Two Documentary Films on Higher Education

September, 2018

Washington -- Recently I've been asked for my views on two different documentary films dealing with higher education. One is "Fail State," about for-profit colleges and how they take advantage of students. The other is "Looking Back to Move Forward: A History of Federal Student Aid," a series of mini-documentaries produced to explain the current state of federal higher education law and policy.

Actually, I was approached to appear in each, but declined. For "Fail State," I was in court against a student loan lender at the time of the filming and did not want to appear as if I was somehow attempting to try the case outside the courtroom. For "Looking Back..," I was uneasy with the very premise of the project.

"Fail State" is an excellent documentary, especially how it reveals for-profit college recruitment techniques and their disastrous consequences for unwitting victims. My only regret about the film is that it limited itself to the for-profit colleges and did not go on to link the issues with public policy failures in the student loan industry. That subject will have to wait for another documentary.

"Looking Back..." is not so good. Its purpose was to help inform policy-makers, like Congress, about how current policies and programs came about, by interviewing those who had had a hand in creating and administering them. The result is a rapid-fire juxtaposition of explanations from a myriad of legislative staffers, Department of Education officials, and interest group lobbyists. Sometimes the film is edited such that the talking heads seem to finish each others' sentences. It must be dizzying to viewers. I know almost all of those interviewed – many are personal friends – and I know the history of the Higher Education Act well, but I was left bewildered as to what the viewer is supposed to retain from it all, other than perhaps a message that federal higher education policy is a mess. After all, what we have to show for it is $1.5 trillion in student loan debt that is out of control and growing.

I should also hasten to note that some of the people interviewed do not belong in this film alongside those who have been faithful public servants. I know I would not want my sentences to be finished by those who are responsible not just for program and policy failures, but for debasing the whole federal effort. One talking head led an association whose members were scandalized by taking bribes. Another sold legal opinions to enable several student loan lenders to defraud taxpayers. Several talkers lament the failure of programs, but in fact were happy to see them go down and were instrumental in their demise. Some have profited handsomely from program and administrative dysfunction. Many in this documentary deserve a big "viewer beware" asterisk by their comments.

The fundamental problem with "Looking Back..." is that it takes a how-a-bill-becomes-a-law approach to the subject, which we all remember from fourth or eighth grade civics classes. In this view, federal policies are conceived; they are shaped into a legislative bill; senators and representatives debate them; they are passed and signed by the president, and then implemented. All the film lacks is a little scroll of parchment, with arms and legs, named "Bill."

A better way to look at all this, I think, would have been through the lens of legendary political scientist Harold Lasswell, who wrote Politics: Who Gets What, When, and How. Federal higher education spending is huge; competition for it is cut-throat, both inside and outside the confines of the law. If there has been any one single driving force shaping higher education policy over the last few decades, it is money. "Looking Back..." effects a gauzy, hubris-filled altruism over it all, which does a grave disservice to students, families, and taxpayers who have been victims of outright waste, fraud, abuse, mismanagement, and corruption. For all the good federal spending on higher education has done, it has also left a vast amount of wreckage in ruined lives that will never recover from the predators who have come to dominate the federal student aid endeavor.

To illustrate, look at events that have shaped this landscape just as much, and often even more, than the formal legislative record offered by "Looking Back...." Sallie Mae was created in 1972 as a government sponsored enterprise (GSE) to serve as a national student loan secondary market, but in the mid-1990s its leadership decided there was a great money-making opportunity and convinced Congress and the Clinton White House to allow it to put the profit motive ahead of its educational mission. "Reinventing government" was the guise for the change. Deputy Assistant Secretary Tom Wolanin, among those who appear in the film, resigned rather than be a party to it. The story of his resignation could and should have been a part of the film. Sallie Mae, now re-named Navient, has become a deeply troubled loan servicer and is currently the defendant in a lawsuit brought by the Consumer Financial Protection Bureau (CFPB), joined by state attorneys general, on behalf of victims.

An even bigger conversion of formerly non-profit educational entities to money-making corporations took place in the 1990s after Senator Ted Kennedy slipped in a last minute, non-debated amendment to an unrelated bill allowing a switch for Massachusetts-based secondary market Nellie Mae. The amendment did not limit the provision to Massachusetts, and soon secondary markets throughout the country were converting to proprietary corporations. This happened on the heels of 1992 legislation that greatly expanded student loan volume, applauded by at least some of the film's talking heads who pushed student loans as "good debt." Within a decade, new for-profit corporations in Arizona, Texas, South Dakota, and elsewhere were engaged in behaviors so outrageous newspaper editorials from coast to coast demanded that Congress act, which it did. This is not part of "Looking Back...."

