The strategy to curb the student loans debt crisis.

The strategy to curb the student loans debt crisis.

For anyone who follows even some news, it is no secret that America is in crisis.

In fact, it is in many different crises at the same time.

And one of them is the student loans debt crisis.

A simple search shows that the total debt 42 million Americans owe is more than 1.5 trillion dollars.

Read, for example, https://www.aft.org/highered/student-debt-crisis, quote:

“Collectively, student debt is over $1.5 trillion, and this debt surpasses all types of household debt other than mortgages. Unlike holders of other types of consumer debt, who have experienced lower levels of delinquency and default since the Great Recession, student loan borrowers remain in distress.

Nearly 1 in 4 federal borrowers are in default or struggling to stay current on their loans. When they fall behind on their payments, the consequences are dire: negative credit reports, wage garnishment and diminished options to cure defaulted loans.”

Or another source, https://www.businessinsider.com/how-address-student-loan-crisis-finance-professor-2019-3, quote:

“Over the past decade, college enrollment of high-school graduates has reached 67% and student-loan debt has more than doubled. To meet this demand, federal government and private lenders offering less-friendly terms have ramped-up lending.

Each quarter, students (and cosigners) add $30 billion in new debt at interest rates as high as 13%.

Interest compounds once the loan is taken out, increasing the odds that students will graduate with greater debt than when they started. Even seven years after graduation, many owe more than originally borrowed.”

How to solve this crisis?

Financial conversates offer various solutions, including “abolish legal roadblocks so that student-loan debt, similar to other consumer debt, can be discharged in bankruptcy.”

On another side of the spectrum are progressives, who charge to forgive all the student debt.

All approaches have their merits.

But they all missing one important question – where is the money?

Where did all that $1,500,000,000,000.00 go?

If we find the money, maybe first we could recover at least some of it, before we forgive all that debt and write off the sum equivalent to the annual GDP of Australia?

Who do we find if we look for the owner of the debt?

Turns out, the vast majority of the debt is owned by the government!

Here are some quotes on the matter.

From https://studentloanhero.com/student-loan-debt-statistics/

“Total (All Federal)         $1.4392 trillion    42.9 million borrowers”

From https://www.studentdebtrelief.us/featured/student-debt-statistics/

“The majority of student loans come from the federal government with the need for private loans declining. For the 2017 to 2018 school year, private loans made up just 11% of the total borrowed money.

Students attending a private college pay nearly three times as much as those attending an in-state public university. It follows then that bachelor’s, master’s, and doctorate program graduates from private universities owe much more than their public college counterparts. In 2012, bachelor’s degree graduates from private universities owed an average of $32,300 while public school graduates only owed $25,550.

Newer data confirms that students at private colleges continue to borrow more federal money each year than their public school counterparts. This is especially true for students enrolled at four-year private for-profit colleges.”

From https://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp

“Almost all loans are fully guaranteed by the government.

The cost of federal student loan programs is widely debated

If you rely on the fair value estimate, the government loses approximately $100 billion to $250 billion per year, including $40+ billion in administrative costs.

In other words, the government does not recoup the value of the loans, putting present and future taxpayers in the position of guarantor.”

So, the government gave the money to students, and now the government cannot get that money back, and now the government is losing a lot of money, and if the debt will be forgiven, the government will never recover any of it.

But when we say “the government will lose the money” that means we – the taxpayers – will lose all that money!

Everyone one of us, all 330 millions of us, every single American will lose – forever! - about four thousand five hundred dollars ($4,500.00)!

Before the government gave that money to students, we gave that money to the government!

We gave it to the governed because we wanted that the government would spend that money helping our fellow Americans to get education sufficient for paying back their debt in full within a reasonable timeframe, and then keep boosting our mutual economy.

And if all that money would have returned to the government, the government could have used that money for something else good for all of us – for example, to build the F-35.

Just kidding, F-35 does not worth that.

But covering medical expenses for millions of Americans who cannot afford medical treatment does (if that happened, people may be wouldn’t even talk about “Medicare For All” with proposed budget of 3 trillion dollars a year – twice of the debt no one can recover and many want to forgive).

So, before giving up on one-point-five trillion dollars (1500,000,000,000.00), maybe we should have a better look on what happened to them?

