It gets worse...much worse

I applaud this piece wholeheartedley.

However, what is left out is the enthusiasm with which the industry defaults loans, attaches massive penalties, fees, and collection costs onto the debt, ruthlessly pursues misfortunate borrowers to pay the hugely increased amounts, and most of all, the multitude of basic, standard consumer protections that Congress legislated away that made this all possible.

Most importantly, this piece leaves out the broad and deep swath of economic destruction that the student loan industry has left in its path over the past decade. Destruction that has made the choice of going to college the worst decision millions of citizens have ever made.

Bankruptcy protections were taken away for all student loans, both public and private, between 1998-2005. So to were statutes of limitations, truth in lending requirements, refinancing rights, and even fair debt collection practices in some instances. Simultaeneously, Congress legislated into existence collection powers that “would make a mobster envious” (quote from Elizabeth Warren). Powers that include wage, tax, Social Security, and even disability income garnishment....and all without a court order.

The result: Sallie Mae saw its “fee income” increase by a whopping 228% between 2000-2005 (its managed loan portfolio increased by a mere 87% during the same time period).

“Non profit” guarantors saw their revenues escalate massively. This was reflected, I might add, in their executives compensation in most cases. I seem to recall a Mr. James Lintzenich, head of the USA Group, whose compensation increased from $883,000 in 1999 to $3.5 million in 2000, to give only one example of hundreds across the industry.

Collection companies (often owned by the original lenders)had a job as easy as shooting fish in a barrel. Indeed, one notable collection company in Indiana even installed a 4000 gallon shark tank in their corporate headquarters.

A feeding frenzy to be sure, with the students serving as live bait.

So where did all this free money come from? It came from people like Capt. Rob, a veteran whose $35,000 in student loans escalated to $155,000 with penalties, fees, and accrued interest. Capt. Rob can no longer get a security clearance until he pays this astronomical sum.

It comes from people like David, a chiropractor in Texas whose $70,000 in loans ballooned to over $400,000. David is now driving trucks in Amarillo, Texas, since the state suspended his license due to his defaulted student loans.

I could go on here and- literally- give thousands of examples. The Department of Education could supplement these with millions of their own, except that its not in their best interest to do so. Heck, most of the people running the Departments Federal Student Aid program are former student loan executives themselves.

Senior citizens losing their social security income based on similar escalations of their student loan debt, citizens in their 30’s giving up and leaving the country. Others losing all hope, and taking their own lives. These are the stories that I have to read day after day after day.

Sound dramatic? Exaggerated? Too ridiculous to be true? I agree. It sounds like a horrible nightmare that exists only in the imagination. Unfortunately, it is true, and easily demonstrable. Despite the concerted efforts by the lending industry, the Department of Education, and even the universities to push this issue under the rug, the truth has a way of leaking out.

Alan Collinge, Founder at Studentloanjustice.org, at 4:55 am EDT on July 14, 2008

Financial Aid

It definitely addresses the issues regarding the economics of education. It seems that the funding of education has taken a turn towards online and provides students with viable options for the working segment of the population and anyone may receive a “college degree” online. So, what happens to the degree of people that had to mortgage their future to live in “college towns". My loans were manageable at one time but with these loan people the cost of managing my loan has quadrupled and I may never see my life being manageable due to these financial institutions preying on students. The argument could be made about being responsible and people did not have to accept the terms but I was a single parent and felt the viable means to raising a family was to attend college and there was not other choices other than to work at a minimum wage job and a person could make more money as a student. However, I did not plan to be charged for finishing my degree programs.

Jack, Asst. Prof, at 8:05 am EDT on July 14, 2008

“Here is my math as director of a journalism school: My graduates with $30,000 or more debt earn degrees in an industry that pays $21,000-$25,000 in starting salaries.”

$21K-$25K?!? Good grief. Where are most of your students landing jobs? That seems awfully low.

Ol’ Mizzou, at 8:10 am EDT on July 14, 2008

School Loans = Indentured Servitude

This is the story of how I am being coerced into an INDENTURED SERVITUDE and how the US Government has sanctioned one industry to prey on us and our children in re-instituting a legal form of INDENTURED SERVITUDE in 21st century AMERICA.

In 1988, I was formally classified as disabled by the US Department of Social Security Disability after working for 19 years as a metal worker. I could no longer continue to perform my job in the New Orleans area due to a disabling knee injury from childhood (acquired a bone eating disease) that grew progressively worse with age. At the age of 38, I was directed to unemployment disability, section 8 housing, Vocational Rehabilitation assistance, and food stamps in joining the rolls of disabled Americans.

