Defund Columbia: Federal loans for high-cost, low-value graduate schools have enabled the Ivy League master’s-degree racket to thrive.

https://www.nationalreview.com/2021/07/defund-columbia/

Defund Columbia

By Preston Cooper

July 13, 2021

Federal loans for high-cost, low-value graduate schools have enabled the Ivy League master’s-degree racket to thrive.

Columbia University is among America’s most elite schools. Many believe that a graduate degree from Columbia or another Ivy League school will lead to financial security for life. But a recent investigation by Wall Street Journal reporters Melissa Korn and Andrea Fuller shows that this perception, so eagerly cultivated by universities, is a fiction.

Master’s-degree students at Columbia and many other elite schools take on hundreds of thousands of dollars in student-loan debt. Yet after they graduate, too many find that the degree did not open the doors promised. The existence and scale of these subpar graduate programs is tied to irresponsible federal lending practices, which extend unlimited lines of credit to graduate students with no regard to their ability to repay.

Students in Columbia’s Master of Fine Arts in film program typically accumulate $181,000 in federal debt, according to the report. But when they enter the labor market, their median salary is just $30,000 — less than one-sixth of the debt they took on. Few, if any, of those students will fully repay what they borrowed from taxpayers.

“There were 55 students in my incoming class at Columbia’s MFA Film program,” says former student James Stoteraux. “Only 4 of us ever managed to make a career out of it. . . . Columbia traded on its reputation to sell them big dreams that it could never deliver.”

Fueled by federal aid, master’s-degree programs have become profit centers for elite universities. Ivy League schools coast off their selective undergraduate programs, which earn the schools top spots on the U.S. News & World Report college rankings. They leverage this prestige to churn out graduate degrees that would make many for-profit colleges blush.

The strategy has paid off. During the 2019-20 academic year, Columbia collected $268 million in federal loans on its graduate programs. The undergraduate schools, on which Columbia built its reputation, only supplied $16 million in federal loans.

Columbia officials have even admitted to the scheme. The school’s vice provost for academic programs says that master’s degrees “can and should be a revenue source,” according to the Wall Street Journal report. The cost of that business model falls on students, who are responsible for paying off the debt, and taxpayers, who inevitably will be stuck with part of the bill when the government forgives the loans that students can’t pay.

There’s only one way to solve this problem: Defund Columbia and other elite institutions guilty of this practice. End the federal loans for graduate schools that have enabled the Ivy League master’s-degree racket to go on for so long.

Congress originally created the federal student-loan program to help low-income students afford college. But student loans have transformed into a welfare program for rich universities. Graduate loans now account for two in five loan dollars issued by the federal government. That has not happened by chance; it is the result of deliberate policy changes.

Created in 2006, the federal Grad PLUS program allows graduate students to borrow an effectively unlimited amount from the federal government, provided they attend an accredited college or university. After taking on the debt, students are allowed to pay it back through income-based plans, where payments average just $154 per month. Ten or 20 years after a borrower starts payments, any remaining debt is canceled.

The Congressional Budget Office estimates that 60 percent of the loans issued in 2021 and repaid in this manner will eventually be forgiven. Internal Education Department documents suggest that over $400 billion of the federal government’s loan portfolio will not be repaid. To be sure, students themselves will be responsible for paying a lot as well. But colleges and universities are running away with the profits.

Congress could put an end to this with one simple policy change: Stop supporting graduate programs with federal loan dollars.

There’s a reasonable economic justification for federal lending to undergraduate students, since most have no credit history to speak of and might need government help to get a loan. But that argument generally does not apply to graduate students, who are in their 20s and 30s. The economic rationale for a federal graduate-loan program is nonexistent.

Indeed, there was a thriving private market for graduate loans — one that could be engaged once more — before Grad PLUS arrived on the scene. Students who needed to borrow large amounts for a high-value degree, such as medical students, could almost always secure private funding, and usually at a lower interest rate than the federal government offered.

But programs with outrageous tuition costs and meager earnings payoffs would have a hard time pocketing funding from a private lender that cannot simply pass losses on to taxpayers, as the federal government can. Only the presence of federal graduate loans, with their heavy implicit subsidies, makes high-cost, low-value programs possible on a large scale.

Problems are best solved by removing their root causes. Defunding Columbia and other graduate schools is the most effective way to rescue graduate students from unaffordable debt and taxpayers from the burden of cleaning up the mess.

