Gore Vidal bequeathed his entire estate to Harvard University, but he died anyway.

Gore Vidal died in 2012, leaving his entire estate to Harvard University. I'm sure he received a nice thank-you note. Harvard knows how to charm the suckers.

I know. I once received a letter from Harvard confirming my appointment as a teaching assistant. I think it was signed by the Provost. It came on fine stationery and closed with the words, "Your most obedient servant."  Of course the job only paid $300 a month, less than my family's monthly health health insurance bill. But a  letter from some Harvard muckety muck signed "Your most obedient servant" meant more to me then than a living wage. I kept the letter for years.

According to the New York Times, Vidal died in his home at age 86, tormented by alcoholism, incontinence, and dementia. Apparently, no one in his life meant more to him than Harvard, which gets the royalties from Vidal's book sales plus his $37 million estate.

But why give the money to Harvard, which after all has loads of money. Perhaps Gore Vidal sought to buy immortality. As one of his friends said in the New York Times story, "Gore was clearly

Gore Vidal in 2009
Photo credit: Wikipedia

uncomfortable talking about a wold without Gore Vidal. Nothing above immortality and world domination would ever be enough for him."

But a $37 million bequest to Harvard won't buy immortality. And Neither will Vidal's 25 novels.  Even literary giants die and their reputations fade into obscurity. Remember Norman Mailer, super egotist and winner of two Pulitzer Prizes? How many people read Armies of the Night last year do you suppose?

We all creep toward death, most of us in obscurity. I have no money to give to Harvard and wouldn't give it if I had.  Harvard figured that out years ago and stopped sending me its glossy Harvard magazine. I will never be rich, never be famous, never be powerful.

But I am comforted at this time in my life by my wife and family--comforts Mr. Vidal apparently never had, although he had a long time companion he loved very much. I am grateful for my small home in a friendly Southern town, by the beauty of South Louisiana's swamps and bayous, and by the mild and temperate sun that shines most days throughout our Southern winters.

And I am comforted by my faith.  I feel sure a priest will give me last rites in my final hours. I know I will have a funeral Mass at Christ the King Church on the LSU campus; and I am confident that at least some of my grandchildren will attend.  And surely someone will write my name in the Book of Remembrance and will pray for my soul now and then.

And in my remaining years, God will strengthen me with the Mass, with Christ's body and blood. And when bitter memories and regrets sweep over me, I am reassured by God's forgiveness.

I am sorry  Gore Vidal did not have these comforts in his final years. It made me sad to learn that this famous and dazzlingly creative man felt compelled in the last year of his life to make the pathetic gesture of giving the fruits of his life's work to a soulless university he never attended.

References

Tim Teeman. A Final Plot Twist. New York Times, November 10, 2013, Style Section, p. 1.

The Demise of Legal Education as a Noble Pursuit

You teach yourselves the law, but I train your minds. You come in here with a skull full of mush; you leave thinking like a lawyer.

                Professor Kingsfield, The Paper Chase

I have a bachelor's degree in liberal arts and a doctorate in education policy from Harvard, but my only worthwhile educational experience was my three years at the University of Texas School of Law.

I loved law school. I admired my professors, who taught their classes in business attire and were always well prepared. I respected law school's rigor, the fact that students were graded on a curve and only five percent received As. And I came to love the order, the logic, and the majesty of the law. UT Law School changed my life.

"You come in here with a skull full of mush . . ."
Professor Kingsfield, The Paper Chase

Now, thirty years on, I am saddened by the decline of legal education in the United States. Applications for admission have plunged nationwide, putting pressure on the schools to lower admissions standards.  The market for lawyers is saturated, due in part to the proliferation of third- and fourth-tier law schools, which turn out far more lawyers than our society needs.

And law school has gotten incredibly expensive. In-state tuition at UT Law School is now $36,000 a year! It was only $1,000 a year when I attended.   Students are having to borrow incredible amounts of money to study law, and many don't earn enough after they graduate to pay back their loans.

In fact, some law school graduates are suing their alma maters for fraud and misrepresentation, claiming the law schools falsified their graduates' employment rates to entice people to enroll.

As best I can determine, most of these suits are unsuccessful.  The Sixth Circuit recently issued an opinion that affirmed the dismissal of a lawsuit brought against Thomas M. Cooley Law School by its graduates. The law school was not liable for fraudulent misrepresentation or fraudulent concealment, the Sixth Circuit ruled.

Nevertheless, the facts outlined in the Sixth Circuit decision are disturbing.  Thomas M. Cooley Law School enrolls more law students than any other law school in the United States, the court said. Tuition is $36,750 per year, about the same as the University of Texas School of Law, one of the nation's top-ranked law schools. According to U.S. News &World Report (as cited by the Sixth Circuit opinion), Cooley Law School has the lowest admission standards of any accredited law school in the country. In 2010, it admitted 83 percent of its applicants.

On the other hand, a federal court in New Jersey allowed a lawsuit against Widener University School of Law to go forward.  In that case, under-employed law-school alumni sued Widener under the New Jersey Consumer Fraud Act and the Delaware Consumer Fraud Act. 

The alumni claimed that Widener had published misleading post-graduate employment data and salary information. As the court summarized the heart of their claim, "Plaintiffs argue 'they would not have paid over $30,000 a year in tuition had they know that merely 56% of Widener graduates were employed in jobs that require or use a Widener law degree,'" In the court's view, the plaintiffs had sufficiently plead a claim under the New Jersey Consumer Fraud Act to proceed with their case.

Most of this litigation has been brought against lower-tier law schools that charge high tuition and have trouble placing their graduates in the legal job market.  But I wonder if there is also something wrong with elite law-school education.  Law schools are supposed to teach students to use language carefully--never to deceive the courts or anyone else for that matter. Yet we have seen President Obama--a Harvard law graduate and Editor of the Harvard Law Review--make representations again and again about the Affordable Care Act that simply aren't true.

All Americans should be concerned about the deterioration of legal education in this country.  Since the beginning of the Republic, our nation has drawn its leaders from among lawyers. It has been lawyers who have drafted our legislation, presided over our courts, and made many of the important policy decision that have shaped our national life.

We cannot preserve our nation's democratic ideals, our commitment to fairness and equality, without noble lawyers. And we won't get noble lawyers unless they receive noble legal education.

References

Harnish v. Widener University School of Law, 931 F. Supp. 2d 641 (D.N.J. 2013).

MacDonald v. Thomas M. Cooley Law School, 724 F.3d 654 (6th Cir. 2013).

President Obama Pushes Income-Based Repayment Plans for Student-Loan Debtors: Madness! Madness!

