It's Not Just The Students Who Are Broke: LSU Draws Up Bankruptcy Plan

Tyler Durden's picture

We’ve spent quite a bit of time documenting the student loan bubble which has now ballooned to $1.3 trillion and has recently led The White House to reexamine how student debt is handled in bankruptcy. Further, we’ve taken an in-depth look at delinquency rates in an effor to determine just how dire the situation has become. As it turns out, nearly one in three students in repayment is 30 days or more past due and recent data out of the St. Louis Fed indicates that far more delinquent borrowers are becoming “seriously” delinquent (i.e. never going to pay) now than in the past. Meanwhile, Moody’s recently warned on some $3 billion in student loan-backed ABS noting that increased use of IBR combined with deferment and forbearance make it increasingly likely that some paper will not be fully paid down at maturity. 

Now, it appears that it’s not just students that are in dire financial straits, but schools as well because as Bloomberg reports, Louisiana State University is now drawing up bankruptcy plans in the wake of funding cuts from the state:

Louisiana State University will draw up a financial exigency plan, equivalent to college bankruptcy, as budget cuts proposed by Governor Bobby Jindal threaten to cripple the higher-education system.


Exigency, declared when schools face insolvency, would allow the state’s flagship institution to restructure and fire tenured faculty.


“We know the worst-case scenario, we know the timeframe, and we know what’s at stake,” President F. King Alexander said in a statement. He said he wants legislators to “mitigate the devastation these budget cuts promise.”


State cuts to higher education have sent tuition soaring across the U.S., adding to the more than $1.2 trillion in student-loan debt. While public subsidies covered almost three-quarters of operating costs in the 1980s, the share is now closer to half and falling every year, according to the State Higher Education Executive Officers Association.


Louisiana faces a $1.6 billion budget shortfall in the coming fiscal year, a result of both plunging oil-tax revenue and the state’s failure to enact adequate tax increases or spending cuts after the economic downturn in 2009…


The latest plans would mean an 82 percent cut to the state’s public colleges and universities. Per-student funding would plummet from $3,500 to $660, according to the New Orleans Times-Picayune, causing concern at Baton Rouge-based LSU. The school may be running out of time to find a solution, as the state’s legislative session ends June 11.

According to Alexander, those last figures are indeed as bad as they sound. “States around the country spend more than that on their community colleges,” he told the New Orleans Times-Picayun. The President went on to note that if the university opts for financial exigency it will “never get any more faculty.”

The school recently cut its planned new hire count by more than 50% from 125 to just 60 and says that in the event the worst case budget cut scenario plays out, it will have to cut 2,500 courses, an eventuality which the school says is simply not tenable. 

Of course what all of this means is that tuition will rise, burying students under still more loans, a third of which will be delinquent once they go into repayment. Here’s NBC:

But without a rescue from lawmakers, Alexander said programs could be dropped or entire departments shuttered under a worst-case scenario. "Specifically, we don't know which programs or departments we're talking about [but] it would require us to utilize every tool possible," he said.


Even if the worst-case scenario doesn't come to pass, it's possible students could find themselves paying more, through increases in tuition and fees or decreases in the state's TOPS scholarship program. Lawmakers have historically been reluctant to raise tuition -- currently $8,758 for tuition and fees for in-state students at LSU -- but there is discussion about giving schools themselves more freedom to do so…


"We've gone from being very state funded-intensive to being tuition-dependent, and we've got 40 percent of our students that are Pell [grant] eligible," said Sandra Woodley, president of the University of Louisiana system, which consists of nine universities throughout the state. Since 2009, tuition and fees have climbed by 61 percent while state funding has dropped by 55 percent, a drop of $90 million.


"We've already shifted to mostly being funded by tuition revenue in a state that has a relatively low income population," Woodley said. Further cuts would just hurt the most vulnerable.

Meanwhile, Moody's has cut its outlook on the university from stable to positive (apparently being bankrupt counts as "stable") citing "limited prospects for sustained revenue growth due to potential reductions in state operating funding, tight state control of tuition pricing, and pricing sensitivity limiting out-of-state enrollment revenue growth." LSU then pulled a $114 million bond offering which would have financed the construction of a new residential hall, family housing and a student health center.

