The University of California gained a lot of experience dealing with student protesters during the Free Speech movement of the 1960s. One would think its institutional memory would include some protocols about how to handle peaceful student protesters.
Apparently not. After campus police officers pepper sprayed peaceful students at UC Davis last November, the president of UC Davis commissioned a report, which was recently released. Prepared with the aid of a former California Supreme Court justice and a consulting firm, the report weighed in at 190 pages long.
This week, the University of California issued another report, only 150 pages long, entitled "Response to Protests on UC Campuses, put together under the leadership of UC's general counsel and a law school dean. This report found--and I know you will find this shocking--that pepper spray is harmful to people's health. Yes, it is all there in the report. Pepper spray can damage people's eyes, respiratory systems,and skin. The report, which contains 50 recommendations, cost about $300,000 to produce.
The University of California's response to the UC Davis pepper spray incident illustrates what is wrong with American higher education. In the wake of a shocking assault, the University of California commissioned high-paid administrators, consultants and lawyers to put together two reports. As far as I know, no one who perpetrated those outrages upon UC Davis students has been punished.
Meanwhile, tuition goes up every year, and students are expected to pay their bills by taking out larger and larger student loans. No wonder students are angry.
References
Edley, C.F. & Robinson, C. F. (2012). Response to Protests on UC Campuses (Draft). University of California. http://campusprotestreport.universityofcalifornia.edu/documents/Robinson-Edley-Report-043012.pdf
Monday, May 7, 2012
Sunday, May 6, 2012
The Controversy Over Elizabeth Warren’s Native American Ancestry: Warren and Harvard Should be Embarrassed
I have long admired Elizabeth Warren. As a person who grew up in Oklahoma, I am impressed that Warren rose from humble beginnings in Norman, Oklahoma
to become a Harvard Law Professor. I
also admire her work in bankruptcy law and consumer-protection
law.
Thus, I was greatly disappointed to read that Warren listed
herself as a minority as she was advancing her academic career based on the
fact that she is 1/32nd Native American.
Elizabeth Warren Source: Harvard Law School OTnline Directory |
If Warren is embarrassed by this controversy, she should
be. And Harvard Law School should be
even more embarrassed. Currently,
Harvard Law School claims to have one Native American faculty member but won’t say who
it is. If it is not Elizabeth Warren,
then who is it? Do you think it might be Alan
Dershowitz?
Why is this controversy significant for student-loan borrowers? Students have seen their tuition go up every year while they borrow more and more money to finance their educations. Meanwhile, universities--and particularly,the nation's elite universities--have obsessed on race. Harvard Law School apparently thinks it struck a blow for equity by counting Elizabeth Warren as a Native American because her great great great grandmother was a Cherokee. What would higher education look like in this country if Harvard and other elite universities focused on substantive issues of access and equity instead of fixating on race.
Why is this controversy significant for student-loan borrowers? Students have seen their tuition go up every year while they borrow more and more money to finance their educations. Meanwhile, universities--and particularly,the nation's elite universities--have obsessed on race. Harvard Law School apparently thinks it struck a blow for equity by counting Elizabeth Warren as a Native American because her great great great grandmother was a Cherokee. What would higher education look like in this country if Harvard and other elite universities focused on substantive issues of access and equity instead of fixating on race.
References
Chabot, H. (2012, April 27).Harvard trips
on roots of Elizabeth Warrant’s family tree. Boston Herald. http://bostonherald.com/news/regional/view/20220427harvard_trips_on_roots_of_warrens_family_tree_officials_touted_her_native_american_lineage
Chabot, H. (2012,
May 4). Harvard won’t say if Liz Warren is listed as minority. Boston Herald. http://bostonherald.com/news/politics/view/20220504harvard_wont_say_if_liz_listed_as_minority
Wednesday, May 2, 2012
A Crummy Idea: Supplementing University Presidents' Excessive Salaries with Foundation Money
According to the Los Angeles Times, the California State University Board of Trustees will consider a new policy that will freeze state-funded compensation for new university presidents, but allow private foundations to enhance presidents’ salaries with foundation money (Ceasar & Rivera, 2012).
· First, it is unseemly. For university presidents to supplement their salaries with foundation money puts them in the same league as SEC football coaches, several of whom get extra compensation from foundations to supplement their public-university pay. Public universities have been severely criticized for letting coaches’ salaries get out of control, and supplemental compensation from college foundations have contributed to the problem. Do we really want university presidents to become the academic equivalent of Nick Saban, the University of Alabama's football coach?
Stephen Ceasar, S. & and Rivera C. (2012, May 1). Cal State to consider letting foundations augment president’s pay. Los Angeles Times.
