tag:blogger.com,1999:blog-3660083024919144793.post5877361189321029188..comments2024-03-27T20:23:56.493-06:00Comments on Outside the Law School Scam: A Lesson in Moral Hazard from New AmericaUnknownnoreply@blogger.comBlogger25125tag:blogger.com,1999:blog-3660083024919144793.post-55997505121835841292014-10-02T16:30:26.273-06:002014-10-02T16:30:26.273-06:00Retail pharmacy is the equivalent of document revi...Retail pharmacy is the equivalent of document review (except for the pay). Pharmacists stuck there are "pill bottle fillers".<br /><br />The requirement of the PharmD was brought about by the higher education industrial complex.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-82866941619375649462014-10-02T11:20:47.096-06:002014-10-02T11:20:47.096-06:00Agreed, @ 12:32, but let me add this. In addition...Agreed, @ 12:32, but let me add this. In addition to the torrent of money we're more and more seeing a credentialing mentality. If I go to school for X many years and get Y piece of paper someone is going to give me a high paying job. Lemmings rush in and swamp the boat, then the oversupply starts driving down the wages. Medicine, nursing and dentistry have done a bit better because of the "if we screw up people die" factor, but seeing credentialing creep into pharmacy is not a good sign (unless, of course, pharmacists are now just pill bottle fillers). Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-52314727144656210812014-10-02T01:32:25.418-06:002014-10-02T01:32:25.418-06:00This is very interesting, with many parallels to t...This is very interesting, with many parallels to the law school scam. But with law schools it took 20+ years to reach the situation of a full-blown graduate glut and oversupply crisis. With pharmacy schools it only took about 8 years. That's progress for you. It just shows how much money is being pumped into the education sector in general that all these pharmacy schools could be opened so quickly.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-23944037192375573642014-10-01T21:25:28.631-06:002014-10-01T21:25:28.631-06:00I went to law school in the late 90s/early 00s and...I went to law school in the late 90s/early 00s and all the interest was subsidized. Graduated with about 28k in loan debt. I simply cannot imagine taking on the debts that current students are incurring, esp considering the current job market.BamBamnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-62254268702362871392014-10-01T19:16:30.850-06:002014-10-01T19:16:30.850-06:00That's right, 4:08. Even in the late 1980s, pe...That's right, 4:08. Even in the late 1980s, people would get more interest from an ordinary savings account than they paid on their student loans.<br /><br />Old GuyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-66802702349177495782014-10-01T17:32:46.043-06:002014-10-01T17:32:46.043-06:00Certainly the profe$$ors and other beneficiaries o...Certainly the profe$$ors and other beneficiaries of the scam live a damn sight more lavishly than the students that borrow most or all of the cost of attendance. Nonetheless, it is true that the thousands of people borrow the cost of living—as determined by the law school—for three years and won't ever pay the loan back. Why should some mouth-breathing Cooleyite get to live for three years at the public expense?<br /><br />Old Guy<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-14788508685426933162014-10-01T17:08:34.735-06:002014-10-01T17:08:34.735-06:00Actually, @1:35, in the late 1970's interest r...Actually, @1:35, in the late 1970's interest rates were sky-high but student loan interest was subsidized and thus dirt cheap. Many folks took out loans and parked the money in high interest CDs, which I believe led to the lenders making the checks out to the school or the student and the school.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-15221462271821477852014-10-01T15:51:56.872-06:002014-10-01T15:51:56.872-06:00The institution will give you a check from loan pr...The institution will give you a check from loan proceeds up to their estimated cost of living. It depends on how much you want to borrow.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-9571678946511513922014-10-01T14:49:48.449-06:002014-10-01T14:49:48.449-06:00IBR is here to stay. It is simply a structured ba...IBR is here to stay. It is simply a structured bankruptcy over the life of the student, or up to twenty years, depending on which comes first. I know law students with close to $300K in debt and jobs making in the lower five figures. They will never be paying off those loans absent a windfall and knowing that the Windfall may go to pay off the loan . . I suspect many young lawyers with large loans won't even bother trying to make that windfall or pay the loans off. The loans are, imho, a huge disincentive to make large amounts of money. Why bother when the income goes to the debt. Better to work not so hard and make smaller amounts so the amount that needs be paid back is much less?