Tuesday, June 25, 2019

On Student Loan Journalism, the Warren/Sanders Proposals, and the LSTC's Private Hell

We know what has caused the student loan problem: college (and, as relevant here, law school) tuition costs have increased dramatically faster than indicated by CPI, post-degree wage growth, or any other comparable measure of inflation; the federal government carelessly writes loans without realistic underwriting criteria; and consumers have been stripped of bankruptcy as an option for a poor financial decision.

Given that reality, the best political solution we've come up with is income-based repayment, which is basically a softened Chapter 13-style repayment plan for one debt in that you pay what you can and the remainder is eventually discharged.  A better solution might be simply restoring bankruptcy rights as people have suggested for some time.  Another prospective solution might be to either regulate loan origination by limiting tuition increases or by removing the government entirely and letting the free market scoff at paying ludicrous tuition rates for lackluster degrees.

(The LSTC would also propose retroactively recalculating due student loan balances based on CPI, issuing credits and taxing educational endowments for the deficiencies, but that would be, one suspects, politically unfeasible.)

I was all set to rip on Elizabeth Warren's unnecessarily convoluted and weirdly devoid of rational justice plan when, this morning, Bernie Sanders went whole hog and suggested a freaking student debt jubilee.

Lord, what did we do to deserve this fresh hell?

Do I want student debt relief?  Yes, and I would benefit to varying degrees under either plan (tax issues aside for a second), but what the hell?  The system as it exists needs rational, forward-looking, cohesive reform, not ludicrous, empty headed hip-thrusts at vacuous Millennial populism by elder statespersons who should know better.

We need bankruptcy rights.  We need IBR free of any tax bombs.  We need lower interest rates.  We need credit bureaus and financial institutions to feel security that the full amount isn't going to ever come due because Congress changed its mind.  We need an out when the government's been paid its fair share.  We need educational institutions to bear the systemic costs of what we all know but the law can't say was fraud...

At the same time, Warren and Sanders are just playing the hands dealt to them.  The arguments around student loans have become so polarized that the second any kind of reform idea emerges forth, one of two results invariably happens:
  • Some jackass who owes like $15k won't shut up about how oppressive their student loans are and cheers wildly; and/or
  • Some jackass whines that money borrowed has to be repaid, students knew what they were doing, the taxpayers shouldn't be on the hook, "but I ate canned soup for 5 years to pay mine ASAP," etc.
My private hell is populated with nothing but people from both camps and then I spend eternity trying to reason with them while "Come On Eileen" and "You Can Call Me Al" play on constant loop. 

As with many issues, our journalism about the student debt crisis blows.  When they focus on the debtor side, it's almost invariably Boomer-triggering anecdotes, often with gaudy headlines that bury the lede.  Then there's the pie-in-the-sky solution subgenre and the ubiquitous live-at-home-and-give-up-coffee subgenre.

Screw these people.

The problem with all of these sub-styles of journalism is that they take what we know is a systemic problem caused by the intersection of well-meaning policies creating a bad outcome and transform it - or reduce it - to a personalized, dig-your-own-hole, bootstraps, etc. problem.  Journalists, both educated and amateur, often deliberately seek the personalization, the pathos, the Dickensian aspect or whatever. This situation calls for more, or, at least something different.  At a minimum, journalism should've learned from the housing crisis how to report on broken financial systems that incentivize bad consumer behavior. 

That financial crisis wasn't about Raynette buying a 500k home in Vegas with no income any more than this one is about Raynette's kid spending $300k on a social work degree.

There are decent deep dives out there, but too often they seem to get bogged down in partisan politics or pandering to the audience; e.g., the WSJ article I just linked has the following paragraph:
The Obama administration also heavily promoted income-based repayment programs...This severed the link between the value of students’ education and how much they could borrow, providing a huge incentive for schools to raise tuition, since taxpayers would pick up more of the tab. Enrollment in these programs is one big reason that the government’s costs for student loans are exploding.
Yeah, Bub....this is an political issue, for starters.  That link between value and borrowing was already severed and schools don't care about repayment because they get the money upfront.  Enrollment in IBR-style programs is irrelevant to the government's costs (which are dynamic projections, anyway, that change if current outlays on tuition were brought down or income to people in repayment would increase...as it often does over time) because the alternative, generally, is default, which means higher administrative costs being thrown at debts that would likely go uncollected - the funds simply aren't there.  If these idiots think IBR "costs" the government any money, someone should actually report on what the default rate would look like if IBR went away.