In 1998, another non-debated and glossed-over change entered federal law when Congress took away bankruptcy protections for student loan borrowers except for undue hardship, an extremely high bar in practice. It happened in conference committee when conferees needed savings to score to pay for other provisions in the bill. Closing off bankruptcy options has since doomed many defaulted borrowers for life. Never able to repay their loans, they will be unable clear their credit records, to have normal homes and families.

Such lapses happened under Democrats. When Republicans came into power in 2001, it got much worse.

What soon developed was a revolving door between the student loan industry, the Department of Education, Congressional staffs, and higher education lobby groups, fueled by the scent of easy money. President Bush installed industry lobbyists in top Department of Education jobs, who lost no time in devising ways to move taxpayer money to their friends in both the for-profit colleges and in the student loan industry. The personnel and the money circulated in classic "iron triangle" pathways. Taxpayer money came back in the form of industry political contributions so as to extract yet more taxpayer money. By 2003, U.S. News and World Report outlined the situation in "Big Money on Campus." It reported, not surprisingly, that political contributions from higher education interests were growing. Fortune magazine described Big Education as competing with sums from Big Oil and Big Pharma.

Meanwhile, the appetite for student loans, to which colleges and universities of all kinds were becoming addicted, grew ever greater as students and families, in order to pay for college, were increasingly required to sign for private loans in addition to maxing out on federal loans. Many colleges routinely put private loans in their students' financial aid packages. Some financial aid officers at prestigious institutions received kickbacks for endorsing certain lenders. In 2005, at the behest of the loan industry, Congress even closed off bankruptcy protection for borrowers of private student loans.

In 2007, after the Department's Inspector General identified vast false claims by multiple lenders against taxpayers, reaching into the billions, Secretary Margaret Spellings accepted the findings but relieved the lenders of any obligation to pay the funds back. This created a moral hazard, as it showed lenders and loan servicers that there was little risk of government sanction for such behavior.

In 2010, Congress shut off one of the subsidy spigots to the lenders, but only because the Great Recession had required a federal bailout of the lenders and Congress came to the realization that much taxpayer money could be saved by using Treasury capital for all federal student loans. It was a rare bright spot* in the history of federal higher education programs in the 21st Century. Savings in the federal loan program were deployed to provide a welcome increase student grants.

But even this did not stop or even slow the growth of student loan debt, so adept had institutions become in gaming the federal financial aid system through tuition increases, institutional merit aid, and other contrivances that were geared more toward increasing their prestige rankings than helping needy students. Nor did the 2010 action cut out federal support for the largest players in the student loan industry, as they became servicers and collectors of the ever-growing volume of loans. This year has witnessed a new low: the Department of Education has taken action ("preemption") to try to prevent state attorneys general from protecting their citizens from corrupt and abusive student loan servicing and collecting practices. This audacious move came on the heels of a U.S. Supreme Court decision** that took away the "sovereign immunity" protection of one of the largest and most abusive servicers, subjecting it to state and borrower class action suits.

Unlike many of my friends and colleagues who appeared in "Looking Back..," I don't believe the federal student financial aid system can be saved by simplifying the FAFSA aid application form, harmonizing the different income-based repayment options, or even increasing grant funding, although I support those and many other reforms. The nation is losing confidence in higher education itself because of all the bad outcomes perpetrated on far too many students and their families. My recommendation: look to see how other countries do a much better job, and start over.

As to the two documentary films, watch "Fail State" and skip "Looking Back to Move Forward." Especially if you are in Congress.

* Even this was a mixed outcome for financially needy students. Congress had long realized that lender subsidies could be cut and the proceeds moved to student grant programs, but there was insufficient political imperative to do so. That imperative came about when Congress needed $10 billion to make passage of the Affordable Care Act revenue neutral. So it put student loan provisions into the ACA, with the net result that only part of the subsidy savings went to students. This was not surprising in that borrowers have long been tapped for resources to offset costs elsewhere, whether through excessively high interest rates, origination fees, guaranty agency fees, or, most recently, outright denial of benefits earned.

