Education Law Prof Blog

Higher Education, Bankruptcy, and Teacher Tenure

Matthew Bruckner has put together an interesting three part series on the intersection of bankruptcy and higher education.  His first paper, Bankrupting Higher Education, was published in the American Bankruptcy Law Journal.  He argued:

Many institutions of higher education are struggling financially and would benefit from the use of bankruptcy reorganization tools designed to enable struggling enterprises to restore themselves to a state of financial viability. This essential set of tools for responding to financial distress is available only in bankruptcy reorganizations and Congress has effectively precluded colleges and universities from having access to them. This Article argues that this is a mistake and is premised upon an outdated and unsupported premise. It contributes to the nascent literature on higher education bankruptcy proceedings by examining how differences among the three primary organizational structures of institutions of higher education affect whether and under what circumstances institutions of higher education should be allowed to reorganize through bankruptcy. This Article argues that the profound differences in how colleges are organized greatly affect whether bankruptcy reorganization is appropriate for each type of institution. It concludes that for-profit colleges are most likely to benefit from access to bankruptcy reorganization, public colleges would likely benefit least from having bankruptcy reorganization available, and the myriad far-reaching benefits of granting all institutions of higher education the right to reorganize under the bankruptcy law far outweighs any potential risks.

In his second article, Higher Ed ‘Do Not Resuscitate’ Orders, he explored how concerns over for-profit colleges' questionable practices clouds the issue of whether colleges on the whole should be able to use bankruptcy to reorganize.  In his abstract, he writes

Congress has effectively precluded all institutions of higher education from reorganizing in the bankruptcy courts because it was concerned about exploitative profiteers opening fly-by-night colleges, defrauding students, and then finding refuge there. This choice harms students, employees, creditors and communities. As such, this Article advocates that Congress should reverse its decision and allow colleges to reorganize in bankruptcy. To support this argument, this Article contrasts the bankruptcy treatment of healthcare enterprises to that of higher education enterprises. In doing so, this Article builds on my own prior work and contributes to the literature on higher education bankruptcies.

His newest article goes to an even deeper level of nuance, analyzing how professors' tenure rights would intersect with bankruptcy proceedings.  He offers this summary:

Many institutions of higher education are in dire financial straits and will close, merge, or file for bankruptcy in the near future. This Article considers the effect of bankruptcy laws on the ability of higher education institutions to restructure their workforces and, in particular, the impact that a bankruptcy filing may have on tenured professors. It also addresses how some tenured professors may be able to complicate their employer’s reorganization to their own strategic advantage.

 

Maryland's Remedy for Segregation in Higher Education Is "Woefully Inadequate," Says Legislative Black Caucus

A decade and a half into the litigation over Maryland's failure to integrate and treat its Historical Black Colleges and Universities (HBCU) fairly, plaintiffs have a new offer on the table.  The state is offering $100 million over the next ten years in increased resources for its HBCUs, which is twice as much as it previously offered.  For those new to the case, the Supreme Court in US v. Fordice considered segregation in the context of higher education and established standards for remedying the problem.  Of course, the fact that enrollment in higher education is voluntary makes the desegregation of higher education different than k-12.  But the simplest way to further integration in higher education is to avoid "program duplication."  Rather than offer programs in agricultural science and hotel management at both an HBCU and a traditionally white institution (TWI), the state could offer agricultural science at the HBCU and hotel management at the TWI.  It can also fund both schools fairly.  If it does so, the thinking is that students will voluntary integrate schools over time. 

In a nutshell, the trial court found that Maryland has done the opposite over the past couple of decades.  It has opened new campuses and expanded others when it could have been expanding the HBCUs.  To make matters worse, it offered new programs at other schools that duplicated the programs already being offered at HBCUs.  It goes without saying that the politics of university funding run high.  Add race and legacies to it and it only gets worse.  It is not clear that the state has made any good faith effort to fix the problem, even after having it brought to the state's attention.

From afar and given the findings by the trial court, $100 million looks like a relatively small offer.  The Maryland Legislative Black Caucus calls it "woefully inadequate."  The Caucaus released this letter:

 

I write in response to your chief legal counsel’s Feb. 7, 2018, letter of information regarding the status of the case — Coalition for Equity and Excellence in Maryland Higher Education Inc. v. Maryland Higher Education Commission et al — and your administration’s goals.

The Maryland Legislative Black Caucus appreciates that correspondence and your desire to end litigation in a manner satisfactory to all parties and to all Marylanders. We share your desire and believe that justice in this matter is long overdue.

Respectfully, your “comprehensive settlement” offer of up to $100 million over ten years is woefully inadequate given the district court’s finding that, in the decades since Brown v. Board of Education, the state has violated the constitutional rights of students at Maryland’s Historically Black Institutions. We note that similar lawsuits in other states such as Mississippi and Alabama have been settled for over $500 million and still have proven inadequate to alleviate longstanding educational discrimination in those states. While supplemental appropriations are necessary and appropriate, any proposed settlement should include the establishment of programmatic niches, academic enhancements, and a reformed process for approving new academic programs, at each HBI. We believe the court’s remedial framework, which would be overseen by a special master, goes a long way towards a truly comprehensive solution.

In sum, the single greatest state-sponsored educational deprivation in Maryland’s history deserves more. Given the proven, multi-generational discrimination against Maryland HBIs and the enormous importance of these institutions to our state, we believe an Amazon HQ2-like commitment is warranted from your administration.

Del. Cheryl D. Glenn
Chair, Legislative Black Caucus of Maryland

Do Changing Student Attitudes Shrink Their Own Free Speech Rights?