This is a crummy idea for several reasons:
Statue of Nick Saban |
· Second, this proposal fails to address the legitimate criticisms raised by college students that university executives are paid exorbitant salaries while students suffer under the strain of rising tuition costs and growing student-loan indebtedness. Enhancing presidents’ salaries from foundation funds does nothing to put the lid on excessive salaries and benefits for university presidents and senior executives.
· Third, the notion that universities must pay their presidents extravagantly in order to attract top talent is absurd. This is the same argument the finance industry made to justify obscene bonuses and compensation for top bank executives--the very people who put the national economy in the toilet. Does anyone really believe our universities cannot attract able leaders without paying them a half million dollars a year or more?
In Good to Great, Jim Collins pointed out a common characteristic of truly great corporations: modest leaders. Modest university presidents would put the interest of their institutions and their students above their own desire for more money. And modest university presidents would accept some personal financial sacrifice before asking students to pay higher tuition or faculty to accept wage freezes.
I hope the California State University Board of Trustees abandons this ill-advised proposal. The student protesters are right: salaries and perks for university presidents and senior executives are too high and need to be capped until higher education’s financial crisis is past.
References
Stephen Ceasar, S. & and Rivera C. (2012, May 1). Cal State to consider letting foundations augment president’s pay. Los Angeles Times.
Monday, April 30, 2012
Paul Krugman's Advice for Aiding College Students is a Little Thin
Far be it from me to
criticize Paul Krugman’s advice on economic issues. After all, Krugman received
the Nobel Prize in economics, and I did not.
(I may have gotten the Boy Scout merit badge in Personal Management.)
Krugman, writing in today’s
New York Times, reviewed the dire
situation of many college graduates. As Krugman rightly pointed out, many are
saddled with huge student loans and can’t find jobs.
Personal Management Merit Badge |
With
all due respect, Mr. Krugman’s advice is a little thin. Expanding student aid will not do American
young people any good if it is disbursed in the form of student loans that they
are unable to pay back. And pouring more
money into an unreformed higher education system is a waste of resources.
The
Cal State student hunger-strikers have put their finger on the problem. We need to freeze college tuition and reform
the universities. We can start the
reform effort by cutting back on the exorbitant salaries our universities pay
senior executives and administrators.
Of
course there are lots of other things we can do to straighten out the
student-loan mess and help young people obtain college experiences that will
help them get good jobs. But simply
saying we should expand student aid, as Mr. Krugman suggested in today’s New York Times, merely endorses the
status quo. That is how we got into this
mess, and we now have one trillion dollars of outstanding student-loan
indebtedness and 37 million student loan debtors.
References
Krugman, P. (2012, April 30, 2012). Wasting our minds. New York Times.
Cal State Students Plan Hunger Strike to Protest Tuition Hikes: Let's Hope They Don't Get Pepper Sprayed
"Let them eat pepper spray" |
According to the Los
Angeles Times (Rivera, 2012), students at six Cal State campuses vow to go
on a hunger strike Wednesday in protest of rising tuition costs. Their demands are quite reasonable. They want
tuition costs frozen for five years and a rollback on excessive administrators’
salaries.
A Cal State
spokesperson, displaying the tone-deaf response so typical of
California university administrators, said the hunger strikers don’t understand the issues. This reminds me of what Marie Antoinette is said to have remarked about the poor people of Paris: “Let them eat
cake.”
We should give these courageous students all our support. And let us hope university police
officers won’t pepper spray them.
References
Rivera, C. (2012, April 29). With tuition hard to swallow, Cal State students to go hungry. Los Angeles Times. http://www.latimes.com/news/local/la-me-0429-hunger-strike-20120429,0,6584621.story
References
Rivera, C. (2012, April 29). With tuition hard to swallow, Cal State students to go hungry. Los Angeles Times. http://www.latimes.com/news/local/la-me-0429-hunger-strike-20120429,0,6584621.story
Thursday, April 26, 2012
Are We Rearranging the Deck Chairs on the Titanic? Keeping Interest Rates Down on Student Loans
President Obama has asked Congress to pass legislation that will keep the interest rate on student loans from doubling later this year. Of course, this is a good idea; and I think Congress will act favorably on the President's request.
Unfortunately, keeping interest rates down on student loans is like rearranging the deck chairs on the Titanic. The ship is still going down.
The core problem is this: millions of Americans have borrowed money for a postsecondary education, and they can't pay it back. Solving this problem won't be easy, but we can start by doing these three things:
- Congress must pass legislation allowing overburdened student-loan debtors to discharge their loans in bankruptcy in the same way they can discharge other unsecured debts. In other words, Congress must repeal the "undue hardship" provision in the Bankruptcy Code that makes it almost impossible for students to discharge their student loans in a bankruptcy court.
- We must do a better job of regulating the for-profit colleges, which is where the student-loan default rate is the highest.
