Is Senator Elizabeth Warren a Paper Tiger? Her Bill to Lower Interest Rates Was a Non-Starter

A lot of people think Senator Elizabeth Warren is a fierce advocate for college-loan debtors, a feisty bulldog who strives mightily to get some relief for the millions of young Americans who are burdened with crushing student loans. I once thought so myself.

But I've become skeptical.  So far,Warren's basic thrust has been to advocate for lower interest rates on federal student loans. Lower interest rates will give college-loan borrowers some relief, of course; but lower interest rates will do nothing to stop the spiraling cost of higher education--which has forced students to borrow more and more money every year in order to attend college. 

And lowering interest rates will do nothing to clean up the fraud and abuse in the for-profit college industry--a problem that Warren says little about.

Earlier this week, Warren's bill to lower student-loan interest rates failed in the U.S. Senate, killed by the Republicans.  The bill never had a chance of passing because it included a provision to raise taxes on the wealthy--something Republicans would never vote for.

And of course Warren knew that. Basically the bill was a cynical attempt to paint the Democratic Party as the friend of indebted college students while embarrassing the Republicans by portraying them as hardhearted protectors of the rich.

All fine theater of course, but did anything get accomplished? No--not a damn thing.

I realize of course that getting real student-loan reforms through Congress will be difficult. The for-profit industry and its lobbyists are very powerful; and the for-profits make strategic contributions to key legislators like Speaker of the House John Boehner.

But Warren could render real service simply by publicizing just how bad the student-loan mess is.  She should demand, for example, that the Department of Education release information about the true default rate--not the watered-down rate that it publishes every October.

In addition, she could team up with outgoing Senator Tom Harkin and publicize how the for--profit colleges are exploiting low-income and minority students.

She could advocate for a reform of the Bankruptcy Code so that millions of insolvent student-loan debtors could discharge their loans in the bankruptcy courts.

But no--she is content to sponsor legislation that she knows will go nowhere simply to embarrass the Republicans.

I suspect that Senator Warren's core constituency in Massachusetts--all those corpulent, self-satisfied and arrogant colleges like Harvard, Boston University, Brandeis, etc. etc.--are quite happy to see their senator engage in sound and fury regarding the student loan program. They know Senator Warren's bombast will never lead to any legislation that would threaten their interests.

So just keep yakking, Elizabeth; go right on yakking.

References

Julie Hirschfield Davis. In School Speech, Obama Deplores Blocking of Student Debt Bill. New York Times, June 12, 2014, p. A20.

Like a Secret Drunk Who Hides A Bottle of Bourbon in His Office Drawer, The Higher Education Industry is Addicted to Student Loans But Won't Admit It

Almost everyone agrees that Alcoholics Anonymous has the best treatment program for alcoholics. AA's simple 12-step program is followed by alcoholics all over the United States, and AA's method for treating alcoholics has been adapted for other addictions as well--including the addiction to drugs.

Perhaps the higher education industry should adopt an AA-style 12-step program to treat its addiction to the federal student loan program.  After all, higher education's dependence on federal student aid money really is an addiction. For-profit colleges in particular could not survive a week without regular infusions of federal cash.

Drinking problem? What drinking problem?
photo credit: twentytwowords.com

But the Obama administration and Arne Duncan's Department of Education treat the student-loan mess as if it were just an irritating  problem and not a full-blown crisis.  It's like Aunt Sally's tolerance for Uncle Ed's drinking binges--she just smiles while reassuring herself that Ed maybe drinks just a wee bit too much.

And President Obama's announcement to expand the Pay As You Earn program shows us that he is in denial about the magnitude of the student-loan crisis.  His administration's decision to expand the program, like its decision to continue strengthening the regulation of the for-profit industry, shows that President Obama and Arne Duncan know that the student-loan mess is serious.  But they want to address the problem like Aunt Sally deals with Uncle Ed's drinking--they just want to water down the whiskey.

Let's face it, in spite of the New York Times' sycophantic praise, Pay As You Earn is nothing more than a plan to stretch students' 10-year student-loan repayment obligations to 20 years.  Yes, this will reduce borrowers' monthly payments, which will give college-loan debtors some short-term relief; but borrowers will be paying on their loans for a majority of their working lives. Is that a real solution?

Second, although I haven't seen any financial analysis to back me up on this observation, I suspect a lot of people who elect the government's income-based repayment options for paying back their loans  won't be making payments large enough to reduce the principal on their debt.  When their loan obligations are discharged after 20 years, millions of people will still owe as much as they borrowed. How can that be a good thing?

So let's look at that 12-step plan.

Step number one is to admit that you have a problem and are powerless to control it.  The Feds could follow that first step by releasing the real student-loan default rate--not that phony three-year rate it releases every October.  According to DOE's latest report, about 15 percent of  recent debtors defaulted within three years of beginning their loan repayment phase; for students who attended for-profit colleges, the rate is 21 percent.

Those numbers are bad but they dramatically understate the true default rate.  Many for-profits, community colleges and some traditional four-year schools have hired so-called "default prevention" firms to contact distressed student borrowers and encourage them to sign up for economic hardship deferments.  Students who obtain these deferments--which are quite easy to get--are not counted as defaulters even though they are not making loan payments.

Just facing up to the reality of how many millions of people are not paying back their loans would be an admission that the student-loan program is out of control.  That's step number 1 of the AA's 12-step plan.

Another important step in AA's 12-step program is to make amends to the people you have injured. I believe that is step number 9.

And of course the Obama administration, Congress and the nation's colleges and universities haven't made amends to the people who have been hurt by the student-loan program.  And until they make amends they haven't done what is necessary to break the higher education industry's dependence on federal student aid money.

What should be done?  As I have tirelessly advocated, Congress needs to amend the Bankruptcy Code to allow insolvent student-loan debtors to discharge their  student loans in bankruptcy so long as they file in good faith.

Second, the federal government should stop garnishing the Social Security checks of elderly student-loan debtors who defaulted on their loans.

And third, the for-profit college industry needs to be shut down.

Of course none of these things are going to happen.  Our government will continue to hide the true magnitude of the student-loan default rate, and it will continue to let millions of people suffer who have no reasonable hope of ever paying off their student loans.

And just like Uncle Ed, who drinks in secret, our nation's colleges and universities will continue abusing students by forcing them to borrow more and more money.  Eventually, Uncle Ed will kill himself from excessive drinking. And eventually, higher education's addiction to federal student aid will destroy the integrity of our nation's colleges and universities, which were once the envy of the world.

No one knows just how Uncle Ed will die--liver disease or a fatal car accident.  And no one knows just how low American higher education will go in terms of its degradation.  But the future is bleak for both of them.

References

Student Borrowers and the Economy. New York Times, June 11, 2014, p. A20.

Bowdoin College Casts Out a Christian Prayer Group: In the Coming Years, Catholics Will Be Pushed Out of the Universities and Public Life

The New York Times carried a front page story today about a decision by Bowdoin College to withdraw recognition of a Christian prayer group as an official student organization.

And what did the Christians do to cause Bowdoin to cast them into the outer darkness? The group refused to allow non-Christians to be appointed as their organizational leaders.

Bowdoin is one of many so-called elite colleges and universities around the country that are withdrawing recognition to Christian student groups, which generally means these groups will be denied access to facilities and services that are open to other student groups--the local S & M club for example.  Vanderbilt has done the same thing, along with Tufts, State University of New York at Buffalo and Hastings Law School in California.

Edith Stein
Later St. Teresa Benedicta of the Cross
(Did not attend Bowdoin)

What happened to the constitutional right to freedom of religion, you may be asking? Didn't the Supreme Court rule in Widmar v. Vincent that a state university could not deny recognition to a Christian student group if it recognized other student organizations?