The U.S. Department of Education is sending e-mails to selected student-loan borrowers, urging them to consider signing up for income-based repayment plans (IBRs) to pay off their student loans. Currently, about 1.6 million student-loan borrowers participate in IBR plans, but DOE wants to sign up 3.6 million additional participants within the next six weeks.  If DOE is successful, more than 5 million people will soon be making student-loan payments based on a percentage of their income over a long period of time--20 to 25 years.

A lot of the major players in higher education like IBRs--"pay as you earn" plans as some people call them. In a co-authored essay in Chronicle of Higher Education, Sandy Baum of the College Board lauded the President's plan for notifying students about IBRs and said IBRs should be the "default option" for student-loan repayment. In other words, unless student borrowers affirmatively opt out, they would automatically be enrolled in a student-loan repayment plan that would stretch their payments out over 20 or 25 years.  Wow, what a super idea!

And how will income-based loan repayments be collected? The details aren't clear yet, but I imagine the feds will do what the Brookings Institution recommends.  Student-loan borrowers will have their loan payments deducted from their payroll checks. The IRS will become the national debt collector, and a student-loan borrower's monthly loan payments will go up or down based on the borrower's current income, like income-tax withholding payments. 

Thus, the day may be coming when former college students will see their monthly student-loan payment appear as just another deduction on their paychecks--like Social Security, mandatory retirement contributions, and federal and state taxes. And for most borrowers, those deductions will last about a quarter of a century.

President Obama probably thinks he is doing college-loan debtors a favor by encouraging them to sign up for long-term repayment plans. He reminds me of Colonel Nicholson in Bridge on the River Kwai. Colonel Nicholson (played by Alec Guinness) is so obsessed with building a bridge for the Japanese army that he loses sight of the fact that he is hurting his country's cause, not helping it.. Not until the end of the movie does the Colonel realize that he has betrayed his country and the soldiers he commands.  The last lines of the movie are: "Madness, Madness!"

Col. Nicholson in Bridge on the River Kwai
"Madness! Madness!"

Why are all the insiders lining up in favor of IBRs? Two reasons:

IBR plans will hide the student-loan default crisis. First and most importantly, IBRs are a cosmetic fix for the soaring student-loan default rate.  As I've explained before, the true student-loan default rate is probably twice as high as the anemic three-year default rate DOE reports every year. In the for-profit sector, the overall default rate is at least 40 percent.  Over the long run, such a default rate is economically and politically unsustainable.

For years now, the for-profits have hid their institutional default rates by encouraging their students to sign up for economic hardship deferments so they won't be counted as defaulters. Millions of people have these deferments, but this shell game can't last forever. Eventually, the government will have to admit that a lot of people on economic-hardship deferments (probably most of them) are really defaulters who will never pay back their loans.

Putting people in IBRs is unlikely to increase the number of people who pay off their loans, but it will obscure the true student-loan default rate for several years. How? If people are automatically enrolled in IBRs, their loan payments will be lowered perhaps as low as zero for people who are unemployed or are in low-paying jobs.  These people won't be paying off their loan balances because interest will continue to accrue.  But they won't be counted as defaulters.

IBRs will take the heat off colleges and universities to keep their costs down.  Second, IBRs benefit the colleges and universities. If students pay for their college experiences based on a percentage of their income instead of the amount they borrow, they will have little incentive to shop for a college based on price. And governmental agencies will have less incentive to try to keep college costs down. Colleges and universities can perpetuate the status quo indefinitely, raising their tuition rates every year without being pressured to keep their costs down.

The for-profits will be the big winners if IBR plans become the default option for student borrowers because their student-loan default rates will drop to zero in spite of the fact that too many students who attend for-profit colleges are paying exorbitant tuition and getting substandard educational experiences.

For most students and for American Society, IBRs will be a disaster. Income-based repayments may make sense for a small percentage of student-loan debtors, but if IBRs become the default option for college-student borrowers, the consequences will be disastrous.

First of all,  as I just said, IBRs reduce students' incentive to borrow as little money as possible to attend college. In fact, many students will conclude that it makes economic sense to borrow to the max. Thus, if IBRs become popular, the total amount of money students borrow every year to attend college will  continue going up--perhaps at a faster rate than in the past.

In addition, mass adoption of IBRs will hurt the American economy. If young people are locked into making student-loan payments for 20 or 25 years, their take-home pay will be smaller and they will have less money to purchase homes, have children, and save for retirement.

But this is the most chilling fact about IBRs: They have the potential for creating a large class of people who are in essence share croppers for the federal government They will be forced to contribute a percentage of their earnings to Uncle Sam for the majority of their working lives. No one can say with certainty what the psychological impact of this arrangement will be on American college graduates, but it could reduce their faith in the American dream and lead to mass cynicism about the American political process.

And IBRs will not increase the number of people who pay off their student loans. I predict that a majority of students who select IBR plans as their student-loan repayment option will be students who pay too much to attend for-profit colleges and don't make enough money after they complete their studies to pay back their loans.  A lot of these people will be unemployed or working in low-wage jobs that entitle them to pay nothing on their loans or to pay so little that their payments won't cover accruing interest.

These poor people will see their federal loan debt grow, not shrink, over the years, even if they make all their loan payments on time.  For example, the New York Times ran a story about a veterinarian who borrowed $300,000 to attend a for-profit veterinary school outside the United States. Even though this individual found a job as a veterinarian and is making regular student-loan payments under an IBR, her current job does not pay enough to enable her to make loan payments that are large enough to cover the accruing interest on her debt. A financial analyst estimated that when this veterinarian completes her 25 year repayment period, the amount of her debt will not have been paid off.  In fact, it will have doubled--from the $300,000 she originally borrowed to more than $600,000!

In short--and I say this emphatically--wholesale adoption of income-based repayment plans is madness and its long term effect will be drive millions of people out of the middle class and into a new class of Americans--sharecroppers for the federal government.

References

Sandy Baum & Michael McPherson. Obama's Aid Proposals Could Use a Reality Check. Chronicle of Higher Education, August 26, 2013. Accessible at: http://chronicle.com/article/Obamas-Aid-Proposals-Could/141265/

David Segal. High debt and falling demand Traps New Vets. New York Times, February 23, 2013. Accessible at: http://www.nytimes.com/2013/02/24/business/high-debt-and-falling-demand-trap-new-veterinarians.html?pagewanted=1&_r=0

Michael Stratford. You've Got Mail. Inside Higher Education, November 4, 2013. Accessible at: http://www.insidehighered.com/news/2013/11/04/education-dept-will-email-35-million-student-loan-borrowers-about-income-based

Fewer college students major in the humanities: Is anyone surprised?

A few days ago, the New York Times carried a front-page story on the declining number of humanities majors at American colleges.  This shouldn't surprise anyone.  In fact, students have been shifting from the humanities to business majors for over 25 years.