** Full disclosure: the case is Oberg v. PHEAA (2017)

Sasse's Options on Kavanaugh

September, 2018

Washington -- The Kavanaugh hearings are now over. Senator Ben Sasse (my Nebraska senator) has captured headlines with his condemnation of the confirmation process. He blames Congress for not doing its job of legislating, forcing the Supreme Court to be politicized over issues that should rightly be dealt with by the legislative branch.

That is a valid criticism. Sasse also correctly notes that Congress has been giving away its powers to the the executive as well as the judicial branch.

There is a remedy, of course, and that is for Congress to exercise its Constitutional powers rather than to shrink from them vis-a-vis both other branches.

By pointing all this out, Sasse has either built a powerful case for his no vote on Kavanaugh or painted himself into a corner as to why not. Sasse's no vote would simultaneously strike a blow against a nominee who champions the expansion of executive power and a blow for Congress's assertion of its advice and consent powers over judicial nominees.

Sasse has essentially asked himself to put up or shut up. Could a no vote from Sasse be in the offing?

Beyond the Sasse disquisition on the failures of Congress, there are other reasons why traditional conservatives – if Sasse is one – would vote against Kavanaugh. He is an activist judge who has shown minimal respect for stare decisis and has demonstrated scant regard for Madisonian checks and balances. I am not the first to note that Kavanaugh was a late addition to the list of potential nominees with more traditionally conservative credentials, likely because his expansive view of executive power could be the deciding factor in the struggle of the President against the Special Counsel.

There is another reason Sasse might vote no, and be joined by one or two other Republicans. That is to put the Kavanaugh nomination in the hands of Democratic senators from red states, forcing their hands to support the Trump nominee or face defeat at the polls. (It is the conventional wisdom that Senators Manchin, Heitkamp, Donnelly, and McCaskill are in trouble if they do not vote for Kavanaugh.) This scenario could come to pass even without political chicanery behind it, so it is worth exploring. I am inclined to think that these senators' votes for Kavanaugh would be more likely to spell their demise than their votes against him, as they would lose Democratic votes and enthusiasm. So it is not beyond the pale to think that devious minds (like Senator McConnell's) are thinking of how both to confirm Kavanaugh and hold the Senate in Republican hands through the Kavanaugh vote.

That might be too much for Sasse. His record shows he talks a good line but seldom, if ever, follows through with action, either on principle or on politics.

Farm Bill Now In Doubt

September, 2018

Washington -- Congressional Farm Bill conferees met September 5th to see if enough House-Senate compromises had been made over the summer so as to pass the bill before the September 30th deadline, when previous farm program legislation (from 2014) expires.

Unfortunately, big roadblocks remain. The situation was not helped by coordinated tweets on the day of the meeting from the President, Vice-President, and Speaker trying to politicize the Farm Bill over work requirements for SNAP (food stamp) recipients. They know the Senate will not pass such a bill. Most SNAP recipients are already subject to such requirements and the Senate, on a bipartisan basis, has already rejected the idea.

The coordinated tweets from the nation's three top elected officials signaled, however, that trying to rile up the Republican base before the mid-term elections is more important to them than passing a Farm Bill.

The conferees are also far apart on the conservation title. House Republicans want to kill the Conservation Stewardship Program (CSP), the nation's largest conservation program for working farms.

There is still no progress on adopting the Grassley (R-Iowa) Amendment, a bipartisan effort in the Senate that would put limitations on farm subsidy payments. The amendment would fight waste, have the effect of lowering farm property taxes, and allow more young farmers to enter agriculture, but House Republicans want to move in the opposite direction, to remove subsidy limitations.*

It is hard to believe that farm state Republicans in either house want to miss the deadline for a Farm Bill at a time when the President's tariff policies are hurting crop prices and when agricultural income, percentage-wise, is forecast to decline this year by double digits. It is hard to believe that farm state Republicans are turning deaf ears to pleas from rural America for "trade not aid" but are in thrall to presidential tweets trying to politicize the Farm Bill, historically a bipartisan effort.

Yet that is the situation.

* Current law contains substantial waste in the farm safety net. See this GAO analysis.

Potential Roadblocks for Kavanaugh

September, 2018

Washington -- This week hearings begin on the nomination of Brett Kavanaugh for the Supreme Court. Conventional wisdom suggests that there will be party line votes and he will be confirmed.

We're not there, yet, for two reasons.