- We need to defer interest on loan balances for people who have economic hardship deferments or are paying back their loans through an income-contingent loan repayment plan (ICRP). Otherwise, most of the people who are participating in these student-loan hardship plans will never be able to pay back their loans because accruing interest will make their debt loads unmanageable.
Wednesday, April 25, 2012
Are Professors' Salaries Responsible for Tuition Increases?
Why does college
tuition go up every year? According to Vice President Joe Biden, higher faculty
salaries provide a partial explanation. “Salaries for college professors have
escalated significantly,” Vice President Biden said recently. (June, 2012, p. A1).
But the AAUP
disagrees. According to a recent AAUP report, faculty salaries have not kept up
with inflation. Professors have only received modest raises in recent years,
especially compared to college presidents, who are doing just fine financially.
Don't Blame Me! |
It would be a
mistake, however, to conclude that professors have not contributed to higher
tuition rates at our colleges and universities, because in fact they share part
of the blame. Here are some examples of
the way professors contribute to out-of-control college costs.
·
When
a professor insists on getting a course release to design a new course instead
of doing the work as part of the professor’s regular work load, college costs
increase.
·
When
a professor uses college funds to deliver a mediocre academic paper at a
conference in Europe simply to get an expense-paid trip to an exotic locale,
that action wastes a college’s money.
·
When
professors cap enrollment in their graduate courses at unreasonably low levels
in order to teach smaller classes, those decisions increase a college’s costs.
·
When
professors unilaterally decide to end their work weeks on Thursday instead of
Friday, as many of them do, those individual decisions have a financial impact.
In short, many decisions
that professors make to reduce their job responsibilities or serve their own
selfish interests have an impact on the cost of doing business at our nation’s
colleges and universities. Therefore, it would be misleading to say that the
nation’s college professors have not contributed to the spiraling cost of
attending college.
And who pays the
price for the colleges’ inefficiencies—including inefficiencies in the way
professors work? We know the answer.
Students pay the price as they borrow more and more money to pay escalating
tuition costs.
References
June, A. W. (2012, April 13).
College’s cost isn’t due to jumps in pay, AAUP says. Chronicle of Higher Education, p. A1.
Thornton, S., & Curtis, J. W.
(2012). A very slow recovery. Washington,
DC: American Association of University Professors. Accessible at http://www.aaup.org/AAUP/comm/rep/Z/ecstatereport11-12/
Monday, April 23, 2012
Albert Lord Says Student Loan Program is Not in a Bubble: Should We Believe Him?
Albert Lord CEO, Sallie Mae |
So Mr. Lord assures us the
student loan program is not in a bubble. Should we believe him?
No, we should not. First of all,
as everyone knows, the percentage of students who borrow money to attend
college is going up and students' average indebtedness is going up as well. Moreover, annual student-loan default rates
have almost doubled between 2003 and 2009—going from 4.5 percent to 8.8
percent. And these numbers only reflect
the numbers of students who default within two years after beginning
repayment. When the default rate is
expanded to measure defaults during the first three years after repayment
begins, the rate goes up substantially—especially for students who borrowed money to attend for-profit colleges.
According to one projection, the three-year default rate for the 2009 cohort is 29 percent for students who attended
for-profit schools. (Lederman, 2011). Surely this is a
sign of serious trouble ahead for the student loan program.
We should also look at some recent
reports by outside analysts when we assess Mr. Lord’s assurances about the
student loan program. The Federal Reserve Bank of San Francisco, in a 2011
publication, reported that private lending increased dramatically from 2000 to
2007, reaching 26 percent of all student loans during the 2006-2007 academic
year. Private loan volume then retreated from a high of $22.6 billion in
2006-2007 to only $7.9 billion in 2010-2011.
(Choi, 2011). This may be an indication that the private banking
industry has concluded that student loans are becoming riskier for banks, in
spite of the fact that these loans—like federally guaranteed loans—are almost
impossible to discharge in bankruptcy.
In a 2012 publication, the
Federal Reserve Bank of New York reported that total outstanding student-loan
indebtedness has reached $870 billion, surpassing the nation’s entire
outstanding credit-card balances and its outstanding car-loan balances.
According to the New York Reserve Bank, there are about 37million people with
student-loan balances, Sixty percent of these borrowers are 30 years old or
older, and about 27 percent of all borrowers have at least one past-due
student-loan account. Seventy-five
percent of individuals with past-due student-loan accounts are 30 years old or
older, and 40 percent are 40 years older or older. These numbers tell us that a lot of people
are struggling with student-loan debt well into midlife.
In addition, Moody’s issued a report in July
2011, which is sharply different in tone from Mr. Lord’s optimistic reassurances.