The title of this essay is more rhetorical than anything.  Laws and courts, not students, shrink or expand free speech rights.  Yet, student attitudes about free speech and other constitutional rights certainly have real world impacts and, in some instances, have incidental effects on legal doctrine.  A new study by Brookings reveals that college students have a relatively narrow view of free speech rights.  Students were asked if the First Amendment protects hate speech and here are their responses:

 

These opinions are having spillover effects on the policies that universities do and do not adopt.  Universities are struggling to balance the interests of free speech against the anti-harassment concerns and student demands that some speakers simply not come to campus.

The Foundation for Individual Rights in Education (FIRE) has made it its business to challenge policies that restrict speech.  That business appears to be growing.  Two years ago, they filed a lawsuit against my University regarding its policies on free speech zones and the investigation of harassment claims, alleging those policies infringe on free speech rights.  Interestingly, that case did not get to the merits.  The University changed its policies and the district court dismissed the case as moot.  Plaintiffs are now appealing the issue as to whether they are still entitled to an injunction against future actions by the University.  This case is not unique.  A quick look at FIRE's docket reveals a number of analogous cases have been filed and are pending in several other jurisdictions.

The point of this post is not to analyze the doctrine but to point out students' role in these shifts.  This free speech shift reminds me of an article Jason Nance authored a couple of years ago about the increase in suspicionless searches in public schools.  His empirical research strongly suggested that schools were regularly violating students' privacy rights. 

The Supreme Court defines the scope of students' privacy rights, in part, based upon their reasonable expectations.  So what happens when schools violate students' rights so often that they no longer expect privacy? Does that actually shrink their right to privacy?  If so, Nance's research is extremely troubling.

In the case of free speech, what happens when students become so unable to countenance opposing points of view that they are actually wounded or harmed by those views?  The First Amendment is tougher on this issue than the Fourth, but it warrants consideration because it is true that students have the right to be free from racially, sexually, and other forms of hostile environments.  Thus, schools can restrict speech that crosses that line.  I strongly defend the existence of that line and am sympathetic toward Universities that enforce it appropriately.  Yet, the factual question of when an environment becomes hostile may very well be one that could move based on student attitudes. 

New Sheriff, New Rules? By Jonathan D. Glater

 

There is a certain irony in the choice of tactics in last week’s lawsuits filed in response to the Education Department’s effort to back away from Obama-era rules that created a process for indebted students to get out of their loan repayment obligations if the institution they attended made false or misleading statements.  The 19 states that filed a federal lawsuit in Washington, D.C., are making the same kind of argument that for-profit higher education providers used in their lawsuit against prior efforts to regulate in this area.

In their complaint, the states, which include Massachusetts, California, and New York, charge that the Department’s effort to postpone implementation of the rules violates the Administrative Procedures Act, or APA. 

(The Department’s move was announced in a press release, and a prior blogpost assessing it is here.  The rules at issue, which were announced in October and were to take effect on July 1, are here.)

While the Department justified the decision to delay implementation of the rules by citing pending litigation filed by the California Association of Private Postsecondary Schools, the states argued in their complaint that not every rule subject to delay had been targeted in the trade group’s lawsuit.

According to the states, the Department’s delay of the rule must itself be subject to notice and comment, like any new rule, and the Department’s failure to do so constitutes a violation of the APA.  Through litigation, the states hope to have a judge order implementation of the rules.

To appreciate the irony, you have to let your mind wander way back to 2011.  That’s when the Association of Private Sector Colleges and Universities sued the Education Department to block implementation of the “gainful employment” rules, which among other things would have imposed penalties on institutions if the ratio of their students’ debt to income exceeded a specified level.  The trade group’s lawsuit succeeded in delaying full implementation of the rules; if you want the gory details, the trial court decision was Association of Private Colleges and Universities v. Duncan, 870 F.Sup. 2d 133 (2012). 

The Department re-developed the rules, which the trade group immediately sued to block.  The new version of the gainful employment rules survived a set of legal challenges by the trade group, culminating in an opinion by the D.C. Circuit Court of Appeals (Association of Private Sector Colleges and Universities v. Duncan, 640 Fed. Appx. 5 (2016)).

The irony arises because in both sets of challenges to those rules, what provision of what law did trade group rely on?  You guessed it:  The same provision of the Administrative Procedures Act. 

The trade group argued that each version of the gainful employment rules was “arbitrary and capricious,” the magic phrase from the Act, which at 5 U.S.C. §706(2) requires a reviewing court to “hold unlawful and set aside agency action, findings, and conclusions found to be… (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 

The states contend that the delaying of the rules is arbitrary and capricious and otherwise flawed.  So to protect a more recent regulatory effort, the states are using the same tactic that was used to attack a prior one. 

Whether a new sheriff in town can impose new rules will thus depend on whether the courts find that the new sheriff played by the rules. 

Sometimes, Financial Market Predictions Are Correct By Jonathan D. Glater

 

The price of shares of for-profit higher education provider Apollo Education Group, owner of the University of Phoenix, rose nearly 7 percent the day after the election of Donald Trump, and kept rising in the following weeks.  The price had been trending downward in 2015. 

Various news organizations have written about similar post-election, upward bumps in the sector.  Now comes the announcement on Wednesday from the Education Department that the Trump Administration intends to delay implementation of Obama-era rules aimed at curbing misconduct in the for-profit sector. 

So we have some evidence that investors’ expectations were accurate. 

Betsy DeVos, the education secretary, in a statement described the move as part of a “regulatory reset.” She did not explain precisely the reason for the reset, but more on that in a moment.