There are two main reasons for the decline. First, as the Times noted, more and more young people see college as "a tool for job preparation" rather than an opportunity for deeper self understanding. And that makes sense as the price of attending college goes up. People don't go to college to find themselves any more. They go hoping to get a job after graduation.

Tuition costs are especially high at institutions like Stanford and Princeton, which were mentioned in the Times article. A person would almost have to be crazy to pay the sticker price of attending one of the expensive, elite institutions just for the privilege of getting an undergraduate degree in women's studies or medieval history.

Of course, as the College Board assured us in its recent report, a lot of people don't pay the sticker price--the sucker price--to attend an elite college.  A person who gets a grant or scholarship would incur a lot less debt to attend Stanford or Princeton than a person who takes out loans and pays the full cost.

And people who know they are going to law school, business school, or medical school after they graduate don't have to worry too much about their choice of majors. People who graduate at the top of their class at Harvard can major in anything they want as undergraduates.

But people who don't get a coveted grant or scholarship and who don't come from wealthy families should be extremely cautious about going to an elite college with the goal of getting a degree in the humanities. Apart from people who borrow money to attend for-profit colleges, the people hurt most by student-loan debt are probably the people who borrow $100,000 or more to get a humanities degree from Dartmouth, Emory, or some other overpriced, hoity toity higher education institution.

Apart from the increased cost of obtaining a college degree, I think there is a second explanation for a decline in humanities majors.  Let's face it, a lot of so-called humanities professors don't teach humanities anymore; they teach postmodernism. Instead of helping students search for ultimate truths, these professors guide students toward cynicism, relativism, and self-centeredness

And so we see the proliferation of degree programs in women's studies, African American studies, Hispanic studies, LGBT studies--programs that encourage college students to develop intensely self-focused perspectives on life and to abandon the search for universal truths.

Frankly, given the present state of humanities at American colleges, I am not sure we need humanities majors or humanities professors.  It is increasingly plain that great literature,  insightful histories, and perceptive interpretations of culture and society are coming from journalists, novelists, script writers, and self-employed intellectuals. For example, Erik Larson's In the Garden of Beasts and  David Benioff's City of Thieves are fine examples of creative work by non-academic writers that give readers a glimpse into European history during World War II and the pre-war years.  And Rick Atkinson, trained as a journalist, wrote a wonderful trilogy on the history of World War II.

If you want to know more about 20th century European history, read Benioff, Larson, and Atkinson. Why pay $5,000 to hear a Stanford professor give fifteen history lectures and then give you a grade of C+?

References

Tamar Lewin. Interest Fading in Humanities, Colleges Worry. New York Times, October 31, 2013, p. 1.

Jennifer Levitz & Douglas Belkin. Humanities Fall from Favor. Wall Street Journal. June 6, 2013. Accessible at: http://online.wsj.com/news/articles/SB10001424127887324069104578527642373232184

Things Universities Don't Want to Talk About: It's Time for a Freedom of Information Act for American Colleges That Participate in the Federal Student Loan Program

LSU President King Alexander recently told a Rotary Club audience that the cost of attending Louisiana State University is very reasonable.  For the many students who receive one of Louisiana's TOPS scholarship, the cost is only about $1,000 a year for housing and other costs, according to President Alexander.

LSU President King Alexander:
It only costs a TOPS student a thousand bucks a year to attend LSU.  Really?

But that's not accurate. In a letter to the editor of the Baton Rouge Advocate, Elizabeth Welsh, a Baton Rouge homemaker, corrected LSU's president.  The true cost for a TOPS student attending LSU is between $2,000 and $3,000 per semester, Welsh pointed out--at least four times President Alexander's figure. 

How did Ms. Welsh figure out Alexander's numbers were wrong? By drawing on her family's own experience with a child in college and by looking at housing costs posted online at LSU's web site.

President Alexander's recent misstatement is just another example of the modern university's tendency to hide the truth.  LSU, after all, is the same university that refuses to disclose the names of people who applied for the LSU president's job that Alexander now holds.

Some more examples? George Washington University recently admitted that it had not told the truth when it represented that it had a needs-blind admission policy.  Sorry about that.

UC Davis refused to explain the circumstances under which Lieutenant John Pike, the guy who pepper-sprayed non-offending students in November,2011, left university employment.  Was he fired? Did UC Davis pay him off? Who knows? UC Davis won't talk.

And then there's Ohio State University, which was embarrassed to disclose how much it was paying OSU President Gordon Gee.  It took an Ohio newspaper about a year to pry that information out of the university after it filed a Freedom of Information request.

And remember Harvard Law School's refusal a few years ago to disclose which of its professors was a Native American, although it represented that one faculty member was an Indian? Why the reticence? I suspect it was because it was counting Professor Elizabeth Warren as a Native American, when in fact she is not.  Oops!

Finally, there's the College Board, which speaks for higher education in general.  In a report issued earlier this month, it actually represented that the cost of attending a private nonprofit college had  gone down over the past ten years, in spite of the fact that tuition at a private college has gone up almost every year for the past 30 years.

How did the College Board justify that whopper?  By distinguishing between the sticker price of attending college (going up) and the so-called net price, which the College Board said has gone down a bit after tax benefits, grants, scholarships, and inflation are taken into account. Of course not every student gets those scholarships, grants, and tax breaks.  You--Mr. and Ms. sucker--are probably paying the sticker price.

Why do colleges and their constituent organizations continually hide the facts about their activities? Two reasons.  First, they are accountable to no one and don't care if they get caught in a misstatement or an embarrassing activity. Do you think King Alexander cares about being corrected by a Baton Rouge homemaker?

Second, the upper echelons of American higher education are contemptuous of the American people.  Like Colonel Jessup who screamed "You can't handle the truth!" in A Few Good Men, they don't think Americans deserve to know the facts about the way their universities are being run.

That's why we need a federal Freedom of Information Act that requires all colleges and universities receiving federal funds to publicly disclose a whole range of their activities including the way they choose their executive leaders, their affirmative action practices, their admissions policies, and the way they distribute scholarships and student aid.

Until they are required by law to do so, American universities will continue to behave like Lois Lerner, the IRS administrator who assured Congress she had nothing wrong and then took the Fifth Amendment.

 

Lois Lerner of IRS
Not taking any questions

References

Koran Addo. LSU President calls for reinvestment in higher education. The (Baton Rouge) Advocate, October 17, 2013. Accessible at: http://theadvocate.com/home/7336360-125/lsu-president-calls-for-reinvestment

Elizabeth Welsh. LSU cost numbers don't add up. The (Baton Rouge) Advocate, October 29, 2013, p. 8B.

 

Ivy League graduates are smarter, more ethical, and more competent than the average American: That's why we let them run the government!