Unfortunately, the Supreme Court overturned Widmar v. Vincent as a constitutional  precedent, although the Court did not have the courage or the intellectual honesty to say so.  In Christian Legal Society v. Martinez, as cynical a piece of sophistry as anything the Court ever wrote, Justice Ruth Ginsberg upheld a decision by Hastings Law School to deny recognition to the Christian Legal Society because the CLS limited its members to Christians who agreed to abide by traditional Christian beliefs about sexual morality.

Justice Ginsberg said that Hastings had a compelling governmental interest in enforcing an open-to-all-comers policy for all student groups and could deny recognition to any student group that refused to comply. CLS denied membership to anyone who did not commit to the Christian standard of sexual morality, which prohibits all sexual activity outside the relationship of marriage between a woman and a man.

The bottom line is this: According to the morality that prevails at some of America's most prestigious (and expensive) colleges, Christian groups discriminate against people who do not adhere to Christian sexual values.  Thus they should be kicked off campus. In the postmodern academic mind, Christian students who hold traditional religious beliefs about sexual morality are reprehensible--as reprehensible, I suppose as racists.

The universities' anti-Christian policies are not expressly aimed at Catholics.  So far, from what I can gather, it has been evangelical Protestant groups that have been exiled.  But Catholic student organizations are as vulnerable as Protestant groups to expulsion.  Catholics believe, after all, in Christ's real presence in the Eucharist--a belief not held by Protestants. Catholic will never allow a Protestant or non-Catholic to be a leader of a Catholic student organization.

And--under Justice Ginsberg's wacky reasoning, a Catholic student organization that refused to allow an abortion advocate to be an elected leader would also fall afoul of the CLS v. Martinez ruling.

So Catholic student groups are going to be pushed off college campuses. In fact, I'm sure that has already begun happening.

What does this mean? Three things I think:

First of all, the decision by Bowdoin, Tufts, Vanderbilt and other elitist institutions to censor Christian student groups demonstrates just how shallow, vacuous and intellectually dishonest our nation's colleges and universities have become. Based on no basis other than the fashions of the day,  colleges and universities that Americans once trusted to preserve and pass on our nation's cultural and religious heritage have declared that Christianity--or at least traditional forms of Christianity--is a shameful cult that does not deserve to even have a presence on an American college campus.

Of course, the new campus groupthink won't have any effect on the mainstream Protestant organizations--the Methodists, Episcopalians, and the Disciples of Christ.  Those folks don't have any firm religious convictions; their doctrine changes with the whims of the New York Times editorial page. As long as they keep their Times subscription current and do what the Times editorial-page writers tell them to do, they will be fine.

But if you are a Catholic, a Mormon, a Muslim, or a Southern Baptist, then you are a bigot in the minds of many campus administrators; and it will be the job of the university to re-educate you--just as China re-educated its dissidents during the Cultural Revolution.

But at least the Chinese didn't require its nonconformists to pay outrageous tuition to brain wash you.  The rural re-education camps were free!

Second,the higher education communities' accelerating trend into mendacity, deceit, and sophistry will push faithful Catholics out of the nation's leading universities and out of the professions, which have shown a distressing trend to censor Christian views.  The day will come when law, medicine, education, counseling, and academia in general will be closed to anyone who professes a belief in the doctrines and tenets of the Catholic faith.

And third, I think Catholics and evangelical Protestants will grow closer as the kulterkampe expands its reach and America's intellectual elites become bolder in their bigotry.  Personally, I have a growing admiration for our Protestant brothers and sisters who have taken their place in the front lines in the fight against abortion. And I believe evangelical Protestants are looking more tolerantly toward Catholicism.

Now may be an opportunity for Catholics to reach out and evangelize the evangelical Protestants. I think we might be surprised by how receptive they are to our Catholic faith.

Certainly, as evangelical Protestants and Catholics go down into the catacombs together, we will have plenty of time to contemplate the Gospel and to ask ourselves what God requires of us as the Postmodern Age sweeps aside the culture, the traditions and the moral principles that are the bedrock of Western Civilization.

And while we are down in those catacombs, let us mediate on the life of St. Edith Stein, who was a great intellectual who held two doctoral degrees and has been named a Doctor of the Catholic Church.  If Edith were alive today, her views would not be welcome at Bowdoin.  I don't think Bowdoin would gas her as the Nazis did at Auschwitz; but  in the coming years, who knows how far the new anti-Christian bigotry will go?

References

 Michael Paulson. Colleges and Evangelicals Collide on Bias Policy. New York Times, June 10, 2014, p. 1.

For what we have done to you, we are truly sorry: The Baby Boomers should apologize to the Millennial Generation for the student-loan mess

Frank Bruni wrote a long op ed essay in yesterday's Sunday Times about the wrongs the Baby Boomers have committed against the Millennial generation.   According to Bruni, the Baby Boomers are leaving today's youth with towering problems: climate change, a sick economy, and a mounting national debt. Bruni quotes former governor and U.S. Senator Bob Kerrey as saying the nation is spending too much on the last generation (Medicare, Social Security, and Veterans' benefits) and not enough on the next one.

Dear Millennnials: We're Sorry for the Student Loan Crisis (burp)!

Kerrey is right of course, and so is Bruni. The Baby Boomers have bequeathed the young people of our nation with a host of problems--problems that are only going to get worse because this generation doesn't have the courage or integrity to face them.

Bruni's op ed essay was in harmony with an editorial that appeared in the same issue of the Times entitled "Starting Out Behind." The Times points out that young people are graduating from college with massive indebtedness only to face a sickly job market.  Unemployment among people in their early 20s is higher than the national average, and underemployment (those people who are unemployed, employed part-time or who have given up looking for work) is very high--16.8 percent.

The Times editorial quoted statistics showing that 44 percent of today's college graduates hold jobs that do not require a college education.  There was a time, the Times observed, when people working in jobs that did not require a college degree made decent money--tradespeople like plumbers and electricians, union workers, etc. Today, a lot of college-educated young people are working as waitresses, bar tenders and store clerks.

Perhaps the most disturbing bit of data the Times mentioned is the fact that more than half of young adults (55 percent) still live with their parents. Nobody wants to see that number go higher.

The Times editorial did not mention the burgeoning student-loan indebtedness that is crushing this nation's young adults. And this is odd, because  of all the problems this generation passed on to the Millennial generation, the federal student-loan mess is the most egregious and the easiest one to fix.

Addressing climate change,  the national debt, and our sickly national economy are complicated problems with no easy or certain solution. But we could easily do some things to ease the burden of student-loan indebtedness on our nation's young people; and we could do these things today.  Here are a few things we could do that would be helpful:

1) The federal government could remove any higher education institution from the federal student loan program that does not freeze tuition and fees at current levels.   In essence, our government would be telling the nation's porky colleges and universities that the party is over.

2) Congress could amend the Bankruptcy Code to allow insolvent student-loan debtors to discharge their loans in the bankruptcy courts so long as they file for bankruptcy in good faith.

3) The Obama Administration could instruct the Internal Revenue Service to stop garnishing the Social Security checks of elderly people who defaulted on their college loans.

4) Congress could easily shut down the private student-loan industry by making it easier for distressed debtors to discharge their private student loans in bankruptcy.

5) Congress could shut down the for-profit college industry, which has the highest student-loan default rates and which is riddled with fraud and abuse,  simply by making all for-profit colleges ineligible to participate in the federal student aid program.

Of course none of these things are going to happen.  So far, the Obama administration, which is fully aware of the magnitude of the student-loan crisis, can think of nothing better to do than extend students' loan repayment period from 10 years to 20 or 25 years.  Not very bold or creative in my opinion.