First, Kavanaugh has a troubled background, having been a partisan leaker of substantive grand jury information for the Office of Independent Counsel under Kenneth Starr. By conveniently moving between the OIC and a private law firm, he has avoided making sworn statements that he did not provide grand jury leaks to reporters. He may also have to overcome embarrassing information about his personal conduct and judgment. There is also the matter of some 100,000 documents that are being kept under wraps, not to mention his prominent role in turning the Starr investigation into salaciousness.

Second, the timing of the nomination may become more of an issue. The country is headed into a Constitutional crisis over executive powers. Confirming a justice whose views show little appreciation for the Madisonian checks and balances that restrain such powers may strike many voters as the wrong thing to do. That includes traditional conservative voters, who are looking for one or two Republican senators with sufficient backbone to call for a slowdown to assess what is at stake.

Hearings may bring out a better understanding that the "originalism" jurisprudence favored by Kavanaugh is hardly conservative. It has been responsible for much recent judicial activism, as it has been used to undermine stare decisis, fundamental to judicial restraint. As the conservative writer George Will has suggested, originalists have a lot of explaining to do when it comes to the 14th Amendment's equal protection clause, let alone other matters.

If Kavanaugh is to be stopped, it will likely be that voter sentiment will start to inform senators that he is the wrong man at the wrong time. One Constitutional crisis at a time, please, voters may well tell their senators. The country does not need a cheerleader who sees the president above the law while in office, while at the same time re-writing the meaning of equal protection clause so as to undo voters' ability to throw the rascal out.

There was a time, not so long ago, when prudent Republican senators would have intervened. John Chafee would be appalled at what a Kavanaugh appointment would do to his lifelong work for responsible environmental protection. Robert Stafford, after whom the federal student loan program is named, would think it utter nonsense that a nominee supported by the Federalist Society would countenance stripping states of consumer protection in the case of student loans. (That would be a good question for the hearings.) Nancy Kassebaum, who bolted from her party over the nomination of John Tower for Secretary of Defense, would be a voice of caution about moving too quickly on Kavanaugh.

If backbone is lacking among today's senators, whatever happened to old-fashioned leverage? A Nebraska citizen has publicly asked in a letter to an editor why the state's two Republican senators don't demand a more responsible trade policy to save their state's farmers as a condition of their support of Kavanaugh? It isn't as if there are not at least a dozen other potential nominees cleared for the nomination, without Kavanaugh's baggage. There is a clear precedent: Nebraska Senator Ed Zorinsky* broke with the Democratic Party in 1985 over the vote on the federal budget resolution. He used his leverage to cast the deciding (50-49) vote in favor of the Republican resolution after securing funding for a trade policy that would benefit Nebraska farmers.

May the Kavanaugh hearings explore all this, and more, with the hope that senators will put country and Constitution ahead of party.

* Professor (and former USDA assistant secretary) Bruce Gardner recounts the Zorinsky move in his NBER chapter at

"...[A]s the 1985 farm bill deliberations groups had refined their general support for export promotion to more concrete proposals, and U.S. wheat exports had declined still further while the EC’s grew. In this situation the administration’s desire to continue ad hoc export subsidies without binding legislation was no longer politically tenable.

"...In May 1985, the administration (represented by the Office of Management and Budget [OMB] and the USDA) and the Senate leadership (principally Dole and Senator Edward Zorinsky [D-Nebraska]) agreed to implement, under existing USDA authorities, an Export Enhancement Program.

"Politically, the EEP was given the breath of life by a conjunction of interests...: Senator Zorinsky’s strong desire, as the ranking Democrat on the agriculture committee and representative of Nebraska, for a substantial export subsidy program; [and] budget director David Stockman’s need for Democratic votes on key economic legislation....

"Stockman agreed that the administration would implement an export subsidy program, in exchange for Zorinsky’s vote on the budget resolution containing the Reagan administration’s fiscal proposals, with the subsidies to take the form of unwanted CCC surplus commodities with a zero budget score.

"The agreed-upon program committed $2 billion worth of CCC-owned commodities to be made available as a bonus to U.S. exporters to expand sales of U.S. agricultural commodities in targeted markets. The objectives stated were to increase U.S. farm exports and to encourage trading partners to begin serious negotiations on agricultural trade problems."

Remembering John McCain

September, 2018

Washington -- Today is John McCain's funeral and an occasion to reminisce. McCain's life intersected with mine several times.