*  *  *

So in the end, the decline in oil and gas prices which has been partially driven by QE-fueled deflation has helped to blow a hole in the state's budget (taxes on oil extraction account for some 15% of Louisiana's revenue), which is in turn set to trigger budget cuts that will cripple LSU, possibly causing the university to raise tuition which will encourage students to accumulate still more federally-backed debt. Yet another virtuous circle.

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MrButtoMcFarty's picture

Louisiana....who gives a fuck really....

localsavage's picture

The school that I went to has doubled in size in the last 20 years.  They have to build the most expensive artsy buildings and are now in huge debt (as in hundreds of millions).  Their only answer is to beg the alums for cash and raise tuition....both are just dead ends

NoDebt's picture

"The President went on to note that if the university opts for financial exigency it will “never get any more faculty.”"

They say that like it's a bad thing.

ZerOhead's picture

Their Economics Department, Finance Department, Political Science Department and Climate Science Department are already morally bankrupt so it only seems fitting that they should be financially bankrupt as well.

P.S. Let the faculty take a nice Big fat Greek salary haircut.

AlaricBalth's picture

" will have to cut 2,500 courses, an eventuality which the school says is simply not tenable. "

The Science of Harry Potter, UCLA - needs to be gone
The Phallus, Occidental College (Obama's school) - needs to be gone

The list of ridiculous college courses is beyond reason.

Michael Snyder (of course) even had a list.

Any course which develops critical thinking skills would be an essential requisite. Too bad budget cuts eliminated these types of courses decades ago.

johngaltfla's picture

But, but, but, but, but, but, but, but, Keynes said...

boogerbently's picture

Ha, Ha,

How else can they attract the best and the brightest ?

I wonder what they pay their football coach.

onewayticket2's picture

well, Northwestern is voting to go Union....players would no longer be "students" but "employees" of the university....and would siphon all the football cash away from the university to their checking accounts.


....wonder what that missing ($15MM?  $25MM?  50MM?  each year) revenue stream will do to tuition for non "employees".....

Anusocracy's picture

Everything government touches turns to crap.
- Ringo Starr

cnmcdee's picture

So no professor of basket weaving?.. Your breaking my heart come on!!

juangrande's picture

" College men from LSU

"Went in dumb, come out dumb too"     Randy Newman

Son of Loki's picture

Ya mean my LSU student guidance administrator might not be getting that $16 million pension?

Anusocracy's picture

Critical thinking skills have to be developed when young.

College years are way too late. By then they are thoroughly programmed by the State.

MonetaryApostate's picture

Don't rush to be smart, that's stupid, becoming smart takes A LOT OF TIME & STUDY!!!

(It has nothing to do with age sir, but rather more to do with the desire to become & much EFFORT!)

Anusocracy's picture

The brain basically develops over two decades as a controlled process.

For example, if the window to learn a language is missed, you are then at a disadvantage with using language.

Antifaschistische's picture

how could you have POSSIBLY left off the ATHLETIC Department!  :)   I'd love to ask, how much does that Athletic Department run you every year, but LSU is like every other University in pursuit of Football domination.   The true cost is burried in so many insidious places it would be impossible for an Accounting Department to even begin to calculate.

Same of course is true in High Schools, but the dollars are just smaller.

PS.  Isn't the highest paid government employee in the state of Louisiana the Football Coach at LSU?   Thought so.

kaiserhoff's picture

Typical hype and arm waving from ZH.  State funding is one of many revenue sources, like tuition, student housing, the endowment fund, etc, and these massive institutions typically pay NO LOCAL REAL ESTATE TAXES.  Think about that.

Here's an idea.  Close all the "traditionally black" institutions in the state, whose mission is obsolete, and only put out bogus degrees for affirmative action flunkies, and fire 90% of the "administration".

See how easy peasy that was???

ZerOhead's picture

Without propaganda mills the quality of eduction might actually rise...

greyghost's picture

least we forget the state also has a red state governor. well what the fuck has he been doing these past years? taking care of budgets? sorry, sometimes you just gotta ask

p.s. 6 down votes? someone still believes in the red or blue state crap? there is no difference morons....none. the only difference is the "COLOR". corporate welfare is set in stone/with both parties.....wake the fuck up

ebworthen's picture

LOL - yup.