President Obama graduated from Harvard Law School and Michelle graduated from Princeton.  All nine Supreme Court Justices graduated from Harvard's law school or Yale's.  More of Obama's top aides have graduate degrees from Oxford than from any American public university. Secretary of State John Kerry and former Secretary of State Hillary Clinton--both Ivy Leaguers.

Don't call me, Barack. I'll call you.

These are the people who run our government or greatly influence it. And that's as it should be because people who graduated from America's elite colleges are smarter, more high minded, and more competent than the average American--some guy who graduated from Kansas State University, for example.  That's why we put Ivy Leaguers in charge.

How's that working out for us?

Under Barack Obama's leadership,  American prestige has never ebbed lower.  The U.S. has managed to offend all of Europe's top leaders, including German Chancellor Angela Merkel and French President Francois Hollande.  Vladimir Putin, President of Russia, looks like he doesn't want to be in the same room with President Obama when the two presidents are photographed together. Three South American countries offered asylum to Edward Snowden,whom the United States government describes as a traitor and a defector--something that would never have happened under previous American presidents.

Let's let Toni's company build
the Obamacare website: How
hard could it be?

In the Middle East, Saudi Arabia, one of America's staunchest allies, turned down a seat on the UN Security Council out of anger toward the U.S.  Libya, where President Obama dabbled by ordering air strikes on Muammar  Gaddhafi, has been flooded by jihadists; and terrorists killed our ambassador in Benghazi.

And now we learn that Toni Townes-Whitley, Michelle Obama's college  roommate at Princeton, is Vice President of CGI Federal, the company hired by the Obama administration to construct the Obamacare website.  CGI got a no-bid contract to perform the work, and so far the website it constructed has been a disaster. Oh yeah, and CGI is a big Obama campaign contributor.  Are the Obamas really all that high minded?

When will Americans get the message?  Our Ivy League colleges do not teach their students to be problem solvers, to be competent, or even to be patriotic.  Instead, they produce graduates who are arrogant, narrow-minded, and contemptuous of traditional American values.

Personally, I'd rather give Joe Six-Pack a chance to run the country than continue with the bozos whom Barack Obama has accumulated around him.  Honestly, I think we would be better off if we limited all presidential candidates to people who reside in Pocatello, Idaho rather than continue to allow these Ivy League losers to drive our once great nation into the ditch.

References

Fox News. Michelle Obama's Princeton Classmate Was ObamaCare's Web Site Builder. Fox Nation web site. Accessible at: http://nation.foxnews.com/2013/10/27/michelle-obamas-princeton-classmate-was-obamacare-website-builder

Brian Resnick & Brian McGill. More Top Obama Officials Have Graduate Degrees from Oxford Than Any Public University in the United States. National Journal, July 19, 2013. Accessible at:
http://www.nationaljournal.com/decision-makers/more-top-obama-officials-have-graduate-degrees-from-oxford-than-any-public-university-in-the-united-states-20130719

Only suckers pay the sticker price. The College Board says college costs at private colleges went down over the past 10 years. Really?

I think the hand-wringing about the trend [in college costs] is greatly exaggerated.

                                                  Sandy Baum, College Board

Year after year, College Board faithfully delivers two messages.  First, college is a fabulous investment when you consider the life-time difference in earnings between college graduates and high school graduates. 

Second, a college education does not cost as much as most people think it does. In fact, last week the College Board issued a report that said the inflation-adjusted cost of attending a private college is actually cheaper than it was ten years ago!  That's right. Even though college costs have risen faster than the rate of inflation for the past 30 years, the cost of attending a private college actually went down over the past ten years, according to the College Board.

Sandy Baum of College Board

It is true, the College Board admitted, that the sticker price of a college education has gone up over the past ten years, but only suckers pay the sticker price. When grants and tax benefits are calculated, the so-called actual price is only 57 percent of the sticker price. Adjusted for inflation, the net price has remained virtually unchanged from what it was 10 years ago.

To put it another way, college costs haven't gone up that much for some groups of people.  Colleges grant huge discounts to preferred customers.  Applicants with high SAT scores get scholarships or grants, because these students help raise colleges' rankings by the various rating entities like U.S. News and World Report.

And low-income students are eligible for Pell Grants.  As Andrew Kelly pointed out in a recent blog, Pell grant spending more than doubled between 2008 and 2011, growing from $16 billion to $37.5 billion in just three years.  The number of Pell Grant recipients grew by more than 80 percent between 2006 and 2012. 

And let's not forget affirmative action.  Not only do the leading colleges give minority applicants preference for admission, they generally give these students scholarships and grant aid--particularly at the elite colleges.

Who then pays the sticker price--the sucker price--to attend all these expensive elite colleges?  If you are a white person from the middle class with lackluster SAT scores, it's you. Citing a federal study, the College Board acknowledged that families in the second highest quartile of family income saw the cost of attending a private college go up by 8 percent from 2003-2004 to 2011-2012 (as reported by NY Times).

References

College Board. Trends in College Pricing 2013. Accessible at: http://trends.collegeboard.org/college-pricing

Andrew P. Kelly(2013, October 24. New data on tuition prices: Is it possible it's even worse than we thought? AEI Ideas blog. Accessible at: http://www.aei-ideas.org/2013/10/new-data-on-tuition-prices-is-it-possible-its-even-worse-than-we-thought/

Richard Perez-Pena (2013, October 25). Despite Risking Stick Prices, Actual College Costs Stable Over the Decade, Study Says. New York Times, p. A14.

 

Lack of Accountability in Higher Education: Revisiting the UC Davis Pepper-Spray Incident

People complain all the time about American higher education. They say it is too expensive and the quality is declining. Reports come out frequently that unfavorably compare the skill level of American workers to the skill levels of workers in other countries. Nevertheless, for the past 30 years, the cost of higher education in the U.S. has risen faster than the annual inflation rate.

I contend that a lot of higher education's troubles stem from lack of accountability.  Colleges and universities demand more and more every year, and yet we don't hold college and university leaders accountable for their actions. The UC Davis pepper spray incident supports my point.

You recall what happened. In November 2011, Lieutenant John Pike, a UC Davis police officer, pepper-sprayed non-threatening students who were sitting on a sidewalk as part of an Occupy Wall Street demonstration.  The incident went viral, and a You Tube video of the event was visited more than a million times.

The  University of California produced two lengthy reports to examine what happened, one at the campus level and one by the UC system.  Experts and lawyers were hired, and both reports concluded that UC Davis officers acted wrongly when they pepper sprayed students.  In fact, the officers had not be trained how to use the  particular form of pepper spray that was used in the attacks.

The student victims sued, and UC settled with them for about $1 million.  Lieutenant John Pike, the chief offender, was put on administrative leave and later left university employment under undisclosed terms.  The local district attorney determined there were insufficient grounds to prosecute him.