But Frank Bruni is right: the Baby Boomers generation owes the Millennial generation an apology.  But it should apologize for more than global warning and the national debt; it should say it is sorry for corrupting higher education with a corpulent and abusive federal student loan program that has put this nation's young people in debt to the tune of $1.2 trillion.

References

Frank Bruni. Dear Millennials, We're Sorry. New York Times, June 8, 2014, Sunday Review Section, p. 3.

Editorial. Starting Out Behind. New York Times, June 8, 2014, Sunday Review Section, p. 10.

Workin' for the Man: President Obama's Disasterous Plan to Expand Income-Based Repayment Programs for Student Loan Debtors

Tomorrow, President Obama is expected to announce an expansion of his "Pay as You Earn" income-based repayment program for student loan debtors. This program,  which Obama initiated by executive action in 2011, allows student-loan debtors to pay roughly 10 percent of their income on their loans for a period of 20 years.  (The exact formula is a bit more complicated that.)  At the end of the 20-year repayment period, any unpaid loan balance will be forgiven.



Passing the student-loan mess on to the next president

Pay as You Earn is popular with student debtors because it is more generous than the other income-based repayment (IBRP) options. One major program requires debtors to pay 15 percent of their income over a period of 25 years.

But a lot of student debtors don't qualify for Pay As You Earn under present regulations. According to the New York Times, Obama plans to extend eligibility to an additional 5 million student-loan borrowers, including those who took out loans before October 2007. 

Is Pay As You Earn a good thing for the nation's distressed student-loan debtors. Yes it is--at least in the short term. For people struggling to pay mountains of debt under the standard 10-year repayment plan, Pas As You Earn will lower monthly payments substantially.  People who are currently paying 15 percent of their income under a 25-year IBRP will be delighted to switch to Obama's more generous Pay As-You Earn program.  People who are unemployed or underemployed will be particularly grateful, because if their income falls below the official poverty level, they won't have to make any monthly payments at all.

Is there a down side to Pay As You Earn? You bet.

First of all, all the income-base repayment plans remove all incentives for student borrowers to limit the amount of money they borrow. If their loan payments are based on their income and not the amount they borrow, then there is no reason not to borrow as much money as you can.

Second, Pay As You Earn and other IBRPs do nothing to slow the burgeoning cost of going to college.  Colleges have no incentive to keep their costs down, because they know students will simply borrow more money to cover tuition hikes.  What do colleges care if their graduates are making student-loan payments for 20 years?

Third--and most significantly, these long-term repayment plans are going to fundamentally change the way Americans view postsecondary education and the world of work. There was a time when low-income individuals worked their way through college, graduated with no debt, and entered the workforce determined to buy homes, start families, and begin the confident climb up the economic ladder.

Now, 18- and 19-year olds are going to begin college knowing that they will pay for their postsecondary education by donating some percentage of their income to the federal government over the majority of their working lives.  In essence, they will become indentured servants for the government--sharecroppers if you will.

I think this arrangement will foster cynicism among the young, because they will realize on some level that they have been forced into unreasonable levels of indebtedness because colleges refuse to control their costs. They will see university presidents like NYU's John Sexton make outrageous amounts of money while they sign up for long-term college-loan repayment plans that they will not pay off until they are in their 40s and 50s.

And, since they won't have to pay anything under Pay As You Earn if they are unemployed or live below the poverty level, I think many of them will postpone going to work. Many will figure that it makes sense to travel or take low-wage jobs in exotic locales rather than seek more remunerative employment. And the incentive to work "off the books" will increase, because people in IBRPS who enter the cash economy will not only avoid paying taxes and making Social Security contributions, they will avoid making student-loan payments as well.

Moreover, once these college-going young people figure out that their payments will be based on their incomes and not the amount they borrow, they will borrow as much as they can.

I appreciate the President's efforts to provide overburdened college-loan debtors some immediate relief by offering plans to lower monthly loan payments while extending the loan repayment period. Unfortunately, in the long run, the results will be catastrophic.

In reality, President Obama is simply passing the student-loan mess on to the next president to deal with.  Millions of people may see their student-loan payments go down in the short-term, but they will be significantly extending the length of their loan repayment period. Most Pay-As-You-Earn participants --I predict--won't be making loan payments large enough to cover accruing interest  or pay down the principal on their notes--which means they won't really be paying their loans back at all. 

And meantime--total student-loan indebtedness--now more than $1 trillion dollars--will continue to grow and grow.


References

Jackie Calmes. Obama Plans Steps to Ease Student Debt. New York Times, June 8, 2014, p. 17.

Transparency--The Last Refuge of a Scoundrel: New York University's Abu Dhabi Construction Scandal

Patriotism, Samuel Johnson remarked, is the last refuge of a scoundrel. But times have changed. Today,self-proclaimed "transparency" is the last refuge of the scoundrel--or at least of scoundrel universities.

Earlier this month, the New York Times broke the story of labor abuses during the construction of New York University's Abu Dhabi campus.  According to the Times, construction workers were required to pay hiring bonuses to get jobs, forced to work long overtime hours in order to obtain the wages they were promised, and crammed into substandard housing--sometimes 15 workers to a room.  Immigrant workers' passports were confiscated, and striking workers were arrested and beaten.

Transparency--the queen of virtues

New York University apologized immediately after the scandal broke, probably pulling a template apology from its public relations department files.  But it never took responsibility for what occurred.  In fact, NYU President John Sexton tried to distance the university from the scandal by claiming that the construction company, not NYU, was responsible for working conditions during the Abu Dhabi construction.

A few days later, NYU held its first graduation ceremony on its Abu Dhabi campus, and Bill Clinton showed up to give the commencement address.  Did he reproach NYU for the labor scandal? No he did not.

This is what Clinton said:

When this story came out, instead of going into immediate denial, the university did something which reflects the values you have been taught here . . . The university, and the government, promised to look into the charges, to do it quickly, to do it honestly and, most importantly, among all the world's skeptics, to do it transparently and if the charges were well founded, to take appropriate, remedial action promptly.

Ah, transparency!  The new queen of virtues.

But then, only a couple of days later, the New York Times reported that the construction company that built NYU's Abu Dhabi campus and apparently abused its construction workers, is run by Khaldoon Khalifa Al Mubarark, a member of NYU's boad of trustees!

So NYU President John Sexton was not being transparent when he suggested that NYU was not directly involved in the Abu Dhabi construction project.  In fact, the construction company's chief executive was sitting on NYU's board.

This is not the first time NYU has been caught being less than transparent. Remember when Senator Charles Grassley tried to get NYU documents pertaining to the low-interest loans it was giving favored administrators? NYU employees finally let Senator Grassley's staffers look at some pertinent documents but they would not permit any documents to be copied or allow Grassley's people to keep any documents for further review.

Some transparency!  Let's face it--New York University, which pays President John Sexton an obscene salary and has a board of trustees packed with Wall Street insiders, is about as transparent as a Louisiana crawfish pond.

Which is fine.  Let NYU run itself any way it chooses.  If it wants to pay its president $1.5 million a year, dispense exit bonuses to guys like Jacob Lew, and give low-interest loans to help insiders buy second homes--I say go right ahead.  But let's kick this renegade institution out of the Federal Student Loan program.


References

Clinton Lauds N.Y.U. Graduates, and Inquiry, in Speech. New York Times, May 25, 2014.

Ariel Kaminer.  N.Y.U. Impeding Compensation Inquiry, Senator Says. New York Times, July 10,2013.  Accessible at: http://www.nytimes.com/2013/07/11/nyregion/nyu-accused-of-impeding-compensation-inquiry.html?_r=0

Andrew Ross Sorkin. N.Y.U. Crisis in Abu Dhabi Stretches to Wall Street. New York Times, May 26, 2014.

Obama's College Rating System: Why Do Something Simple and Effective When You Can Do Something Complicated and Futile?