This is happening in every State; less funding from the State government, which means the increases are passed on in the form of tuition hikes, which means the bill is passed to Parents, Grandparents, and/or Student Loans via the Federal government.

States are doing this with employment as well, changing full-time positions for every mid to lower level rank into 29 hours per week jobs, meaning no benefits; no pension or defined contribution plan for the State, and the bill for healthcare subsidies is passed to the employee and the Federal subsidies (which go to enrich the health insurance companies and Corporatcare system).

Son of Loki's picture

Private corps are digging up some old ways of cutting pensions; simply merge with another company and then amend the pension plan to give fewer benefits.


There's many reasons for lots of M&As these days [besides hiding any fraud and scambling the books]. .

Condition 1SQ's picture

The same goes for elementary, junior high, and high schools.  The buildings being erected are not there for the students.  Rather, they are monuments of self-worship for the staff, faculty, architect and politicians.  Not to mention the building contractors making a mint on the backs of the taxpayers.  Of course, these contractors are paying Davis-Bacon union scales, so the trade unions are benefitting from this boondoggle as well.  It is a crooked cabal of scumbags exploiting the taxpayer in the name of the "next generation".

As a kid, I was dragged across the country as my family looked for work.  As a result, I attended schools from one corner of the country to the other.  You know what?  I didn't give two shits what the school looked like.  The best education I got was at a private Christian school that taught out of used doublewide trailers.  But hey, when it isn't your money, that brand new school with the gold-plated toilets looks mighty appealing.

post turtle saver's picture

I'd wager about 90% of the money that goes into US primary and secondary education is a fucking waste... I've seen my fair share of "it's for the children" bond issues get passed over and over again, resulting in some Taj Majal school district project that had *fuck all* to do with improving education... it sure as hell increased our property taxes, though... never understood how so many people around my neck of the woods who consider themselves "educated" can't make that connection... they think bond issues are free money... morons

Condition 1SQ's picture

Speak of the devil, we just got hit with a $60 mil school bond issue.  The property taxes on my business quadrupled, and I'm not even in city limits.  I live in a very conservative area, but even they can't resist dipping into my pockets.  Scumbags.

pigs-n-space's picture

Thank God for other people's money. .......


WTF ,the  madness  never ends. 

MonetaryApostate's picture

The Debt Bubbles are gonna bust soon & it won't be a honey moon for any nation, period.


Trust me on this one, you have no idea how mad this world is about to get...

rubiconsolutions's picture

" will have to cut 2,500 courses.."


Hopefully that will include underwater basket weaving and all those courses that (cough) student 'athletes' take on the taxpayers dime.

snodgrass's picture

They'll probably fire all the straight white males teaching math, science etc. and keep all those teaching women studies, black studies, queer studies, etc. You know, the really important subjects. Otherwise, it would be racccccist.

kchrisc's picture

"Louisiana....who gives a fuck really...."

Americans and the American country.
The same people that cared about the Bundy's and the surrounding community around the Bundy Ranch?

Liberty is a demand. Tyranny is submission.


"We stand together against tyranny, or we huddle together in the labor camps."

Anusocracy's picture

Sorry to disagree, but only a moron would stand against 100:1 or 1000:1 odds.

The solution is there, and a number of ZHers understand it: leave, leave the rotting corpse that was America.

The behavioral adaptation that is freedom is present in probably less than 1% of the US population. It is a nuisance, an encumbrance, or the outright enemy to the other 99+% and the chances of their changing those beliefs is practically nil. That is until they die, or by them getting rid of the freedom culture entirely.

My position is "outlive the bastards", not get slaughtered by them so they can remove the freedom adaptation from the gene pool and be secure with their lives that originated in the animal world.

kchrisc's picture

This is my country, not theirs.

Liberty is a demand. Tyranny is submission.

Steel Magnolia's picture

Thank you kchrisc. I was born & raised in Louisiana. It really is a great state. The people are the most friendly, giving & fun on the entire planet. We are absolutely family oriented & our friends are just as important. We stick together & are very conservative. We all work for what we have & we don't take kindly to being robbed. It truly is a sportsman's paradise. We are armed to the teeth & not afraid to prove that we stand for liberty!