I did not want to be on welfare and had great ambitions to pursue the American Dream. I decided I had nothing to loose by seeking an education to remove myself off of disability and into a viable tax paying vocation. I had a wife and twin 6 year old children to support. So, I began investigating schools in my area.

Initially, I attempted to enroll in Tulane University because it was the only university in my area that offered the Chemical Engineering curriculum which interested me. However, Tulane informed me that I could not attend their school because I did not have a “track record” (GPA, ACT score, etc), since I had been out of high school for 19 years. They informed me that I would have to go to another school to establish a track record.

So, I enrolled at Delgado Community College in New Orleans. I attended for three years and graduated Magna Cum Laude with two degrees, Electronics Servicing and General Science. I took every Math, Chemistry, and Physics class the college offered for the General Science degree. The problem was that I could not find a job in either degree after three years of student loans.

Then, the Dean of Tulane University engineering school sent me an invitation to meet with him. Subsequently, the Dean offered me a 4 year “need Based” scholarship to the Tulane engineering school valued at nearly $100,000 in tuition. I explained that I had two children to support, but he insisted that the only condition for this scholarship is that I must attend full time. So I accepted, knowing that I would be forced to make more school loans for books and to feed my family. At least there seemed to be a chance that we may educate our way out of poverty.

For the next four years, 1991-1995, I attended Tulane Engineering School on scholarship, while I received Sallie Mae school loans to help support my family. We also received food stamps and lived in section 8 housing. You know, like the projects where the government subsidizes part of the rent. In 1995, I graduated with a 3.0 GPA earning a BS in Chemical Engineering.

I consolidated my school loans and the total came to $40,000 at 9% interest. In March of 1996 I acquired a job with International Paper Company located in Camden , Arkansas. I began repaying my school loan to Sallie Mae at about $363 monthly. I thought I had successfully achieved my goal of educating myself off of unemployment disability.

**Please note that I attended both Delgado College and Tulane University with foreign students. Many of these foreign students were from countries like Pakistan , India , Lebanon , Taiwan etc. Many of these students were receiving the Federal Pell Grant and free tuition and non repayable grants to attend American universities. These foreign students did not have student loans to repay for their education and many of them don’t contribute anything to the American tax base after graduation if they decide not to work in this country. The American taxpayer pays their tab in full. They essentially take home a great education and an elevated status in their home work force for free.

I worked for International Paper (IP) for three years. After a year of payments to Sallie Mae, I received a statement from Sallie Mae detailing the amount of my monthly payments and amounts applied each to principal and interest. I noticed that the numbers did not make sense. On several months, no amount was applied to principal at all. On several occasions, I telephoned Sallie Mae and inquired about this discovery. No one was able to explain where the money was going or why nothing was applied to principal on some months. On a few of the telephone inquiries, a Sallie Mae supervisor was put on the phone with me and each time I spoke with a supervisor, they could not explain the P&I distributions at that time, but claimed they would find out and get back to me with the explanation. Each time, they never got back to me with anything. (I still have the P&I statement and I managed to obtain the Sallie Mae telephone records indicating the dates we spoke.) I took the detailed Sallie Mae statement to a CPA and asked if they could explain the method of amortization and distribution to interest and principal. The CPA also could not explain the method of P&I distribution. Frustrated at the lack of response from Sallie Mae, I called and demanded an explanation and notified the SM representative that I would, “discontinue further payments until someone explained to me the distributions and why my principal was not going down". No one responded to my simple inquiry, so, I discontinued making payments in an effort to force a response.

In the meantime, in 1998 I researched an orthopedic surgeon and located one of the best at the Mayo Clinic in Minnesota who had acquired the technology to possibly allow me an opportunity to walk normally. I decided to chance the risk of amputation for the opportunity to walk almost normally, without pain. The good doctor successfully performed an unusual knee replacement through the grace of GOD, while I was employed with International Paper Company and miraculously, I was no longer disabled.

In 1999, International Paper Company at Camden , Arkansas was doing poorly financially, and the plant manager explained to me the company would probably shut the plant down or sell it. Camden , Arkansas is a small town of 10,000 people with this IP plant as the primary industry and main support of the town. I began looking for another job immediately. I also put my home in Camden on the market for sale immediately.