“The long-run outlook for student lending and borrowers remains worrisome,” the
Moody report stated. “[T]here is increasing concern that many students may be
getting their loans for the wrong reasons, or that borrowers—and lenders—have
unrealistic expectations about borrowers’ future earnings.” Moody’s warned that
“[u]nless students limit their debt burdens, choose fields of study that are in
demand, and successfully complete their degrees on time, they will find
themselves in worse financial positions and unable to earn the projected income
that justified taking out their loans in the first place” (Moody’s Analytics,
2011).
In my opinion, Mr. Lord is wrong
to say the student loan program is not in a bubble. Independent analysts see
trouble ahead. As I have written
earlier, there are many things we can do to ease the burdens that weigh down overstressed
student-loan borrowers. But the first
thing we must do is face reality and admit that the student loan program is out
of control.
References
Choi, L. (2011, December). Student debt and default in the 12th
District. San Francisco: Federal Reserve Bank of San Francisco. http://www.frbsf.org/publications/community/research-briefs/Student-Debt-and-Default-in-the-12th-District.html
(last visited April 23, 2012).
Brown, M., Haughwout, A., Lee, Donghoon,
Mabutas, M., & van der Klaauw, W.(2012). Grading students loans. New York: Federal Reserve Bank of New
York. http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html
(last visited April 23, 2012).
Deritis, C. (2011, July). Moody’s Analytics: Student Lending’s Failing Grade.
Lederman, D. (2011, May 23). Trouble ahead on student loan defaults. Inside Higher Education. http://www.insidehighered.com/news/2011/05/23/student_loan_default_rates_rise_sharply_especially_for_for_profit_colleges (last visited April 23, 2011).
Lederman, D. (2011, May 23). Trouble ahead on student loan defaults. Inside Higher Education. http://www.insidehighered.com/news/2011/05/23/student_loan_default_rates_rise_sharply_especially_for_for_profit_colleges (last visited April 23, 2011).
Mulholland, S. (2012, April 19). Sallie Mae CEO Albert Lord Rejects
Education Loan Bubble Claims. Huffington Post. http://www.huffingtonpost.com/2012/04/19/sallie-mae-ceo-albert-lor_n_1438595.html
(last visited April 23, 2012).
Tuesday, April 17, 2012
The New American Serfs: Student-Loan Debtors in the Federal Income Contingent Repayment Plan
Slavery in the United States ended
with the Civil War, but slavery in another form lived on. Slavery was replaced by a new kind of bondage,
whereby tenant farmers and share croppers basically became serfs to their
landlords and were as bound to them as if they were still human chattel. The age of the share cropper and the tenant
farmer did not end until the Great Depression, when the rural poor fled the
land and migrated to the cities or to California.
But those days are over, right? No
one in the United States is a slave or an indentured servant in the 21st
century.
Sadly, our national government has
created a new form of bondage, which it imposes on college students who
participated in the federal student loan program but can’t pay back their
loans. Some of these former students are
burdened with student-loan obligations for decades--hounded by the loans they
cannot repay and the accumulating interest on their debt. Some of them have
become true indentured servants--bound to pay a portion of their income to
their federal student-loan creditors for a majority of their working lives.
The Disturbing Case
of In re Stevenson
If you think I have overstated my
case, you should read In re Stevenson
(2011), a recent decision by the U.S. Bankruptcy Court in Massachusetts. Janice
Stevens took out two student loans in 1983 to obtain additional education beyond
her bachelor’s degree. She took out a third loan in 1987 and another in 1992. By
2008, when she filed for bankruptcy, Ms. Stevenson was in her mid-50s, and her
total indebtedness was approximately $112,000, including accrued interests and
costs.
Ms. Stevens filed an adversary
proceeding in bankruptcy court, seeking to have her student loans discharged on
the grounds of undue hardship. Most
people would think she had a pretty good case. Although she had held good jobs over
the years, she had suffered periods of joblessness and homelessness and had sometimes
lived in homeless shelters. In addition, Ms. Stevenson had health issues--back
problems, high blood pressure and an autoimmune disease that required her to
take medicine.
During the bankruptcy proceedings,
Ms. Stevenson held a part-time job at Walgreens, earning less than $500 a
month. She supplemented her meager income with unemployment checks, which were
scheduled to terminate in a matter of months.
She also received a monthly subsidy from the State of Massachusetts to
help her pay her rent.
In spite of Ms. Stevenson’s bleak
economic circumstances, Judge Joan Feeney ruled that her student loans were not
dischargeable in bankruptcy. Judge Feeney concluded that Ms. Stevenson should
continue paying her loans through the federal government’s Income Contingency
Repayment Plan (ICRP), whereby she would pay a percentage of her income toward paying
down her loans for a period of 25 years.
At the end of the 25 year period, any remaining balance would be forgiven.
Did Judge Feeney Make
Ms. Stevenson an Indentured Servant?