Louisiana is not the problem & we will stand proud with the rest of the country to defend America who is under attack.

MrButtoMcFarty's picture

And then there is New Orleans....


kchrisc's picture

"We are armed to the teeth & not afraid to prove that we stand for liberty"

I stand with you in the defense and Restoration of the American country, of ourselves, and our human dignity.

An American citizen, not US subject.

Liberty is a demand. Tyranny is submission.



The most powerful weapon the American people have is Rejection.

The system of fraud and theft that has been built up upon the backs of the American people is dependent upon our backs. Withdraw our backs, and the whole scheme collapses. This is our greatest weapon.

Quit Paying--Put it into food, and precious metals, etc. They stole whatever "debt money" they loaned you in the first place (fractional reserve banking) and soon you won't be able to pay them anyways.

Quit Obeying--If they are in violation of the Constitution then they are not legitimate anyways.

Quit Playing--Quit being a tool for them to use.

The Four Rs
Rejection: Stop Paying, Stop Obeying, Stop Playing
Revolution: It is inevitable, so prepare, as they are.
Retribution: The guilty must answer for their crimes against the American people and the Constitution.
Restoration: Restore the American people, country and Constitutional republic.

All_Your_Base's picture

kchrisc - you have been on a roll for a while; keep it up.

MrButtoMcFarty's picture

Do you even know who the fuck you are defending??

thetruthhurts's picture

Just the beginning of the tsunami to come...

ZombieHuntclub's picture

Does this mean Les Miles won't get paid? 

Buckaroo Banzai's picture

I assure you, the LSU football program is at the bottom of the cutbacks list.

kaiserhoff's picture

I'm sure the football program will not be touched.

Every government agency should see these cuts, sooner not later.

Welcome to our world, kleptocrats.

NoDebt's picture

Damned right,  And no, the football program probably won't be touched because it's a huge money maker for the university.

daveO's picture

They need to cut out the useless crap degrees, psychology and arts. Here's an article written by a woman about how many useless degrees are being created(this all started back in the 70's with the ERA push). If a man had written this article, he'd probably be working at Starbuck's, too.

Real Estate Geek's picture

Regardless of the degree, if she learned how to suck dick in college she will always be employable.

Antifaschistische's picture

hate to say this, since you're comment was so well received.   However, it is my personal belief that big time college football programs are not nearly the "money maker" we think they are.   The schools are incentivized to represent these programs as giant money makers...why? 

Here's my challenge...any program that claims to be a money maker should be willing to be set up, in the schools accounting systems as a separate entity.  all stadium costs, electricity costs, facilities cost, travel costs, employee costs, scholarship costs, security costs...and a HUGE percentage of overhead allocation should be charged against that entity.  If it really makes money then they should welcome this.  But this won't happen.

PS...I'm almost always pulling for LSU because I usually hate their opponents.

Condition 1SQ's picture

Maybe.  My alma mater makes the same claim, but I wonder if it's true once you strip away all the subsidies.

sunny's picture

Ask any financial officer at any State university how much the state actually contributes to the running of the school.  Many states contribute less than 5% of the operating budgets.  Are they State Universities or State Located Universities?

In any case, the last programs cut will the athletics.

PresidentCamacho's picture

Your right, you don't touch your football program because without it  you would have to cut even more from your budget. Because everyone knows they get slave players without having to spend a dime and then rake in millions off their backs.


GeezerGeek's picture

College sports programs may thrive financially by using what you call slave players, but I wonder how many of those slave players would be accepted into a college were it not for their sports abilities. Based on interviews I've watched, many of them sound like they haven't earned a high school diploma, much less learned anything at a college level. College sports is big business and it opens many doors to jocks that would otherwise remain closed. Is there a better way? How about corporate backing of each college sports team? Rather than the Florida Gators we could have the GM Gators of the University of Florida. Or the Pepsi Cola Seminoles of Florida State, or the Weather Channel Hurricanes of Miami. And if single sponsors aren't enough, they can go NASCAR and wear numerous sponsor tags on their uniforms. (As an aside, Congress should be forced to wear sponsor tags from their top donors; that would be revealing.)

Back to your 'slaves': just who, exactly, is forcing them into such 'slavery'?

chunga's picture

It's just a bluff.