President Obama Wants to Institute a College-Rating System to Help Bring Down the Cost of Higher Education. Is This a Good Idea?

President Obama wants to create a college-rating system to help prospective students make better choices about where to attend college.  Obama's proposed rating system will consider a number of factors--cost of tuition, graduates' average debt load,  post-graduate earnings, etc.--which will all be weighed with the goal of identifying which colleges provide the best value for students' tuition dollars.

University of Houston's Renu Khator: This woman needs a performance bonus!

According to a New York Times story, Obama's proposed rating system would not rank institutions numerically. Rather, colleges and universities would be given grades like "excellent," "good," "fair," or "poor."

Not surprisingly, many higher education leaders are opposed to President Obama's initiative. Most of them want nothing to do with a college-rating system designed by the U.S. Department of Education.  The New York Times quoted the reaction of several university presidents to Obama's college-rating proposal, who described it  variously as  "clueless," simplistic, and "wrongheaded."

Personally, I have no sympathy for the college presidents on this issue.  Colleges and universities have been jacking up tuition for years at twice the annual rate of inflation, and Americans have wracked up more than $1.2 trillion in outstanding college-loan debt. I commend President Obama for trying to reverse this trend.

But will a complicated, federally designed college-rating system do anything to stop the upward spiral of rising college costs? I doubt it. 

In a way, Obama's college-rating initiative is like the Clery Act, which Congress passed in 1990 to give parents and prospective students more information about crime activity in and around the nation's colleges and universities.  The Clery Act requires higher education institutions to collect and publicly report on various categories of crime in their campus communities.

Unfortunately, there is little evidence that the Clery Act has had much impact on college students' awareness of campus crime.  One study reported that only 10 percent of students considered campus crime statistics when making decisions about where to attend college.

Two authors who surveyed research and commentary on the Clery Act concluded: "It is clear that students remain unaware of the [Clery] Act"  and do not use the information contained in their institutions' annual campus crime reports (Gregory & Janosik, 2002, p. 46). It seems likely that more students choose their universities based on varsity-football rankings than on the crime statistics that higher education institutions are required by federal law to compile and publicize.

Why Not Attack College Costs and Rising Student Indebtedness Head On?

To his credit, President Obama recognizes that soaring tuition costs and rising student indebtedness have reached crisis proportions. As Cecilia Munoz, one of Obama's top advisers put it, "This is a system which perpetuates itself, and is moving in a direction which is unsustainable to the American people." 

Nevertheless, it seems unlikely that  President Obama's federal college-rating system will have any significant impact on rising college costs and rising student indebtedness. On the contrary, Obama's initiative will probably increase administrative costs at colleges and universities because they will be required to hire more bureaucrats to deal with the college-rating regulations.

Shut down the for-profit college industry. Instead of dealing with rising college costs and student indebtedness indirectly, why not tackle the problem head on? For example, we know that for-profit colleges have the highest tuition rates, the highest student-loan default rates and the highest dropout rates of any sector of the higher education industry.  Moreover, although they enroll only about 11 percent of all post-secondary students, they soak up a quarter of all the federal student-aid money.

Why not simply kick the for-profit colleges out of the federal student loan program altogether? The money saved--more than $30 billion annually--could be directed to public community colleges, which can offer post-secondary education at a far more reasonable price.

Shut down the private student-loan industry. We also know that rising tuition is made possible in part by a thriving private student-loan business.  Professional schools in particular could not set tuition rates at their current high levels if it were not for the fact that students have access to a private student-loan market to pay their tuition bills.

Why not shut down the private student-loan industry?  And how could that be done? Simply by repealing the 2005 revision to the U.S. Bankruptcy Code that makes private student loans almost impossible to discharge in bankruptcy.  If the banks knew that insolvent student-loan debtors could discharge their loans in bankruptcy as easily as they could discharge other unsecured loans, the private-loan industry would shut down almost overnight.

Force colleges and universities to cap tuition and executive compensation as a condition of participating in the federal student loan program.  Finally, all colleges and universities should be required to cap tuition, fees, and executive compensation at current levels as a condition of participating in the federal student loan program.

The value of capping college tuition and fees should be obvious. Telling colleges they must freeze tuition and fees at current levels in order to receive federal student-aid money would force higher education to immediately rein in costs.

And capping executive compensation is also important Let's face it, many college and university presidents make obscene amounts of money and their total compensation packages are often not publicly disclosed.  No institution participating in the federal student loan program should be allowed to do what New York University has done--give low-interest loans to favored employees to buy second homes or pay its president a "length of service" bonus of $2.5 million.

No institution that receives federal student aid money should do what the University of Houston did, which was to pay its Chancellor, Renu Khator, a salary of $700,000 a year plus an additional $200,000 a year in deferred compensation along with a $100,000 a year retention bonus and a contingent bonus of $50,000 a year dependent on performance. 

Don't you think that's ridiculous?  Chancellor Khator makes a million dollars a year in total compensation (plus free housing), and then she gets an additional $50,000 incentive for superior performance? So what's Ms. Khator telling the University of Houston? I'll do a pretty good job for a million bucks a year, but for an additional $50 grand performance bonus, I'll do a super job!

These three actions--shutting down the for-profit college industry, shutting down the private student-loan business, and forcing colleges and universities to cap tuition and executive compensation--would help stop the spiral of rising college costs and growing student indebtedness. All three actions would be simple to implement and all would have an immediate effect on the cost of higher education.

On the other hand, President Obama's proposed federal college-rating system will do absolutely nothing to rein in the cost of higher education or reverse the trend of rising student-loan indebtedness. The time for tinkering with this problem is over.  Only drastic action will restore fiscal sanity to American higher education.


References

Dennis E. Gregory & Steven M. Janosik. The Clery Act: How Effective Is It? Perceptions From the Field--The Current State of the Research and Recommendations for Improvement. Stetson Law Review, 32, 7-58 (2002).

Renee C. Lee. UH gives Khator big bucks to stay. Houston Chronicle, December 21, 2012. Available at: http://www.chron.com/news/houston-texas/houston/article/UH-gives-Khator-big-bucks-to-stay-4139696.php

Michael D. Shear. Colleges Rattled as Obama Presses Rating System. New York Times, May 26, 2014, p. 1.

Don't Mess With the Man: Occupy Wall Street Activist Cecily McMillan Gets Three Months In Jail

I lived in Alaska for nine years, a state that takes its wildlife very seriously.  If you were accused of bank robbery or murder, you could expect justice.  But heaven help you if you shot a moose out of season!

Cecily McMillan

America's elitist colleges have a similar scheme of skewed values. Our elitist institutions encourage students to focus on trivial issues.  When Dartmouth students took over the college president's office to demand gender-neutral bathrooms, Dartmouth treated them with utmost respect. Likewise, our elitist colleges are happy to entertain bizarre student demands to put warning labels on great works of literature.  Warning! The Adventures of Huckleberry Finn contains racist language!

Why do colleges put up with such mindless student antics? Because they don't want students to start thinking about true injustices: the cost of tuition, the out-of-control student loan program, the economic injustice perpetrated by the corporate banks and our federal financial policies.

No--when students protest about important things, the authorities come down hard. Remember the Occupy Wall Street protesters at UC Davis awhile back?  UC Davis police pepper-sprayed students sitting passively on a sidewalk.  Don't mess with Wall Street!

And Cecily McMillan, a graduate student at the New School, was recently sentenced to three months in jail for allegedly assaulting a police officer during an Occupy Wall Street demonstration in New York City.  Ms. McMillan denied the charge, saying that she was only defending herself against a police officer who grabbed her breast. Personally, I think her only crime was to challenge the economic order in an Occupy Wall Street demonstration.  She should have barricaded herself in a college president's office demanding an end to "abilityism."  The college president would probably have served her coffee!