The rules, slated to take effect on July 1^st, were already the product of a negotiated rulemaking process.  The Education Department announced a new negotiated rulemaking on the regulations, which addressed borrower defenses to repayment and the “gainful employment” requirement. 

The defense to repayment regulations sought to incorporate student borrowers’ ability to repay in the assessment of institutional eligibility for participation in federal student aid programs.  The idea was, if a significant share of student borrowers struggled with their debts, perhaps the educational program should not be eligible to participate.  A description of the rules is here.

What was wrong with these rules?  They were “overly burdensome and confusing for institutions of higher education,” according to the Education Department statement.

The borrower defense to repayment rules create a procedure for student borrowers to contest the obligation to repay, if they can show the education provider made a misrepresentation or that the provider failed to perform on its contract with a student.  The description is here. 

On these, Secretary DeVos cited college and university concerns about the “excessively broad definitions of substantial misrepresentation and breach of contract, the lack of meaningful due process protections for institutions and ‘financial triggers’ under the new rules.” 

Basically, it seems that neither set of rules was popular with the regulated industry, hence the “reset.” 

Prior to the election, there was good reason to believe that a Trump Administration might be sympathetic to the for-profit education sector.  After all, then-candidate Trump was associated with Trump University, which shortly after the election last fall settled civil lawsuits filed on behalf of former students.  That settlement was approved by a court a few months ago.

But this week’s announcement is public executive action explicitly beneficial to the for-profit sector.

All of this is putting aside the question of whether the Education Department can unilaterally put the brakes on the rules.  In its press release, the Department cites section 705 of the Administrative Procedures Act –  do not worry, that is not a rabbit hole this post will explore in depth.  But note the language of that provision, 5 U.S.C. §705, here in full:

When an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review. On such conditions as may be required and to the extent necessary to prevent irreparable injury, the reviewing court, including the court to which a case may be taken on appeal from or on application for certiorari or other writ to a reviewing court, may issue all necessary and appropriate process to postpone the effective date of an agency action or to preserve status or rights pending conclusion of the review proceedings.

Postponement is discretionary, not mandatory, under this provision.  (The “pending judicial review” is a challenge to the defense to repayment rules filed less than a month ago by an association of private postsecondary schools, including for-profits; a link to the complaint is here.) 

Unfortunately for Apollo Group shareholders, they voted way back in May 2016 to take the company private, in a transaction completed in February.  Perhaps they should have held on.

Betsy DeVos's Confused Logic on Student Loans By Jonathan D. Glater

The evolution of education policy rationales can make for interesting study.

Last week, Betsy DeVos, the secretary of education, explained in a Wall Street Journal column why the structure of federal student loan servicing needed to change.  Instead of maintaining a stable of companies that service loans for student borrowers – servicing entails receiving and keeping track of payments, keeping track of borrowers, ostensibly trying to keep borrowers out of default – the Education Department would move to a single servicer model.

“Simply put, the current systems used by Federal Student Aid are not designed to put customers – students and their parents – first,” DeVos wrote in explaining the move. The process, which she went on to characterize as “complicated and rife with confusion,” makes it too burdensome for students to get questions about their loans answered, for example. 

Continue reading

Public Service Loan Forgiveness in the Administration’s Crosshairs By Jonathan D. Glater

 

It is just a few pages in the Trump Administration’s budget proposal, but to student borrowers and indebted graduates toiling in public interest jobs that they entered because they expected to have their loans forgiven, they are pages that matter.  The Administration wants to eliminate the Public Service Loan Forgiveness program (“PSLF”), which “unfairly favors some career choices over others and is complicated for borrowers to navigate,” in its entirety.

The full proposal is here and the quoted language comes from page 129.  This is not the first blow student borrowers expecting to count on PSLF have suffered – see this prior post – but way back last month, the Administration had not proposed complete shutdown.

But wait, there’s more.

The White House proposes elimination of multiple student loan repayment plans in favor of a single, income-linked plan under which borrowers would pay 12.5 percent of their discretionary income.  (This is from page 127.)  Any undergraduate debt remaining after 15 years of repayment would be forgiven; graduate debt, after 30 years.

Finally, the proposal would eliminate the federal subsidy that pays the interest on needy student borrowers’ loans while they are enrolled in school.  The proposal states:  “While the in-school interest subsidy has not been rigorously evaluated, lessons from behavioral economics indicate that the subsidy is less likely to increase postsecondary enrollment, due to the complexity of the interest rate benefit, than straightforward need-based grants to students.”  (Page 130.)

I confess I did not reach out to Cass Sunstein for comment on the lessons of behavioral economics, although I would be curious what his thoughts are.  It does seem plausible to claim that few students consider monthly interest payments on their loans when making enrollment decisions.  On the other hand, any federal subsidy that reduces overall indebtedness and so lowers the financial burden of higher education is a concrete, good thing.

What makes these changes so interesting is the way they muddle the purposes of federal student aid program.  I should say, muddle further, because since the G.I. Bill, the federal role in higher education finance has pursued multiple goals.  Some government programs aim to encourage students to pursue higher education who otherwise might not; some seek to encourage students to make career choices that serve the national community; and some states seek to reward students who have done well in primary and secondary school and might well have enrolled in college anyway.

The antipathy to PSLF is telling.  That program did not seek to confer an “unfair” advantage on those graduates who launched themselves on some random career path but to create an incentive for students to make choices beneficial to all of us, choices that otherwise would not be feasible.  Apparently in the view of the Trump Administration, choosing to pursue public service and accept low pay is no different, from a policy perspective, from choosing to pursue a lucrative private sector career. 