Anyone want to report on that?  Anyone?  

The real frustration, of course, is that the Dickensian portraits, when they come, are only one-sided, like reading Great Expectations with half the subplots missing.  Only rarely do these articles actually go after that group of antagonists, the policy-makers and the school administrators, many of whom absolutely knew what they were doing. 

Because despite saddling millions of people with funny-money debts, no one wants to even suggest the f-word outside of those few truly awful for-profit colleges.  It's a shame, because the real story of student debt isn't that Johnny carries $250k - it's that an American college or two had the audacity to charge Johnny $250k and he's not licensed to perform niche surgery.

Why don't the anecdote articles ever call out the schools that bilked the subject sucker?  Why don't the "I gave up utilities to pay my loans" pieces not typically mention the institution partly responsible for lowering the standard of living of alumni?  Why are people proud of paying off student debt like it's a race, anyway, and why are those articles newsworthy?  Why, when the federal government took over loans, did it not heavily regulate the costs of attendance or the marketing of admissions materials? 

Oh, and here's one:  How can Bernie call out Wall Street while proposing what is, in effect, a massive bail-out of Big Education's malfeasance and, in many cases, fraud on the federal taxpayer?

It's regrettable that Warren and Sanders go straight to these bandage-style post-hoc debt forgiveness solutions that play directly into the well-worn "personal responsibility, ddddderp!" narrative so easy for journalists and editors to exploit for hits and social interaction.  They could lead in awareness regarding the root of the problem in the event "free college" doesn't pan out (and it won't).  

But successful politicians also need a partner in the media and it would sure be nice if the press high and low quit leading readers down a primrose path of reinforcing the lazy readers' preconceived notions.  When framed correctly, there is a lot we could agree on (like if you owe $20k and make $60k+, get bent), just as with the underlying issues of the housing crisis, but it means we need journalistic skepticism towards not only the weary debtor but the institutions that created the debt, and loud enough for the butthurt ramen-eaters to hear.

You would hope that good journalism wouldn't even be necessary to stop the nonsense and discuss real, plausible solutions that Republicans may get behind - things like qualified Ch. 13 bankruptcy or making all student loan interest tax deductible - but we live in the world we've created and damn it I think I hear "It's Raining Men" and it's kinda hot, now that I think about it.


  1. Here is a useful related article regarding the Public Service Loan Forgiveness program. The SSRN cite is at the bottom.

    Why Are 99% of the Applications for Debt Discharge under the Public Service Loan Forgiveness Program Being Denied, and Will This Change?

    Gregory S. Crespi
    Southern Methodist University - Dedman School of Law


    During the first 18 months after October 1, 2017 that student loan borrowers were able to apply for tax-free debt forgiveness under the Public Service Loan Forgiveness program a striking 99% of the 76,002 applications that have been fully processed have been denied. The more recently adopted Temporary Expanded Public Service Loan Forgiveness program also has a 97% to 99% application denial rate, depending on how it is calculated. This short article discusses the various factors that may be contributing to such a bizarrely high denial rate, and why the number of applications filed and the proportion of applications filed that are approved are both likely to increase significantly over time, particularly after 2024, and to a greater extent if the Department of Education improves its currently inadequate borrower outreach and loan servicer oversight activities.

    Available at SSRN: https://ssrn.com/abstract=3397656 or http://dx.doi.org/10.2139/ssrn.3397656

    1. The worst part of this is the Cartel merrily published PSLF in its propaganda as a "real" option for years, not knowing (or caring) one iota about how it would actually work. Who knows how many were enticed with this false hope, only to receive a 99% denial rate because no-one on the cartel-side, student-side, or loan-side knows how this works?


    2. This doesn't surprise me. Not that I had an option for a public service job, those were very difficult to obtain and only the military appeared to be an option for me, but I figured I was better off just paying my loans off and at least not dealing with that stress. Especially considering how uncertain my income always was in law.