The first was in the South China Sea in late July, 1967. His ship, USS Forrestal, crossed paths with mine, USS Rainier, during the night after the disastrous Forrestal fire that claimed 134 lives when a Zuni rocket accidentally discharged and hit McCain's bomb-laden aircraft on the flight deck. Forrestal was returning to Subic Bay in the Philippines for repairs; Rainier was outbound from Subic to resupply it and other ships operating in the Tonkin Gulf. Signalmen exchanged messages by flashing light. We advised Forrestal we would re-direct its many bags of mail via other ships.

McCain was shot down over North Vietnam soon thereafter, flying off USS Oriskany, and became a prisoner of war. In Hanoi, he joined my friend, NU classmate, and fellow Navy officer Dick Ratzlaff, who had been captured in 1966. They were both released in 1973. Dick Ratzlaff died in 1981, never fully recovering from his mistreatment at the hands of the North Vietnamese.

The next career-crossing was in the U.S. Senate in 1979, when McCain, now a Navy captain, staffed the Navy liaison's office in the Russell Senate Office Building. Senator Jim Exon, for whom I worked as legislative director, was a member of the Armed Services Committee. His legislative assistant for national defense issues, Greg Pallas, worked closely with McCain. I had recommended Greg* for the position partly because he had also been a Navy officer. He and McCain hit it off. From his Navy liaison position, McCain also developed close relationships with Senators John Tower, Gary Hart, William Cohen, John Breaux, Sam Nunn, Scoop Jackson and their staffs. Other key staff included Arnold Punaro (Nunn) and Richard Perle (Jackson).

Jim Exon considered himself a Scoop Jackson Democrat and usually followed Jackson's lead, until Jackson died in office in 1983. Greg Pallas succeeded me as legislative director for Senator Exon after I left the position in 1984. In 1986, McCain was elected Senator from Arizona.

In 1989, relationships were strained over the nomination of John Tower to be Secretary of Defense. Senators Nunn and Exon led the opposition; McCain supported Tower, who was defeated. Senator Exon retired in 1996.

I became congressional liaison for higher education at the U.S. Department of Education in the 1990s, but had little to do with Senator McCain officially. Greg Pallas remained a part of the bipartisan McCain-Breaux social circle; I was an occasional guest. Greg Pallas died in 2003 at the age of fifty-one. John McCain attended his funeral in Annapolis.

Senator McCain did not involve himself in higher education affairs much beyond advocating for the interests of the University of Phoenix. His efforts, in my opinion, were misguided, although perhaps understandable in the context of constituent services. McCain walked out** of a 2010 hearing chaired by Senator Tom Harkin, also a former Navy pilot, because he thought Harkin was being too hard on for-profit colleges.

Although McCain presented himself as a friend of veterans, he was notably absent when it came to protecting them from higher education fraud under the GI Bill. With others, I have been involved in setting up protections for veterans, especially with Veterans Education Success (VES); we could have used McCain's help.

But McCain rose to the occasion on other matters at least three times in his life, and for those he will be remembered as a hero. One was when, as a prisoner of war, he refused a North Vietnam propaganda move to release him as the son of the U.S. Commander in Chief of the Pacific (CINCPAC). Another was when, as a presidential candidate in 2008, he would not be drawn into race and religion baiting against his opponent. The third was his principled death-bed stand for America as a country based on values and ideals, not blood and soil tribalism.

McCain, a Republican, worked easily across political boundaries because at his core he was a follower of Alfred Thayer Mahan's geopolitical theories of sea power, as are many Democrats. He was an implacable foe of Russia, the heartland country destined under the theories of Sir Halford John Mackinder to dominate the world. His antipathy to Donald Trump was firmly rooted in geopolitical theory as well as personal dislike.

* A native Californian, Greg Pallas stood out in his 1978 employment interview with chief of staff Bill Hoppner and me. Among several defense experts, he was the only one who had done his homework on Nebraska. He went on to adopt Nebraska wholeheartedly, forging lasting relationships with close associates of Jim Exon like Norm Otto and Chuck Pallesen. When Jim Exon retired, Greg Pallas had the senator's office, including his desk, recreated as a small museum on South 27th Street in Lincoln.

** The moment is memorialized in the award-winning documentary movie "Fail State", which had its Washington premier on September 4, 2018.