When she came into bankruptcy
court, Ms. Stevens had unpaid student loans stretching back to 1983. Instead of
discharging her debt based on undue hardship, Judge Feeney concluded that Ms.
Stevenson should participate in a federal repayment program that would obligate
her to pay a percentage of her income toward her debt for 25 years.
If Ms. Stevenson goes on the ICRP, she will be nearly 80 years old when her payment obligations cease. By that time she will have been burdened with
student-loan debt for well over half a century.
Solutions?
It seems to me that the Income
Contingent Repayment Plan, which Judge Feeney endorsed for Janice Stevenson, is
nothing more than a modern version of indentured servitude, whereby student-loan
debtors like Ms. Stevenson pay a portion of her income to student-loan creditors
for the balance of her working lives.
The federal student loan program is
out of control, and the Income Contingency Repayment Plan is making life harder
for overburdened student-loan debtors, not easier.
Congress needs to do two things. First,
it should amend the bankruptcy laws to allow insolvent student-loan debtors to
discharge their debts in bankruptcy just like any other overburdened debtor.
Second, Congress should pass
legislation abolishing the ICRP option for stressed out student-loan debtors.
People who are insolvent deserve the fresh start that bankruptcy is designed to
give them. They don’t deserve to be saddled with a 25-year repayment plan that
will cripple them financially for the rest of their working lives.
References
In re Stevenson,
463 B.R. 586 (Bkrtcy. D. Mass. 2011).
Thursday, April 12, 2012
The UC Davis Pepper Spray Incident and the Boston Massacre: Universities Should Respond Quickly to Outrageous Conduct on Their Campuses
More than one million people have viewed the You Tube video showing UC Davis police officers pepper-spraying peaceful students on the UC Davis campus last November. Any eight-year old who views that video can tell you that the police used unnecessary force against university students who were peaceful protesting economic conditions as part of the Occupy Wall Street demonstrations.
But apparently UC Davis does not have the capacity to respond quickly and decisively when their own employees assault students in broad daylight on the University’s own campus. Almost five months after its students were attacked, the University issued a 190-page report prepared by a 13-member committee and chaired by a former California Supreme Court justice. Evidently, the committee thought the incident was too complicated to be investigated by laypeople, so it hired an outside consulting firm to find out what happened. To no one’s surprise, the report concluded that University officials made lots of mistakes.
Almost immediately after the Boston killings, all the soldiers who participated in the shootings were arrested, along with their commanding officer; and they were tried for murder. Captain Preston, the officer in command, was acquitted. The jury believed Captain Preston’s testimony that he gave his soldiers no order to fire on the crowd. In a separate trial, most of the soldiers were acquitted as well, although two were convicted of manslaughter. The soldiers were pinned into a corner by a threatening mob when they fired their guns and probably feared for their lives.
The point of my comparison is this. After the Boston Massacre, local officials responded quickly and forthrightly. British soldiers who participated in the incident were arrested and tried in a criminal court. In contrast, all UC Davis has done in response to the pepper-spray outrage is issue press releases, suspend some of the employees who were involved in the incident, and write a 190-page report.
If you disagree, look again at the You Tube video.
Shouldn’t someone be punished?
Tuesday, April 10, 2012
The Pepper Spray Incidents at UC Davis and Santa Monica College: Universities Need to Listen to Students' Concerns about the Rising Cost of a College Education
Earlier this
month, campus police at Santa Monica College pepper-sprayed more than two dozen
students who were trying to enter a Trustees meeting to protest a tuition hike. Chui L. Tsang, the college’s
president, defended the police officers’ conduct, insisting that police used
appropriate restraint and did not arrest anyone. (Rivera, 2012).
Last fall,
campus police at UC Davis pepper-sprayed students who were peacefully participating
in an Occupy Wall Street demonstration. A video of this incident, posted on You
Tube, shows a helmeted police officer calmly pepper spraying students who are
passively huddled on a campus sidewalk.
What’s going on
here? Don’t colleges realize that
students are the customers? Don’t they understand how bad they look when people
view these incidents on You Tube? How many UC Davis students and Santa Monica College
students who witnessed their classmates being pepper sprayed are going to donate
money to their alma maters after they graduate?
Campus police
should not pepper spray anyone—student or nonstudent—who is not behaving
violently or physically threatening other people. The students at UC Davis and Santa Monica
College were not behaving violently (although some of the Santa Monica College
students were a bit rowdy), and they should not have been pepper sprayed.
Instead of
pepper spraying their students, colleges and universities should listen to
student protests about the rising cost of tuition and burgeoning student-loan
debt; and they should demonstrate that they are taking action to address their
students’ concerns.
What should they
be doing?
- First,
colleges and universities should stop raising tuition while they continue
paying extravagant salaries to college presidents and senior executives.