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-59084869134989429972014-10-01T14:35:11.109-06:002014-10-01T14:35:11.109-06:00i read somewhere that federal loan money goes dire...i read somewhere that federal loan money goes directly to the institution. the borrower cant even intercept that payment for his/her own purposes. don't know about private loans though. maybe private loan borrowers are living it up.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-37760858176683321332014-10-01T12:02:23.808-06:002014-10-01T12:02:23.808-06:00Most of the student loan money goes to the law sch...Most of the student loan money goes to the law school. The only people who lived "lavish" lifestyles at my school were the students who had family money and the faculty.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-60910343913626551472014-09-30T21:30:32.429-06:002014-09-30T21:30:32.429-06:00The vast bulk of the student loans goes to tuition...The vast bulk of the student loans goes to tuition and other study related expenses not living expenses. So its more correct to say that these student loans are enabling tens of thousands of lazy-ass "lawprofs" to live lavishly for decades at the public expense.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-44656184693629362342014-09-30T17:01:20.717-06:002014-09-30T17:01:20.717-06:00And is also enabling tens of thousands of lazy-ass...And is also enabling tens of thousands of lazy-ass brain-dead "students" to live lavishly for three years at public expense.<br /><br />Old Guy<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-23392322782009542852014-09-30T14:54:17.072-06:002014-09-30T14:54:17.072-06:00Most current and prospective students I know don&#...Most current and prospective students I know don't seem to believe they will ever actually pay off their loans. They expect to either get IBR, PSLF, or simply never pay them off. With that in mind, why would they take anything less than the maximum possible cost of living amount? Why would schools charge anything less than sky-high tuition? Everyone just expects the taxpayers to end up holding the bag.<br /><br />This is moral hazard at its worst. The federal student loan system is funneling enormous sums of money straight into the pockets of a bunch of "academics" who pretend to be humble public servants.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-4683702433325288402014-09-30T12:53:50.534-06:002014-09-30T12:53:50.534-06:00Part II:
*Fair value cost accounting is OK for cr...Part II:<br /><br />*Fair value cost accounting is OK for credit card debt, where defaults result in 15 to 20% collection rates. It is not OK for federal student loans, where defaults result in 90 to 130% collection rates. Whoops! Some more moral hazard, particularly since your federal student loan administrator has a 50-50 chance of being an erstwhile student lender who also owns an authorized collection firm for defaulted federal student loans (read: SLM/Navient and Nelnet).<br /><br />**Tangential, but just to open everyone's eyes a little more, back in the pre-Direct Lending, pre-GradPLUS days, the largest provider of federal (FFEL) and private student loans to graduate students was the non-profit AccessGroup. In any given year, about half of its loan volume was to law students. Guess what? AccessGroup*** was actually jointly owned by the 197 accredited law schools as a membership corporation. And despite being a nonprofit, it too rolled all of its loans into SLABS and sold them; from the documents I have seen, it managed to originate about $11 billion of SLABS between 2000 and 2008. AccessGroup is still around, too, despite lending virtually nothing and having long since outsourced its loan administration. It sits on about $300 million and pays a host of executives anywhere between $250k and $600k for... showing up and turning on the lights, I guess. Like SLM and Nelnet and Citi and the other major lenders, they are simply waiting for an opportunity to take market share back from the government.<br /><br />**Long-time readers of the law school crisis may recall that this is the organization that Richard Matasar took a lot of flack for being its chair of the board of directors while also being the dean of New York Law School and a pseudo-defender of the value of law school.<br /><br />As you can see, moral hazard is everywhere when it comes to student loans.<br />Unemployed Northeasternnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-55723336206182079202014-09-30T12:53:37.434-06:002014-09-30T12:53:37.434-06:00Part I:
