Republicans Attempt to Block State’s Student Bill of Rights
Even though most states have done little to improve access to healthcare, it is ok for states to regulate ACA and Medicaid as states are supposedly closer to their constituent’s needs. If the Federal government steps in and tries to regulate voting registration requiring ID, planned parenthood, ACA, etc. because certain state(s) give a damn about discrimination, children, and human rights; then, it is a supposed violation of state rights. For once, states have gone the other way. Student loan regulation of servicers has worsened in the last two decades under the Federal Government, states have taken notice and stepped in voluntarily to rein in the abuses of the student loan servicers.
It is a well-known and voiced complaint amongst student borrowers; the loan servicers are difficult to deal with, the regulators over bearing as borrowers have no recourse with them or in court, the laws and procedures are not accurately told, and any penalties assessed for delinquency or recasting loans in default are usurious. Deciding enough is enough with the Federal Government, legislators doing little to remedy the issue, and servicers being abusive; some states have taken action.
Recounting his experience and interaction with a student loan servicer’s staff, one state’s General Council had this to say:
“The situation is so challenging that even a state banking regulator (financial attorney) struggled to figure it out. Bruce Adams, the general counsel for Connecticut’s department of banking, recounted his exasperation in dealing with a servicer when discussing his wife’s student loans in a recent interview. After multiple calls to the company where he heard different answers to the same question, Bruce Adams (43 years of age) had finally had enough.”
Bruce Adams: “I expressed my frustration and said I am a financial lawyer and I understand the words that you’re using. I don’t understand what you’re telling and if it does not make sense to me, how is it going to make sense to anyone who is not in this field?”
In a Connecticut legislative hearing to address the challenges facing student loan borrowers, Bruce Adams told his version of what took place during his conversation with a student loan servicer. The story was convincing enough to Democrat and State Representative Matt Lesser for him to spearhead legislation. That conversation with a few other Connecticut state legislators and Matt Lesser actions led to the first state sponsored Student Loan Bill of Rights in the nation.
Why is this so important? According to the agency Trump placed under the direction of Mick Mulvaney, the CFPB stated:
Former CFPB Director Richard Cordray: “One out of four student loan borrowers are struggling to repay their loans or are already in default, cleaning up the servicing market is critical, today’s report underscores the need for market-wide student loan servicing reforms to halt harmful practices and boost assistance for distressed borrowers.”
If you think this will happen under Mick Mulvaney, then you probably thought the Republican Tax Bill will skew much of the relief to middle and lower income taxpayers too.
It has been two years since Market Watch’s Jillian Berman wrote about Connecticut’s Student Loan Bill of Rights. Since then Betsy DeVos is heading up the Department of Education and advocating for less regulation of student loans, pushing for privatization of public education, and favoring Charter Schools regardless of quality. Since Jillian’s article, I am confident the student loan dynamics have edged closer to the 1 in 4 being in default as also claimed by Alan Collinge of the Student Loan Justice Organization.
So, what is happening today?
Jillian and Market Watch points us to recent state activities in loans for education. Other states have started to or put in place similar bill of rights to protect student borrowers. Then President Obama placed additional restrictions on nonprofit and for-profit schools. However in 2017, the dynamics changed with the election of Trump to the presidency as he, McConnell, Ryan, and Republicans are attempting to rollback or change Obama’s accomplishments threatening the nation’s younger citizens with becoming indentured more so than previously to the servicer and loan industry.
The House Education and Workforce Committee leadership released a Republican sponsored 540 page bill called PROSPER or “Promoting Real Opportunity, Success, and Prosperity through Education Reform,” HR4508. It is the House proposal reauthorizing the Higher Education Act and contains a plethora of promises to the financial industry and limits Federal and State Government’s intervention in regulating colleges, student loans, and repaying student loans.
Republicans have been big on limiting Federal regulation of States under the guise of states rights. Progressive states have moved to provide protections for the welfare of students borrowing money for college and conservative states have moved in the opposite direction to lessen their protection. Republican US Representative Virginia Foxx bill’s intentionally eliminates any state intervention.
Tucked away deep inside the bill on page 464 of 540 pages is the wording doing so;
PROSPER, line 10: (d) FEDERAL PREEMPTION, the Republican bill reverses the trend of state regulation.
Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act: HR 4508: Sponsors: US Representative Virginia Foxx NC (R) and US Representative Brett Guthrie KY (R)
To support students in completing an affordable postsecondary education that will prepare them to enter the workforce with the skills they need for lifelong success.
“(d) FEDERAL PREEMPTION.
“(1) DISCLOSURE AND COMMUNICATIONS.—An entity awarded a contract under this section for the origination, servicing, and collection of loans made under this title shall not be subject to any law or other requirement of any State or political subdivision of a State with respect to :
“(A) disclosure requirements; or
“(B) requirements or restrictions on the time, quantity, or frequency of communications with borrowers, endorsers, or references with respect to such loans.
“(2) SERVICING AND COLLECTION.—The requirements of this section with respect to the serving or collection of loans shall preempt any law or other requirement of a State or political subdivision of a State to the extent that such law or other requirement would, in the absence of this subsection, apply to a loan servicer, or the servicing or collection, of a loan made under this title.
“(3) LIMITATION.—This subsection shall not have any legal effect on any other preemption provision under Federal law with respect to this title.”
The House bill effectively eliminates any and all regulation by states existing today, going forward, and including Connecticut’s Bill of Students (to be redundant). It appears, Republicans do not believe in state rights when it comes to the regulation of student loans, private servicers, loan repayment, collection of student loan debt, and the lending institutions making these loans.
Some Issues with PROSPER HR4508:
The bill also limits the Federal government regulation of nonprofit and for-profit colleges and universities.
The bill increases the limits of federal loans made for education; but, colleges can limit the federal loan amount and potentially force students to go to the private lending institutions if they do not have enough fundings from college loans. A difficulty also arises in consolidating private and Federal loans as it can not be done. Another potential problem with colleges administering loans surfaced 10 years ago when some colleges had favorite servicers/banks and directed loans to them. Colleges were given favorable pricing, kickbacks, or gifts if they used particular lending institutions such as JP Morgan Chase, Citibank, Bank of America, Wachovia, Wells Fargo, National City, Sallie Mae, CIT/Student Loan Xpress, etc.
Loan interest rate caps for these loans will also increase.
Undergrad student loans are capped at 8.25% or 10-year Treasury Rates + 2.05%; Graduate Students and Professional student loans are capped at 9.5% or 10-year Treasury Rates + 3.6%; and Parent One Loans are capped at 10.5% or Treasury Rates + 4.6%. My argument against such high rates has revolved around the need for a highly educated work force and more graduate and doctorate graduates to do the required doctoring, research and development, and teaching. Instead of increasing interest rates and eliminating deductions for interest, the nation should be reducing the cost of going to college by lowering interest rates to cover cost alone. 3% maximum sticks in my mind.
The length of a loan repayment is limited unless approved for an IBR plan (IBR plans have been difficult to administer with 1 in 4 students dropping out of them and eventually going into delinquency.)
The length of the payment plan shall be no more than 120 months or 10 years unless an Income Based Repayment Plan is offered. Under PROSPER, the IBR 20-25-year limit still exists but the loan forgiveness is eliminated. Today and with the IBR, loan forgiveness can be achieved after 20-25 years. The payments under PROSPER are also higher and a student borrower can be making payments till the grave.
For-Profit colleges no longer have to put their own funding up and can use taxpayer money as a basis to be in business or have “skin in the game”.
The elimination of the 90/10 rule which required for-profit institutions to put up 10% of their own funds up besides federal funds for loans. Taxpayers are funding for-profit school lending again with 100% funding using taxpayer funding. Taxpayers are funding loan companies.
Students are penalized if a loan goes into default and reactivated. These loans are profitable in default and more so.
Reactivation of a student loan today with a private server comes with a rate as high as 16%. This happens with a loan which can not be discharged through bankruptcy or disability unless 100% disabled (including military) as called out in the House bill. As Alan Collinge has stated; “More profit is made on student loans in default than in repayment.”
US Representative Virginia Foxx’s HR4508:
Ben Miller of the Center for American Progress: “We see a decimation of key consumer protections for students. The ‘business of higher education over students’ is just one of the themes that emerged from the more than 540-page bill.”