      These types of policies are generally enacted to benefit those that are already privileged. In this case they made an error in advertising it and wording it in a way that other non-elite classes may have been able to get that benefit. They're not quite certain how to hide who they're actually trying to privilege without admitting it's not open for everyone, so they simply are rejecting applications and purposely keeping everything vague. This is a common trick done in the US. That way apologists will side with the elites even as they and others suffer, while using it as yet another example of the superiority of the elite classes and how they "earned it" and others didn't. With such specious claims as "they just didn't know how to properly fill out the application".

  2. My objection to every student loan reform proposal I've heard is the same. They are all based on the myth that, other than air and water of questionable potability there is no such thing as free anything. Free means what the character Wimpy in the Popeye cartoons used to say: "I'm buying, he's paying." You think academics will work for nothing when they make all public colleges "free?" Bankruptcy reform is just as much loan forgiveness as anything that "Bern it all!" Bernie is proposing. No matter how you structure it, if you want to get people out of their loans over 100,000,000 people in this country who never went to college are going to be left holding the bag.

    And I'm very sorry but it IS a political issue. It involves what our government mostly does now, assigns winners and losers and redistributes money from those who earned it to those who didn't. Look at the political affiliations of the people who run academia. You'll find it pretty one-sided with members of the party that wants to forgive students loans.

    I don't want to hear any talk about existing loans until it is guaranteed that the no-work holders of academic sinecures won't be left free to fill the waste water tank up again in anticipation of mass forgiveness going down on a 20-25 year cycle.

    1. —— No matter how you structure it, if you want to get people out of their loans over 100,000,000 people in this country who never went to college are going to be left holding the bag.

      As will people like Old Guy who did go to college (and then to law school) but paid every penny of their debts—and, incidentally, never even got to deduct any interest. Now, having paid out the ass for my own degrees only to suffer protracted unemployment, I am expected to pay for the $300k that some 139-scoring mooncalf rang up at Cooley or Thomas Mother-Fucking Jefferson.

    2. Well if the loans are not going to be repaid--and the vast majority of six figure law school student loans will not be repaid (whether because of IBR/PAYE, PSLF, or hard default)--then taxpayers will be left holding the bag anyway.

      One objection I have to the loan forgiveness proposals is that they let the schools themselves off the hook for charging outrageous tuition.

    3. 1:13 here. 8:33, your last point is my point exactly.

      But your first paragraph misses the mark. Some people do pay off their student loans. If one person borrowed $25,000.00 and another $250,000.00 do we forgive both? If not, where do we draw the line? And what many people don't get is that with all those mini-payment options people can acquire some degree of wealth which would be fair game in a probate court at the time of their death. Some people in PSLF are pulling down fine salaries in gubmint jobs while struggling solos pay full freight on their loans.

      My father's generation had to grow up in the Depression and fight World War II. Those born in the late 1930's had no recollection of the Depression and hit military age safely between Korea and Vietnam. The generation that borrowed itself into oblivion is facing the challenges of it's own time. One can at least say for the Greatest Generation that their challenges were not of their own making. And, given a choice, I'd probably choose taking on $200K in debt over storming the beach at Iwo Jima with the first wave.

      Most of these people obviously got taken, but that does not justify putting one penny of debt onto those who did not.

    4. —— One can at least say for the Greatest Generation that their challenges were not of their own making.

      One can say that of Generation X, too. Many of our challenges were created by the Baby Boomers.

    5. "And I'm very sorry but it IS a political issue."

      I meant that it's a non-partisan issue. You'd be surprised who winds up running Econ departments, investments, and serving on college boards, but I digress. Anyway, were "liberals" in charge, we woulnd't be in this conundrum; it's the Reaganites' emphasis to cut government spending (contra what Europe, etc., did) that in part led to this reality. And it's not like the left was alone in recommending that everyone and their pet bunny go to college.

      Re: the rest of the thread, I suspect the "taxpayers holding the bag!" argument is grossly overstated. Government isn't a bank, and the "losses" calculated by auditors/think tanks often include things like capitalized interest and always include interest rates that are well above the treasury rates at which the state can borrow (plus, they emphasize current repayment on fresh cohorts despite knowing full well that cohort repayment improves over time). For one example, if I borrow $100k at 7% and I pay back $5k/year, I'm in hard default and not even paying the interest, but the government is effectively making money off the initial outlay, with no loss to the taxpayers at all, even though I'm short of the expectation value.