Critiques of their methodologies - both m...Part I:<br /><br />Critiques of their methodologies - both my own and that of others - can be found in most coverage of their articles on the Chronicle of Higher Education and on Inside Higher Ed. See http://chronicle.com/blogs/ticker/loan-forgiveness-encourages-student-borrowers-to-take-on-more-debt/85729, http://chronicle.com/article/Grad-School-Debt-Is-Said-to/145539/, and http://chronicle.com/article/Obamas-Loan-Repayment-Plan/135144/, among other coverage. I would point out that I communicate with several of the other pseudonymous posters who poke holes in NAF's studies in those threads; they are, by and large, career financial aid professionals. David Sheridan, who shows up in some of the threads, is director of financial aid at Columbia Law School, for instance. Mark Kantrowitz founded finaid.org. Etc. <br /><br />But to briefly list, some of their flaws include the assumption that lawyers will earn low salaries for 10/20 years to hit PSLF/PAYE forgiveness and then jump to a BigLaw partnership or something; they tend to use the risibly inappropriate fair value cost accounting estimates for federal student lending projections rather than the DOE's own projections, and so forth.* The difference between those projections is about $200 billion, by the way: a $100 billion profit (negative subsidy) over the next ten years by the DOE's accounting, a $95 billion loss over the next ten years under a fair value cost accounting method put together by congressional Republicans. But let's take the Republicans accounting at face value, for argument's sake. Fed student loans will lose $95 billion over the next ten years. I recall that in one of NAF's *studies* about IBR plans, they estimated that those plans, in conjunction with the Republican's accounting, will cost the government $150 billion over the next ten years. For real? About 1 in 35 student loans is in an IBR plan, under which they will still have to make payments unless they are under 150% of the poverty line. And that changes a $95 billion loss into a $150 billion loss? C'mon.<br /><br />It has been some months since I last read one of NAF's studies, as they tend to be quite predictable and repetitive in their analysis and recommendations, so my critiques are not as fresh as they could be; hence the links above (which is not meant to be an exhaustive list).<br /><br />@anonymous #2,<br /><br />The private lenders don't care if grads can't make payments. That's because they roll them into those SLABS I mentioned above and sell them to pension funds, sovereign wealth funds, college endowments, investment banks, etc. By the time repayment comes around, the lender hasn't actually owned the loan in years. It's no different than the banks who wrote NINJA loans and sold them to other banks and investors. In fact, I have heard that some of the bigger players used to sell them to various offshore shell company subsidiaries to run up the price before selling them to third parties. In any event, the risk is off their books. They probably still provide loan administration services for the new owners of the student loans, but that's just another revenue stream. <br /><br />@dupednontraditional - I have not seen one breath out of NAF about actually lowering tuition in any of their studies. Just a purportedly axiomatic notion that if you cut federal largesse and repayment plans, things will work out. Of course, law school tuition grew 1) far beyond the bounds of federal lending limits and 2) faster than any other branch of academia for like 15-20 years before GradPLUS or IBR** existed, and that's because private lenders filled the gap. And again, NAF's funder's funder is Sallie Mae. <br />Unemployed Northeasternnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-12980626215601324822014-09-30T07:27:03.521-06:002014-09-30T07:27:03.521-06:00I enjoyed that, too. Floyd B. Olson was a great go...I enjoyed that, too. Floyd B. Olson was a great governor. He was the Minnesota version of FDR.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-8689984231188812962014-09-30T06:35:24.069-06:002014-09-30T06:35:24.069-06:00Not sure that UNE's post was ad hominem. I th...Not sure that UNE's post was ad hominem. I think he/she was pointing out there may be some very real conflicts of interest going on behind the scenes, not unlike unpublished meetings between Goldman Sachs and the Fed on banking regulatory policy.