Give These Borrowers Their Lives Back

June, 2021

Washington — In the last post, I suggested an urgent need to cancel certain federal student loans, including those of borrowers who have been caught in loan hell through no fault of their own and deserve to get their lives back.

I'm not the only one who knows something is very wrong in the Department of Education's collection priorities.  Student Defense, in a new report, writes:  "While the Department aggressively attempts to collect from borrowers, institutions and their owners and executives walked away from more than a billion dollars owed to taxpayers."  

Action must be taken to cancel the loans of borrowers who have been victimized by the mistakes of others and have exhausted remedies without success.  I'll illustrate with the examples of Marjorie Dillon and Charles Stewart.  

Marjorie Dillon attended a public university but was not viewed as a student for whom a good financial aid package should be assembled.  In fact, the package was so loan-heavy it may have been a message that the school would rather not see her enroll.  This practice is one of the techniques of "enrollment management."  When a newspaper reporter wrote up her story, for which she waived her privacy, she was $120,000 in debt and student loan collectors were threatening to ruin her grandmother financially, as well as her disabled father.  She also had a toddler surviving on the WIC program, so four generations were at risk simultaneously.   

The reporter also talked to the "vice president of enrollment" at Ms. Dillon's university.  He made her records public, blamed her for missing application deadlines and coming in to the aid office on the day bills were due. He assured the reporter that the college had given her the required counseling at the time she took out loans.  But anyone familiar with basic federal student aid regulations knows that her rights were violated — by my count, seven times.   She should never have been placed in this situation by her school.  When I looked up the biography of the vice president, I saw he was simultaneously consulting at an enrollment management firm which, through its parent company, was about to take the grandmother's house.  

Then there is the case of Charles Stewart, who has given me permission to discuss his case.  His student loans were mishandled not by design, but by neglect.  When he tried repeatedly to get them straightened out over the years, he always got the same answer.  Yes, there were mistakes, but there's nothing to be done about it.  

I have seen the emails between Mr. Stewart and a Department of Eduction official who said the solution was for the loan guaranty agency simply to cancel the loans.  But the guaranty agency, USA Funds, refused, even though such agencies were funded by borrowers and taxpayers precisely to resolve these matters.  Incredibly, the Department official, rather than pushing back against USA Funds, advised Mr. Stewart to seek his own private counsel and sue the Department for cancellation.  That also did not work, as the lawyer soon dropped the case because he took a job with a conflict of interest.  

Not only should these two borrowers get relief, the institutions and individuals responsible for the situations should be disciplined.   

Secretary Miguel Cardona has the statutory authority to resolve these kinds of cases through compromise and settlement, and to raise the bar as to what is expected of institutions and individuals who are part of the federal student financial aid system.  And President Biden and both houses of Congress must back him up.  

Loan Cancellation Options for the Secretary of Education

June, 2021

Washington —  In all the current back and forth about potential cancellation of federal student loans, for whom and in what amount, two crucial considerations are largely and regrettably absent from the discussion.

One is a management issue.  Loan servicers often cannot properly handle loan administration even in the best of times.  They will be overwhelmed later this year when the pandemic moratorium on loan repayment expires.  It is in the best interest of the federal government to cancel loans where there is a good case to do so, simply to reduce loan administration volume.

The other consideration is the honor and credibility of the federal government.  Many borrowers are in financial trouble and cannot repay their loans because of malfeasance and fraud at schools, or mistakes by the many middlemen involved in loan administration, including the U.S. Department of Education itself.  

The Secretary of Education has statutory authority to compromise loan repayment obligations, which clearly extends to these two reasons for exercise of that authority.  Rather than arguing about cancellation solely in terms of which borrowers may or may not benefit, the conversation needs urgently to turn to what's in cancellation simply for the cause of good and honest government.  

First, the Secretary should take immediate steps to cancel the loans of borrowers who are legally entitled to cancellation.  Who would that be?  If you don't know, you haven't been paying attention.  The Trump administration denied cancellation to many such borrowers.  

Next, loans for which principal and the government's cost of interest have already been paid back should be cancelled to relieve borrowers of further payments.  In many cases, remaining balances represent fees, penalties, and capitalizations that audits and accountability reviews trace to faulty servicer advice, which in turn is a function of an overly complicated loan system and poor administration of it.*  

Next, with the input of the CFPB and SFA, a process of loan cancellation should be afforded to borrowers who have been caught in loan hell through no fault of their own.  Where there is documented evidence that borrowers have been the victims of the mistakes of others' handling of their student loans, and no other remedy has been applied, the remaining balances should be cancelled.  The very honor of the federal government is at stake here.  Bankruptcy reforms should be a part of this discussion as another way for people to get their lives back.  