And that indifference to any distinction between public service and private wealth accumulation may be a hallmark of this Administration’s approach to education policy. 

College Tuition Discounts Hit New High By Jonathan D. Glater

It is the “sticker price” of a college education, or the publicly reported tuition and fees and, sometimes, room and board, that typically gets all the press attention.  Yet as with so many other products, the asking price is just the start of a negotiation, and the latest report from the National Association of College and University Business Officers (NACUBO) reminds us that education is no different, at least in this respect.

Of every dollar in gross tuition revenue from first-year students, colleges and universities used nearly half for grant-based financial aid, according to the summary of NACUBO’s annual Tuition Discounting Study. The institutional “discount rate,” 49 percent, is the highest the organization has ever reported.

The summary of the report by NACUBO, whose members are college and university administrative and financial officers, is available here; the full report costs money.  The findings are based on a survey of 411 private, nonprofit institutions.

The steady increase in the discount rate illustrates how colleges are managing the impact of increases in reported tuition: by cutting the price for students. Further evidence of the impact of rising costs is the share of students receiving grant aid: more than 87 percent of first-year students, NACUBO found.  More than three-fourths of the aid money was awarded on the basis of need

The summary identified two other, potentially worrisome trends from the survey.  First, surveyed institutions reported a decline in the rate of growth in net tuition revenue, to 0.4 percent.  Second, nearly 40 percent of surveyed institutions reported that the number of students they enrolled had declined, both for their first-year classes and their total student body. 

If fewer students are enrolling and limits to the ability of institutions to pass on costs to students are becoming apparent, all but the wealthiest colleges and universities may face some difficult choices in the years ahead.

Private, nonprofit institutions face a powerful incentive to keep raising the sticker price, in an effort to procure revenue from that shrinking sliver of the college-going population that is able to pay, even as they must offer ever more financial aid to everyone else.  Or, if they reduce aid, they will push private higher education further out of reach of a growing number of potential students.

This is another insidious manifestation of inequality.

Students Overlooking Flexibility Options in Repaying Their Loans By Jonathan D. Glater

One of the critical steps taken in recent years to help student borrowers manage rising levels of indebtedness was the creation of flexible repayment plans, which tie monthly payments to borrower income.  However, most students do not use these plans and many may not even know they have the option. 

Yesterday the Consumer Financial Protection Bureau provided some evidence of the cost of ignorance, for borrowers who are most at risk.

The Bureau released a brief report finding that more than 90 percent of borrowers who already defaulted on student loans were not enrolled in one of these flexible repayment plans.  Further, the Bureau found, these borrowers who did not enroll in one of the income-linked plans were five times as likely to default a second time. 

These findings, based on responses from student loan services that, together, manage accounts for approximately half of all student loan borrowers, suggests that students are not getting the word.

Overall, rates of delinquency – that is, falling behind on payments, a prelude to default – are lower for students on income-linked plans.  Slightly less than one-third of federal direct student loans in repayment are in an income-linked repayment plan, according to the Education Department’s Office of Federal Student Aid.

The findings should raise three questions.  First, how well are student loan servicers advising borrowers about their repayment options?  Second, why are there so many plans, creating such complexity for student borrows to navigate?  And third, why aren’t income-linked plans, rather than the ten-year, fixed payment plan, the default for all borrowers?

Good questions all.  Unfortunately, the answers are not in the Bureau’s report.  But the implication is clear:  In the absence of regulatory action, students need to be better informed about their options.

The federal Education Department’s description of the different income-linked plans is here.  This post will not try to weigh the relative advantages and disadvantages of each.  Others, including The New York Times, Time and US News, have already taken that on, and The Institute for College Access and Success has put together a handy comparison chat.

Spread the word.

Oversight of the Federal Role in Higher Education Finance Appears to Be in Flux by Jonathan D. Glater

Earlier this month, the new secretary of education, Betsy DeVos, issued a memorandum withdrawing two Obama-era memoranda that, among other things, had directed the attention of the Education Department to attend to the quality of student loan servicing.  It is not entirely clear yet what the effect of the policy change will be.

But the Department is not the only player.  The deadline expired on Monday for comments requested by the Consumer Financial Protection Bureau on the need for the agency to gather information from student loan servicers, the businesses that manage loans made through the Education Department’s Direct Loan program. 

The independent CFPB, created by legislation passed in the wake of the financial crisis, proposed that it collect information including data on loan volume, types of loans serviced, repayment plans used by borrowers, loan status (for example, in school, in repayment, in deferment, in forbearance), and borrower defaults.  (In the interest of disclosure, your author signed onto a letter supporting the CFPB in its effort.)

Perhaps to bolster the argument for additional data collection, the CFPB today released a supervisory report describing unfair and deceptive practices identified in an investigation of student loan servicers.

The CFPB’s authority to gather information is not unlimited and sailing has not been smooth.  A three-judge panel of the Court of Appeals for the District of Columbia Circuit dealt the agency a setback last week by ruling that it did not properly support a demand for information from the Accrediting Council for Independent Colleges and Schools, which accredits for-profit colleges.  

The CFPB’s “civil investigative demand,” which is unrelated to the proposed data collection from servicers, had asked for information related to “unlawful acts and practices in connection with accrediting for-profit colleges.” In the view of the judges, this was just too broad; the agency did not “state adequately the unlawful conduct under investigation or the applicable law.”

The full opinion, which is narrower than the lower court decision that it affirmed, is here.  The appellate panel left open the possibility that the CFPB could revise its demand for information and try again.

These are potentially difficult times for would-be aggressive regulators of business conduct, as Gary Rivlin of The New York Times recently warned.  The CFPB may not get much support from the Trump Administration. 

