Monday, January 13, 2020

"Punitive Standards"

Image result for dan aykroyd ghostbusters cigarette

I had to read this two or three times to make sure I was getting this correct:

In what is being described as a “stunning” decision, a bankruptcy judge has ruled that a 2004 graduate of Yeshiva University’s Cardozo Law School may erase more than $220,000 in student loan debt.

The law grad, 46-year-old Kevin Jared Rosenberg, represented himself. His annual income is less than $38,000, and his monthly income after expenses runs at a deficit of about $1,500, according to the Jan. 7 opinion by Chief U.S. Bankruptcy Judge Cecelia Morris of the Southern District of New York.

I was going to go into a long quip-filled tirade about how "I felt a great disturbance in the Scam, as if millions of bootstrapping-Boomers cried out in terror and were suddenly silenced," but considering the Chief Judge is a Boomer herself, maybe I'll just keep quiet on that part and move on...

Wow, do I feel for Rosenberg, and I wish him well.  Looking at his statistics - 2004 graduate, 46 years old - I'm seeing some real kinship there in similar numbers.  Another nontrad who was lured by the pipe dreams of the law school cartel.  Another nontrad for whom the the law school dream fell squarely flat, to say nothing of the K-JD variety.

Morris said she was applying the so-called Brunner test for discharge of student debt as it was originally intended. Since the test was created in a 1987 decision, cases interpreting it have set out “punitive standards” and “retributive dicta,” she said. Those harsh cases “have become a quasi-standard of mythic proportions, so much so that most people (bankruptcy professionals, as well as lay individuals) believe it impossible to discharge student loans,” she said.

“This court will not participate in perpetuating these myths.”

Amazing.  It's almost as if the ridiculous and completely unsustainable costs of undergrad and graduate school are finally applying enough pressure to the system that rational people can see the gross disparity between the treatment of student debt and literally all other kinds of debt.  When people can't buy homes, pay their bills, buy things, or start families, all for having the temerity of wanting to improve themselves and their standing, it's a real drag on the economy, man.  Why it took 40+ years to recognize this out is beyond me, but that gush of sweet, sweet federal loan money was probably too distracting for self-interested parties.    

Granted, there will be loan sharks and other holier-than-thou haters that will go into apoplexy over this development.  The case is on appeal, so no doubt the full force of these parties will be brought to bear against this decision standing.  Last thing anyone deserves is an actual jubilee, especially one of those lawyer-types.  You know they all drive solid-gold Bentleys and have seven vacation homes anyway.  Speaking of which, I need to sue somebody, get one of those lawyers on the phone...

Here's hoping this not only opens the door to reasonableness for many, many victims of the scam, but also is a small beginning in the entire financial rethinking of how education is handled in this country.  Wouldn't that be horrible.      


  1. I do agree that student loans should be dischargeable after a reasonable time. And maybe this decision, if it survives on appeal, will lead to meaningful standards for the granting of federally guaranteed student loans. After all, the state will now be stuck with almost a quarter of a million in debt for this one person.

  2. I have to agree with OG; while it's great that this debt, like any other debt, ought to be dischargeable in bankruptcy, there is also a new and not-so-hidden danger. The scam schools, always looking for an opening, will now try to charge even more. Yes, it would have to be subtle, but the message will be conveyed to the clueless-"Everybody wants to be a lawyer, right? And you want to help the whales/immigrants/neglected children/neglected minor immigrant whales, right? So come to Scam U Law School, and take out loans guaranteed by the feds-that way, if things don't work out, just file for bankruptcy. Literally-what have you got to lose; going to law school on someone else's dime beats working retail."
    In a perfect world, the government gets out of the loan business, probably not going to happen, so the scam schools benefit, yet again.

    1. The taxpayers have just been stung for almost a quarter of a million dollars for ONE of the half-million or so students who have gone through law school since 2004. If this case sets off an avalanche of claims for bankruptcy, the charge on the public could be immense.

      So lobby for claw-back provisions and, more importantly, limits on access to student loans.

      It should be noted that Rosenberg finally got his debts discharged 16 years after graduation. So don't expect a quick and easy way out of student loans.