July 13, 2021. Tags: , . Education. Leave a comment.

I really like this idea from Kurt Schlichter: “student loans need to come from the school and to be dischargeable in bankruptcy”

Kurt Schlichter just wrote this excellent column, with a whole bunch of ways to improves colleges.

Of Schlichter’s many excellent ideas, this one is my favorite. He wrote:

Third, student loans need to come from the school and to be dischargeable in bankruptcy. A school is going to be a lot less eager to say, “Sure, go ahead and major in Norwegian Feminist Dance Theory” if they are on the hook when their ardent young scholar can’t get a gig that can pay back the sticker price.

That’s brilliant – absolutely brilliant.

I hope Schlichter’s idea gets adopted as national policy.

July 9, 2020. Tags: , , , . Education. Leave a comment.

A New York City environmental organization called “BK ROT” violates OSHA safety regulations by forcing its employees to dangerously use their feet as brakes, “Fred Flintstone style,” on a bicycle, while hauling “almost eight hundred pounds” down “substantial hills”

* A New York City environmental organization called “BK ROT” violates OSHA safety regulations by forcing its employees to dangerously use their feet as brakes, “Fred Flintstone style,” on a bicycle, while hauling “almost eight hundred pounds” down “substantial hills.”

* Sandy Nurse, the organization’s founder, is running for political office.

* Nurse also thinks she shouldn’t have to pay back her college loans.

By Daniel Alman (aka Dan from Squirrel Hill)

February 15, 2020

In New York City, a woman named Sandy Nurse created an environmental organization called “BK ROT.” The organization collects food scraps and other organic waste, and turns it into compost.

As part if its green mission, all of its employees travel by bicycle.

The New Yorker recently wrote the following about this:

Five days a week, Victor Ibarra rides a bicycle through North Brooklyn, collecting food waste from restaurants, coffee shops, and other small businesses and packing it into plastic tubs on a trailer that he tows with his bike. There are two substantial hills on his route, and when the tubs are full the entire load—waste, trailer, bike, Ibarra—adds up to almost eight hundred pounds. “Uphill is really hard,” he said the other day. “But, actually, uphill is a lot easier than downhill. Going downhill, I have the hand brakes pressed on, but the bike is still going.” To stop completely, he has to use his feet, Fred Flintstone style.

Ibarra is twenty-three. His employer for the past six years has been BK ROT, a nonprofit hauling-and-composting operation in Bushwick.

This is very dangerous, and certainly a violation of OSHA safety rules.

Nurse also thinks she shouldn’t have to pay back the money that she chose to borrow for college, even though she chose to sign a legal document promising to pay the money back.

CNBC recently wrote the following about this:

Sandy Nurse doesn’t see why she needs to be $120,000 in debt “just for trying to improve my understanding of the world.”

And so, after a decade of struggling to repay her student loans, she plans to stop trying. She hopes others will join her, too, in a national strike against the country’s outstanding student loan debt, which is marching toward $1.7 trillion.

“It’s a way not to look at ourselves as failures because we’re failing to pay back an excessive amount of money for knowledge,” said Nurse

Nurse’s comments are despicable. Instead of admitting that she is a deadbeat and a liar, she is trying to falsely portray herself as being a victim.

I wonder how Nurse would feel if her customers who paid for their compost with a credit card were to call their credit card companies and have the charges removed, and Nurse ended up not getting the money that her customers had promised to pay her.

To make matters even worse, Nurse is running for political office to become a member of New York’s City Council.

We already know that, in the name of being green, Nurse forces her employees to use their feet as brakes like in The Flintstones.

Since Nurse is running for political office, I wonder if she wants to force the entire population to do the same thing.

Note from Daniel Alman: If you like this blog post that I wrote, you can buy my books from amazon, and/or donate to me via PayPal, using the links below:

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February 15, 2020. Tags: , , , , , , , , , , , , , , . Environmentalism. Leave a comment.

Did the Obama administration commit ‘the biggest accounting fraud in history’ with student loans? Experts weigh in

https://finance.yahoo.com/news/obama-administration-student-loans-experts-113140861.html

Did the Obama administration commit ‘the biggest accounting fraud in history’ with student loans? Experts weigh in

September 5, 2019

The Wall Street Journal’s editorial board (WSJ) recently accused the Obama administration of pulling off “the biggest accounting fraud in history” with student loans when eliminating the role of private lenders in the federal student lending market.

