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Quitting Law School for Cash

November 18, 2011 Leave a comment

Slate.com published an article by a couple of Yale law professors today proposing a unique solution to the problem of law school grads with enormous debt and dwindling job prospects: pay students to quit school.  From the article:

Law schools might analogously offer to rebate half of a student’s first-year tuition if the student opts to quit school at the end of the first year. (If the student has taken out government loans, this rebate would first go to repay this debt.)  A half-tuition rebate splits the loss of an aborted legal career between the school and the student. Each has skin in the game, so students will not go to law school lightly, and law schools will have better incentives not to admit students likely to fail.

It’s actually not a terrible idea.  My only suggestion would be to offer another chance for a rebate after the second year as well.  Since most students expect to work for free during their first-year summer, it’s typically not until the end of the second year that students start to get an idea of what their post-grad job prospects are going to look like.  If a student has a great deal of difficulty securing a paid summer job during their second-year summer, then it is very likely that same student is going to have similar difficulty securing a well-paid post-grad position.   

 

 

Pledge of Refusal to Pay Student Loans – More Information

November 17, 2011 Leave a comment

A couple of weeks ago, I wrote a post on NYU Professor Andrew Ross’s idea for a Pledge of Refusal to Pay Student Loans – the goal being for signers to stop paying once the petition got one million signatures.  I’ve had an average number of hits on the post since then, until today, when I woke up and found that it was, by far, my most popular post today with a lot of people finding it because they were directly searching for the Pledge.

To my knowledge, the Pledge is still in the works, but I did a little research, and found another blog post over at A Post-Academic in NYC on the topic, written the same day as mine, that provides more information.  Here are some interesting points from that post, but I’d encourage you to take a look at it yourself as well:

Here are a few things to know about the pledge:

  • Signing a pledge is not legally binding. The goal is to raise the issue of education as a human right.
  • People cannot default on their loans individually without serious consequences. But we have strength in numbers to change the conversation about debt.
  • Many of us are on the hook for so many bazillions of dollars that we’re going to be paying until we’re dead anyway, so why not sign? It can only help us.
  • We need to keep our eyes on the prize, which is federally-funded higher ed. We have to keep in mind that we are not asking for a lot. I read the other day that Bank of America has $53 trillion dollars (that’s “trillion” with a “T”) tied up in those nasty derivatives, which even the bank knows is a time bomb waiting to go off. So spending a few billion for college is like pocket change by comparison.
  • The pledge would also include an option for people to sign who are not indebted but who want to support those who are. Anyone working in higher education today is implicated in the growing indebtedness of American students, for example. Parents might also want to sign.

Newt Gingrich’s Work Study Plan Doesn’t Add Up

November 11, 2011 4 comments

The Republican candidates for president debated at Oakland University just north of Detroit a few days ago, and several students expressed concerns about the current student loan crisis.  Apparently only two candidates had the chance to answer their concerns – Ron Paul, whose opinion I have already blogged about, and Newt Gingrich, who had this to say:

Calling the current student loan program an “absurdity,” Gingrich said he supports forcing more students to take part in work-study programs. It would be a “culture shock for the students of America to learn we actually expect them to go to class, study, get out quickly, charge as little as possible, and emerge debt free by doing the right things for four years,” he said.

Having held a few work study positions back when I was in college, I decided to check Newt’s math.  Many work study positions, including those I held, are paid at the federal minimum wage, and they also have limitations on the number of hours a student can work.  During the school year I was limited to 10 hrs per week so, for example, when I worked in my school’s foreign language lab in Spring of 1998, I made $5.15 per hour (minimum wage in that year – and for many years after) or a grand total of $51.50 per week before taxes.  Tuition at my university at that time?  Approximately $17000 per year.

But let’s pretend those pesky limits on hours hadn’t been there.  To earn my tuition, in an imaginary utopia where there were no taxes, I would have had to work 3300 hours per year, or 63 hours per week – with no time off and while going to school full-time.  And remember, this is if work study wasn’t taxed, which, of course, it is.  Yes, Newt, that seems realistic. Read more…

The Default Trap

November 8, 2011 Leave a comment

If there’s one thing worse than shelling out mortgage-sized payments on student loans each month, it’s not shelling them out. 