      While we're at it, let me point out that Cardozo was already rather poorly regarded back when Rosenberg attended. Today, though not an über-toilet, it is a law school that nobody should attend.

    2. The court in this case was PROPERLY applying Brunner for once. There really isn't much risk of people taking out huge loans with the intention of bankrupting them, because Brunner requires both a good faith effort and a demonstrated unlikelihood of improved prospects. Neither of those are things you can demonstrate before you've tried your best and suffered under the loans for a significant length of time, and nothing about this decision alters that. This guy suffered for 16 years as old guy said; there's no way he would've succeeded if it had only been 1 or 2 or even 5.

      It just says that total and complete impossibility of improved prospects isn't the standard. Doesn't change the fact that you still have to act in good faith and show undue hardship as it was originally intended.

  3. The Boomer dominated culture, political correctness , and eviscerated social norms that no longer hold water strike again, and in the worst possible way.

    My man was in the US f**** Navy as an officer. His current gross income as a lawyer is less than a 22 year old Ensign’s (most junior officer) salary, and we haven’t even factored in benefits and retirement. He would have been close to (if not exceeding six figures) as a naval officer if he stuck it out, and he would have a rock solid, completely portable and recession-proof pension to boot. In fact, he probably could have retired with a net pension of around 5-7k a month right now. He would then have the freedom to do whatever he wanted, including pursuing entrepreneurial pipe dreams, stating state side in a decent city in the South or Midwest, or retiring in South America like a Caesar.

    Instead what happened? His life got destroyed. The tax payer got hit for 250k to destroy a perfectly viable and productive human being so law school professors and bankers could profit. This sets a precedent for more destructive behavior.

    You know how this went down, right? Boomer relatives, TV, etc: the military is a hard life. We need to thank our heroes, as they have an incredibly difficult life. Who wants to do that? My man must have been lambasted every single day. Family, friends, colleagues, etc. He probably said “yeah, you know what, I’m worth more than this. I can do better than the military. Look at all these rich attorneys I see on TV!” Damn, this is horrific.

    I wager 10-15 percent of every law school class doesn’t consist of people that merely could have had stable or superior employment, but actually gave up stable employment to pursue a pipe dream. In my class alone there were a couple of cops, public school teachers that left tenured positions, and military people.

    And for what? So some a****holes that have never practiced law, that hate practicing law, and hold practicing attorneys in contempt, can live a leisurely lifestyle at everyone’s expense.

    What I find stunning is that both political parties are aware of what’s going on, and this situation violates the principles of both parties. Conservatives don’t believe in federal graft like this and liberals don’t believe in enriching the top .1 percent at the expense of everyone else. For Godsake, Andrew Yang’s book literally has a quote that law school professors are going to continue living a good life at the expense of everyone else because of this garbage. I just don’t understand how this level of social destruction is possible. We are not talking about someone here that could have been successful. We are talking about someone that literally threw away a ticket to a great life to be totally destroyed, and every ahole with a W2 income funded it. This is spectacular.

    1. I forget where I read it, but I remember a tenured law prof being quoted as saying that he was "doing pretty much the same thing I would be doing if I was independently wealthy." In other words, the life of a tenured lawprof is a lot like the life of a trust fund baby who happens to want to spend his nearly-unlimited free time writing papers on esoteric intellectual subjects.

      The fact that their ability to live this kind of life is dependent upon hordes of 22 year olds signing on to 200k of non-dischargeable debt that will be a negative ROI for the vast majority of them is something that ought to trouble them morally, but I can't exactly blame them for taking a sweet gig like that if it is on offer. Wouldn't you?

      And besides, the average lawprof, if you google the salary surveys, makes somewhere around 120-150k. Not bad, but still very much middle class.

      So yeah, while the prof salaries may be high given how easy and secure the job is, I don't see them as the primary drivers of the high cost. That prof pay pales in comparison to the millions the deans rake in, to the sky-high cost of the palatial facilities these law schools think they need, and to the fact that universities still see law schools as cash cows. They expect the law school to generate revenue well in excess of cost, with that profit being funneled up to the larger university or even to shareholders in the case of the for-profit institutions. I direct more of my ire about cost in those kinds of directions.