Experts who spoke with Yahoo Finance acknowledged the issue with the general policy in hindsight, though they disagreed on who exactly is to blame.

In 2010, Democrats “nationalized the market to help pay for Obama Care,” WSJ asserted. “The Congressional Budget Office at the time forecast that eliminating private lenders would save taxpayers $58 billion over 10 years. This estimate was pure fantasy, and now we’re seeing how much.”

The WSJ op-ed also highlighted the rising number of severely delinquent student loans since then and blamed the Obama administration for expanding plans in 2012 for new borrowers “to reduce defaults, buy off millennial voters and disguise the cost of its student-loan takeover.”

The editorial board then added: “This may be the biggest accounting fraud in history.”

‘There’s no way around that’

WSJ argued that eliminating private lenders from the student loan market severely hurt Americans and that by using fair-market accounting, it becomes clear that student loans will actually cost taxpayers nearly $307 billion over the next 10 years.

Douglas Holtz-Eakin, former director of the Congressional Budget Office (CBO) during the George W. Bush administration and currently president of the center-right American Action Forum, agreed that the accounting discrepancy manifested because of the “technique” used by the CBO to evaluate the cost of these loan programs.

“A widely known deficiency of the Federal Credit and Reform Act is that it does not allow the CBO to incorporate [market risk] into assessments,” Holtz-Eakin told Yahoo Finance. “So the loans, when they’re evaluated are evaluated as safer than they truly are, and thus, the losses are smaller than they may truly be. And there’s no way around that — the techniques force you to do that.”

He added that “that’s why when you when they switched from the private loans to the government loans, it appeared to save money… that is misleading. I don’t disagree, but it’s not the CBO’s fault — those are the rules.”

Sheila Bair, the chair of the U.S. Federal Deposit Insurance Corporation (FDIC) from 2006 to 2011, agreed that the WSJ was “right to call out the government” on the accounting issue and stressed that it is “a huge problem with federal budgeting and transparency generally.”

Income-based repayment plans were ‘poorly designed’

The WSJ argued that the key catalyst for the student debt crisis today — $1.48 trillion student loans outstanding, with 35% of the consumer loans in the “severely derogatory” category — was a result of the Obama administration’s policies regarding income-driven repayment (IDR) plans.

IDR plans allow borrowers to cap monthly student loan payments based on how much money they are making at a given time. As of September 2018, “almost half of the $898 billion in outstanding federal Direct Loans [were] being repaid by borrowers using IDR plans,” according to the Government Accountability Office.

Holtz-Eakin agreed with WSJ, arguing that the CBO “cannot anticipate a future action of either the Congress or the administration.”

If the government chooses “to move to a whole bunch of loan forgiveness and income-based repayment models, they can’t anticipate that and both of those things bring in less money,” he explained. “The money goes out and it doesn’t come back and they’re bigger losses.”

Holtz-Eakin added that the Obama administration “did that on a regular basis — there was nothing CBO could have done about it.”

Former FDIC Chair Bair, who headed the agency during part of both the Bush and Obama administrations, argued that the issue arose from the poor design of the repayment plan system.

“This has been a couple decades in the making, frankly,” said Bair. “I think that the concept of a payment based on income is a good one — it’s not a bad one. But the way these things have been designed, it’s like the worst of all possible worlds.”

With borrowers often in thousands of dollars in student debt, IDR plans are seen as an alternative for borrowers with high debt and low income. But the current income-based repayment plans is “very poorly designed… [and] confusing,” Bair said.

The WSJ pointed out that borrowers end up owing more than they borrowed even though they’re repaying their loans — called negative amortization — which Bair acknowledged.

“With a true income share, you have higher earners paying more and lower earners paying less, but you let the higher earners pay more to help with the cross-subsidization of the lower earners, and also just to mitigate the budget impact,” said Bair. “But what the government does do now is they cap you out.”

In other words, if a borrower decides that they want to increase their monthly repayment amounts, instead of being able to pay back loans quickly, they’re capped out because the repayment structure is based on their income. Hence, the borrower — despite being able to increase payments — is stuck with a loan that’s accruing interest for possibly 20 or 25 years.

‘Recreated the worst aspects of the subprime… crisis’

The other issue was underwriting.