Cecily McMillan

Yes, college presidents and professors will talk with students for hours about the rights of transgender students to go to the bathroom, whether the college endowment fund should divest itself of coal-company stocks, or whether warning labels should be placed on The Great Gatsby. But don't ask them about bloated tuition costs, excessive executive-compensation packages, or the ties between academia and the finance industry.  If you ask difficult questions, you are liable to get pepper sprayed.

References

James C. McKinley Jr. Despite Calls for Release, Activist in Occupy Case Gets Three Months. New York Times, May 20, 2014.

Jennifer Medina. Warning: The Literary Canon Could Make Students Squirm. New York Times, May 18, 2014. p. 1.

NYU's Abu Dhabi Labor Scandal: President John Sexton Should Compensate Exploited Workers From His Own Funds

Yesterday's New York Times reported on New York University's labor scandal in connection with the construction of its new campus at Abu Dhabi.  According to the Times, construction workers, who were largely recruited from East Asia, were crammed into overcrowded living quarters, deprived of their passports, and required to work overtime in order to achieve the wages they had been promised.

Photo credit Sergey Ponomarev for The New York Times       

If the Times report is correct, workers were not paid in accordance with NYU's "statement of labor values, "  which it issued as an explicit assurance that the Abu Dhabi campus would be constructed under fair labor standards. NYU responded to the Times story with a stock apology, but it made no promise to make things right. 

But an apology is not enough. NYU, which has one of the most highly-paid presidents in the country and which charges its students more than $60,000 a year for tuition, room and board, should tap its own resources to compensate workers who were exploited during the construction of NYU's Abu Dhabi campus.

Or better yet, President Sexton should dig into his own pockets to compensate the wronged construction workers.  He is due to get a $2.5 million "length of service" bonus next year, which he really does not need.  After all, President Sexton will receive $800,000 annually for the rest of his life when he retires from NYU.  And he is currently being paid more than $1 million a month to be NYU's CEO.

If President Sexton's $2.5 million bonus were divided among the 6,000 construction workers who were employed on the Abu Dhabi project, each worker would receive a little more than $400.  Four hundred dollars doesn't seem like much to  most Americans, but it represents about a month's wages to the Abu Dhabi construction workers. 

Having President Sexton help pay to make things right seems fair to me.  The construction of NYU's Abu Dhabi campus was an act of hubris and pride on President Sexton's part.  Giving up his extravagant bonus to help right the wrongs in Abu Dhabi would be a humble gesture, and  a touch of humility would do John Sexton good.

References

Ariel Kaminer. N.Y.U. Apologizes to Any Workers Mistreated on Its Abu Dhabi Campus. New York Times, May 20, 2014, p A16.

The Abu Dhabi Scandal: New York University Should Be Kicked Out of the Federal Student Loan Program

Today's New York Times carried a front-page story about New York University's recently constructed campus in Abu Dhabi.  According to the Times, the campus was built by immigrant laborers who worked under harsh conditions for salaries of as little as $272 a month.

Photo credit: NYU Photo Bureau

  

New York University pledged that the Abu Dhabi campus would be built by construction workers who would work under humane conditions and receive fair wages; but apparently that did not happen.  As many as 15 workers lived in tiny rooms, and apparently they were not paid the wages that had been promised to them.  When workers went on strike, the police were called in; and some of the workers were beaten.

New York University is a private institution with extremely high tuition--about $64,000 a year for tuition, room and board.  NYU students graduate with some of the highest student-loan debt levels in the country.  In 2010, NYU students graduated with a total of $659 million in student loans. That's right--nearly two-thirds of a billion!

Nevertheless, John Sexton, NYU's president, is compensated at an obscene level; and the university operates as if it should be answerable to nobody. And when I say obscene--I mean obscene.  President Sexton makes almost $1.5 million per year and is guaranteed a "length of service" bonus of $2.5 million.  When he retires--supposedly in 2016--he will receive annual retirement income of $800,000 a year.  Oh yeah--and he also get an apartment near Washington Square.

Here are a few other recent stories of unseemly behavior by this behemoth institution.

•  According to a recent news story, the university provides a luxury apartment for scholar Henry Louis Gates at below-market rent. Professor Gates is not even employed by NYU; he works at Harvard.

• NYU paid Jacob Lew, now Secretary of the Treasury, an exit bonus of several hundred thousand dollars when Lew left NYU to go to work in private industry.

• NYU gave President Sexton and other favored faculty members low interest loans to purchase second homes. For example, a former law school dean and his wife used a NYU loan to buy a 65-acre estate in Connecticut. 

NYU has the right to operate as it wishes and to disregard its many critics.  The governing board has paid no attention to a vote of no confidence in Sexton's leadership that the Arts & Science faculty issued in 2013.

But does NYU deserve to participate in the Federal student loan program, which is financed by American taxpayers, when it shows so little regard to financial propriety?

I don't think so.  If it wants to pay its president more than $1 million a year and start a high-profile campus in the Middle East, let it do so.  But NYU should not benefit from a federal student loan program that was intended to provide broader access to higher education--not subsidize a lavish and unseemly enterprise.

References

Jake Flanagin. The Expensive Romance of NYU. Atlantic, August 13, 2013. Available at: http://www.theatlantic.com/national/archive/2013/08/the-expensive-romance-of-nyu/278904/

Ariel Kaminer &  Alain Delaquieriere. N.Y.U. Gives Its Stars Loans for Summer Homes. New York Times, June 17,2013.

Ariel Kaminer & Sean O'Driscoll. Worker's at N.Y.U.'s Abu Dhabi Site Face Harsh Conditions. New York Times, May 19, 2014, p. 1.

Abby Ohlheiser. John Sexton will officially leave NYU in 2016. The Wire, August 14, 2013. Available at: http://www.thewire.com/national/2013/08/john-sexton-will-officially-leave-nyu-2016/68346/

Bruce Wright, Harvard Prof. Henry Louis Gates Gets Unreal Housing Perks from NYU. Boston.com, May 17, 2014. Available at: http://www.boston.com/news/nation/2014/05/17/harvard-prof-henry-louis-gates-gets-unreal-housing-perks-from-nyu/pXTFg7YDd3BMSekltbQ4tI/story.html

"Be sure To drink your Ovaltine": Inside Higher Ed partners with a Inceptia, a "debt prevention" company, to produce a tepid booklet of bromides on the student loan crisis

"Be sure to drink your Ovaltine"

Remember the Olvatine scene from the movie The Christmas Story? Ralphie Parker, an avid fan of the Little Orphan Annie radio program, writes to the program's sponsor and asks for a "Little Orphan Annie Decoder Ring."

When the  "Little Orphan Annie" program comes on the air, Ralphie anxiously uses the ring to decode Little Orphan Annie's secret message to  radio listeners. Ralphie thinks the message might have something to do with one of Little Orphan Annie's adventures.

But he is wrong.  When he finishes decoding the message, the disillusioned Ralphie finds that it just an advertisement for the program's sponsor. "Be sure to drink your Ovaltine."

"A crummy commercial?" Ralphie wails. "Son of a bitch!"

I felt a bit like Ralphie when I looked at the online collection of Inside Higher Ed articles that Inside Higher Ed produced recently on the future of student loans.  I was expecting some hard hitting pieces on the student loan crisis. But what I found was a booklet of tepid pieces that was produced in partnership with Inceptia, a nonprofit company that cryptically describes itself as a "leader in default prevention and financial education solutions."

What does Inceptia do to prevent student loan defaults? I'm not sure, but I'll bet its activities include contacting students who are at risk of default and encouraging them to sign up for economic hardship deferments. Senator Tom Harkin's committee report on the for-profit loan industry pointed out that putting at-risk students into economic hardship deferments is good for the colleges because those students will not be counted as people who default on their loans within three years of beginning repayment--even though they are not making payments on their loans. And if those students officially default after DOE's three-year default measurement period expires--who cares? 