    2. To that six-figure salary add sabbaticals, golden benefits, free junkets to fucking midtown Manhattan or San Diego or Waikiki, and practically no work. Not to mention tenure and high status. You won't find me shedding tears for law profe$$ors.

      Payroll represents most of a typical law school's budget. It's true that some bullshit über-toilets like Thomas Jefferson have blown a king's ransom on stupid buildings that they ended up losing or other dumb-ass vanity projects. But in general the personnel of the law school make up the bulk of the charge. And the per$onnel are mainly the profe$$ors.

    3. Old Guy: Fun hypothetical. Your phone rings tomorrow. You are being offered 150k/yr, WITH tenure, to be a professor of constitutional law. The law school is low-ranked and the career outcomes are poor, but its enrollment is healthy and it is in no jeopardy whatsoever of losing its ABA accreditation.

      Would you have the ethical fortitude to turn it down?

    4. I'd take it. My ethical standards are high, but I didn't design this fucked-up society, and taking that is a damn sight better than starving.

      BUT, unlike the Leongs and the McElroys and the Dougie Freshes and the rest, I wouldn't act as if my farts drove the whole goddamn planet forward.

      My greater concern would be not ethics but the misery of having to try to get constitutional law through the rock-hard skulls of über-toileteers.

    5. Fun though that hypothetical is, realistically the Old Guys of the world never get offers of that kind, which are reserved for silk-breeched princesses like Leong, McElroy, and Dougie Fresh.

      Anyway, I've answered your question. Über-toilets of the US, be on notice that Old Guy can be bought off.

  4. While I am happy for Rosenberg, I am sad for the taxpayers. I knew this would happen once the student loan system was nationalized.

    If I am interpreting Old Guy correctly, I agree that we need to lobby for such discharged debt to be charged back, at least in part, to the law schools (or perhaps a fund set up by the law schools for such chargebacks, to handle schools that will go out of business). And, we need to lobby for limits on student loans to graduate students.

    1. That would be a nightmare to implement. Like, who is the responsible school if the person has loans from more than one place? What if the student is just deliberately defaulting or not even trying to find work? They'd also presumably have due process rights in each and every recoupment, which could really drag things out. And, how can they ensure the school even can repay the funds? A for-profit school for example will presumably keep only just enough cash for operations and funnel the rest to shareholders as soon as it is able. The recoupment could victimize other students if they have to take it out of ops, and shareholders would object as there would be no legal basis for veil-piercing. To make that work they'd have to impose a capitalization requirement based on actuarial analysis or something, like the ones banks and insurance companies usually have to meet. In short, it just wouldn't be workable.

      A more workable approach would be to simply keep in mind that the DOE decides whether or not a school is eligible to receive loan funding. Current regime is that they delegate this to accreditation agencies, but they can take that power back in whole or in part.

      I say, rather than making the schools pay back discharges, simply set standards that if a school has unacceptable rates of default, discharge, or perhaps even IBR enrollment (for reasons other than PSLF), then it gets decertified for loans. Losing loan eligibility would put most places out of business, so I think that would be a pretty big stick. And any legal wrangling that would occur, disputes over how they calculated the default rate and such, would just be in one case, as opposed to potentially litigating about it as a separate matter each and every time an individual student defaults which could really gum up the works.

  5. If enough of these pile up, the Congressional Budget Office will be all over it, and the Dept of Education will be ready to yank student loans from the worst offending schools. Maybe...

  6. I am from overseas, have some quick questions about these loans I've never fully understood:

    1. When the bankruptcy changes that went through (in 2005?) making private student loans non dischargeable, was this effective immediately? Ie someone who took out loans in 2003 and 2004 and was still studying when the law changed; were the loans they already had outstanding non dischargeable?