They should freeze or reduce the salaries of their highest paid employees—at
least until the national economy recovers-- instead of tacking the cost of
these excessive compensation packages onto students’ tuition bills.
- Second, college
and university trustees should cap tuition and fees until the economy
improves, and they should work harder at making their institutions more efficient.
- In addition, higher education should demonstrate their empathy for overburdened student-loan debtors by urging Congress to amend the Bankruptcy Code to give overburdened student-loan debtors reasonable access to the bankruptcy courts. They should also support legislation that would stop the federal government from garnishing the Social Security checks of elderly people who defaulted on their student loans.
The cost of
higher education is out of control, total student-loan indebtedness approaches
one trillion dollars, and student-loan default rates are alarmingly high. Colleges
and universities need to show students that they are helping to solve these
problems. Pepper spraying student
protesters is the wrong thing to do.
References
Rivera, C. (2012, April 4). College president defends pepper spray against 'unlawful' crowd. Los Angeles Times.
http://latimesblogs.latimes.com/lanow/2012/04/students-unlawful-pepper-spray-santa-monica-college-president.html
Wednesday, April 4, 2012
Student-Loan Defaulters: Not All of Them are Young
What is your
image of the typical person who defaults on college student loans? Do you
envision a young and irresponsible college graduate—someone who ripped off the
federal student loan program by borrowing money to get a fancy college degree
and then refused to pay it back? If so, your image would be inaccurate. A great
many defaulters are from low-income families. Often they attended a for-profit
institution that provided them with little value. And—this may come as a
surprise—many student-loan defaulters are not young.
Researchers for
the Federal Reserve Bank of New York examined the loan status of 37 million
student-loan borrowers. Fourteen percent of these borrowers—approximately 5.4
million people, have at least one past-due student loan account. According to
the Federal Reserve Bank report, only about 25 percent of student-loan borrowers
with past due balances are under the age of 30. Forty percent of the student
loan borrowers with payments in arrears are at least 40 years old. Almost one
delinquent borrower in six (17.7 percent) are fifty years old or older. And
about five percent of the people who are behind on their student loan payments
are at least 60 years old (Brown, Haughwout, Lee, Mabutas, and van der Klaauw,
2012).
Why are so many
people falling behind on their student loans in midlife or late in life? There
are several explanations.
First, some of
the older student-loan borrowers are people who borrowed money in midlife,
expecting to increase their income potential. Then—due a variety of life
circumstances, these borrowers did not earn the income they expected. Maybe they became ill, lost their job, or
were the victims of the recent economic downturn. As a consequence, some of
these older student-loan borrowers fell behind on their loans.
Second, some of
the nation’s older delinquent borrowers obtained economic hardship deferments
on their loans, which temporarily exempted them from making regular
student-loan payments. For a majority of these people, interest continued to
accrue on their loans during the deferment period, causing their loan balances to
grow. Consequently, when these borrowers
began making loan payments again after their deferments expired, they sometimes
had a swollen loan balance that they simply could not repay.
Finally, I
suspect some of the older people who are behind on their student-loan payments are
people who had previously elected to pay off their loans under the
income-contingent repayment option, which extends the loan repayment period out
to 25 years. For some older people, the prospect of making student-loan
payments during their retirement years may have seemed too daunting, causing
them to stop making payments on their loans.
Older people who
default on their student loans receive no dispensation from their loan
obligations due to their age. In fact, in Lockhart
v. United States (2005), the Supreme Court has ruled that a student-loan
defaulter’s Social Security checks can be garnished. Thus, some elderly people who failed to pay
back their student loans will face severe financial hardship if they are
totally dependent on Social Security income during their so-called “golden
years.”
Obviously, no
one would recommend a government policy that would make it easier for people to
default on their student loans. Nevertheless, garnishing the Social Security
checks of elderly student loan defaulters is an overly harsh measure. Congress
needs to pass legislation that bars lenders and collection agencies from
garnishing a student-loan defaulter’s Social Security check.
References
Brown, M., Haughwout, A., Lee, D.,
Mabutas, M., and van der Klaauw, W. (2012).
Grading student loans. New York: Federal Reserve Bank of New York.
Accessible at: http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html
Lockhart
v. United States, 546 U.S. 142, 126 S. Ct. 699 (2005).
Tuesday, April 3, 2012
Universities Should Cap Tuition and Fees Until National Unemployment Rate Goes Down
In an article
that appeared this week in Chronicle of
Higher Education, Gary Fethke argued that college tuition is going up
because taxpayer support for higher education is going down. (Fethke, 2012). Although his essay discusses
economic theory on a sophisticated level, Professor Fethke’s argument can be
summarized in in the essay’s last sentence: “Students are required to pay more
in college tuition] because taxpayers are paying less—it’s that simple.”