    6. LSTC, I was in college and law school when Reagan was president, how old were you? The Democrats controlled the House the whole time Reagan was in office, any cuts were passed by them. What Reagan could and did do on his own was cut down on the rampant abuse of the system. A woman I knew whose father owned a large Cadillac dealership wasn't able to renew her work study job for the '81-'82 school year. Actually, the number and size of Pell Grants increased under Reagan. What was happening was greedy academics were raising tuition and blaming in on cuts by the evil Ronald Reagan. How old were you during the 1973 Oil Embargo? That's when it started. Schools had gotten blindsided by huge increases in energy costs and had to raise tuition accordingly. There were still people in the academy then who were students during the early days of the Great Depression and remembered campuses clearing out as families fell on hard times. They feared the same would happen with sudden tuition hikes that seemed steep at the time but would be a joke today.

      But a funny thing happened. The campuses didn't clear out. People paid the freight and stayed. The fear born in the depths of the Depression evaporated. Any lingering doubt vanished when a second oil crisis followed the Iranian Revolution in 1979. Unlike those earlier hard times, people had money, it was just a question of how much you could get them to part with. When Mom and Dad were eventually tapped out the nice man with the student loans was waiting to help. The rest, as they say, is history.

      Old Guy makes a good point about boomers, but let me tell you this. The Boom lasted from 1946-1964, 18 years, but those years fit into two nine-year cohorts: The "True Boomers" born '46-'54 and "Late Boomers" born '55-'64. We Late Boomers were too young for Woodstock, too young for protests and riots and too young for Vietnam. We didn't get rich off the fat of the land like the True Boomers, but all but some of the last of us came off better than Gen X. My tuition at a T-20-25 school for '82-'85 was under $27K. I had family support, worked part-time jobs and lived as cheaply as possible. I came out with $10,500.00 in debt, about a quarter of my starting salary. The seven-years-to-partnership careers that the True Boomers had were a realistic goal for us. That world suddenly disappeared in 1989, but we hadn't saddled ourselves with crippling debt. Right after that the tuition started to go vertical on the graph. A friend who graduated from a T-20-25 in 1990 after a year as a very big law paralegal with no family support came out with $90K in debt, but has had a good career to show for it. My cohort, like those too young for Korea and too old for Vietnam, had the luck of good timing even if our careers didn't pan out the way we thought they would.

      Finally, LSTC, your grasp of business is weak. Yes, if you pay 5% instead of 7% Uncle Sam is still making money on you but he based his budget on 7% so the 2% will come from somewhere else, either a printing press or someone's earnings. When you get $100,000.00 forgiven that money, too, is going to have to come from somewhere else.

    7. —— Schools had gotten blindsided by huge increases in energy costs and had to raise tuition accordingly.

      More than everyone else? And how is it that they have "had to" keep on raising tuition far beyond the rate of inflation for the 46 years since that time?

      I agree with your analysis of the Baby Boomers. The early Boomers did indeed make out better than the late ones, but, as you said, the late ones too did much better than those of us in Generation X.

    8. 10:24 here. O.G., chill. The problem in '73 was the schools had set the tuition for the year and couldn't back out of it. Most businesses could just raise their prices. A lot of landlords got burned, too, and after that the triple-net commercial lease became standard.

      And I never said they had to raise the tuition for 46 more years. They didn't, they just wanted more money and had found a way to get it. I believe Reagan's Secretary of Education, Bill Bennett, was the first to posit the theory way back then that schools would raise their tuition ad infinitum to soak up whatever funds the gubmint made available to pay it.

      And to fine tune our discussion of boomers, the True Boomers got rich, the Late Boomers got by, Gen-X got clobbered and anyone after that pretty much got what they asked for.

      A little known cohort is folks born during WWII. Few in number, they reaped the same bonanza as the True Boomers but were better situated in firm hierarchies. They really made a killing.

    9. 10:24 here again. I should clarify that the $27K tuition number I gave was the total for all three years.

    10. BTW, How does a toilet get away with naming its commode after someone like Thomas Jefferson. I thought the ABA had latitude over law school naming issues as a condition of initial accreditation. Why didn't the ABA require a geographic name rather than a historic figure which gives the toilet a false impression of status?

    11. Education Loans are somewhat like Medical Insurance, and more recently and to a smaller degree, dental insurance. As long as there isn't any impediment to the ultimate source of the funds, there will be higher inflation than standard from the provider of the service.