The combination of changes in policy at the Education Department, investigative initiatives at the CFPB, and resistance from businesses, suggests that student loans, and specifically student loan servicing, will continue to be a hot topic.

Whither – Wither? - Public Service Loan Forgiveness By Jonathan D. Glater

 

It comes as no surprise that some of the most important jobs public-spirited graduates want to pursue do not offer high salaries.  To make these careers feasible for indebted students, Congress in 2007 approved the Public Service Loan Forgiveness program, or PSLF, which provides for forgiveness of student debts of those who make payments on their loans for ten years and work for a qualifying public interest employer.

The trouble is, according to a lawsuit filed in December, the Education Department may be tinkering with the definition of qualifying employer.

The ten-year period will end this fall for early adopters, and now some of those student borrowers who counted on forgiveness say they have been told that they are no longer eligible after all.  Last week, The New York Times ran a disheartening story about disavowals of forgiveness by the Department.

The subject started to get coverage after the American Bar Association filed a lawsuit against the Department in December on behalf of the students who were first told they could benefit from forgiveness, then were told later that they could not. 

The lawsuit, filed in federal court in Washington, D.C., is worth watching.  Changes to PSLF, codified at 20 U.S.C. §1087e(m), could have an impact on the lives of millions of students who rely on its availability when they make hard decisions about all aspects of their lives.  Consider how the possibility of loan forgiveness influences choices about careers to pursue, retirement saving, major personal investments, marriage, children, and where to live. 

No wonder the apparent decision by the Department to move the goalposts resulted in litigation.

According to the complaint filed by the American Bar Association (“ABA”) challenging the Department’s apparent decision that some student borrowers’ employment did not qualify them for forgiveness, some borrowers’ loan balances actually grew while they worked in what they thought were eligible public interest jobs.  They used an income-dependent repayment plan and their payments did not make a dent in the principal.

The student borrowers believed that they would benefit from loan forgiveness because they filed “employment certification forms” and received confirmation that their employment qualified. 

Then, after years of making payments, they received notice that their employment did not qualify – and that this finding applied retroactively, such that payments they had already made would not count toward the ten-year requirement.  The law does not specify an appeals process, the ABA notes.

Why is the ABA suing the Department?  Well, “high caliber employees” will leave or may not work for the organization if such employment does not qualify for loan forgiveness, according to the complaint. 

The Department’s answer asserted that the Department had “ultimate authority to review” actions taken by the company that serviced the loans, suggesting that the Department considered no prior finding of eligibility for forgiveness to be binding.  The Department’s response suggests also that perhaps the servicing entity did not have authority to make the eligibility findings that it had.

Further, the Department “does not make a final decision on whether a borrower has been employed by a qualified organization until the borrower submits an application for loan forgiveness,” suggesting that any interim confirmation of eligibility for PSLF is meaningless.

While the outcome matters greatly to students, the battle is also significant because it implicates the larger question of the extent to which the federal government will subsidize accessibility of higher education.  Loan forgiveness to students in repayment reduces the cost of college, it just does so ex post rather than ex ante as a scholarship would. 

Critics of PSLF warn of the program’s potential cost, at least implying that this subsidy is dangerous because of its expense.  And perhaps a debate over national willingness to put higher education within reach of students ready to work in the public interest is one we should have.

In such a debate, we should take note of the distributive effects of PSLF:  students with higher debts, often students who had less in the way of financial resources to begin with, are the ones who will be most affected by restrictions on the availability of forgiveness.  The forgiveness program constituted a legislative effort to turn indebtedness into an incentive to go into fields that otherwise students might view as unaffordable.

But regardless, those students who have acted in reliance on PSLF deserve to have the promise of the 2007 legislation honored.  They are, after all, working in the public interest.

Will Accepting GRE Scores Improve Law Schools' Assessment of Candidates? by Jonathan D. Glater

Harvard Law School’s readiness to accept the GRE in place of the LSAT raises a host of important questions – most importantly, what will the effect be? 

In explaining the move, Jessica Soban, assistant dean and chief admissions officer, told The New York Times that it would “encourage more students in the United States and internationally from a greater degree of disciplines to apply,” and the law school’s dean, Martha Minow, suggested that the law school would be able to admit a more diverse class as a result.

Whether such goals are realized will depend on numbers other than GRE scores.  The results matter, because other law schools likely will follow the lead of Harvard and the University of Arizona, which announced the same move last year.

Many more students take the GRE each year than take the LSAT: 584,677 worldwide, including 326,957 United States citizens, in the 2015-2016 cycle, according to Educational Testing Service (ETS), which administers the GRE.  In contrast, 84,771 people took the LSAT (and 56,500 applied to law school) in roughly the same period, according to the Law School Admission Council (“LSAC”), which administers the LSAT. 

The larger pool of potential applicants could indeed produce greater racial and ethnic diversity at law schools.  According to ETS, 55 percent of the U.S. citizens taking the GRE were white, 6 percent were Asian American, 7 percent were African American, 3 percent were Mexican American, and 4 percent were classified as “other Hispanic,” a category excluding Puerto Rican citizens, who accounted for 1 percent.

In contrast, about 61 percent of law school applicants were white, 15 percent were Asian American, 15 percent were African American, and 13 percent were Latino.  (I did not find precisely analogous data, so please note that these percentages reflect two different sets of numbers:  GRE test takers who are U.S. citizens, on the one hand, and law school applicants, on the other.)