Professor Fethke
is partly correct. Taxpayer support for
higher education has gone down as a percentage of total costs, and this
increase has contributed to higher tuition costs at publicly supported
universities. My own law school
experience illustrates the point. When I
attended law school at the University of Texas many years ago, tuition and fees
amounted to only $500 per semester. I
was able to put myself through law school by working part time as a law clerk
at the Texas Attorney General’s Office, and I graduated from UT Law School—one
of the top ranked law schools in the United States—with no debt. I will always be grateful to the people of
Texas for making this educational opportunity so affordable.
Today, of
course, UT Law School is not such a bargain. According to the law school’s web
site, tuition and fees now amount to more than $32,000 a year—32 times higher
than when I attended law school.
Inefficiency
Contributes to Rising Tuition Costs
Taxpayer support
for higher education has declined over the years as a percentage of total
costs, but this does not fully explain why higher education has gotten so much
more expensive, with costs going up every year at a rate higher than
inflation. Part of the problem lies in
the universities’ lack of efficiency.
I will provide one example from the first
university where I worked as a professor; let’s call it Generic
University. At the time I worked at GU,
the university required every doctoral-level class to have at least five
students. Otherwise the course was cancelled. One of my colleagues repeatedly
had low enrollments for his doctoral-level classes; and one semester, he could
not attract five students to enroll in either of his two courses. Consequently, both courses were cancelled
that semester, and the professor taught nothing at all.
At a
profit-driven institution, this development would have attracted some
attention. Supervisors would want to know why a particular professor’s classes
attracted so few students. Perhaps
someone would have asked questions about the professor’s overall productivity;
how many doctoral students was he supervising, for example? Undoubtedly, a
profit-driven enterprise would have taken some action to ensure that the
professor became more productive.
As it turned
out, the professor’s small classes were not only an indication of his lack of
popularity with students; they were a sign that enrollment was dropping in the
program as a whole. Yet GU administrators did little to reverse the decline in
enrollment during my years at the institution.
I think most
people who work in higher education can provide a similar example of
institutional inefficiency that was not addressed by university administrators.
Instead of becoming more efficient and keeping costs down, it has been easier for
university governing boards to simply raise the price of tuition. Consequently, students have been forced to
borrow more and more money every year in order to pursue a college degree. Today, postsecondary students borrow about
100 billion dollars annually; and total student-loan indebtedness is one
trillion dollars.
Of course,
inefficient faculty is but one part of the problem of escalating tuition
costs. University administrators have
enjoyed enormous salary increases in recent years, so that the spread between
faculty salaries and administrators’ salaries has grown wider and wider.
Colleges
Should Cap Tuition and Fees or Get Out of Federal Student Loan Program
As the economy
continues to sputter and college graduates struggle to find employment, the
rising cost of higher education in the United States has become an enormous
problem. The Obama administration has addressed this problem in various ways,
but tuition costs keep going up.
If the federal
government is really serious about rising tuition costs and rising student-loan
indebtedness, it can implement a simple solution that would go a long way
toward keeping tuition costs in better control
Congress could simply amend eligibility requirements for colleges and
universities to participate in the federal student loan program. Under the new rules, higher education
institutions would be required to freeze tuition and fees at their present
levels until the national unemployment rate drops below a certain level—let’s
say 6 percent.
If the federal
government would require colleges and universities to cap their tuition and
fees at the present level until the unemployment rate goes down, higher
education institutions would be forced to become more efficient. Currently,
universities are free to raise their tuition at will, permitting them to pass
of the cost of their inefficiency onto students and forcing students to borrow
ever larger amounts of money. A cap on
tuition and fees is the simplest and quickest way to deal with this
problem. College and universities that
are unable or unwilling to rein in their costs should be expelled from the
student loan program.
References
Fethke, G. (2012, April 1). Why does tuition go up?
Because taxpayer support goes down. Chronicle
of Higher Education.
Wednesday, March 28, 2012
Occupy Wall Street Needs a Clear Objective: How About Bankruptcy Relief for Overburdened Student-Loan Debtors?
You can fool all of the people some of the time, Lincoln observed, and some of the people all of the time. “[B]ut you can’t fool all of the people all of the time.” The Occupy Wall Street protestors--huddled in tents and shanties in cities across America--are some of the folks who are not fooled about economic conditions in the United States.
Conservative pundits revile the Occupy Wall Street protestors as communists, anarchists, and criminals; and counter-protestors hold up der
isive signs that read, “Get a Job!”
But of course that is the point. Many of the protestors are unemployed or severely underemployed. If these people had good jobs they wouldn’t be camping in urban parks or subjecting themselves to police beatings and arrest. No--the Occupy Wall Street protestors are not wild-eyed radicals. Most are simply angry Americans demanding economic justice. (Lacey, 2011).