It is hard to get to something worse than today’s IBR and Repaye plans plus student loans without Bankruptcy protection something our Twitterer-in-Chief enjoyed 6 or 7 times; but, it appears the Republican PROSPER bill put forth by US Representatives Virginia Foxx, Brett Guthrie, and Republicans has established a new level of debasement of students and indenturing them for life to student loans.
My own Opinion?
I have helped my sons and daughter with their loans, being adamant in what would be acceptable and as well advise other potential college students. All student loans should never have exceeded 3% interest annually to encourage more to go to college. Low interest rate loans promote the nation’s investment in their citizens and give graduates the ability to start life less hindered than what they are today. As one older University of Michigan lobbyist who wanted to have a discussion with me concerning my statement to Senator Stabenow on student loans and the IBR programs, the attitude was “I got mine” and today’s students should get over it and live with it. My answer is; “the ability to gain an education should not hinder those who are seeking education with high interest rates and usury penalties administered by commercial interests. It is beneficial for the country to cause graduates to become as productive as possible as soon as possible. Neither should any person be indentured to the nation financially.” The dynamics have changed over the years.
One State’s Effort to Tackle the Student Debt Crisis Jillian Berman, Market Watch. January 10, 2016.
House Republicans Seek to Roll Back State Laws Protecting Student Loan Borrowers Jillian Berman, Market Watch, December 2017.
HR4058 PROSPER Bill as introduced Sec 493E It is easier to do a search for Federal Preemption.
CFPB Student Loan Servicing September 2015
CFPB Concerned About Widespread Servicing Failures Reported by Student Loan Borrowers
I think there are two or possibly three outcomes of this bill.
1.University education becomes the domain of elites again… pre-WWII variety
2 many of the wealthier states will counter with state based loans and laws less the draconian terms of this bill.
3. public funding in wealthier states will increase substantially again.
#3 is remote though still possible.
#2 is most likely for some states & its residents…. the other states’ high school grads will suffer, ultimately making poorer states or conservative states poorer yet.
But I think this will be a relatively short-lived bill — liberal congress’s and executives will come back into power sooner or later — sooner is something for which I hope.
The way I see it is that banks and lending institutions will compete for student loans driving those loans that come under the bill’s terms to far fewer numbers simply by drying up demand for them…. this leads to the elitist’s objectives and my #1 possible outcome.
Wealthier, more progressive states will step up with lower rate loans and terms for state residents which provide banks in those states demand for greater numbers of lower rate student loans with State sweeteners .. thus higher volumes at lower rates which is still capital profit / roi on a cost of capital competitive basis.
Private enterprises will also have a big effect since they are the ones that have demand for university grads and if that demand exceeds supply they end up having to pay more for employees in that category, reducing profits & eroding competitiveness.
Their other option though is to invest more in overseas R&D operations, which over time shifts their new products & services to the supply of foreign university grads to satisfy their demand. This drives capital and profits from domestic business, reducing U.S.’s GDP while increasing it’s competitors.. a US economic death spiral effect.
One thing I’ve watched over the decades is that CA’s bay area has continued to draw high value business growth since the 1960’s commencing with the onset of the digital revolution, now morphed into internet based software systems and services, and that will moprh into some other high value enterprises, etc.
This condition could not be sustained over half a century so far if there were not a high enough concentration of University grads & University research to sustain it, along with high concentration of national and international travel systems — airports and sea ports, all augmented by a Mediterranean climate, proximity to entertainment (alpine level skiing, mountain parks, oceans and sandy beaches to go with it).
So we have UCSF Medical Center, Cal Stanford, U of Santa Clara, Davis and the larger State Universities … notably SJSU all within a few dozen miles of one another. And then we pull in UCLA, UCSD USC & Cal Poly Pomona grads from SoCal, a short air-hop away.
From my children’s generation of work associates this region pulls in grads from MIT & Carnegie Mellon, U of Munich in Europe, among many others who immigrate to the Bay Area for jobs in the professional fields.(not short term visa’s).. We’ve had increasing more U of Mexico grads, and many from Argentina who come here to get graduate degrees and then relocate to say as soon as they can.