The common story that immediately comes to everyone’s mind is - students borrow money and pay for their education.

Naturally, they pay to a college or a university. So, a college takes that money in exchange for providing education.

Simple enough.

But why would people wanted to buy that education? Clearly, not for fun, or a vacation.

They bought into a promise that education they were buying was sufficient not just to pay the loan back, but also to buy a house, to start a family, to grow a business, to grow American economy.

Whose promise?

Who gave them that promise?

The college or the university they gave the money to.

Let’s say you borrow money from a bank and give the money to a car dealer who promises you it will run for years, and it breaks in a month and the dealer tells you – it’s your fault, and you have no money and no car and all you have is your debt to the bank.

First, this is called “false advertisement” (a fancy term for “lying”).

Second, luckily, there is a law that deals with that. The worst-case scenario, sooner or later you will recover the most of your money and pay your loan back to the bank having no car, but also almost no debt.

But unfortunately, no one thinks about colleges and universities in the same way they think about cars.

People think in the same way about lots of things and lots of services, including medical treatment.

But not about institutions of education.

Why?

The simple answer is – a tradition.

Schools teach, students learn, and if students fail, or simply are not getting good grades – it’s their fault.

Is it?

No one will dispute the fact that there are bad elementary school teachers, or middle or high school teachers. The whole idea of charter schools is based on the premise that the way they operate will allow the principal to get rid off bad teachers and keep only good ones. Otherwise – what’s the point?

The idea of a merit pay for teachers is based on the fact that different school teachers provide different quality of teaching. In the last 20 years every state adopted some kind of a legislation related to the quality of K12 of education.

And yet, a multi-billion industry of higher education has no – zero, zilch –  accountability for the quality of services it provides.

Why?

Oh, I know! It's called “academic freedom” - one of many freedoms Americans enjoy.

Like freedom to bear arms. Well, maybe this is not a good example, because the majority of Americans really wants to limit this freedom.

Maybe, like a freedom of speech? But even this freedom has limits placed by a libel law.

And why academic freedom is being executed in the most opaque way?

I grew up in an authoritarian country under ruling of one party. But even then most of the party meetings were open to public. I worked in four educational institutions and in all of them almost all faculty meetings were open to staff – in fact, staff was encouraged to participate. When I moved to Boston, one of the biggest surprises was the fact the U.S. Academy operates the same way as Freemasonry. Still do not understand – why? And when I was a student, like every student in USSR, I attended weekly army preparation activities. I remember our colonel told us: "In the Army, a general makes the decision, but a private is the one who speaks the first". Makes to me a perfect sense in terms of efficient management (e.g. "Professional Communication: a case study").

The fact of the matter is that when we think about K12 school teachers, we know some of them are bad.

But when we think about higher ed, our brain suddenly stops thinking about teachers/instructors/professors – only students can be bad.
 

Higher ed teachers (instructors, professors) are infallible.

Really?

I mean – do you really KNOW that?

Or that is just something you used to think because everyone used to think the same?

And if you know that – HOW do you know?

In every college there are always graduates who do fine after the graduation, and who struggle. Does anyone have data to analyze – why?

No.

How much of the success depends on who taught graduates who succeeded and who taught graduates who struggle?

No one knows.

And no one wants to know.

The truth of the matter, though, is that almost everyone who achieved some success in life can remember at least one good teacher who had great influence on that person. And many of those who struggle have troubles to name a teacher who really impressed that person.

I don’t know how strong is a correlation between how many good instructors a college has and how many gradates of that college succeed or struggle, but (1) I know it exists, and (2) no one ever studied it.

No one study this correlation because no one wants to know the truth.

Because the truth may be damaging for some instructors or professors, hence for colleges and universities.

This is how the quality control of education in higher ed happens now. Colleges and universities form accreditation institutions. Then those accreditation institutions assess those colleges and universities.

It is called “self-policing”.

Sometimes it works, sometimes it doesn’t. No one knows.

And no one wants to know.

If you got a diploma that did not give you your dream job – is it your fault? Or is it the fault of the job market? Or is it the fault of the university that sold you a wrong or a bad learning experience?

Did anyone at your college warned you not to take that education, not to become that professional because there are too many of others like you already (or for whatever other reason)? Did anyone at your university told you about the risk of not paying your loan but getting stuck with no job? An actual number – what was the percentage of that to happen?