    2. Who will wear the loss of these loans in this case- the private lenders or govt?

    3. Is it true there is no upper cap on GradPlus loans?

    1. @2:20:

      1. I don't know what the exact effective date was, but yes BAPCPA did apply to existing borrowers. Bankruptcy is in the constitution, in that it gives congress the right but not the obligation to establish a uniform bankruptcy law, with no corresponding property interest in whatever regime they might create given to the debtor. Congress could theoretically abolish bankruptcy entirely anytime they want, so there's certainly no right to grandfathering of old versions of the code based on when you took out a loan.

      2. If the loan is federally guaranteed (FFEL) then the government is a guarantor and pays the lender upon default. But FFEL was abolished during the Obama years except for existing loans, so now it's just direct loans. These are lent by the gov directly so of course they bear the risk, either as a direct lender or as a guarantor. There are also private student loans which still benefit from the same bankruptcy-proofing of BAPCPA, like SoFi for example, but which have no government involvement or oversight at all. Obviously, the government does not bear risk on those so many question why they got the BAPCPA protections in the first place.

      3. Yes, that is true. If you qualify for GradPLUS, then you can borrow "the full cost of attendance, less other aid." So take whatever it is the school wants to charge you, add room & board, subtract the "regular" Stafford direct loan limits (which you must exhaust first), and subtract any grants/scholarships/etc that you may happen to have. That's how much a graduate student can borrow via GradPLUS. So, in other words, you can borrow any amount the school will certify. It's limited only by what the school wants to charge and what you're willing to pay; the government sets no cap on GradPLUS like they do with Stafford. When combined with IBR, this is a moral hazard indeed.

    2. Thanks for the answers. Utter madness that there's no upper limit on GradPlus loans! So technically a university could charge 200k a year and people could get loans for that!

    3. Yes, technically, they could charge 200k. But as a practical matter, students might not enroll even with the moral hazard loan system because they can apply to other schools, and it would invite regulatory scrutiny.

      As they often say in business: Pigs get fat, hogs get slaughtered. The schools have a good thing going here, but they know that regulators can start to get real creative in finding something to nail you for if you draw too much attention to yourself, even if what you did is perfectly legal in-and-of itself. Pharma-bro Martin Shkreli found this out the hard way, for example.

      In other words, if someone goes rogue and quadruples their tuition overnight, and the newspapers pick up the story, they could wreck the gravy train for everyone, and they all know it. So tuition can be obscene, but it can't be obscene relative to other schools. That's why Harvard and Cooley charge pretty much the same sticker price. Everyone has to pay attention to what everyone else is charging so that it appears that the tuition is just "market rate" and therefore "reasonable."

      It also helps that gradPLUS is for graduate school only, and therefore flies somewhat under the radar to begin with because most people simply do not go to graduate school. That's why the press is mostly writing about undergrads who owe like 30k. If it were truly and widely known how common six figure loans actually are, Congress would come under significantly more pressure to do something. The schools do not want this. If you've got a good thing going, the last thing you want to do is draw too much attention to yourself.

    4. Yes, that's true: there's no upper limit. Is anyone surprised that tuition rises faster than a helium-filled balloon, given that the ultimate responsibility for those debts lies neither with the students nor with the law schools but with the federal government?

      Already the cost of attendance at several law schools is close to $400k, all of which can be financed with federally guaranteed student loans. How long before the cost hits a cool million? At least the lie of the "million-dollar degree" will seem plainly hollow once the outlay exceeds even that grotesquely exaggerated sum.

      Cooley charges Harvard's tuition (pretty much) because the sorts of people who go to Cooley cannot get into Harvard—or UCLA, or Iowa, or Cardozo… It's Cooley or nothing, and Cooleyites are too stupid to take the better option. So Cooley can charge what it will—up to the limit, as you said, of what the Harvards charge. If Cooley charged more than Harvard, it would run the risk of being slapped down in a hurry.

    5. Exactly OG. What Harvard et al charge serves as a sort of de facto limit on what the lower tier schools can get away with. But, one might also wonder (as you alluded to) why don't they charge less? Why doesn't anyone seem to even attempt to increase enrollment by competing on price? I mean, some do of course give out more tuition discount "scholarships" than others, but no one actually is so bold as to lower the sticker price and advertise based on being an affordable alternative. Why is that?