The only point here is that University graduates are the life-blood of high value enterprises growth, not just start-ups and peripheral business’s though this of course feeds directly into the high value enterprises as well. Part of it is pure geography .. climate, ports, & international air transport hubs. But it’s apparent to me that the driver has been the high concentration of large, sound, and well financed public universities (+ Stanford) with high end research.
Maybe this started with the Manhattan project in fact and Cal’s research contributions… funded by national defense during the war, and was helped along with the Veterans education bill (also federally funded) with thousands of returning vets deciding to stay in CA on their return from the Pacific and Korean wars. I can’t count the number of people I know who grew up on the East Coast or Midwest, got drafted, and went to war in the Pacific theater, and on discharge stayed in CA, brought there wives out here, or married here, rather than return to their roots somewhere else in the nation.. As the son of a CA native since for several generations I was a minority .. native born California residents were rare birds when I went to college and began my career… everybody was from some other neck of the country, relocated to CA with their parents when they were tots or grade-school kids.
So maybe the Bay Area’s concentration of high value enterprises locating here with the close proximity of several Universities began in the war years or immediate post-war rather than the 1960’s. with semi-conductors (digital tech). LA grew faster than the Bay Area with the post war Aero and rocket industries… also mostly funded by defense..
Bechtel funded Fairchild’s start-up… Bechtel was / is a supplier of high and low tech research devices satisfying demand for them by the Universities in CA originally.. I can recall many instruments from them… the cream of the crop, I used in Chem research when I went to college. HP became the leader in electronics instruments used in research…… oscilloscopes, etc. during that period as well.
So was Bechtel the for-runner of and leading indicator because of university concentrations in the Bay Area? I don’t know.. but Bechtel was a high value enterprise in CA preceding semi-conductors and dependent on research demand for instruments & measurement devices for their business and it was concentrated in post-war CA. Did this ultimately stem from the Manhattan Project’s research at Cal during the war?
Whatever the origins, at least from the mid-1960’s the Bay Area was a job growth center with grads from the concentration of Universities here fulfilling demand.. IBM’s disk drive research, development and mfg’ing, HP’s electronic instruments, Fairchild, followed by Zilog & then Intel spun off from dissatisfied researchers at Fairchild. Those spun off programmers for digital (semiconductor based) instruments and test equipment and then for computing on a wide-scale, which created software systems enterprises, leading to Apple, Oracle, then Google, then Facebook (originated by it’s founder in his dorm room at Princeton?) but drawn here by the concentration of programming and IT systems already established?
And all of these remained in the Bay Area… being satisfied by available supply of constant stream of new graduates from the concentration of universities.. Microsoft, Gates & Ballmer were the exception.. remaining in Seattle .. which then grew let Bezos start Amazon in Seattle I note that both are now major employers for research in the Bay Area. Why did Ebay start here? Why did Genentech start here (UCSF Med School researcher Boyer is why). Why did Musk start Tesla (an EV automobile startup no less) here?
So it’s pretty clear to me from my perspective that a high concentration of Universities, coupled with transportation hubs fuels economic growth, jobs, & prosperity hence funding of Universities will ultimately come from taxpayers again and private enterprise . both of which depend entirely on them in the end. The GOP’s elitism, gilded age resurrection is a hiccup (flu) with a relatively short life in the scheme of things. Maybe their last hurrah (one can hope). An anachronism in history.
Yes, the next several years will have had a major negative impact on educational systems, primary, secondary, and higher education, giving our international competitors a big leg up while the elitists dance and rejoice before they collapse. It’s just a crying shame our political system supports this kind of thing..
Here’s another one to ponder.
I worked for IBM’s disk drive division in San Jose
It started in the early 1950’s in a rented house in San Jose by a few IBM researchers and engineers (less than a dozen) sent here by IBM from back east to research & develop faster tape storage systems.. they came up with the same magnetic method but on platters (disks) instead of reel – real or substitute tape systems, allowing extremely fast access by then relative standards. His huge machine was develo9ped and mfg’ed at IBM’s new buiilding in far South San Jose… outskirts in fact, surrounded by ranches and farms… but IBM bought acres and acres at this location.. I forget how big but it was huge, with initially just one building on it (Bldg 1).