Unfortunately, the Occupy Wall Street movement cannot achieve its goals for economic justice without defining some clear objectives--which so far it has not done. It is not enough to say Congress should tax the rich or regulate the financial sector better. Occupy Wall Street needs to boil down its broad demand for economic justice to articulate some clear and realistic political goals.
Student Loan Default Rates Are Catastrophic
Let me suggest one plank for OWS’s economic justice platform--bankruptcy relief for overburdened student-loan debtors. Although the U.S. Department of Education won’t admit it, default rates on student loans are catastrophic--especially for students who borrowed money to attend for-profit colleges and vocational programs.
Even by DOE’s own anemic standard for measuring default rates, those rates have doubled over the past few years (Blumenstyk, 2011). And DOE’s rating system only measures defaults in the first two years of the student-loan repayment period. When the measurement period is expanded to three years--which DOE will soon do--the default rate will spikes dramatically--particularly for students who borrowed to attend for-profit institutions.
And even these numbers don’t tell the full story. Students who qualify for economic hardship deferments are not making their loan payments, but they are not counted as defaulters. Some for-profit institutions have encouraged their students to apply for economic hardship deferments in order to keep their institutions’ official student-loan default rates down. Unfortunately, for most of the people who have economic hardship deferments, the interest on their loans continues to accrue (In re Halverson, 2009). If student-loan debtors defer their payments for just two or three years, they will see the outstanding balance on their loans grow significantly--perhaps to an amount so high that they will never be able to pay back their loans.
Some experts estimate that the student-loan default rate for students who attended two-year for-profit institutions is 40 percent (Field, 2010); and another analysis concluded that a majority of students who borrowed money to attend for-profit institutions are in default (Lewin, 2010). And of course a student-loan default subjects the defaulter to a torrent of bad consequences. Their credit is ruined; they become subject to all the wiles and torments of debt collectors; they can have their income-tax refunds garnished; they can even have their Social Security checks dunned (Fossey & Cloud, 2011; Cloud, 2006). In short, as a recent New York Times editorial put it, defaulting student-loan debtors wind up in “financial purgatory” (Editorial, 2011, p. A34).
Conclusion? OWS Should Demand Bankruptcy Relief for Student-Loan Debtors
For complete article and references click here
But of course that is the point. Many of the protestors are unemployed or severely underemployed. If these people had good jobs they wouldn’t be camping in urban parks or subjecting themselves to police beatings and arrest. No--the Occupy Wall Street protestors are not wild-eyed radicals. Most are simply angry Americans demanding economic justice. (Lacey, 2011).
Unfortunately, the Occupy Wall Street movement cannot achieve its goals for economic justice without defining some clear objectives--which so far it has not done. It is not enough to say Congress should tax the rich or regulate the financial sector better. Occupy Wall Street needs to boil down its broad demand for economic justice to articulate some clear and realistic political goals.
Let me suggest one plank for OWS’s economic justice platform--bankruptcy relief for overburdened student-loan debtors. Although the U.S. Department of Education won’t admit it, default rates on student loans are catastrophic--especially for students who borrowed money to attend for-profit colleges and vocational programs.
Even by DOE’s own anemic standard for measuring default rates, those rates have doubled over the past few years (Blumenstyk, 2011). And DOE’s rating system only measures defaults in the first two years of the student-loan repayment period. When the measurement period is expanded to three years--which DOE will soon do--the default rate will spikes dramatically--particularly for students who borrowed to attend for-profit institutions.
And even these numbers don’t tell the full story. Students who qualify for economic hardship deferments are not making their loan payments, but they are not counted as defaulters. Some for-profit institutions have encouraged their students to apply for economic hardship deferments in order to keep their institutions’ official student-loan default rates down. Unfortunately, for most of the people who have economic hardship deferments, the interest on their loans continues to accrue (In re Halverson, 2009). If student-loan debtors defer their payments for just two or three years, they will see the outstanding balance on their loans grow significantly--perhaps to an amount so high that they will never be able to pay back their loans.
Some experts estimate that the student-loan default rate for students who attended two-year for-profit institutions is 40 percent (Field, 2010); and another analysis concluded that a majority of students who borrowed money to attend for-profit institutions are in default (Lewin, 2010). And of course a student-loan default subjects the defaulter to a torrent of bad consequences. Their credit is ruined; they become subject to all the wiles and torments of debt collectors; they can have their income-tax refunds garnished; they can even have their Social Security checks dunned (Fossey & Cloud, 2011; Cloud, 2006). In short, as a recent New York Times editorial put it, defaulting student-loan debtors wind up in “financial purgatory” (Editorial, 2011, p. A34).
Conclusion? OWS Should Demand Bankruptcy Relief for Student-Loan Debtors
For complete article and references click here
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