Talk About Chutzpah

George Yacik - Contributor - Fed & Interest Rates

If you’ve ever wondered why so many of today’s American college students seem to live in a self-delusional world where they take little personal responsibility for anything that goes wrong in their lives, you don’t have to look any further than the professors who teach them.

In a recent op-ed column in the New York Times, Susan M. Dynarski, a professor of education, public policy and economics at the University of Michigan, takes the Trump Administration to task for its failure to take the proper steps, in Ms. Dynarski’s eyes, to fix the student debt problem, as if Donald Trump himself caused the crisis.

Nowhere in her lengthy critique does she ever address head-on the real culprits in the student debt crisis: the government agency that made these loans in the first place, and the colleges and universities that have exploited these loans in order to drive up the price of higher education, forcing millions of students and their parents into debt if they want to attend college.

First, she says, “the Education Department has weakened accountability for the companies that administer student loans,” specifically calling out Navient, formerly a part of Sallie Mae. Now privatized, Navient is the largest servicer of government student loans. As such, Dynarski says, “companies like Navient are the face of the student loan system, and often the source of enormous frustration for borrowers.”

Moreover, she laments, “borrowers can’t vote with their dollars by shifting their loans to a company that provides better service. Rather, they are locked in with the contractor assigned to them by the Education Department; if the government does not monitor these companies, borrowers are at risk.”

She conveniently neglects to mention that the real face of the student loan system is the federal government, which has monopolized the student loan industry, locking in, to use Dynarski’s phrase, millions of families into debt many of them can’t pay and probably won’t ever be able to.

What’s particularly galling about the good professor’s piece is that she lays all of this mess on the Trump Administration which, as we know probably well enough already by now, has been in office a little over 100 days. Nowhere does the previous administration, which was in power for nearly 3,000 days and basically nationalized the student loan business, come in for any criticism for the crisis it has left for the incumbent to deal with.

Trump even comes in for criticism for closing down the Internal Revenue Service’s Data Retrieval Tool, which enables applicants to the Free Application for Student Aid, more commonly known as FAFSA, to autofill part of the application with their own tax return information. It was apparently Trump’s crime that “the administration disabled the tool with no initial announcement from the I.R.S. or the Education Department, leaving applicants floundering.”

Actually, the tool was taken down after the IRS found that hackers were using it to file fraudulent tax returns using applicants’ personal financial information, so closing it was doing the public a service.

Dynarski leaves out that even before the hack was discovered – and Trump became president – using the IRS tool to autofill the FAFSA form had serious flaws. I tried using it several months ago but couldn’t get it to work. I spent the better part of an hour on the phone with a very friendly and patient representative from the Education Department who also tried to get it to work, without success. In hindsight, I’m glad we failed, since I ran the risk of being hacked if I used it.

The professor’s solution to all this is a beefed-up Consumer Financial Protection Bureau, which the Trump administration wants to bring under greater government control. The CFPB, as I’ve noted before in this space, conveniently has no oversight authority over the body that actually makes student loans – i.e., the U.S. government – only those private companies, like Navient, that service them.

In other words, once the mess has been made, by giving tens of thousands of dollars in loans to individual students and their parents with just the thinnest semblance of underwriting, it’s the servicers’ fault that the borrowers can’t pay. And it’s the CFPB’s job to penalize and hound these servicers in court for failing to rectify the situation.

Dynarkski notes that a group of academics recently urged the CFPB to start “collecting loan-level data on repayment, delinquency and default just as it does in monitoring the mortgage industry.” She fails to mention that unlike the student loan business, the government doesn’t make mortgage loans directly to consumers. Instead, private lenders do so after careful underwriting of their applicants’ finances and the property that they’re buying, and the same private lenders generally service the loans they made. So if the lender screwed up in making the loan in the first place, it’s going to have to clean up the mess if the loan later goes bad.

Wouldn’t it be nice if the student loan business also operated that way? But that would involve taking responsibility, and that apparently has no place in higher education.

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George Yacik Contributor - Fed & Interest Rates

Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from for their opinion.

5 thoughts on “Talk About Chutzpah

  1. The universities are more than anything indoctrination into socialist policies and hate speech - Why are they getting $40B in taxpayer money every year? As far as the grads go - as near as I can tell working with many of them, their number one accomplishment in life has been to be offended many many times. Recently we had one who just got an MBA and thought that in itself that should have netted her >100K per year even thought she was barely performing in the position she accepted. And in defense of Susan M. Dynarski, she's been loudly crowing about that for the last 12 years! (OK I lied - its just typical partisan BS - but wait until next week - I hear Schumer and McCain are going to ask for a special investigator to look into it! [I agree with the article times 2]

  2. Really a good article. I'm glad I subscribed. The best part I liked was that nobody is blaming the very people who enticed students into loans. The banksters.

  3. Not to condone the irresponsibility of failure to pay back debt, but there are circumstances that befall people that put them in a bad financial situation, however, to make matters worse, the Clintons implemented rules that prevent the loans from being discharged thru bankruptcy and the parents have to put up property as collateral for the loans. This was pushed by the big banks that fund the loans, so there was probably a quid pro quo for implementing these rules.

  4. Getting a university degree now LOWERS your job prospects. In fact, two years ago Ernst and Young quit making having a degree a prerequisite for new hires because they found no difference in job performance.

    And of course, successful entrepreneurs like Reed Hastings of Netflix now offer $100,000 scholarships to graduating high school students NOT to go to university. Personally, I have noticed something new happening that I've never seen before...the best and the brightest high school graduates actually considering NOT going to university. To paraphrase one I talked to a couple years ago, "Why would I want to end up in debt to learn a bunch of theory from old people in grey suits that I can get off the Internet. I'd rather DO something with my life."

    Wise words, I'd say.

    So, what exactly IS being taught in universities these days?

  5. it's all a sign of the times. The irony is that most students do want an education from the education industry at all; the bulk just want degrees in order to "get a job". Today's universities do little to either educate or prepare students for the work force. It's remarkable that few parents and/or students see that this is the new reality.

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