settlements unless it cracks down on the chief offender--the for-profit college industry.

Basically, DOE is behaving like a wealthy parent who repeatedly pays the damages for a profligate son's mayhem without demanding that the kid stop misbehaving.  

Biden Administration's Proposed Income-Driven Repayment Plan for Student Debtors is a Disaster

 Everything Everywhere, All at Once. That's a good description of the Department of Education's handling of the federal student-loan program. From every perspective and by any measure, the program is a disaster.

Even before COVID, the program was in crisis. Education Secretary Betsy DeVos admitted in a 2018 speech that only one out of four borrowers were paying down the principal and interest on their loans. And she reported that about 20 percent of borrowers were either delinquent on their loans or in default.

But why dwell on evil tidings?  Shortly after Betsy resigned from the Trump administration, her speech was removed from the web. 

Then came the COVID pandemic, and the feds paused all student-loan debt collection. Thus, 43 million college borrowers stopped making monthly loan payments without penalty and without accruing interest. This pause has now lasted three years.

According to the Committee for a Responsible Federal Budget, the cost of the loan repayment pause was $155 billion as of December of last year. And that cost continues going up as each day goes by.

To add fuel to the flames--the Biden Administration is rolling out a modified income-based repayment plan, which is about as close as one can get to free money.

Under the new plan, undergraduate borrowers will only pay 5 percent of their discretionary annual income on their student loans, which is generously defined as the amount over 225 percent of the federal poverty-level guidelines.

For example, college graduates in three-member households will only pay 5 percent of their annual income over $55,935. Thus, grads making $50,000 a year will make monthly payments of zero, regardless of how much they borrowed!

Our scatter-brained Department of Education estimates this plan will cost the taxpayers $138 billion over ten years--chicken feed!

However, the Penn Wharton Budget Model projects the cost to be more than double DOE's estimate--$333 billion to $361 billion.

Why are the estimates so different? Because Penn Wharton reasonably predicts that more borrowers will sign up for this new easy-peasy repayment plan. 

Currently, about a third of eligible student debtors participate in an income-based repayment plan.  Penn Wharton estimates that 70 to 75 percent of student borrowers will sign up for the new program because most borrowers will only be required to make token payments (or no payments) on their student loans. 

Penn Wharton also predicts that students will take out bigger loans when they realize the new income-based repayment plan is breathtakingly generous.  If that happens, the cost of the program will be even higher.

In short, the Department of Education's new income-based repayment plan is nutso.  It will encourage students to take out ever-larger student loans, which, in turn, will prompt colleges and universities to keep raising the cost of tuition.

DOE's revised income-based repayment plan is nutso.

Young professors should think about their retirement before taking their first job

 The academic job market is terrible right now--especially for people with newly minted PhDs in the humanities or social sciences. A person who graduates with a doctorate in those fields might be tempted to take the first job offer rather than wait for an offer from a more prestigious university or one that pays a higher salary--an offer that might never come.

That could be a big mistake. Before taking any academic job, young profs must investigate the university's retirement plan. Why? Because retirement programs at universities differ widely from state to state.

Here are two cautions for academicians looking for that first tenure-track job:

First, look at the retirement programs at the colleges you are considering. Some states have better retirement plans for public-college professors than others. 

Some states do not participate in Social Security, and public employees in those states will not get a Social Security check when they retire.  Louisiana is one of those states, along with Alaska, Colorado, Maine, Massachusetts, Nevada, Ohio, and several others that do not have universal coverage for all their public employees.

That may not mean much to young scholars in their twenties or thirties, but it will mean a lot to them when they celebrate their 65th birthday.

You may think this is not a big problem because you plan to accumulate Social Security credits when you work in states that participate in Social Security (most of them). You will get a Social Security check based on those credits. 

You should know, however, that you will be penalized for being in a non-Social Security retirement program, which will reduce your Social Security benefits.

The rules are complicated, so do your own research. However, if you spend your entire career at a public university in Louisiana, you will get nothing from the Social Security Administration when you retire.

Second, professors at the beginning of their careers should carefully consider whether they want to join their public university's defined-benefit plan or select an optional retirement plan (offered by companies like VALIC and TIAA-CREF) that builds retirement income by investing in mutual funds.

You may think the stock market will produce more income for you than a defined-benefit plan, but who knows? Sometimes the stock market is up, and sometimes it is down. Where will the markets be when you plan to retire?

Make your own decision, but you will be asked to decide when you start work, and that decision is likely irreversible.

This is my experience. I have a defined-benefits pension from my Texas years and retirement income from my optional retirement plan based on the years I worked in Louisiana.  

You know what? I like the Texas defined-benefit plan better than the Louisiana ORP.

What do you mean I'm not in the Social Security program?

Are we out of our minds? LSU's women's basketball coach makes $2.5 million and has 171 pairs of shoes

 General Motors found a cash cow when it created GMAC, its lucrative auto financing arm. People said that GM evolved from being a car maker with a finance company to a financial institution that also made automobiles.