And now we learn that the University of California paid Lieutenant Pike $38,000 in settlement of his Worker Compensation claim.  Yes, Pike filed a claim for unspecified psychiatric and nervous system damages arising from the pepper spray incident that he himself initiated.  Lieutenant Pike should have been fired.  Instead he gets a check for $38,000.

Of course this is outrageous.  And it is also outrageous that UC Davis Chancellor Linda Katehi was not held accountable for this shameful incident.

UC Davis had already been sued for misusing pepper spray in a 2004 incident in which Timothy Nelson, a UC Davis student, lost sight in one eye after being hit by pepper spray projectiles fired by UC Davis police officers.  The Ninth Circuit ruled that reasonable law enforcement officers would have known in 2004 that it was constitutionally unreasonable to fire pepper spray projectiles at nonthreatening college students.

Apparently UC Davis learned nothing from the 2004 incident because in 2011 UC Davis police used pepper spray again on nonthreatening students--pepper spray UC Davis had not trained its officers to use.

No one was held accountable for this disgraceful event, although President Katehi did apologize. "I feel horrible for what happened Friday," Katehi told a group of students.  "If you think you don't want to be students of the university we had on Friday, I'm just telling you, I don't want to be the chancellor of the university we had on Friday."  Then she lawyered up and appointed a commission to study the event.

So if you want to know why American higher education is in trouble, just reflect on the UC Davis pepper spray incident.  A university president should be held accountable for incidents like the one that happened in November 2011.  Yet President Katehi is still in charge. 

And what is Chancellor Katehi's salary? She makes about $400,000 in base salary, twice as much as the Governor of California.

References

Christopher Edley & C. F. Robinson 2012). Response to Protests on UC Campuses. University of California. http://campusprotestreport.universityofcalifornia.edu/documents/protest-report-091312.pdf

 Richard Fossey. Nelson v. City of Davis: Campus Police Officers Who Injure Nonthreatening Student with Pepper Spray May be Committing a Constitutional Offense. Teachers College Record Online, October 5, 2012. Accessible at: http://www.tcrecord.org/content.asp?contentid=16894

Gordon, L. (2012, September 13). UC to pay settlement in Davis pepper spray case. Los Angeles Times (online edition). http://articles.latimes.com/2012/sep/13/local/la-me-uc-pepper-spray-20120914

Steve Gorman. University of California cop who pepper sprayed student protesters awarded $38,000. Reuters, October 23. Accessible at: http://usnews.nbcnews.com/_news/2013/10/23/21105239-university-of-california-cop-who-pepper-sprayed-student-protesters-awarded-38000.

Judy Lin. Linda Katehi, UC Davis Chancellor, Apologizes for Pepper Spray Incident. Huffington Post, November 22,2013.  Accessible at: http://www.huffingtonpost.com/2011/11/22/linda-katehi-uc-davis-cha_n_1107303.html

Nelson v. City of Davis, 685 F.3d 867 (9th Cir. 2012).

Smith, D. (2012, September 20). Yolo DA won’t file charges in UCD pepper-spraying. Sacramento Bee (online edition).  http://www.sacbee.com/2012/09/20/4836866/yolo-da-wont-file-charges-in-ucd.html#mi_rss=Our%20Region

Stripling, J. (2012, April 11). Scathing report on UC-Davis pepper-spray incident faults chancellor and police.Chronicle of Higher Education (online edition). http://chronicle.com/article/UC-Davis-Pepper-Spray-Report/131496/

A For-Profit College president is charged with a felony: Should Taxpayers Be Supporting Dade Medical College?

Last week, Miami prosecutors charged Ernesto Perez, President of Dade Medical College, with failing to report criminal arrests on a government form, which is a felony offense.  Specifically, Perez was charged with failing to report his conviction for battery and exposing himself to a child for a 1990 incident that took place in Wisconsin. He also failed to report his arrest in 2002 for aggravated assault. In addition, prosecutors charged Perez with two misdemeanor counts of perjury.

Ernesto Perez
Former President of Dade Medical College

Prior to this bump in the road, Perez was doing pretty well for himself.  He had twice  been appointed to the Florida Commission on Independent Education, the state agency charged with regulating for-profit colleges in Florida.  Last summer the South Florida Business Journal gave him an Ultimate Miami CEO Award for his "significant contributions to the local community." Not bad for a guy who dropped out of high school to join a heavy metal band.

Dade Medical College is a for-profit college with  2,000 enrolled students on five campuses. In 2012, the college received 87 percent of its revenues from federal aid--$33 million (according to a story in Huffington Post). The college attracts low-income Hispanics and African Americans who pay high tuition.  The vast majority of DMC students receive federal loans or Pell grants, and  25 percent of student borrowers default on their federal student loans within three years of beginning repayment.

Do Dade Medical College students receive good value for their tuition? Maybe not. The Florida Nursing Board put two of its campus nursing programs on probation this year due to low pass rates by DMC graduates on state licensing exams. One student who was interviewed by the Broward/Palm Beach/New Times said she had taken out $48,000 in federal student loans and yet she had professors who merely gave Powerpoint presentations or read from a book.

 Dade Medical College is a prime example of what's wrong with for-profit colleges in the United States.  Run by a high-school dropout and lavishly funded by the federal government, the college has high failure rates on nursing exams and high student-loan default rates.

Why is the federal government funding for-profit institutions like Dade Medical College? Maybe because the for-profit college industry is politically powerful.  Mr. Perez and his wife are big campaign contributors and have made contributions to Barack Obama, Mitt Romney, Harry Reid, and Marco Rubio. 

President Obama and Congress can talk all they want about quality controls on higher education. But the federal government is pumping billions of dollars a year into for-profit colleges and universities that prey on low-income students, provide poor quality education and have high student-loan default rates.  This is a huge scandal that our politicians refuse to address.

References

Patricia Born & Jay Weaver. Homestead mayor's ties to downtown redeveloper probed. Miami Herald, June 8, 2013. Accessible at: http://www.miamiherald.com/2013/06/08/v-fullstory/3441091/homestead-mayors-ties-to-downtown.html

Read more here: http://www.miamiherald.com/2013/06/08/v-fullstory/3441091/homestead-mayors-ties-to-downtown.html#storylink=cpy

Francisco Alvarado. Dade Medical College Has Powerful Friends but Struggling Students.  Broward/Palm Beach  New Times, August 29, 2013.  Accessible at: http://www.browardpalmbeach.com/2013-08-29/news/dade-medical-college-has-powerful-friends-but-struggling-students/

Dade Medical College.  Ernesto Perez to be Honored at SFBJ CEO Awards. 2013. Accessible at: http://www.dademedical.edu/rightnow/ernestoperezbehonoredsfbjceoawards

David Halperin. $33 Million Per Year of Your Tax Money to For-Profit College Whose CEO Hid Criminal Record. Huffington Post, October 21, 2013. Accessible at: http://www.huffingtonpost.com/davidhalperin/33-million-per-year-of-yo_b_4136451.html

Michael Vasquez. Amid criminal charges, CEO of Dade Medical College Resigns. Miami Herald, October 23, 2013. Accessible at: http://www.miamiherald.com/2013/10/23/3706821/ernesto-perez-resigns-as-head.html

 

Read more here: http://www.miamiherald.com/2013/10/23/3706821/ernesto-perez-resigns-as-head.html#storylink=cpy

 

The Brookings Institution Makes A Proposal for Student Loan Reform: Let's Turn College Graduates Into Sharecroppers

The Hamilton Project, a public policy initiative sponsored by the Brookings Institution, issued a report this month that offers some promising ideas for reforming the federal student loan program. At the same time, not all of the ideas are good.