That year, I began new employment with Boise Cascade located in DeRidder, Louisiana. I continued to market my home in Camden for sale. Shortly after we moved to DeRidder, Louisiana, International Paper Co shut down the plant in Camden , Arkansas and dismantled it. Hundreds of homes flooded the market for sale with no industry to support potential buyers. I continued paying those house notes in Camden until January, 2001. I also continued trying to sell it to no avail. Sallie Mae continued to “hound” me for monthly payments without explanation of the amortization. I mistakenly informed Sallie Mae that I was being forced into bankruptcy. Sallie Mae immediately classified my loans as “default status” and turned it over to one of their collection agencies. The collection agency immediately contacted me with the “default status” and an added 18% of my principal balance as a default fee. A month later (March, 2001), I was forced into bankruptcy, Chapter 7 to relieve the debts from the home back in Camden , Sallie Mae school loans, and the credit cards. However, though I claimed bankruptcy, Sallie Mae school loans are not forgiven and are exempt from federal bankruptcy laws. How can that be legal? That legislation obviously enriched Sallie Mae stock of which I’m sure many of our legislators own shares.

I also went bankrupt against the collection agency which I discovered Sallie Mae also owns. Sallie Mae simply switched the loan and fees to another one of their collection agencies which was not named in my bankruptcy and after the bankruptcy was complete, continued their collection efforts in spite of the Federal Bankruptcy Court. I thought that by going bankrupt against the collection agency, I could eliminate the collection agency’s 18% default fees. I thought that only Sallie Mae was exempt from federal bankruptcy claims, not collection agencies. I knew that Sallie Mae was guaranteed by the Fed not to lose money on a school loan. I did not initially realize that Sallie Mae owned the collection agency companies, also.

Though I turned over many stones in search of an attorney, none would touch a case against Sallie Mae.

In July of 2001, I took another job. I began employment at a plastics manufacturer located in Bay St Louis, Mississippi. Now my credit was destroyed, we lost our home in Camden through the bankruptcy, and Sallie Mae was destroying any further rebuilding of credit through the credit bureaus and continues to do so today. After the bankruptcy, I contacted the Sallie Mae ombudsman and tried to work out our differences. I was allowed to pay the minimum of $200 per month for one year to take my Sallie Mae loans out of default status. Looking back, I realize why Sallie Mae didn’t respond to my inquiries about the P&I amortization. Sallie Mae encouraged me to default on my school loan and was obviously legally rewarded handsomely for it. Sallie Mae added the 18% collection fee costs plus interest and compounded it all daily and suddenly I owe more than $92,000 and climbing.

Meanwhile, my twins are 26 years old, grown and married and moved away and my wife and I still do not have a home to live in.

Further devisive tactics....to the credit bureaus, Sallie Mae is claiming my loan prior to the bankruptcy as a separate loan against which I claimed bankruptcy (even though Sallie Mae and the credit bureaus know you can’t win bankruptcy against a school loan). Sallie Mae has actually stated on the credit reports that this loan was “included” in the bankruptcy. (If Sallie Mae has considered the loan “included in the bankruptcy", then I should be relieved from the debt.) Additionally, Sallie Mae has claimed this same loan as a separate additional loan which is “current” and in deferment, also on the same credit report with an outstanding balance of $92,000 and an original loan amount of $40,000. Combined, these two separate claims on the same credit report display over six figures of indebtedness to potential creditors. Although I contacted Sallie Mae and the Credit bureaus about this “double dipping", the Credit bureaus claim they are reporting it as Sallie Mae dictates and Sallie Mae refuses to change their claims. My only recourse was to add my personal statement to the credit report, which the credit bureau omitted anyway.

Consequently, almost anything I must buy like insurance, etc. costs more. Sallie Mae keeps tightening the noose in an attempt to force me into a modern form of INDENTURED SERVITUDE. I cannot get loan approval to purchase a home regardless. Therefore my primary objective, to get off of welfare, pursue the American Dream of owning a home, and pay my debts and taxes as a viable contributing citizen had become moot.

As a matter of principal, I called Sallie Mae and asked them whether or not they thought that I would spend the remainder of my life (I’m 58 years old now) working just to pay their loan (higher costs than loan sharks) without the chance of the American Dream to own a home? I requested a written reply to the question, “would Sallie Mae garnish my social security?” They wrote back stating that they would NOT garnish my Social Security. I have the letter in writing. What they cleverly omitted is that they have others in their system (a system of collection agencies) that would garnish my Social Security for Sallie Mae, they would not do it themselves. They are currently garnishing others Social Security. How obscene ...and our legislators have allowed this to be legal!