The creative ideas of some in the higher education community to address the student loan crisis should be explored as a way to cancel even more loans.  For example, applying "retroactive Pell" grant amounts to reduce the loan balances of former Pell-eligible borrowers could result in the cancellation of many small-balance loans, as well as a way to target loan relief to those most in need of it.**

Costs of loan compromises must be weighed against costs of business as usual, and discounted for the fact that huge percentages of current loans must be written off as uncollectible in any honest budget scoring.    

I believe the Secretary's authority to compromise loans is broad and extends beyond the examples listed above but, simply for the sake of good government and honorable execution of the Department of Education's mission, the Secretary should act now to cancel as many loans as possible to avoid another looming crisis yet this year.  


*  Much of the rationale for the interest rates and fees now charged on federal student loans is a legacy of a dual loan delivery system, under which the Secretary was to provide equal terms and conditions between bank-based and direct government loans.  That dual system no longer exists; any remaining bank-based paper could be bought up by the Secretary, who could also issue an emergency regulation to reset interest rates going forward at lower levels.  

**  I like the retroactive Pell concept because it eliminates schools' role in subjecting Pell to aid packaging formulas that often disadvantage low-income and minority students.   



Lincoln's Unfortunate Housing Trends

June, 2021

Lincoln — The City of Lincoln has just adopted a commendable Climate Action Plan to try to deal with climate change. But simultaneously it is permitting the worst kind of urban sprawl: car-centric, unsustainable, unneighborly housing.

There is an arms-race in Lincoln among homebuilders as to who can offer more garages and lay more concrete over frontages.  No more is a two-car garage adequate; now houses have three, four, and even five garages in front. The houses themselves have to peek out from behind to show that, indeed, there is a house at the address, presumably with people living in it.  

A view from the back side does not give much clue about residents, as the houses have tall, opaque fences around back yards. 

I took some photos.  Note the view of a new Lincoln development from above, showing the expanses of concrete that will contribute to downstream flooding.  That is what the Climate Action Plan supposedly wants to avoid. Note the dark, heat absorbing roofs, driving up peak summer electrical usage, which the Climate Action Plan hopes to reduce.  

Wide expanses of impervious surfaces

Views from the front show small monoculture lawns, maintained by environmental toxins as hawked on television. 

These are homesites where there are likely more garages per lot than earthworms.  

Lincoln is not an environmentally friendly city, judging by its trends in housing construction.  The same could be said for its esthetics; many urban sprawl developments have the look of self-storage businesses.  

"Peek-a-boo" house style

"Fortress Garage" model

It didn't have to be this way. Lincoln dipped its toe into New Urbanism with the creation of Fallbrook, which was supposed to be a walkable community with higher population density and a smaller environmental footprint. Obviously, it didn't catch on. 

The photos above are from the development immediately west of Fallbrook, which would have been an ideal place to demonstrate that there is an alternative to climate-warming, flood-inducing urban sprawl. 

Compare another community that chose New Urbanism, this one in Maryland. Notice from the aerial view that there is much less concrete slab. Garages are tucked behind houses, entered via picturesque, tree-lined, carbon-storing alleys. Inhabitants walk to stores on sidewalks and pause to chat with neighbors on front porches.  Many roofs have solar panels.  

New Urbanism

This community, built around 2000, is also diverse, with low-income housing mixed in seamlessly with townhouses and with single family homes of various sizes.  Its county government also bans weed-and-feed and neonicotinoid products, so it is safer for children, pets, and wildlife.

Porches in front of houses

Mixed income housing: townhouse, low income, single family options 

Two-car garages in back, accessed by shady, tree-lined alleys 

Unfortunately, Lincoln is considering builder incentives to put urban sprawl housing on and adjacent to environmentally sensitive properties such as tallgrass prairies and habitat-rich riparian corridors.  Where bulldozers level the areas, centuries of carbon storage will be released.  For adjacent areas, it will mean streetlights illuminating the dark prairies at night, wide-roaming cats wiping out grassland bird species, and pesticide drift killing off prairie forbs.  

Not all is bad in Lincoln housing development.  Some areas, like the Telegraph district, are being turned into denser, walkable communities.  Smart growth.

But when it comes to urban sprawl, please stop it, Lincoln.  We're a better city than this.