The Hamilton Project Proposal in a Nutshell

In a nutshell, the Hamilton Project proposes a simple income-based repayment plan for student borrowers that will replace the hodgepodge of repayment options now in place. Students will make loan payments based on a percentage of their income for a maximum of 25 years. Any unpaid balance owing at the end of this 25 year period will be forgiven with no tax consequences for the debtor.

Loan payments would be paid through a payroll deduction similar to Social Security deductions and debtors would be free to make larger loan payments than the minimum if they want to pay off their loans early. The proposal calls for the government to manage the repayment program instead of contracting out this work to private loan servicers.

In addition, the Hamilton Project recommends the elimination of interest subsidies for low-income borrowers while they are in school. The authors point out that these subsidies do nothing to increase the number of low-income students who enroll for college since the subsidy doesn't really benefit them until they enter the loan-repayment phase.  In the authors' opinion, money spent on subsidizing interest rates should be directed toward grants.



Long-Term Student-Loan Repayment Plans Will Create a New Class of Sharecroppers
Sharecropper cabin, 1936
Photo by Carl Mydans

Finally, the Hamilton Project proposes important reforms for the private student-loan industry.  Most significantly, the Project recommends the repeal of a 2005 Bankruptcy Code provision that makes it almost impossible for borrowers to discharge private student loans in bankruptcy.  The Project recommends that private student loans be treated like any other unsecured debt in bankruptcy.

The Hamilton Project's Proposal Contains Some Good Ideas

I like some of the Hamilton Project's proposals.  First of all, I heartily endorse the Hamilton Project's proposal for providing better bankruptcy protection for people who took out private loans from the banks. Congress made a mistake when it amended the Bankruptcy Code in 2005 to make it almost impossible for debtors to discharge their private student loans in bankruptcy. As I have said before, repealing the 2005 provision would probably have the salutary effect of driving the banks out of the private student- loan business.

I also like the Hamilton Project's proposal for simplifying the process for student debtors to participate in an income-based repayment plan and for having the government handle loan repayments through payroll deductions rather than having private student-loan servicers manage the repayment process.  Some of the private loan servicers are harassing delinquent student-loan debtors, and I would like to see their operations shut down.

Flaws in the Hamilton Project's Proposal

But  the Hamilton Project's proposal has some flaws.  First and most importantly, the plan calls for student-loan repayment obligations to stretch out for as long as a quarter of a century. In essence then, student-loan debtors will become sharecroppers for the government, paying a portion of their wages over most of their working lives in return for the privilege of going to college. I am opposed to lengthy income-based repayment plans as a matter of principle.

And, as I have said before, income-based repayment plans reduce students' incentives to borrow as little as possible and they reduce the colleges' incentives to keep their costs down.

The Hamilton Proposal is Based on a False Assumption

The Hamilton Proposal is based on the premise that most students don't borrow that much money, and thus they should have no trouble paying off their loans under an income-based repayment plan in just a few years. It points out that almost 70 percent of student-loan debtors borrow less than $10,000.

But as the Hamilton Project acknowledged in footnote 7 of its report, by the time people go into default, they owe considerably more than they borrowed due to penalties and accruing interest. If interest rates accrue for low-income borrowers while they are in school or if low-income borrowers' income-based payments are too low to cover accruing interest, then the amount of their debt will become larger--probably much larger--than they originally borrowed.

Conclusion: Some of the Hamilton Project's Proposals Have Promise, But We Should Avoid Putting Student Loan Debtors in Long-Term Repayment Plans

Some of he Hamilton Project's proposals have promise.  Restoring bankruptcy protection for private student-loan borrowers and eliminating the private student-loan repayment servicers are good ideas.

But the people who have been hurt the most by the federal student loan program are young people who attended for-profit colleges. As the Hamilton Project pointed out, people under 21 years of age have the highest loan default rates of any age group, and we know from many sources that people who attended for-profit colleges have the highest student-loan default rates.

The Hamilton Project's proposal is likely to put a lot of young, low-income people into long-term repayment plans they will never pay off.  And many of these long-term debtors--perhaps most of them-will be people who attended expensive for-profit colleges.

We simply must shut down the for-profit colleges.  Otherwise, the Hamilton Project's proposal for putting student-loan debtors in 25-year repayment plans will likely created a 21st century version of indentured servants--people who attended for-profit colleges that were too expensive and who will spend the majority of their working lives paying for college experiences that did not enable them to earn a salary large enough to quickly pay off their student loans.

References

Susan Dynarski and Daniel Kreisman. Loans for Equal Opportunity: Making Borrowing Work for Today's Students. Hamilton Project, Brookings Institution, October 2013. Accessible at: http://www.brookings.edu/~/media/research/files/papers/2013/10/21%20student%20loans%20dynarski/thp_dynarskidiscpaper_final.pdf

Another Day Older and Deeper in Debt: A Sobering Report on Student Indebtedness from the National Center for Education Statistics

If young people will just go to college, the higher education industry assures us, everything will work out fine for everyone.

 Indeed that was the message delivered in a recent New York Times op ed essay. Jonathan Cowan and Jim Kessler,  executives of Third Way, a so-called "centrist" policy organization, argued that the problem of stalled wages and growing income equality in the U.S. is being solved  because more people are going to college.

But reams of studies and reports cast doubt on this Pollyannaish notion. Earlier this month, the National Center for Education Statistics (NCES) released a report indicating that the economic

Pollyanna:
Just go to college and
everything will work out fine.

picture for college graduates is getting worse. Here are some highlights from the report, authored by Jennie Woo.

• The percentage of college graduates who borrowed for their undergraduate education went up from 49 percent among people who graduated in 1992-1993 to 66 percent for people who graduated in 2007-2008.

• Among college graduates, the average amount borrowed went up from $15,000 for the 1992-1993 cohort to $24,700 for people who graduated in 2007-2008

• Among people who graduated from for-profit institutions in 2007-2008, 90 percent had taken out student loans.