Why did IBM send these dozen people to San Jose instead of remaining in NY? Why did they buy a huge acreage for just one building and then another to make the platters, and another to put the machine together.. with tones of remaining land (all in orchards leased to local ranches) in the 1950’s?
They bought where land was ultra cheap.. far south San Jose orchards and farms right next to (literally abutting) the major North-South RR line (SP) and the only North-South highway (then called Monterey Highway and otherwise known as State Highway (2 lanes) 101?. There were no home developments nearby.. though in short order several grew up immediately to the east of the property and then a little later immediately to the north along the country road (Blossom Hill rd, which led to the Cottle Ranch which IBM bought most of on Cottle Road of course..
Why San Jose? Why CA for that matter? Fairchild wasn’t even a sparkle in anybody’s eyes yet. IBM was a pure East Coast company mostly only in upstate NY (financial industry and Insurance Company’s, plus DC politics), but close enough to NYC still. It hired engineers, sales, and management almost exclusively from the East Coast’s major universities and NY’s state colleges.
CA was the “left coast” also known as the “left out” coast. It might as well not even have existed as far as IBM was concerned. It had no competitors out here. It didn’t even have much or any real revenue from out here… maybe a system at Cal’s nuclear research institute if that even.
None of the fewer than a dozen they sent out here were from the west coast… no roots out here at all. And they set these guys up in a cheap rented house ..not a building or leased offices and labs!!! A house fer Christ’s sake! Hedging their bets perhaps? No commitments beyond a 1 year lease in a residential area?
What did IBM know in NY that others didn’t know or expect? Why, if this little team were successful didn’t everything shift back to NY where all their engineering, management, and mfg’ing was with plenty of room at those sites to expand.
Why when the team succeeded in their design did IBM xfer engineers and managers from back east and hire from local universities instead of just moving the dozen or so guys back to NY? Why buy huge unused acreage in farm land at the furthest reaches of civilization in the Bay area.. further from SF than anywhere else they could have picked?. with the sole access by the two lane Monterey highway or the country Blossim Hill Rd?
By the time first became aware of the place it was mostly in mobile trailers for offices of admin and engineering with I think then two mfg’ing buildings and 3 small R & D buildings plus their original single building over in one corner. and it was way south… the boondocks. I wasn’t impressed. There was then a big pit in the ground which they said was going to be their new headquarters building .. so moving out of the trailers. I’m not even sure there was a permanent cafeteria yet, though that was the only place to get lunch… no food joints, -restaurants or McDonald’s yet nearby, but there were a couple of new bars. .
I think that was in 1967 or maybe 1968 when I first saw the place.. looking for a part-time job… but it was way far away from the college (relatively) so I really wasn’t all that enthusiastic about a part-time job there anyway. The place was still mostly leased orchards.. plums in fact. Blossum Hill road was still a 2 lane country road with farms and orchards on either side for miles. No residential housing yet along Blossom Hill road.
So why did IBM do all this beginning on the left out coast in San Jose, starting in a residential house in San Jose, and then buy large acreage at the southern tip of it on the Cottle Ranch?.
Hint: High concentration of nearby major universities (Cal and Stanford) and State colleges (SJS and SFS at the time), plus several other private universities, and a major transportation hub (port, RR hub & SF International Airport with Oakland and SJ much smaller (tiny) ones. Plus a Mediterranean climate, nearby recreation (Sierra Nevada range, and Pacific ocean, plus SF Bay itself… with a major metro city (SF) within an hour for arts and restaurants and symphony, etc. All of these things related to future employment draws in the management and professional fields .. emphasis on future.
By the time went to work there in 1970/71 it was one of the three largest employers in the valley along with HP and National Semiconductors. But at that time it was still in the boondocks in South San Jose, and nobody had a clue what they did there… disk drives? what’s that?..Oh, you mean like tape drives?.. That’s old hat…. not high tech. No future.
Little did they (or I) know what they were doing there even when I was interviewing… the most advanced technologies at the time, the most heavily funded research and development with the most modern equipment money could buy.. .and lots of it. Some of the best and brightest from across the US… large proportions from Cal. and believe it or not, little ol’ San Jose State.