Average GRE scores of different racial and ethnic groups vary across the population of U.S. citizens who took the test, according to ETS.  White and Asian American test takers earned higher average scores than black, Mexican American or “other Hispanic” test takers.  White test takers tended to score higher on the verbal reasoning component of the exam and Asian American test takers tended to score higher on quantitative reasoning. 

As with the LSAT, on which LSAC reports similar patterns, if admissions processes at relatively more selective institutions continue to weigh test scores heavily, the greater size of the pool may have less of an effect on student diversity at law schools.  The selection process, committed to a particular definition of merit, may get in the way.

Just how important is the LSAT, or GRE, for that matter, in predicting who will do well in law school?  To ask that question is to raise another, which is, how good should it be in order to play the powerful role in admissions decisions that it does.  According to an ETS report for the University of Arizona last year, “scores for all GRE subtests, individually or composited, are both highly reliable and valid for use in law school admissions.”

The study was based on a sample of 78 people, and took into account GRE, LSAT, undergraduate GPA and first term law school GPA.  The study did not capture how students did in the second and third years of law school. 

The ETS study presented the data in different ways but the most intuitive may be this:  54 percent of students in the top third of GRE composite scores had a first semester law school GPA in the top third of their class, while 23 percent were in the bottom third.  Of students in the bottom third of GRE scores, 48 percent were in the bottom third of their law school class and 16 percent were in the top third.  That means that 52 percent – more than half – of the students in the bottom one-third on the GRE did not land in the bottom one-third of their law school class.

To put that finding in context, the studies mentioned in the report for the University of Arizona found that the GRE verbal and quantitative sections “almost always predicted graduate [school] grade point average (GGPA) in general and first year GGPA at least as strongly as [undergraduate] GPA.” 

A recent study, available here, suggests that the LSAT itself is not a great predictor of law school performance.  While an LSAT score is a statistically significant predictor of law school GPA (twice as accurate in the first year than overall), the effect is not overwhelming. Each additional LSAT point predicts an increase in law school GPA of 0.016 – a bigger deal, the bigger the LSAT score difference between two applicants, but nonetheless a “modest” effect “compared to how heavily schools weight LSAT scores.”

So both tests predict law school performance, but to a limited degree. 

Where should this leave us?  Frankly, uncertain.  The tests do not predict a lot.  The ETS report for the University of Arizona does not look beyond the first semester of law school.  Average performance on both LSAT and GRE appears to vary with the race of the test-taker. 

Law schools have been using an imperfect tool and two are now moving toward incorporation of a complementary but also imperfect tool.  While predictions are always risky, especially about the future, it seems highly likely that results of adoption of the GRE will be imperfect, too.

Community College Drops What Advocates Called a "Blacks Only" Course

 

A few days ago the New York Civil Rights Coalition sent a letter to Moraine Valley Community College to

call your immediate attention, and to request your formal response, to the Chicago Tribune August 4^th  piece, and in other media, about a college course at Moraine Valley Community College reportedly exclusively for black (African-American) students.

Especially concerning to us are quotes attributed to college publications and officials that explain and seemingly justify the racial restrictions on enrollment in the required college course, “College: Changes, Challenges, Choice.” According to published reports and the Chicago Tribune piece, a catalog of course listings Note specifies that registration to a section of the aforementioned course is “limited to African-American students.” The piece quotes the college’s assistant director of communications, Jessica Crotty, as explaining that the course, which meets for 8 weeks, is required to be taken by students in their first year. The catalog describes the course as one that “provides [the student] an opportunity to assess your purpose for college, assess your study strategies, set college and career goals, examine your values and decision-making skills, and develop an appreciation for diversity.”

In explaining and, arguably, defending racial restrictions on some sections of the course, Ms. Crotty is quoted as saying: “Sometimes we set aside sections for specific populations, including veterans and older students.” (Emphasis added). Ms. Crotty added, and I quote: “Students feel comfortable and are more likely to open up because they’re with other students who are like them.” (Emphasis added),

I find it strange indeed that a course that purports to guide and develop students’ “appreciation for diversity” employs racial separatism and segregation as acceptable and effective means for teaching that “appreciation” for diversity. Most shockingly, I find it incredible and disingenuous on the part of any educational institution and/or higher education official to equate offering courses in racially restrictive ways to that of clustering students in focus groups that are not themselves categories prohibited by law or regulation.

Worse, we are shocked and appalled by the notion that racial segregation can be argued for, much less justified, on the premise that statistical data or “social science evidence” may exist somewhere that allegedly supports the college’s policy and/or practice of restricting or conditioning enrollment in a course of study in any academic program by race or skin color. Such argumentation obscures and defies everything we know about the wrong-headedness of classifying and treating students differently by reason of their “race”, and separating them by race and/or skin color in the academy.

Separation or segregation by race defies state and federal laws, and Supreme Court decisions that prohibit differential treatment of black students or of other students because of their skin color or groupings that are premised and justified by stereotypes about their racial group.

Tell me, please, that these media reports are errant.

Tell me, please, that Moraine Valley Community College is not actually segregating students in academic courses by race and/or skin color, in ways that separate them from their peers of other skin colors and in ways that bar any student from enrolling in a course designated for students of a particular race only.

In explicit terms, it is not sufficient for the college to offer psychobabble rationalizations for reprehensible racial classifications and legally and morally suspect groupings. We find it especially abhorrent for a college to project and invoke the bogus argument that any principled or singular objection to classes and courses for blacks only is itself a manifestation of [whites’ and others’] hostility or racism towards blacks. That’s racial and sheer idiocy. Rather, the grouping of black students in a course designated only for “them” is the practice of racism; it is the same as the college decreeing that sections of a course will be restricted to students who are “white/Caucasian,” and, therein, justified in the guise that students of a certain skin color supposedly feel more comfortable in discussing sensitive matters with peers of ‘”their own kind.”