Here is the story of Casey Zimmerman Thompson, a resident of rural Maryland who borrowed a total of $7100 in student loans in the 1980s.  Zimmerman Thompson claims that she has paid approximately $18000 towards the loans since then.  Despite that, she still owes over $9800.  That’s right, 25 years after she took out her original loans, she still owes more than she borrowed.

The reason?  Due to various economic setbacks throughout her life, including a medical condition that ended a former career and unpaid child support from her abusive ex-husband, Zimmerman Thompson defaulted on her loans several times.  And, as anyone who has ever defaulted on a student loan knows, coming back from such a setback can be nearly impossible.  From the article:

“Short of a lottery win, for student loan borrowers like Thompson, there is literally no way out. The government can garnish the income tax refunds and eventually the Social Security checks of defaulters. Changes to bankruptcy law in 1984 and 2005 mean borrowers can’t charge off their obligations the way they can escape mortgage, credit card and even gambling debt when they file — unless they can prove “undue hardship.” But just 29 of the 72,000 student loan debtors in bankruptcy in 2008 were able to do so, according to Mark Kantrowitz, founder of the student aid website Finaid.org.”
Read more…

Student Loan Bubble?

November 6, 2011 Leave a comment

Here’s an interesting piece in the Huffington Post about whether student loans are really a bubble about to burst akin to the mortgage crisis.  I found this part particularly interesting:

First, one thing that’s important about the possible student loan bubble is that it poses much less of a threat than housing debt did to drag down the entire economy. Yes, many individual borrowers may find themselves in trouble. But total student loans probably amount to less than 10 percent of outstanding mortgages. Every single student loan could default and it still probably wouldn’t match total mortgage defaults during the recent downturn. More importantly, unlike mortgages, Wall Street isn’t knee-deep in securities comprised of bundled student loans, as it was with mortgages. (It also helps that it’s also harder to speculate in student loans; an investor can flip a house, but not a brain.)

If huge numbers of defaults on student loans would not significantly harm the economy, then, presumably, generous loan forgiveness would not either.  Read more…

If Corporations are People…

November 5, 2011 Leave a comment

If corporations are people, then we need to ask what kind of people they are and whether we, as a society, want to continue to incentivize their more nefarious aspects. 

So what kind of people are private student loan lenders?  Deeply disturbed people.  Psychopaths.  Mobsters who want to corner the market so that you have no choice but to borrow money from them and then come after you with a metaphorical baseball bat when you can’t pay your debt. 

These lenders lack empathy and have no conscience.  They delight in your failure because when you default on your student loans, they can add late fees and compound your interest and ensure that by the time you can pay, you will owe thousands – sometimes tens of thousands – of dollars more than you originally borrowed. (Note – this goes for government loans too).

And those in the government who continue to support them?  Those are the corrupt policemen who take kickbacks in exchange for their support. 

See, the problem with calling corporations people is that they can’t be punished like people.  No one is going to put Sallie Mae or Citibank in jail.  No one is going to give them a psychological evaluation and deem them unfit for human society.  No one is going to pump them full of psychiatric drugs so that they can function at a normal level and stop hurting others.

And when it’s not just a few corrupt people but a large swath of your government that is in collusion with them, how do you fight back?  I have some ideas that I will post about soon, but, in the meantime – what are your ideas?

Paul Ryan – Stripper?

November 3, 2011 Leave a comment

This is a couple of weeks old, but I just happened to see it today.  Apparently, Paul Ryan (R-WI), thinks that instead of receiving Pell Grants, students should rely on even more student loans and then work three jobs to pay them back.  Here is Ryan’s exchange with student Matthew Lowe at a town hall meeting in Muskego, WI:

LOWE: I come from a very middle-class family and under President Obama, I get $5,500 per year to pay for school, which doesn’t come close to covering all of the funding, but it helps ease the burden. Under your plan, you cut it by 15 percent. I was just curious why you would cut a grant that goes directly to the middle- and lower-class people that need it the most.

RYAN: Cause Pell Grants have become unsustainable. It’s all borrowed money…Look, I worked three jobs to pay off my student loans after college. I didn’t get grants, I got loans, and we need to have a system of viable student loans to be able to do this. Read more…