<br /><br />NAF's pointing out that IBR is moral hazard is good, and one way to directly impact the hazard is by lowering tuition, not coming up with a new loan schema. It's very possible that NAF's parent institutions are indeed laying down a "whoa, let's not get crazy, here!" smokescreen, as lowering tuition would be (1) a direct fix, and (2) affects interested parties, ah, "negatively."<br /><br />Antiro: Best of luck. dupednontraditionalhttps://www.blogger.com/profile/04170022654810216357noreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-58320069565522766612014-09-30T06:09:44.169-06:002014-09-30T06:09:44.169-06:00You can't get blood from a stone... without IB...You can't get blood from a stone... without IBR or PAYE a lot of graduates would be completely impoverished if they were forced to pay whatever usurious terms private lenders demand. Are these lenders really looking forward to making graduates destitute for short term profits?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-828516976642946262014-09-29T19:48:57.831-06:002014-09-29T19:48:57.831-06:00lol goodlol goodAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-69558321997150888662014-09-29T18:30:24.856-06:002014-09-29T18:30:24.856-06:00I would like to hear more about what you think abo...I would like to hear more about what you think about their methodologies. <br /><br />There's no question that they are funded in large part by Lumina, what I would like to know is whether or not we can rely on said studies to attack the loan scam. <br /><br />I appreciate your long and detailed response.Antirohttps://www.blogger.com/profile/13353794908230833127noreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-28824714458213668112014-09-29T13:25:21.188-06:002014-09-29T13:25:21.188-06:00Dear Unemployed Northeastern:
Your post is all ad...Dear Unemployed Northeastern:<br /><br />Your post is all ad hominem attacks. It does not deal with the underlying facts of Antiro's post. 2 + 2 still equals 4 regardless of the motives and character of the person who claims it. I welcome your input and hope it can deal more in facts than ad hominem.<br /><br /><br />Dear Antiro:<br /><br />Best wishes for the bar exam and hope that job comes through. Let us know how it goes.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-17619699045647461782014-09-29T10:14:22.397-06:002014-09-29T10:14:22.397-06:00Good readGood readAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-4262779242956866712014-09-29T09:54:54.984-06:002014-09-29T09:54:54.984-06:00The Cartel continues to lay tuition on their Procr...The Cartel continues to lay tuition on their Procrustean Bed and force it to fit their notions of what it should be, because money. The Feds blindly follow suit and taxpayers are left holding the bag. The good news here is that the collapse of the funding will unravel this whole IBR scheme. The bad news is that thousands will suffer for it, when they were supposed to be the recipients of it in the first instance. <br /><br />But, that's what these so-called "educators" are banking on: the false lure of IBR means money for me today; debt for you, tomorrow and forever. It is a sad day when crashing the bus is the only way to affect change, even though the shrapnel will injure many innocent parties.<br /><br />Yeah, I know, some (Boomer) haters will say that 22-year-olds are all scheming connivers and are functionally no different than Bernie Madoff, merely for wanting to go to law school. Just goes to show you how messed up the 'Murican Dream has become.dupednontraditionalhttps://www.blogger.com/profile/04170022654810216357noreply@blogger.comtag:blogger.com,1999:blog-3660083024919144793.post-52983964351999524792014-09-29T09:45:16.926-06:002014-09-29T09:45:16.926-06:00"Georgetown, The Advantage Group, and every &..."Georgetown, The Advantage Group, and every "non-profit" institution that benefits from charging students ridiculous prices for diminishing returns, the good times are just about up."<br /><br />I wish I shared your optimism. This scary, scary stuff. Think about it. You're saying to people that if they agree to forfeit a fixed percentage of their paycheck every week they can have unlimited funds for "education." Everyone loses 7.65% of their check (up to the Social Security limit) to FICA and just forgets about it. There are tens of millions of idiots in America who think they paid no income tax last year because they got a refund. <br /><br />Under this system schools will have zero incentive to not quadruple tuition and suck up student loan money at taxpayer expense. You think the game is up? When have you ever heard any politician say that higher education is grossly overpriced? I never have, but I've heard plenty of them talk about helping people pay for college.<br /><br />I despair of living long enough to see a solution. Anonymousnoreply@blogger.com