Classes for “whites only” and/or classes for “blacks only” are one and the same—sheer racism. Such racial restrictions violate every tenet of equal protection under the law, and of academic integrity—notably the open pursuit of knowledge. I need not recount here or remind you what the federal and state laws require and prohibit. Indeed, Moraine Valley Community College’s web site and mission statements make clear that its leadership and trustees are keenly aware of the legal framework and guidelines for avoiding discriminatory policies and practices: “It is the policy of Moraine Valley Community College not to discriminate on the basis of race, color…” or “conduct in its educational programs, activities or employment practices” discrimination based on race, color.  Thus, we cannot abide the alibis and excuses offered by any official or spokesperson for a community college for registering students—or barring students’ registering or enrollment to any academic offering—on the basis of any student’s race or skin color.

The mocking of the law and the sheer arrogance implicit in decision-making based on race and skin color “differences” are at hand. Any policy or effort that restricts enrollment to a college course on such objectionable and prohibited racial grounds—is profoundly obvious and disturbing. Such racial discrimination raises troubling and substantial questions about the college’s commitment to state and federal law—indeed to the rule of law—and to its commitment to the open pursuit of knowledge which is a fundamental of the academic experience and mission. To defy the law and regulations and academic principles in such a flagrant fashion suggests the lowering if not outright abandonment of rigorous standards of the college’s accreditation. That is why we are addressing this open letter to the college’s president and to the president of the Higher Learning Commission, the college’s accrediting authority. We are also copying this letter to the Chair of the Board of Trustees, because it is our belief that the trustees share responsibility for upholding the law and for fulfilling the college’s academic mission without compromise with fads and racist shenanigans.     

With confidence, we are of the opinion that a self-respecting board of trustees and Higher Learning Commission will promptly recognize and act on their duty to intervene and to correct any violations of law and public policy and to remedy any diminution of academic standards. The imposition of any racial qualification or restriction on any student, of any race, to enroll in any college course because of his/her race or skin color, cannot stand. The objection to such race-based restrictions must by definition take exception to any purported rationalization that the affected or excluded racial group will not contest the racial classification. Likewise, we are not impressed with the argument that the affected minority group or the excluded members of other racial groups may “opt” to enroll in alternate courses that do not have the racial restrictions.

Let us be clear; racial segregation as offered or practiced by a community college is objectionable on legal and educational grounds. That there are some blacks, and whites, who advocate such restrictions on course enrollment, matters not the least bit to us. In our view, racial restrictions and qualifications for a course are improper classifications and are evidence of discrimination per se, in purpose and effect. As my mentor, Dr. Kenneth B. Clark, the social psychologist, observed while he was alive—in objecting to the then fashion of separatist fads that were sweeping some college campuses, commented:

“In 1954 [when the U.S. Supreme Court outlawed enforced segregation in public education] it would have been the consensus in the black and white liberal communities that white racism would have gained its greatest triumph had it been able to persuade its black victims that segregation was not only acceptable but desirable in itself, and that the justification for this separatism was color alone.’

Segregation by race then and today is not acceptable; and it is not desirable.

Higher education leaders should express the strongest opposition and outrage over this latest fad and manifestation of racism—that of stereotyping, steering, and segregating students by their “race” and/or skin color into separate courses and classrooms.

If these reports that I have described to you have any ring of truth to them, we urge you to rethink and remove all racial restrictions and qualifications for course-taking at Moraine Valley Community College, forthwith.

The College President, Sylvia Jenkins, immediately recanted, indicating that the "decision has been made to remove all racial restrictions and qualifications for course-taking at Moraine Valley Community College."  If winning were only that easy in other instances.

 

 

Second Circuit Restores Class Certification Claim For Former Students Of Failed Vocational School Chain

The Second Circuit recently reversed the dismissal of a class action lawsuit by former students of a chain of cosmetology schools, even though the Department of Education (DOE) had discharged the student loans of the named plaintiffs, because the issue was likely to reoccur with other plaintiffs in the class. The Second Circuit held in Salazar v. King, Sec. of Education, No. 15-832 (2nd Cir. May 12, 2016), that the suit was not moot under an exception for “inherently transitory” class action claims that related back to the complaint's filing. Plaintiffs had alleged in the suit that the beauty school chain, Wilfred American Educational Corporation, fraudulently certified students' eligibility for federal student loans by telling the government that students without a GED or high school diploma had an “ability to benefit” from the program, which the Education Department required to certify eligibility for federal student loans. Wilfred did this by certifying that its students had passed an approved ATB test when they had not. Wilfred, which got nearly 90% of its revenue from student loan payments, eventually closed, leaving many of its attendees without the ability to complete their training. The U.S. government nevertheless required Wilfred students to repay their federal student loans for some years afterwards, some through tax refund seizures and wage garnishments. The Wilfred plaintiffs were never told that their student loans could be discharged by the Education Department if the school falsely certified their eligibility. The Second Circuit reversed the district court's finding that the DOE's actions were unreviewable under the agency discretion doctrine. The opinion is available here.

Bankrupting Higher Education

Matthew Bruckner has posted his new paper, Bankrupting Higher Education, to ssrn.  He offers this abstract:

Many colleges and universities are in financial distress but lack an essential tool for responding to financial distress used by for-profit businesses: bankruptcy reorganization. This Article makes two primary contributions to the nascent literature on college bankruptcies by, first, unpacking the differences among the three primary governance structures of institutions of higher education, and, second, by considering the implications of those differences for determining whether and under what circumstances institutions of higher education should be allowed to reorganize in bankruptcy. This Article concludes that bankruptcy reorganization is the most necessary for for-profit colleges and least necessary for public colleges, but ultimately concludes that all colleges be allowed to reorganize in chapter 11.