      There has to be a way to impose a brake on these triangulated kinds of transactions.

    12. A law school must be in business for years before it can apply for accreditation from the ABA. At that point, it is so well established that the ABA won't tell it to change its name.

      At least the scamsters of the Thomas Jefferson School of Law had the sense to choose someone with a reasonably good reputation. The U of New Hampshire named its law school after Franklin fucking Pierce…

    13. The ABA reportedly required New England School of Law to change its name from Portia Law School as a condition for accreditation in 1969. Perhaps this was the last time, or the only time that the ABA took such a step. Maybe there is a line that can be crossed even with the ABA.

    14. Thanks for the information. I didn't know about that. The name Portia Law School seems inoffensive. Did the ABA demand the change of name because "Portia" obviously (to anyone reasonably well versed in Shakespeare) refers to women? If so, that's very disappointing.

    15. NELS started out in 1908 as a law school intended to accept only women. By the 1920's this model proved to be unsustainable and the school began admitting men with men eventually becoming the majority. The name change came at the time of ABA accredidation but I can find no reference to it being a condition of accredidation. My thought would be that naming a school after a fictional person is rather unusual, especially after the reason for adopting the name had long since ceased to exist.

    16. Well, Ave Maria named itself after a fictional person…

    17. No point in going there as the 2 billion people who disagree with you can no more prove you are wrong than you can prove that they are.

      In any event, I can't imagine many of the folks enrolled at NELS have had much, if any, exposure to Shakespeare. Maybe these toilets should call themselves things like "Boston Legal School of Law." That ought to fetch a generation whose parents' parents were gaga that their kid (now breeding lemmings) learned to count to twenty in Spanish on Sesame Street but could not explain what use that is if you only know those words and have no clue about the grammar, syntax, etc. of the language

    18. This is 9:34. I thought that I had read an article at one time that stated that the ABA required the closure of Calvin Coolidge College, an adjunct to Portia, as well as the name change. My current research only comes up with what 5:17 has. Perhaps I misconstrued the name change as an ABA requirement when it was a voluntary one.

      On the other hand, my research came up with this gem, which I never read before. Apparently the folks in Harvard Square already had formed an opinion of Portia and its associates. Harvard was still interesting in 1968 when it was privileged dilletants rather than now international braniacs. You can picture the author of the article with bowtie and clenched teeth if being read.


    19. Let me get this straight. If I named a law skule after the Flying Spaghetti Monster, I could then insist that His existence could not be challenged because those who denied it could no more prove their case than I could prove the contrary.

      Anyway, I too suggest that Shakespeare is little known at the vertical-bar academy, where the students' literary experience probably doesn't far surpass "The Little Engine that Could".

    20. No, O.G., you can challenge anything you want. The point is that snarky, off-topic comments don't really add to the discussion and, in point of fact, neither side can prove it's case. If Ave Maria called itself Florida Not-Quite Coastal it would still be exactly what it is. One of my best friends is a confirmed atheist. We accept and respect each other's rights to our own beliefs and neither of us is the poorer for doing so. Live and let live. Love your neighbor as yourself.

      I hope that when you are working you don't discuss religion or politics. Calling people stupid for what they believe is no way to win friends, and your propensity that I have observed, to imagine a racist or misogynist lurking behind every tree you see, makes you look to an employer like a CHRO complaint and lawsuit waiting to happen. I've made a payroll. I would imagine you never have.

    21. I suspect if someone were to found the Xenu School of Law or the Satanist School of Law and seek accreditation, many dyed-in-the-wool Catholics (and Protestants and Jews) would suddenly and miraculously see the inherent problem of partisan/theological schools of law immediately.

      The exploitation isn't any less b/c it's Mary as opposed to Thomas Jefferson.

    22. I'm not going to answer the personal insinuations above. Suffice it to say that I as a lawyer have represented clients of various religious and irreligious affiliations, including members of clergy.

      LSTC raises an interesting point. ABA-accredited law schools cover the range of socially accepted religion: several are Roman Catholic, several are mainstream Protestant, a few are fundamentalist Protestant, one is Jewish, one is Mormon. Imagine the self-righteous hue and cry if a Muslim law school were proposed, never mind a Satanist or an atheist law school.