We might say something similar about the nation's public universities. Once, they were educational institutions that offered varsity sports. Now they are becoming sports franchises that educate students as a side business.

Look at Louisiana State University, the Pelican State's flagship public university. According to Tiger Rag, "the Bible of LSU Sports," LSU's football program spent $25 million in salaries and wages last year and lost almost $14 million in Fiscal Year 2022.  

LSU's head football coach Brian Kelly makes about $6.5 million annually. Ed Orgeron, who took LSU to a national championship, was bought out in 2021, costing LSU's athletic program $17 million.

Kim Mulkey, LSU's women's basketball coach, makes $2.5 million a year and owns 171 pairs of shoes. She also has a gig endorsing Gordon McKernan, a personal injury lawyer. Her likeness appears on billboards all over Baton Rouge. 

Speaking of Gordon McKernan, perhaps Baton Rouge's leading personal injury attorney, he estimates that he gave between $750,000 and $1,000,000 to NIL (short for "Names, Images, and Likeness,") an outfit that helps college athletes sell their "brand" by marketing themselves for cash.

How much money do LSU football players get for selling their brands? According to Tiger Rag, LSU's 85 scholarship football players are worth an average of $479,000!

And then there is the sports betting revenue. LSU proudly announced that it was the first university in the Southeastern Conference to sign a contract with a gaming company. Sports betting is now advertised in Tiger Stadium (along with the Louisiana Lottery). 

LSU's spin doctors emphasize that much of the money that pours into LSU athletics comes from its athletic foundation, which is a separate entity from the university. This is true, but does it make sense for wealthy individuals and corporations to get tax breaks for supporting university sports? 

LSU's Tiger Athletic Foundation generated $41 million in revenue in 2021, mostly from donations from wealthy individuals and businesses. And LSU is the only school in the SEC that gets more donations for athletics than it does for academics.

Of course, everyone in Louisiana loves sports. I get pumped when the LSU Tigers play one of their arch-rivals during the SEC football season.  But who can afford a ticket to a ballgame, much less the eight-dollar beer sold in the stadium?

I wonder whether Louisianians are focused on the right things--the future of our youth, for example.

Louisiana's public universities rank next to last in terms of return on investments for students enrolled in them. According to U.S. News, Louisiana ranks #48 in education. The state is the nation's second poorest, with a poverty rate of almost 18 percent. 

Some Louisianians are doing fine. LSU football players get paid to endorse Hooters and a personal injury lawyer.  The athletic coaches are getting rich, and even some assistant coaches make more than a million dollars a year.

Yet our state's public schools are the third worst in the US, and our coastline loses the equivalent of a football field every ninety minutes.

Maybe Louisians should rethink their priorities. In the meantime, Go Tigers!!

Kim Mulkey, you look fabulous!

Surprise! Surprise! Survey finds college graduates are not emotionally ready to enter the workforce

 Before the French signed an armistice with Germany in 1940, France and England were allies against Hitler. One of their first major joint ventures was a plan to invade Norway and deprive Germany of the iron ore that the Nazis needed to wage war.

British, French, Norwegian, and Polish forces attacked German troops at Narvik, the leading Norwegian port for exporting iron ore. Ten times larger than the Germans' defending force, it took the allies a long time to dislodge the Nazis. Then France and Great Britain threw their victory away by abandoning Norway to send troops to deal with the Wehrmacht onslaught in France.

British General Claude Auchinleck, reflecting on the Norwegian campaign, expressed disappointment with his country's army. "By comparison with the French, or the Germans for that matter, our men for the most part[,] seemed distressingly young, not so much in years as in self reliance and manliness generally."  In other words, in the spring of 1940, the British army wasn't up to the dirty job of defeating the Nazis.

Something similar is happening with American college graduates. A recent survey of recent college graduates by the Mary Christie Institute concluded that many recent college graduates aren't emotionally prepared for the world of work.

"Our findings found that once in the workplace, young people continue to struggle mentally and emotionally," MCI reported.  Overall, more than half the respondents reported mental health problems, with women reporting more mental health issues than men (p. 4).

Disturbingly, almost 40 percent "of respondents said their college did not help them develop skills to prepare them for the emotional or behavioral impact of the transition to the workplace" (p.  5).

Over half the respondents said they experienced burnout at least once a week (p. 4). Not surprisingly, graduates with heavy financial obligations reported more anxiety than their peers who were not excessively burdened by debt.

The MCI authors pointed out that the COVID pandemic probably contributed to the stress and anxiety young college graduates are facing. And I'm sure that's true.

Nevertheless, the MCI report highlights the fact that colleges need to do more to prepare their graduates to be confident and successful workers. Unfortunately, I believe colleges are contributing to their graduates' anxieties by placing them in an artificial environment that is very different from the corporate workplace.

First, grade inflation is rampant throughout higher education, which means that students are getting good grades without doing much work. Many perceive their stellar report cards as participation trophies--they get a good grade if they just show up for class. That attitude often transfers to the workplace, where college graduates' perception of work conflicts with employers' expectation that their professional workers do their best to excel.