• In 2001, about two-thirds of college graduates were making payments on their loans one year after graduating. In 2009, that figure had dropped to 60 percent. The other 40 percent had either obtained a forbearance or were in default.

• Among college graduates who were employed, average annual salaries went down from $39,300 in 2001 to $34,400 in 2009 (measured in 2009 dollars).

To summarize: Over a 13 year period, more Americans were  borrowing to attend college, and they were borrowing more money. At the same time, salaries for college graduates went down and fewer graduates were making payments on their loans one year after graduating.

 Unfortunately, the data analyzed in Ms. Woo's NCES report are old.  She was reporting on the financial situation of people who graduated five years ago. But there is no indication that the financial outlook for college graduates has gotten better in the last five years.  On the contrary, the student-loan default rate has gone up substantially in that time period.

Does this trend have a happy ending? I don't think so. I don't have a sure-fire formula for getting college costs under control or for reducing the amount of money college students need to borrow. Nevertheless, we could brighten this dreary picture if we shut down the for-profit colleges and encouraged low-income students to attend low-cost community colleges and state institutions. And we could ease the burden on overstressed student-loan debtors if we allowed them reasonable access to the bankruptcy courts.

But almost no one is talking about serious reforms in higher education. Instead, we just keep telling ourselves that a college degree is a good investment--no matter what it costs.

References

Jonathan Cowan & Jim Kessler.  "The Middle Class Gets Wise." New York Times, October 20, 2013. Sunday Review Section, p. 4.

Jennie H. Woo. Degrees of Debt: Student Borrowing and Loan Repayment of Bachelor's Degree Recipients 1 Year After Graduating: 1994, 2001, and 2009. Washington, DC: National Center for Education Statistics, October 2013. Accessible at: http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2014011

Surprise, Surpise! Student Loan Ombudsman Reports Problems in Private Student Loan Industry

 I admit that I have been pleasantly surprised by the quality of the reports coming out of the Student Loan Ombudsman's office. Rohit Chopra, the Student Loan Ombudsman for the Consumer Financial Protection Bureau, is doing good work.  Mr. Chopra's reports on student loans are clear, concise, and helpful.

Mr. Chopra's latest report, released this week, focuses on complaints against the private student loan industry.  About 13.7 million people have outstanding balances on private student loans, which total well over $100 billion.  Students who attend for-profit colleges are most likely to take out private student loans. In 2008, almost half of all undergraduate students who attended a for-profit college (46 percent) had at least one private student loan.

Last year, the Consumer Financial Protection Bureau received 3,800 complaints against private student-loan lenders, which is a highly concentrated industry. Almost all the complaints were made against eight private lenders, including Wells Fargo, JP Morgan Chase, Citibank, and KeyBank.  Almost half of the complaints were made against one lender--Sallie Mae.

Here are some of the chief complaints that student-loan borrowers reported:

• Borrowers had trouble paying off their loans early.  They had difficulty getting an accurate payoff number. And when they attempted to pay their loans off early by making additional payments, these additional payments were often not properly credited to them.

• Late fees were charged even when borrowers paid their monthly payments on time.

• When borrowers ran into financial trouble and only made partial payments, these payments were credited to maximize the penalties against them.

A few comments. First, some private student-loan lenders are getting out of the business, and that is a good thing.  For Example, JP Morgan Chase, which once loaned billions of dollars a year to student borrowers, announced last month that it shutting down its private student-loan operation.

Second, there is no valid reason why private student-loan borrowers should be having the problems that the CFPB reported. People with home mortgages have no difficulty paying off their loans early by making extra payments and they have no difficulty getting an early payoff amount.  So why are student-loan borrowers having a problem?  My guess is that the banking industry runs its student-loan operations to maximize profits and has no interest in helping their borrowers pay off their loans early.

Third--and most importantly, the banking industry got its toadies in Congress to amend the Bankruptcy Code in 2005 to make private student loans as difficult to discharge in bankruptcy as federal student loans.  Several respected commentators have recommended that this provision be repealed.

If Congress would repeal its 2005 Bankruptcy Code provision and allow distressed student-loan borrowers to discharge their private student loans in bankruptcy like any other unsecured debt, the private student-loan industry would disappear almost immediately.

The banks are in this business because it is very profitable, and their borrowers have almost no access to bankruptcy or to effective consumer protections.  Students who attend for-profit colleges are most vulnerable to these voracious institutions. I say it is time to shut this pernicious industry down.

References

Rohit Chopra. Annual Report on the CFPB Student Loan Ombudsman. Washington, DC: Consumer Financial Protection Bureau. October 16, 2013. Accessible at: http://www.consumerfinance.gov/reports/annual-report-of-the-cfpb-student-loan-ombudsman/

Alan Collinge. Commentary of the Day-May 2, 2012: What Congress Can do to Fix the Student Loan Crisis. Posted on Irascible Professor Website. accessible at: http://irascibleprofessor.com/comments-05-02-12.htm

Kimberly Hefling. Lender problems target student loan complaints. The Baton Rouge) Advocate, October 17, 2013, p. 8A.
JP Morgan Chase to stop making student loans. USA Today, September 5, 2013. Accessible at:
http://www.usatoday.com/story/money/personalfinance/2013/09/05/jpmorgan-chase-student-loans/2772509/

JP Morgan Chase to stop making student loans. USA Today, September 5, 2013. Accessible at:
http://www.usatoday.com/story/money/personalfinance/2013/09/05/jpmorgan-chase-student-loans/2772509/

Private Student Loans. Finaid web site. Accessible at:  http://www.finaid.org/loans/privatestudentloans.phtml

Private Student Loans. Report to Report to the Senate Committee on Banking, Housing, and Urban Affairs, the Senate Committee on Health, Education, Labor, and Pensions, the House of Representatives Committee on Financial Services, and the House of Representatives Committee on
Education and the Workforce. August 29, 2012. Accessible at: http://files.consumerfinance.gov/f/201207_cfpb_Reports_Private-Student-Loans.pdf

Private Loans: Facts and Trends. Report updated in July 2011. Project on Student Debt. Accessible at: http://projectonstudentdebt.org/files/pub/private_loan_facts_trends.pdf

How high Is the student loan default rate? Buddy, you don't really want to know.

 How many people have kissed my girlfriend, Eddy Arnold asked in one of his greatest hit songs. "How many, how many, I wonder. But I really don't want to know."

No, Eddy decides he would rather remain ignorant. In fact he instructs his girlfriend not to tell him about her former lovers, even if he asks.  "So always make me wonder," Eddy Arnold crooned. "Always make me guess. And even if I ask you, darling please don't confess."

Eddy Arnold
"I really don't want to know."