Georgia Rejects In-state Tuition for Deferred Action Immigrants

The Georgia Supreme Court in Olvera v. Univ. Sys. of Georgia's Bd. of Regents, No. S15G1130, 2016 WL 369382, at *2 (Ga. Feb. 1, 2016), rejected a challenge to the state university system policy of denying in-state tuition to immigrant students who are lawfully in the country pursuant to President Obama's "Deferred Action for Childhood Arrivals program" (DACA).  The students "filed a declaratory judgment action against the University System of Georgia's Board of Regents and its members in their official capacities (collectively, the Board) seeking a declaration that they are entitled to in-state tuition at schools in the University System of Georgia." The trial court,  however, dismissed the challenge, holding that the Board was entitled to sovereign immunity in the case.  The Court of Appeals affirmed, as did the Georgia Supreme Court.  In other words, the court did not rule on the merits of the case, but rather rejected plaintiffs' ability to challenge the policy--at least a challenge directed at the Board of Regents.  In its final paragraph, the court wrote:

 

[o]ur decision today does not mean that citizens aggrieved by the unlawful conduct of public officers are without recourse. It means only that they must seek relief against such officers in their individual capacities. In some cases, qualified official immunity may limit the availability of such relief, but sovereign immunity generally will pose no bar.

 

Nonetheless, the decision was a major setback for plaintiffs who sought not just to challenge the actions of particular state officers, but the policy itself.  As to the policy, the dourt offered this summary of the arguments:

 

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Scholarship: Engle on Mandatory Reporting of Campus Sexual Assault and Domestic Violence

Prof. Jill C. Engle (Penn State) has posted Mandatory Reporting of Campus Sexual Assault and Domestic Violence: Moving to a Victim-Centric Protocol that Comports with Federal Law on ssrn. Thanks to CrimProf Blog for the tip. Excerpted from the introduction:

Interest in getting campus reactions to [sexual assault] "right" is at an elevated level nationwide in the wake of certain high profile allegations of sexual violence at numerous colleges, including Columbia, Vanderbilt, Yale, Florida State, and the University of Virginia. This Article describes the legal and social landscape of mandatory reporting and the attendant challenges, along with the policies and practices that colleges should adopt for faculty reporting to comply with federal law while still remaining sensitive to victim needs. 

 

OCR's Dismissal of Asian Americans' Claim of Discrimination Against Harvard Is Much Ado About Nothing

Yesterday, a number of major new outlets, from the Wall Street Journal and the AP to the Bloomberg and US News & World Report, published stories on the fact that the Office for Civil Rights dismissed the complaint that Asian Americans recently filed against Harvard.  The complaint alleged that Harvard systematically discriminates against them in the admissions process.  The substance of the complaint and the prestige of the university against which it was filed are both significant.  See my prior post on the complaint.  That OCR dismissed the complaint, however, is not.  

After filing the complaint, the plaintiffs had also filed a lawsuit in federal court.  The federal court's jurisdiction exceeds and can preempt that of OCR's.  Thus, even if OCR had left the complaint open, the final word would have belonged to the federal court.  That OCR, which has a rapidly growing case load, would choose to avoid devoting resources to this complex case makes perfect sense.  This not a substantive judgement on the merits of the complaint, as some headlines would leave readers to believe, but just good stewardship of federal dollars.  Moreover, if there are issues the federal court does not address, the plaintiffs will be free to revive their complaint with OCR.

What Happened to the "Public" University?

Yesterday's Los Angles Times offered a pretty bleak picture of the state of public higher education. The overall trend is a sharp increase in tuition since 2008 and a decrease in public funding for universities.  In nine states, tuition has increased by more than 50%.  The increase in Arizona is a whopping 83.6%.  Only ten states managed to keep tuition growth below 15%, which would have amounted to an arguably reasonable set of annual increases (just over 2% a year during a time of non-existent inflation).  The California Budget Project goes back further in time a traces the spending on prisons versus universities, finding that in 1980-81 California corrections accounted for 2.9% of the state budget and the state's university systems 9.6%. By 2014-2015, the proportions were reversed -- corrections were 9% of the state budget and the universities down to 5.1%. 

The LA Times article does a good job of explaining the politics that is producing this result. But regardless of why it is happening, this declining state support and sharp increase in the cost of attendance also begs the question of how many of our state universities can be fairly characterized as "public" and how long they will continue to be?

Aaron Taylor's Response to "Why I Defaulted on My Loans"

This weekend the New York published an opinion piece by Lee Siegel in which he says he was confronted with the choice of  "giv[ing] up what had become my vocation (in my case, being a writer) and [taking] a job that I didn't want in order to repay the huge debt I had accumulated in college and graduate school.  Or I could take what I had been led to believe was both the morally and legally reprehensible step of defaulting on my loans, which was the only way I could survive without wasting my life in a job that had nothing to do with my particular usefulness to society."  He "chose life" and defaulted on his loans.  He, of course, then goes on to further support his choice.

Aaron Taylor offers this response:

I recently authored a post lamenting the effects of misinformation on the decision making and outlook of student loan debtors.  My premise was that most of the commentary on student loans betokens a fundamental misunderstanding of the student loan system, particularly, the scope and extent of income-based repayment options.  This misinformation is especially dangerous because much of it is peddled by individuals who position themselves as experts and publications that are viewed as trustworthy.

 

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