Second, students who graduate from college without trying hard may believe their bachelor's degrees prove that they are more intelligent than most people.  In fact, someone who graduates with a high GPA from a humanities program at a mediocre college often doesn't know anything that would be useful on the job.

Finally, colleges that cause their students to take on heavy student-loan burdens are increasing their graduates' anxiety when their student loans stop, and they have to pay their rent and monthly student-loan payments.

Bummer!

What happens to young people who go to college without basic reading and writing skills? It's not good

  The Baton Rouge Advocate published an editorial a few days ago titled "Get ahead in colleges like LSU, without all the hard work." 

The editorial quoted Benjamin Haines, a graduate student at Louisiana State University, who has discovered that many LSU students arrive on campus without the basic skills they should have learned in high school.

"In my anecdotal experience as a teaching assistant at LSU," Haines wrote, "many young college students aren't equipped with the requisite writing or literary tools necessary to produce passable writing, a product of a failing secondary education system, rather than an indication of students' abilities. 

Haines continued with this condemnation:

Especially here in Louisiana, professors, instructors, and teaching assistants fight a daily uphill battle against a decrepit secondary educational system in which students are failing to receive the necessary literary skills to excel at the next level of learning, and business-minded university administrators that accept students who aren't genuinely qualified into their rolls.

As a professor who spent twenty-five years in public universities, I can attest that Haines' rebuke of secondary education is on the mark--at least here in Louisiana. Many students graduate high school without a basic understanding of grammar and punctuation and no clear idea about constructing a paragraph, much less a well-reasoned analytical or research paper.

And Haines is right to blame university administrators for admitting students unprepared to do college work. University leaders are desperate for tuition dollars and are willing to foist clueless young people off on hapless professors and instructors who are faced with three choices:

1) They can flunk unprepared students. Students whose GPAs plummet will eventually be expelled on academic grounds.

2) Professors can turn their university courses into remedial classes, which will require them to teach students basic literary skills they should have learned in the sixth grade.

3) They can indulge in grade inflation and give every student a passing grade. I fear that this is the option most college instructors are taking.

What happens to the unprepared students who go to college? Some become discouraged and drop out. Others will soldier on, drifting into soft majors with low academic standards. Often these misfits stretch out their four-year degree programs to five, six, or even seven years.

With grade inflation and declining academic standards, many unprepared students will eventually obtain college degrees without learning anything useful.

What will they do then? They will stumble into the adult world of work with a mountain of student debt and no practical job skills.

But not to worry. People who get worthless college degrees can always go on to graduate school.

Will a degree from your public university pay off?

 Education Secretary Miguel Cardona says people with college degrees earn one million dollars more over their lifetimes than people who only get a high school diploma. You're nuts, then, if you don't go to college.

Unfortunately, Secretary Cardona's cheerleading pitch for higher education is only partially accurate. For example, people who attend for-profit colleges don't do so well. According to a Brookings report published a few years back, nearly half (47 percent) of the people who attend for-profit colleges default on their student loans within five years of beginning repayment (p. 48, table 8). And the overall five-year default rate is 28 percent.

We also know that thousands of academic programs don't pay off. Higher Education analyst Robert Kelchen compared student -loan debt to earnings for 45,000 educational programs and identified thousands where students left school owing more in student loans than their first-year salaries.

And more recently, the Foundation for Research on Equal Opportunity (FREOOP.org) released a report on educational outcomes for students who attend public universities. Foundation researcher Preston Cooper found Return on Investment (ROI) varied widely among the states.

Students who studied at a public university in these five states had the highest median return on investment: South Dakota ($216,027), Minnesota ($214,923), Iowa ($214,105), Kansas ($180,770), and Pennsylvania ($167,442).

At the bottom end of the Return-On-Investment scale were public universities in these five states: Hawaii (negative $5,720), Louisiana ($18,246), New Mexico ($20,877), Montana ($24,909), and Connecticut ($38,979).

Living as I do in Louisiana and only two blocks from Louisiana's flagship university, I was startled to learn that Louisiana public institutions have the lowest median return on investment of any public university system in the United States, except Hawaii, which has a negative return on investment.

Of course, not all students graduating from a Louisiana public college will end up with a low return on their college investment. Engineering graduates from LSU will do fairly well, as well as nursing graduates. 

Colleges will never admit that they operate academic programs with poor financial outcomes. There's no warning sign on the door to the sociology department or the department of gender studies saying, "Ye who enter here are lost."After all, tenured professors teach in those departments, and they must lure at least a few gullible students to sign up for their loser programs.

Young people planning their college careers need to do their own research about the universities and academic programs they are considering. Don't be seduced by the colleges' glossy brochures--the ones that show pretty cheerleaders cavorting at sporting events and kindly professors instructing intense students on how they can cure cancer.

Before choosing a college and a major, ask yourself these questions. 1) How much will it cost?

2) How much money will I need to borrow, and how will I pay it back?

3) What's the monetary return on my college investment? 

If you don't ask those questions, you may wind up with a bogus college degree, a mountain of student debt, and no clear way to earn a middle-class living.