And just btw, neither did any IBMers from back east know either.. I tought executives in NY about what San Jose did and how they did it.. tecnnology.. they were hugely suprised… how can that be possible when IBM is computers in NY? How can you be doing this kind of advanced research and technology we’ve never heard of?
IBM was then still East Coast centric.. we out here were still on the left out coast… but IBM headquarters finance and money men in NY knew how important we were to IBM’s coffers then and into the future, but it wasn’t advertised, internally or externally. Two entirely different corporate cultures and management styles had developed in the same Company on two different coasts in about a single decade or less.
I was the first engineer hired in IBM globally and SJ in particular with long hair, way below my collar, huge mutton chop sideburns, big mustache, not wearing a suit or sports coat or white shirt or a tie., and who refused to sign on if I had to punch a clock, work specific starting times (to the minute.. I kid you not), or do the dress code or hair code.
I was viewed and thought of as a “hippy”, but I wasn’t a hippy at al in any respect…. I just didn’t conform to what IBM thought of then as an “engineering or science professional”. I was what IBM called a “wild duck” but even those were 3 piece suit wearing standard haircut, clean shaven, white shirt with tie, clock punching guys. I was not anything like IBM had ever hired before anywhere .. and after the fact I learned that there were big fights between HR (no chance they would hire me, ever), and engineering and different management groups.. ultimately deciding that I might be worth it despite my appearances.. maybe I’d conform after a while? I never did though.. but IBM on the west coast and SJ shortly were hiring lots of other west coast educated professionals.. a lot of them just like me.. and shortly our dept stopped punching clocks, and arriving on the minute at start time and started wearing khakis and spots coats and colored shirts (heaven forbid) with no ties. I was one of the first in SJ to come to work in blue jeans and a short sleeved multi colored shirt in summer… others followed….
The point is only that the west coast college grads were a different breed than on the east coast. My generation was the first I think that discarded the 1950’s as relevant to anything.. the pill had come along, VN war protesting had come along, civil rights had come along… and this was reflected heavily by CA’s youth probably more-so or earlier than that elsewhere in the country by rejecting all the prior norms, and “corporatism” was not going to change us..
IBM engineering management was a powerful group in SJ.. after-all engineering was SJ’s future products and revenue. So engineering management had to adapt to CA culture coming out the Universities in the bay area or fail to hire whom they preferred… and that’s why I was hired as the 1st “hippy looking” professional engineer in IBM as it turns out after the fact..by engineering managers who wanted what I did better than most, not how I looked. It was my way or nothing and I was just the first “experiment” IBM took on…. and in short order they had no choice anyway.
Either they hired the best and brightest (I wasn’t the best and brightest however.. I just had a different way thinking about things than engineers at the time.. “out of the box” is what it was eventually referred to) or they wouldn’t be able to hire them if they required conformance to old norms and standards. It was a difficult transition even for IBM in SJ on the left out coast. It didn’t follow quickly on the east coast for several more years in fact. I went to a major east coast meeting on a major problem once and showed up in my khaki’s and a light sports coat no tie, long hair and when I entered the conference room (with my name placard on the table in front of me) I was asked to leave… “you’re in the wrong place” with everybody in 3 piece suits, white shirts and ties looking at me like I was a hourly paid assembler from mfg’ing. When I sat down anyway, without saying a word, the “head” guy said .. “I’m sorry, but I must ask you to leave.. this isn’t the place you’re looking for” I said, “Then why is my name in front of me on the table?” Absolute silence.. pin drop, mouth dropping silence. My name and reputation had preceded me, but not my appearance. I figured it was pretty much like racism… appearances dictate the prejudices… oh and I was quite a bit younger than anybody else the room… in youthful appearance as well as age. It turned out that my “engineering title e.g. “rank” gave the impression that I was in my mid or late 40’s or early 50’s, but I was just 31 or 32 I think at the time.
So university grads are private enterprises most important dependency besides hourly paid labor.. and with restricted ability to become college educated private enterprise will suffer greatly so it the bill that may become law or is law will change in due course. Count on it. I hope he elites enjoy their last dance.