That's kind of the way the Department of Education feels about the federal student loan program.  Every autumn, DOE reports on the federal student-loan default rate.  But DOE's measure vastly understates the true default rate.  Like Eddy Arnold, DOE really doesn't want to know the truth. Or maybe DOE knows the truth and doesn't want us to know.

Nevertheless, let's look at DOE's latest report on student-loan default rates. According to DOE, 14.7 percent of students who began repayment in the 2010 fiscal year defaulted within three years. As usual, the default rate is highest in the for-profit college sector.  About one in five people who attended for-profit colleges  (21.8 percent) defaulted within three years of beginning repayment.

I've said this many times, but it bears repeating: The true student-loan default rate--the percentage of students who default over the lifetime of their entire loan-repayment period--is probably double the rate that DOE announced this week. In other words, the true default rate for all student borrowers is about 30 percent and the rate for people who took out loans to attend for-profit colleges is at least 40 percent.

As Senator Tom Hawkins' Senate Committee Report on for-profit colleges spelled out, the for-profit colleges are very sophisticated when it comes to managing their institutional default rates. They encourage former students who are in danger of defaulting during the first three years of repayment to apply for economic hardship deferments. Borrowers who get deferments are not counted as defaulters even though they are not making their loan payments. And these deferments are very easy to get.

How many people have obtained some kind of deferment or forbearance on their student loans? Almost nine million people, according to the Consumer Financial Protection Bureau. That's nine million people who are not making loan payments but who aren't counted as defaulters.

Of course some people who get economic hardship deferments will eventually make their loan payments, but a lot of them will not. And those people are not included in DOE's default rate.

When we look at all the evidence, it is hard to escape the conclusion that the federal student-loan program has wrecked the lives of about 30 percent of the program's participants. Isn't it time we confront this stark reality?

But DOE, Congress, and the higher education community don't want to face the truth.  And so DOE continues to post its misleading student-loan default rates and the total amount of student-loan indebtedness continues to rise.  

References

Nick DeSantis. Default rate on federal student loans climbs again. Chronicle of Higher Education, September 30, 2013. Accessible at: http://chronicle.com/blogs/ticker/default-rate-on-federal-student-loans-climbs-again/66985?cid=pm&utm_source=pm&utm_medium=en

President Obama's "Pay as You Earn" program to stretch out student loan repayment over 20 Years: Scarlett O'Hara would approve

 I can't think about that right now. If I do, I'll go crazy. I'll think about that tomorrow.

Scarlett O'Hara, Gone With the Wind

President Obama has shown a commendable concern about the rising cost of attending college and the rising student-loan default rate.  Unfortunately, the President's proposed solutions don't go to the root of the problem.

Yesterday's New York Times reported that the U.S. Department of Education is going to contact student-loan debtors who are in danger of default and urge them to consider a variety of repayment options--including "Pay as You Earn."

DOE's "Pay as You Earn" program allows student-loan borrowers to make loan payments based on a percentage of their income over a period of 20 years. At the end of the repayment period, the remaining balance on the loan will be forgiven.

Scarlett O'Hara would approve. As she famously said in Gone With the Wind, "I won't think about that right now. . . I'll think about that tomorrow." Pay as You Earn simply "kicks the can down the

I'll think about student loans tomorrow

road," so to speak, postponing the day when the government must face the fact that the federal student loan program is a disaster.

Education Secretary Arne Duncan thinks extended repayment programs will help prevent student-loan defaults, and he may be right. Admittedly, allowing student-loan debtors to make income-based payments over 20 years instead of fixed payments over 10 years will allow borrowers to make smaller monthly loan payments. But here are the problems with the program.

Most Pay as You Earn debtors will never pay off the principal of their loans. By design, the program allows people to make loan payments based solely on their income, and for many debtors--probably most of them--those payments will not be enough to pay down the principal of their promissory notes.  Under the plan, people who are unemployed or who have very low incomes may pay nothing on their loans for several years. Meanwhile interest will continue to accrue, making their debts grow larger.

Right now, 1.6 million student-loan debtors are participating in some kind of income-based repayment plan. I think it is safe to predict that at least a million of those people will still owe on their loans when their 20-year or 25-year repayment plan comes to an end.

In essence, Pay as You Earn debtors are indentured servants to the government. Second, requiring people  who attended college to pay a portion of their income for 20 or 25 years turns those people into 21st century indentured servants. They will be sending a portion of their income to the federal government for a majority of their working lives. Who thinks that is a good idea?

Income-Based Repayment Plans eliminate people's incentive to borrow as little money as possible to attend college.  Obviously, if students' college-loan payments are going to be based on a percentage of income regardless of the amount borrowed, then it makes sense for students to borrow as much money as possible.

Not only will the program eliminate the incentive to minimize student borrowing, it will also reduce the incentive for colleges to keep their costs down.  Who cares how much college costs, if student-loan payments are going to be based solely on an ex-student's income?

Pay as You Earn  will likely  increase red tape and bureaucracy.  Pay as You Earn and other federal income-based repayment programs will likely create a giant bureaucracy that will require the
government to adjust people's loan payments on an annual basis based on changes in income, periods of unemployment, and other factors.

The federal student loan program is already nearly incomprehensible to many student-loan debtors. I fear this program will balloon into the educational equivalent of Obamacare and Social Security and will require mountains of paperwork and bureaucratic red tape to administer.  Is this the future we want for our college graduates?

Conclusion: It's time to face the music.   It is time for the Obama administration, government policy makers and the nation's universities to face the music.  The federal student loan program is a catastrophe.  Like a drug addict, our universities have become hooked on federal student-loan money, which they rely on to survive. Thus, we cannot eliminate the program overnight; or our loan-dependent universities will go into toxic shock.

But we can gradually begin dialing this program down.  First, let's kick the for-profits out of the federal student loan program. That would shrink the cost of the program by about 25 percent and reduce the number of loan defaulters dramatically.  Of course, most for-profit colleges would be forced to close. But that's OK; the United States can get along just fine without the University of Phoenix.

Second, as I've said repeatedly, we have to allow truly distressed student-loan debtors to discharge their loans in  bankruptcy, so they can get a fresh economic start.

Third, we need to encourage more low-cost community colleges to do what some have already done--get out of the student loan program altogether. Wouldn't it be a good thing to offer low-income students low-cost options for attending college--options that would not require them to assume crushing debt just to get an education?

But so far, the higher education industry and the federal government want to prop up the status quo.
No one wants to confront the enormity of the problems that were created by the federal student loan program.  Like Scarlett O'Hara, we've decided not to think about that right now.  We'll think about that tomorrow.

References

Tamar Lewin. U.S. to Contact Borrowers With New Options for Repaying Student Loans. New York Times, September 25, 2013, p. A20.