Inceptia is a unit of the National Student Loan Program (formerly the Nebraska Student Loan Program), which is located in Lincoln, Nebraska.  Randy Heesacker, Inceptia's CEO, is well paid.  I couldn't find out his current income, but I found the Nebraska Student Loan Program's 2011 federal tax return.  According to that tax filing, Heesacker received total compensation of $378,457 when he was CEO of the Nebraska Student Loan Program (including bonuses and deferred compensation).

Does that sound like an extravagant salary for a non-profit oranization's employee?  Don't worry.  The Nebraska Student Loan Program's tax return assured the IRS that "[o]utside legal counsel undertakes a comprehensive evaluation of the compensation and benefit packages for officers and other affected employees of the organization, comparing the same relevant industry and other market comparables."

Oh, that's a relief.

And if Heesacker made $378,457 in 2011 as CEO of the Nebraska Student Loan Program, what do you think he's making now as CEO of Inceptia?  

I think it is a safe bet that the articles Inside Higher Ed chose for its online booklet were acceptable to Inceptia.  And not surprisingly, most of the articles quoted various student-loan organizations that basically support the status quo.

One writer advocated larger Pell Grants. Someone argued for lower interest rates on student loans.  And one organization wants lending standards loosened for Parent PLUS loans. 

No one in the  Inside Higher ED's collection of articles advocated for revising the bankruptcy laws to make it easier for distressed student-loan debtors to discharge their loans in bankruptcy. No one recommended elimination of the Bankruptcy Code provision that makes private student loans very difficult to discharge in the bankruptcy courts.

No one recommended tighter restrictions on the for-profit college industry or regulations to stop abusive collection practices or the garnishment of of Social Security checks.

No--almost everyone who participates in the public conversation about the future of the student loan program is an insider--an organization that benefits directly or indirectly from the $100 billion that the federal government spends each year to subsidize the higher education industry, which has been raising the cost of attending college every year for the past 30 years.

I'm sorry Inside Higher Ed and Inceptia--your vision of the future of student loans is not sustainable.

Someday--and I hope that day comes soon--we will have to introduce radical remedies for the student loan mess.  Those remedies--to be effective--will have to include bankruptcy relief for distressed student loan debtors, strict regulation of for-profit colleges, and a candid reporting on what the student-loan default rates really are.

 References

Inside Higher Ed (with support from Inceptia). The Future of Student Loans: A Selection of Higher Ed Articles and Essays. May 2014.

It Seemed Like a Good Idea at the Time: Student-Loan Forgiveness Programs are Making the Student Loan Crisis Worse

The federal government's student-loan forgiveness programs--like  Germany's decision to invade Russia in 1941--must have seemed like a good idea at the time.

After all, millions of college students are burdened by crushing student loans, the student-loan default rate creeps ever upward, and many college graduates have not gotten jobs that pay well enough to service their student-loan debt.

So why not create some programs that will lower student borrowers' monthly loan payments?

  And so the government created two programs that are essentially student-loan forgiveness programs. One program allows people who take public service jobs to make loan payments based on a percentage of their income for ten years. At the end of the ten-year period, the balance of their loans are forgiven.


Germany invaded Russia in the summer of 1941
It seemed like a good idea at the time.

The other program--income-based repayment plans (IBRPs) --allows borrowers to make monthly student-loan payments based on a percentage of their income for 20 or 25 years (there are several variations). Just as with the public-service loan forgiveness plans, student-loan debtors will see the balance of their loans forgiven at the end of the repayment period.

The attractiveness of these programs for student-loan borrowers is obvious. They see their monthly payments go down, which may keep many student-loan debtors from going into default.

Currently, about 1.3 million borrowers are enrolled in public-service loan forgiveness plans, and about the same number are enrolled in IBRPS. 

But here is the downside.  None of these programs contain provisions to discourage students from borrowing more money than necessary.  In fact--since the monthly payments are based on a percentage of borrowers' income and not the amount borrowed, the programs contain a perverse incentive to borrow as much as possible.  As a result, many of the people making income-based loan payments will never pay back even a portion of their loans.

Here are a couple of examples--one taken from a Wall Street Journal article and one taken from a New York Times story--that illustrate the problem.

Haley Schafer borrowed $312,000 to attend veterinary school in the Caribbean, even though the job market for veterinarians in the United States is terrible  Schafer got a job making about $60,000 a year, not nearly enough to comfortably pay back her student loans under the standard 10-year repayment plan.

So Schafer signed up for a 25-year income-based repayment plan that lowered her monthly loan payments to about $400 a month. Unfortunately,  her monthly payments aren't large enough to cover accruing interest on her loans.  The New York Times estimated that her loan balance will continue to grow, and when she finishes her 25-year repayment plan her loan balance will be more than twice the amount that she borrowed--$650,000!

And that's Haley Schafer's story. Now let's hear about Max Norris, a public-service attorney who borrowed $172,000 to go to University of California's Hastings College of Law.  Under the public-service student-loan forgiveness plan, he only pays $420 a month on his loan balance, not enough to cover accruing interest.

Norris's loan balance will be forgiven after 10  years. Assuming Norris stays in public service and gets annual raises of 4 percent, the government will forgive $225,000 in student-loan indebtedness--more than Norris borrowed!

In other words, the federal government is giving Morris a 100 percent subsidy to go to law school, even though the market is flooded with lawyers. In fact there are currently two law-school graduates for every new legal job.

Surely, anyone can see that it makes no sense for the federal government to permit people to borrow $100,000 or more to train people for professions that are already overcrowded and then allow them to make loan payments that are so small that the payments don't cover the accruing interest.

But that is what our federal government is doing.  

And, although these programs may help keep the student-loan default rate down, they are actually making the student loan-crisis worse.  Not only do we have 7 million people who stopped making loan payments and are in default, we have another 9 million who aren't making payments because they received an economic hardship deferment or are entitled to some other form of forbearance.  And then we have 2.5 million people who are making loan payments based not on the amount they borrowed but on their income, which means most will never pay off the principal of their loans.

In short--the number of people who will never pay off their student loans is in the millions--many, many millions.

References

Josh Mitchell. Student-Debt Forgiveness Plans Skyrocket, Raising Fears Over Costs, Higher Tuition. Wall Street Journal, April 22, 2014.

David Segal. High Debt and Falling Demand Trap New Vets. New York Times, February 23, 2013. Available at: http://www.nytimes.com/2013/02/24/business/high-debt-and-falling-demand-trap-new-veterinarians.html?_r=0

 

The Private Student Loan Industry Doesn't Need Better Regulation: It Needs to Be Exterminated

Businesses that protect homeowners from termites and roaches call themselves pest control companies. But speaking as a homeowner, I don't want the roaches in my house to be controlled. I want them dead.

Image credit: pestcontrolman.cm

The Consumer Financial Protection Bureau (CFPB) is much like a pest control company that looks out for the interests of the pests.  It wants to regulate the the nation's rapacious financial services sector in a way that doesn't cause the banks too much discomfort. When it comes to the private student loan industry, this attitude is a mistake.

As the New York Times pointed out in a recent editorial, private student loans are very different from federal student loans.  Students who take out federal student loans get a fixed interest rate, and they can apply for an economic hardship deferment if they run into financial difficulties.  Private lenders often offer variable interest rates that allow monthly loan payments to adjust upward,  and they usually don't have any process in place to assist financially distressed borrowers.