      Well, as you said, it's about where you could get in being so narrow, and about how schools don't place hardly at all outside their geographic vicinity unless it's Harvard or whatever. If I know your LSAT and geographic ties, then chances are I can narrow it down to 2-3 law schools, at most, that you realistically might attend.

      The schools aren't really competing with each other at all. They just kinda tacitly agree on a price they'll all stay roughly in line with, and divvy up their respective "turfs" based on geography and a very narrow LSAT range (usually like literally a 5 point range) they will cater to.

      In other sectors, a cartel that basically fixes prices and then divvies up territory amongst its members would raise antitrust red flags. But not here. Perhaps in part because the loans have already distorted this market so much anyway that traditional notions of competition have no place.

    6. A few of them actually do charge substantially less than the $40k–60k mainstream (see the data at Some of the state schools charge a good deal less for residents. There are also institutions like Brigham Young and the University of North Texas (_UNT, fill in the blank) that charge a lot less than the median (which is around $240k). But at every law school in the US (other than the University of Puerto Rico), the cost of attendance is over $100k—and usually a lot more. Harvard's degree is probably worth $100k, but no toilet school's is.

      There's little competition. A few toilet schools succeed in attracting lemmings from distant places—typically because of an attractive location (a big city or a place near a beach), but occasionally because of some special factor (the U of North Dakota, hardly in an attractive location, swept up much of Arizona Summit's jetsam by offering admission by transfer at the last minute). But toilets seldom attract people on the basis of price. Law school is an inelastic commodity, thanks to the guaranteed student loans that largely relieve lemmings of sensitivity to cost. You made that point when you referred to distortion of the market. I'd go further and say that there really is no market—more of a cartel, as you put it.

  7. I love how the court concentrated on the second prong of Brunner, the one about difficulty being likely to persist which has, as the court said, been repeatedly misinterpreted by courts to require essentially a showing that improved income is an absolute impossibility. As a practical matter, the only way to show that the future is totally hopeless is to show that you are either disabled, or of a sufficiently advanced age that you don't even really have much of a future.

    That misinterpretation essentially rendered the Brunner test meaningless, substituting it with a test of total and absolute hopelessness which neither Brunner nor the undue hardship statute contemplated. I hope the appellate court affirms.

  8. Über-toilet Thomas Jefferson lost its ABA accreditation last year, but the odious ABA has decided to continue that accreditation on a "limited" basis for three more years, while Thomas Jefferson implements a "teach-out" plan:

  9. I'm somewhat happy this is Carbozo, which once fancied itself the next Fordham. In a way, it is. Hopefully, the decision will be upheld and a bunch of Brooklyn Law alumni will then troop to court.

    JD Painterguy, you still out there?

  10. Yeah. I'm on ICR and half a million in debt and counting. I don't paint now though. I'm a taxpayer too you know as are many other student debtors. The case will be appealed as dupednontraditional says. So things like this take time and the law is a slow moving thing by it's nature since, after all, people are getting paid to work on the law in various capacities and no matter how long it takes and no matter what the outcome which, I hope, will one day favor the debtors rather than, for lack of a better word, the decades old "cartel" so often referenced hereabouts.

    My best guess is that the student lending system will be defended by all interested or relevant parties (Radix malorum est cupiditas) until it can't be defended any more and it might take a two trillion total and another four year election cycle, and so we wait. But, for the millionth time, please check out the work of Alan Collinge.

    "No," the Boss corrected, "I'm not a lawyer. I know some law. In fact, I know a lot of law. And I made me some money out of law. But I'm not a lawyer. That's why I can see what the law is like. It's like a single-bed blanket on a double bed and three folks in the bed and a cold night. There ain't ever enough blanket to cover the case, no matter how much pulling and hauling, and somebody is always going to nigh catch pneumonia. Hell, the law is like pants you bought last year for a growing boy, but it is always this year and the seams are popped and the shankbone's to the breeze. The law is always too short and too tight for growing humankind. The best you can do is do something and then make up some law to fit and by the time that law gets on the books you would have done something different."