  3. I, too, paid of every cent of my student loans. I, too, never got to deduct the interest. Now I am paying every cent of my children's college. And now i am expected to pay for everyone else's? No way!

    1. I would not object if the universities were paid for entirely (or mostly) from public funds as they are in much of the world, even though I never got that benefit myself. (Hell, maybe I'd sign up for yet another goddamn degree, this time at public expense.) But I would insist on standards. None of this business of admitting every ass-faced nincompoop.

  4. In Germany, the BA is a 3 year degree, the student-teacher ratio is about 50-1, there are no dorms, and none of the universities own semi-professional sports teams. You have to do well on the admission test, so under-qualified people are not admitted, about 30 percent of high school grads go to Uni.

    In America, we cram 60 percent of HS grads into college, the student-teacher ratio is about 12-1, social life takes full precedence over academics, it's a 4 year degree that takes 6 to get, and the average State U has 3 times the number of majors to pick as German universities.

    Before we address student debt, let's break costs by addressing the overblown waste occurring on college campuses.

    1. What you correctly call semi-professional sports teams have long since taken over the US's "universities", many of which have become male football/basketball enterprises with a few classes tacked on for appearance' sake. The same elevation of games for the few over study for all has infected the high schools as well. Just look at the signs in front: "East Bumblefuck High School, home of the Bullfrogs".

      The proliferation of majors is a recent phenomenon. When Old Guy was in university, there was no such thing as a bachelor's degree in recreation management or interior decorating. And note that every major, however simple or involved, just happens to fit into a four-year package.

      Germany also doesn't have anything like the holy trinity of Harvard, Yale, and Princeton. German universities, unlike those in the US, maintain a uniformly high standard, so such things as toilet schools with remedial courses don't exist.

      Law school in Germany is very demanding, with exams along the way that disqualify much of the class. Not so in the US, where functional literacy is optional.

    2. I'm guessing student-teacher ratios are a product of a competitive race with respect to rankings and to have a sales pitch for parents with money who made sure junior was in a good school district.

      I have no idea what the real benefit of it is. I know anecdotally I took a number of great courses in giant auditoriums with zilcho professor/TA interaction, and that law schools sure seem okay dumping 50-100 people in a room for a basic 1L course.

  5. The other thing to keep in mind re: media coverage and the lack of attacking institutions is that a degree from an elite university is very much a social signifier in certain circles, which, by and large, members of the national media are a part of both (graduates of elite universities and run in circles where that matters). Essentially, media members would be tearing down the institutions that separate them from the unwashed masses. In their prestige-obsessed world, that is a huge disincentive.

    1. A degree from an élite university seems to be a negative social signifier in the circles in which Old Guy moves.

  6. Universities need to be held to a higher level of accountability in any sort of student loan reform deal. Along with some sort of gainful employment rule, universities should be ineligible for federally backed student loan dollars if a certain percentage of their graduates default on loan repayment. A rule such as this certainly won't solve the problem of dealing with an entire generation of college-educated indentured servants, but it sure would put pressure on garbage schools from admitting underqualified students into garbage programs.

  7. The "go to rural Nebraska" scam, yet again:


    1. Yes, I am sure young college graduates are eager to give up 3 years of their lives to law school, and graduate with 6 figure debt, so that they can try to eke out a living as a solo in the middle of nowhere . . .

    2. Yep. The Cartel lie was that students were acting "too good" to accept entry-level law jobs, and that they might have to make a go of it starting our with something more modest. Typical blame-the-victim tactics, so as to divert attention from the real problems generated by the Cartel itself.

      Reality is, students were willing, but for the cost of entry. When a few Boomers said, "here, take the practice, I don't expect you to buy me out," then funny, recent graduates heeded the call.

      I generally jump on the Boomer-blame train, but this is one of the few examples where I have to admit some Boomers took the high-road.


    3. The Boomer blame train, which I too endorse, is about the behavior of Boomers as a group and its consequences. What you discussed in the cited article is the decision of an individual Boomer to give his small-town practice to a fresh graduate. That's no credit to Boomers generally. No one has ever suggested that every single Boomer is greedy, selfish, or parasitic, only that the cohort in general is.

      Also, that retiring lawyer's practice probably wasn't worth much. Still, he was good to give it to a new lawyer, and also good to recognize the monstrous rise in the cost of a degree.