The CFPB collects hundreds of complaints each year from people who took out private student loans. In a recent analysis,  the  Bureau reported that some private student-loan borrowers were forced into default without warning even though they were current on their loan payments In particular, the CFPB documented that some student-loan borrowers who were making regular payments on their loans were forced to pay back the entire amount of their loans if a person who co-signed their loan died.  Some student borrowers received notice from their lender that their loans were being called due at the same time they were mourning the loss of the parent or grandparent who had cosigned the student's college loan. Now that's crumby behavior.

And guess which private lender received the most complaints? Sallie Mae.  The CFPB received 995 complaints about Sallie Mae between October 2013 and March 2014.  That's a 50 percent jump over the previous measuring period.

And coming in second place for most number of complaints was JP Morgan Chase.

Issuing private loans is a particularly lucrative business for the banking industry. Why? First of all, in 2005, the banks got Congress to amend the bankruptcy laws to make private student loans almost impossible to discharge in bankruptcy.

Second, about 90 percent of these loans are co-signed--often by a parent or a grandparent. Co-signers stand jointly liable with the student borrower when it comes to paying off a private student loan. And co-signers--like the student borrowers themselves--cannot discharge a private student loan in bankruptcy except under very rare circumstances.

In its recent report, the CFPB practically begged the banks to be more compassionate to their student-loan debtors.  Rohit Chopra, CFPB's Student Loan Ombudsman, pointed out that a student-loan borrower who had a bad experience with a bank would be less likely to use that bank for other banking matters. And, Chopra added, treating student-loan borrowers  badly might hurt the banks' reputation.  Yes--the CFPB's Student Loan Ombudsman actually expressed concern about the banks' reputation!

The New York Times, commenting on the CFPB's report, thinks more federal regulation is the way to deal with the rapacious private student-loan industry. "Federal regulators clearly have a lot to do to address what amounts to a student loan crisis," the Times editorialized. Regulators "can begin by preventing contracts that unfairly burden borrowers," the Times suggested and loan terms "should be clearly stated."  And--the Times concluded, student-loan borrowers should be notified when their loans are at risk and borrowers in good standing should not be "shoved into default."

Personally, I don't give a damn about Sallie Mae's reputation or the reputation of the banks that have been mistreating private student-loan debtors. And I don't think another layer of regulation will make the banks behave more compassionately or more responsibly.

The way to deal with problems in the private student-loan industry is to shut this sleazy business down. And that can be easily done. All Congress needs to do is to repeal the 2005 law that made it exceedingly difficult for private student-loan debtors and their guarantors to discharge student loans in the bankruptcy courts.

If Sallie Mae, JP Morgan Chase, Wells Fargo and the other major players in the private student loan industry knew that distressed student-loan debtors could discharge their student loans in bankruptcy in the same way they could discharge other non-secured debts, they would get out of the student loan business in a hurry.  And that is exactly what we should want them to do.

References

Rohit Chopra. Mid-year update on student loan complaints. Consumer Financial Protection Bureau, April 2014.

Editorial. Troubling Student Loans. New York Times, April 29, 2014, p. A20.

David Leonhardt says it's harder and harder to get into Harvard University: "Frankly, my dear, I don't give a damn!"

David Leonhardt wrote an essay in the Sunday issue of the New York Times about how hard it is these days for someone get admitted to an Ivy League college--particularly if the applicant is an American. In 1994, Leonhardt wrote, about 45 college-age Americans out of every 100,000 were attending Harvard.  In 2012, that number dropped to just 33 out of every 100,000.

David Leonhardt

At the same time, the number of foreign students attending our nation's most elite institutions is growing. According to Leonhardt, about 10 percent of the student body at many of the nation's most selective colleges are foreigners.

Why are our elite institutions admitting more foreign students?  Because they can pay the full freight of tuition, room and board without the need for grants or scholarships In other words, foreign students from wealthy families are an important revenue source for America's most prestigious colleges and universities.

Leonhardt's essay appeared just a few days after Evan Mandery published an article in the Times deploring the fact that the nation's most elite institutions give admission preferences to the children of their alumni.  Mandery said that legacies have a big edge in the admissions process similar to the edge given to African Americans, Hispanics, and varsity athletes.

Take together, Leonhardt's essay and Mandery's essay convey a very clear message. If you want to go to an Ivy League college or a handful of other selective institutions it will help you if you are Hispanic, African American, the child of an alumnus, a varsity athlete or a wealthy foreigner.  And as Leonhardt pointed out, a "large fraction" of students from all these categories come from high-income families.

I could not tell whether Leonhardt was critical of this trend or a supporter.  Like so many New York Times op ed essays, Leonhardt's article wallows in cryptic indecision.  Leonhardt concludes his essay with these lines: "[T]hese [elite] schools have become a patchwork of diversity--gender, race, religion, and now geography. Underneath the surface, though, that patchwork still has some common threads." 

I have no idea what that means.

I do know that white male Southerners and Midwesterners who come from low-income families have very little chance of being admitted to an Ivy League school.  But so what?  Why would anyone who grew up living in the real world want to enter a higher education environment in which admission decisions are based--even in part--on race and greed? 

In my opinion, young people who want to expand their horizons by going to college should skip the elitist institutions--Harvard, Yale, Emory, Brown, etc. etc.  Instead, they should consider studying outside the United States.  Why not attend college in Monterrey or Guadalajara, for example?  Even if the educational experience is unexceptional, Americans studying in Mexico will learn an important second language and immerse themselves in another culture.

As it happened, Leonhardt's essay appeared in the same issue of the Times as an article about  Elizabeth Warren, a former Harvard Law professor and now U.S. Senator.   Warren has been critical of the federal government for regulating the finance industry in a way that favors Wall Street. "The game is rigged," Warren was quoted as saying, "and the American people know it."

Warren is right of course, but it is not only Wall Street that has rigged the game against the American people. Our elite colleges and universities have rigged the game as well.  It is no accident that Lawrence Summers, former president of Harvard, has also been a hedge fund manager and was one of President Obama's top economic advisers.

Warren quotes Summers as telling her she could be an outsider or an insider, and Warren obviously portrays herself as an outsider and friend of the little guy.  And maybe she is.  But we should not forget that Warren advanced herself in the world of academia by portraying herself as being part Native American--specifically a Cherokee--when in fact she almost certainlyis  not.

And so I repeat my question. Why would anyone want to attend an elite college where a person's advancement can be enhanced by the fact that he or she might have a trace of Native American blood?

Yes indeed, Elizabeth. The game is rigged.

"The game is rigged."

References

David Leonhardt. Getting Into the Ivies. New York Times, April 27, 2014, Sunday Review Section, p. 1.

Gretchen Morgenson. From Outside or Inside, the Deck Looks Stacked. New York Times, April 27, 2014, Sunday Business Section, p. 1.

Elitist Colleges Give Admissions Preferences to Children of Alumni: Let's Kick Them Out of the Federal Student Aid Program

Evan Mandery wrote an op ed essay in the New York Times recently decrying the preferential

admissions polices of our elitist colleges.  No--Mandery was not talking about affirmative action, whereby colleges give preference to minority applicants when making admissions decisions. He was talking about the special preferences many elitist colleges give to the children of alumni--often called legacies.

According to Mandery, the children of alumni have a 45 percent greater chance of admissions at 30 of our nation's most elite colleges than non-legacies. Mandery thinks it is wrong for colleges to favor the children of alumni when making admissions decisions, and I agree. The legacy preferences of our elitists colleges stink.

Almost in passing, Mandery acknowledged that our elitist institutions also give admission preferences to racial minorities.  In fact, Mandery noted that being a legacy is "the equivalent of 160 additional points on an applicant’s SAT, nearly as much as being a star athlete or African-American or Hispanic."  

So here is the bottom line. If you want to attend Harvard, Yale, or a couple of dozen other elitist universities, it will help enormously  if you are Hispanic, African American, or the child of an alumnus.