I doubt all that.

To everyone graduate who struggles to find the job directly related to the diploma one got in a college I want to say – that can’t be just your fault. And if that is not just your fault – then whose? And how much?

I would strongly advise you to take a better look at your college – did it really do a good job educating you? Are you sure? How do you know?

How do YOU know - if even colleges themselves do NOT know how good or bad their education is. They simply do NOT measure that. Because it is AUTOMATICALLY assumed good. Because that is – a tradition (we just made a full circle!).

The quality of services must be correlated with the amount of money paid for those services. Bad services should not be rewarded with the same amount of money as good services. Colleges and universities definitely provide good services to some students. But colleges and universities also definitely provide bad services to other students. And those students have their right to demand their money back.

They may also have their right to get their debt forgiven, why not?

But why should a service provider keep money it got for providing bad services when everyone else (330,000,000 of Americans) loses that money?

I believe that every graduate who believes that his or her college or university did not do a good job educating that person has the right to demand their money back. And if all those graduates would take their money back, they could pay off the debt, and the only looser in this scenario would be that institution that did not live up to its promise of providing good education.

And if this scenario would exist – at least in theory – colleges and universities would finally started paying attention to the quality of education they provide to their students.

Because currently no one does.

They say they do, but they don’t.

Especially at a large research universities.

Those institutions only call themselves “a university”, but in reality they think of themselves as “a research facility”. Students are “a cash cow”. The purpose of the faculty is to get grants and publish research papers to beat competitors. The actual mission of an institution is to grow in ranks and to make more money every year. This is simply NOT a university anymore, whose #1 mission since its inception was educating people.

Nothing and no one can break this attitude. No one even tries. The tradition is too strong.

Hence, nothing can and will be done about higher ed institutions operate. Hence, the huge student loans debt is only destined to grow.

Unless, of course, we all will take the losses, forgive the debt to struggling graduates, and let colleges and universities keep our money.

I, personally, do not like this idea.

I believe that higher ed institutions have to be accountable and responsible for the quality of education they provide.

The question is – how can we make them be accountable and responsible for the quality of education they provide?

The answer is given by another American crisis – an opioid epidemic.

The roots of the opioid epidemic started to grow about thirty years ago (at least) – we can mark 1986, i.e. the year when FDA approved Percocet and Vicodin, as the birth year of this tragedy.

Very soon greedy pharmaceutical companies and unscrupulous doctors started pushing opioids to patients, even though those patients didn't really need such strong and addictive painkillers. It took decades and thousands of deaths (quote: “as of 2017, the overdose death rate has grown to 142 per day” – per a day!) for the public to realize how dangerous and how irresponsible that treatment was.

And now people affected by this greedy and irresponsible behavior are suing pharmaceutical companies for hundreds of millions of dollars and this is the only action that was able to push the pharmaceutical executives to finally stop using their abusive or even criminal  practices.

This is the American way of dealing with a crisis – any crisis – a lawsuit.

Or at least a threat of it.

A threat of a lawsuit is the only reason car manufactures recall their cars; weed killer manufacturer pay for damages, and pharmaceuticals stop killing people by their pills.

You can say - but no one has ever sued a college or a university for bad education.

So?

How many people burned their skin by pouring hot coffee over it until a woman decided (rightfully!) - I'm gonna make money of it and sued McDonald's for millions of dollars.

Someone always has to be the first.

But, of course, any lawsuit is much stronger when many dissatisfied customers join their forces to sue a company.

That is why struggling graduates of the same college or university should form teams.

And, naturally, the result will be much more achievable if the movement will become national (42,000,000 potential plaintiffs!).

That is why the best approach to curb the student loans debt crisis is to form a national nonprofit organization – “Americans For Reforming Higher Education”. That would help to organize all struggled graduates in a cohesive force, bring unification to documentation and coordination to actions. Eventually, maybe, even a push for legislative solutions.

So, if you are a young and ambitious lawyer, this is a project for you, this is an opportunity for you to make your name, and even some money.

Or, 

if you are a politician (or want to be one), remember - 2020 is an election year!

You're welcome.

Dr. Valentin Voroshilov