Previously, the government guaranteed student loans that borrowers took out from private lenders. Today, it controls more than 90% directly.

When the Obama administration “got rid of the guarantee program with the private sector out of the process and made it a direct federal loan, they got rid of all underwriting,” Holtz-Eakin noted.

“And so they recreated the worst aspects of the subprime mortgage lending crisis,” he stated. “They gave anyone who walked up a loan, without any notion of their capacity to repay.”

September 5, 2019. Tags: , , , , , . Barack Obama. Leave a comment.

How Obamacare blew up the student loan crisis

https://www.washingtonexaminer.com/opinion/how-obamacare-blew-up-the-student-loan-crisis

How Obamacare blew up the student loan crisis

July 2, 2019

Sen. Elizabeth Warren wants to cancel student loan debt for 95% of debtors. Fellow 2020 hopeful Sen. Bernie Sanders wants to cancel all of it. What they and every other statist and socialist eager to default on trillions owed to taxpayers forget that President Barack Obama nationalizing student loans brought us to this catastrophe in the first place.

Lost in the kerfuffle and fuming of the Affordable Care Act’s passage in 2010 was the Health Care and Education Reconciliation Act, signed into law just seven days after Obamacare. Half of the act consisted of small and otherwise innocuous amendments to the ill-fated Affordable Care Act, but the other half, Title II, radically overhauled the country’s student loan industry, replacing federally backed bank loans with direct government lending.

The private student loan industry was already dysfunctional and never truly private. The largest private student loan lender, Sallie Mae, originated as a government-sponsored lender, and the government-subsidized market only emerged out of a small but much older federal student loan market. But Title II replaced a mess with a nightmare.

Universities took advantage of the new, easier loan requirements to raise tuition rates still further. From 1995 to 2012, the average tuition at a 4-year private college had risen by 30%. In the following four years alone, it spiked by another than 12%. Researchers at the New York Federal Reserve Bank famously found in 2015 that the pass-through effect of subsidized federal student loans on tuition raised rates by 60 cents for every dollar of loans spent. Although lefty politicians love to hate on fraudulent for-profit schools and blame them for the problem, only 9% of all college students in the country attend for-profit institutions. More to the point, nonprofits still act like for-profits anyway.

For decades, student loan debt had remained in the low hundreds of billions, but during Obama’s presidency, it exploded from $150 billion to more than $1 trillion, the overwhelming majority of which is owed to the government. As student loan debt continues to spiral upward, the federal government’s revenue streams for the programs are becoming more tenuous than ever. For instance, the Department of Education has found that income-driven repayment plans, which allow lower-income borrowers to dodge payments and receive complete debt forgiveness 25 years after the loan initiation, increased by 625% alone.

Now Sanders and Warren want to erase the whole thing with a magic wand and nationalize the colleges’ tuition-hiking scam.

On a moral level, canceling student debt more or less translates to defrauding taxpayers. On a practical level, it defeats whatever incentive structure we’ve attempted to build into the loan process. Whereas home loans are secured by houses as collateral, debtors can’t exactly take your brain away when you default. To send a message both to students and colleges that loans constitute free cash will then only exacerbate the tuition crisis we face.

The federal government set the stage for this problem, exacerbated it by subsidizing and regulating private student loans, and finally sent it into a trillion dollar tailspin by nationalizing the whole mess. If the past serves as any lesson, the government’s best bet is to get out of this imploding industry entirely and refocus on forcing colleges to get some skin in the game.

August 15, 2019. Tags: , , , , . Barack Obama. 2 comments.

Attention banks! Do not give a mortgage to Simon Galperin!

A guy named Simon Galperin just wrote this article, which is titled, “I’m a 29-Year-Old With $235k in Student Debt. I’ll Never Pay It Back.”

Galperin’s statement that he will never pay back his student debt is not because of a medical issue that has rendered him unable to work.

Instead, his statement is proof that he is irresponsible, lazy, spoiled, and entitled.

He also says he believes that innocent taxpayers should be forced to pay off his student debt, so that he can then get a mortgage to buy a house.

If Galperin ever does apply for a mortgage to buy a house, I hope that any bank that considers giving him a mortgage will come across this article that he wrote, and realize that he is an absolutely horrible credit risk.

June 17, 2019. Tags: , , , , , , , , , . Economics. 4 comments.