Like most New York Times essayists, Mandery probably thinks he is a liberal progressive. But his suggestions for ending legacy preferences are about as radical as 1950s era Reader's Digest article.  Here are  his suggestions: "a huge reform" of the nation's tax structure and "improved access to higher education."  My God, Mandery's an anarchist!

Such twaddle.

Mandery's suggested reforms have nothing to do with the rotten and corrupt way our nation's elitist colleges are admitting students.  As Mandery admits--these slimy institutions give preferences to their rich alums and to racial minorities.   What's more, they brag about it!

 I suppose laws could be passed to ban these practices, but as Justice  Ruth Ginsburg said in her dissenting opinion in Gratz v. Bollinger, our nation's colleges would probably continue giving racial preferences when admitting students even if it were illegal; they would just lie about it. 

Evan J. Mandery
photo credit: Amazon.com

As for me, I think we should kick the elitist colleges and universities out of the federal student loan program and invest this money solely in public universities and public community colleges.  I favor letting Harvard, Yale, Dartmouth, Brown, Wesleyan, Smith and all the other private elitist institutions stew in their own postmodern and often racist juices.  Let them admit  students however they want; just don't give them access to federal student loan money or  Pell Grants. 

Moreover, just as our elitist colleges give special preferences to minorities and the children of their alumni when making admissions decisions, I think the American public should give a special preference to anyone who did not graduate from one of these sleazeball institutions when choosing our nation's leaders.

In other words, people who graduate from Harvard or Yale should be penalized in the public mind if they run for president, seek a federal judgeship, or apply for a cabinet post .  As everyone knows, our government is now run almost entirely by elitist college graduates, and the Russians are showing them up to be fools.

References

Evan J. Mandery. End College Legacy Preferances. New York Times, April 24, 1014.  Accessible  at: http://www.nytimes.com/2014/04/25/opinion/end-college-legacy-preferences.html?_r=0

The New York Times Said Something Sensible Today About Predatory For-Profit Trade Schools

I seldom agree with the New York Times.  I live in the real world, and the Times editorial writers and op ed essayists live in the land of gobbledygook.  Nevertheless, every now and then the Times makes contact with planet earth and says something sensible.

And today is such a day. In an editorial entitled "Reining in Predatory Schools," the Times commended the Obama administration for its attempts to regulate the predatory for-profit trade-school industry that has hurt so many poor and disadvantaged students.

The Obama administration seeks to impose reasonable rules on the for-profit trade schools, requiring them to maintain average debt levels for their graduates that don't exceed 8 percent of their total annual earnings. In addition, to remain eligible for student-aid money, the trade schools must keep their student loan default rates at no more than 30 percent.

These are good rules, and the Obama administration deserves credit for pushing these rules forward in spite of ferocious opposition from the for-profit college industry, its lobbyists, and the lap-dog legislators who receive receive campaign contributions from the for-profits and do the industry's bidding.  But--as the Times noted--the rules do not go far enough.

Currently, the for-profits risk being kicked out of the federal student-loan program if their student-loan default rates exceed 25 percent for three consecutive years.  As I have pointed out before, the Feds only measure loan defaults during the first three years of a student's repayment period.  Any student who defaults after three years is not counted in an institution's default rate.

The for-profits have been successful in hiding their true default rates by encouraging their former students to sign up for economic hardship deferments, which excuse students from making their loan payments.  In fact, many for-profits have formal "default management" programs that target former students and help them get deferments.

Hundreds of thousands of former trade-school students who obtained economic hardship deferments will never pay back their loans and for all practical purposes are in default.  The Times is right to say that this problem must be addressed.

And just as importantly, the federal government needs to identify all the people who took out federal loans to pay for worthless for-profit training programs-well over a million people--and forgive these loans. Otherwise, all the people who defaulted on these loans will be hounded by their student loan debts for the rest of their lives.  As I have said before, these people deserve reasonable access to the bankruptcy courts.

I could say more on this topic, but today I simply tip my hat to the Obama administration for its efforts to rein in the predatory trade-school industry and to the New York Times for supporting the Obama administration and urging it to do more.

References

Editorial. Reining In Predatory Schools. New York Times, April 17, 2014, p. A20.

The Student Take-Over of the Dartmouth President's Office: Three reasons not to borrow money to attend an elitist American college

Dartmouth students staged a takeover of the Dartmouth College president's office recently, protesting a variety of isms: racism, sexism, heterosexism, ableism, and another ism I can't recall right now.  Will they be disciplined in any way? Probably not.

Students take over Dartmouth President's Officve
photo credit: lipstickalley.com

This is the kind of event that drives Bill O'Reilly crazy, but I'm not going to comment on the insanity of this incident. I think it is enough to say that Dartmouth is one of the most politically correct institutions on earth. It is totally incomprehensible to me why students who are privileged to attend Dartmouth--a thoroughly liberal-minded institution--would behave so irrationally.

But the Dartmouth president's office takeover illustrates why smart, decent young people should avoid attending elitist higher education institutions--especially if attending a nuthouse like Dartmouth requires borrowing money.  Here are three reasons to skip the elitist college experience:

1. The inmates are running the asylum.  First, as the Dartmouth president's office takeover shows, the inmates are running the asylum.  It is the students at our nation's elitist colleges that get to lecture to the  professors--not the other way around. I understand one of the participants in the Dartmouth takeover was a freshman who had only attended Dartmouth for a few months.  Yet he felt himself entitled to condemn Dartmouth for its allegedly racist culture and practices.  And the professors cower in their offices--afraid to express any opinion that would attract the ire of the student thought police.

2.  You won't learn anything useful at an elitist college. A college education is supposed to teach people to think rationally, to learn how to solve problems and to gain a broad understanding of our civilization's history, art, literature and culture. But as the recent Dartmouth incident illustrates, students aren't learning much of anything at our elitist colleges.

I would admire today's college students if they took personal risks to advance social justice in this country. But these Dartmouth students went to the barricades (so to speak) to demand gender-neutral bathrooms!

3. The elitist institutions are deceptive.  You would think that our finest colleges and universities would be driven by the search for truth, that they would encourage a free flow of ideas and debate.  After all, Harvard's motto--Veritas--is the Latin word for truth.

But in fact, our elitist  higher education institutions operate in a web of deception and intellectual dishonesty.  Our colleges and universities pretend to be open to controversial ideas, but in fact they close their ears to anyone who voices an opinion that contradicts the elitists' postmodern worldview.

Ross Douthat made this point in a recent New York Times op ed essay.  Our nation's elitist institutions make a pretense of universality, Douthat observed, when in fact they will not tolerate points of view that are contrary to their own. "I can live with the progressivism," Douthat wrote. "It's the lying that gets toxic."

Of course our nation has experienced irrational social movements before, and most of them faded away after being subjected to the light of public scrutiny. The Know Nothing Party of the 1850s, the second rising of the Ku Klux Klan in the 1920s, the McCarthyism hysteria of the 1950s--all disappeared within two or three years of their first emergence.

But bizarre campus behavior like the recent bedlam at Dartmouth has become embedded in the culture of our elitist colleges.  We've seen campus building takeovers, irrational student demands, and anti-intellectual bullying on America's most prestigious universities for more than 40 years.  What happened at Dartmouth is not an aberration--it is an example of how our elitist college communities think and behave.

So my advice is this--skip the elitist college experience. Get your degree from a respected public university. You might not learn much there either, but at least it will be cheaper. No sensible person should invest a quarter of a million dollars to hang out for four years at a goofball institution like Dartmouth.

References

Ross Douthat. Diversity and Dishonest. New York Times, April 13, 2014, Sunday Review section, page 12.

Oppressed by the Ivy League: What Dartmouth's president should have told bullying students. Wall Street Journal, April 4, 2014. Available at: http://online.wsj.com/news/articles/SB10001424052702303987004579479501134392562