The US Government should reward me for getting off of welfare, as a former taxburden to the American public and for becoming a tax contributor as a Chemical Engineer. At the very least, all interest and fees should be negated due to the divisive tactics utilized to accumulate them and my loan should revert back to the original principal amount minus payments received. I refuse to follow Sallie Mae’s immoral program into INDENTURED SERVITUDE for my remaining working years and beyond, even if it is LEGAL. Someone has to understand how unjust the school loan industry has become and how our legislators have provided these loan sharking operations such as Sallie Mae more power than the IRS. Before greed took over, this industry may have been a viable system for lower income people to attain an education, a home, and a life. Somewhere along the line it was twisted into an abusive money making machine by lobbying and attaining unlimited power such that no other institution has seen in America’s history. The school loan industry today does not negotiate and answers to no other agency. Even the daily job of running Sallie Mae was shipped to India. Whenever I have contacted Sallie Mae for the past several years, the people that service my loans can’t even speak good English because they are not Americans. On several occassions, I had to request somone to translate my questions.

Further, on August 29, 2005, Hurricane Katrina hit Pass Christian, Mississippi directly...destroyed the house I was renting and destroyed all of our furnishings and possessions. We just happened to be in the wrong place at the wrong time.....AGAIN.

It has come to my understanding and in lieu of my experience that school loans have destroyed more homes than Hurricane Katrina and the toll continues to climb. The true statistics are being suppressed. I did not suffer through 7 years of tough education just to work for Sallie Mae.....I climbed the educational mountain to attain the American Dream. I would prefer to be homeless and a FREE AMERICAN rather than an “INDENTURED SERVANT” to Sallie Mae.

Now our legislators must realize the monster they have supported preys on our childrens’ lives, also. For many, the American Dream has become the future American Nightmare. I am currently forced to pay Sallie Mae $782 per month out of my monthly income for the next 24 years beyond the rest of my working career. Currently, this leaves only a remainder to survive on until I retire. Do you know what I see in my future for retirement? My dwindling social security check will also be garnished as the Sallie Mae monster continues to eat fat while I eat from a garbage can.

This is a form of INDENTURED SERVITUDE, except I cannot earn enough to pay the cost of my passage to a FREE America in six years as was done in traditional Indentured Servitudes.

Murphy Allo, at 8:30 am EDT on July 14, 2008

Student Loans-The Modern Day Scarlett Letter

Student Loans are not true players in the financial/credit free market economy. They have no risk and this is anti-capitalism. Student Loan companies should carry the risks of default, just like banks in the mortgage mess. But due to their lobbying power they have basically created a no-lose situation for themselves, while creating an indentured servitude in student loan borrowers. Instead of assisting students in achieving the American Dream by getting an education student loan lenders are creating “An Imprisoned Generation: Student Loan Lenders are Creating Indentured Servants and Handicapping Our Economic Future.”

I have been fighting to keep my student loans current and staving off default. I penned the following in my darkest depression. It is a personal account on how student loan lenders treat student borrowers and illsutrates the un-American anti-capitalistic student loan industry.

Student Loans- The Modern Day Scarlet Letter

I did what everyone says to do in order to have an opportunity at success and a “good” life, but all it has brought me is pain and misery. Get an education they say, I did that. This will enable you to succeed, they say. Not in my case. All I have to show for my “education” are layoffs, unemployment and empty promises.

Student loans are to help you achieve, I did that. But when life does not go as planned or your dreams are dashed, such assistance to attain those dreams imprisons one to poverty, despair and indentured servitude. Black balled due to bad credit relating to Student Loans one can’t find gainful employment to pay back the loans. Yet like a loan shark or racketeer the “loans” keep growing exponentially while at the same time preventing one from getting back on the track of life, productivity and employment, i.e. living. One becomes jailed in a debtor’s prison that was supposed to not exist in the US. Harassed and threatened by student loan sharks and racketeers, who would be put in jail if they weren’t given sanctuary by the government, life’s purpose slips away, my education empty promises and dreams unfulfilled. Yes, they are a government approved criminal organization preying on those in pursuit of the illusionary American dream; while at the same time enriching the “mob bosses” at the top of the student loan pyramid and discarding the rest of us like yesterday’s newspaper.

A theology of human belief extorting one to get their “pot of gold” and be damned those destroyed on this path. The true human soul, one of: self-importance, self-service, self-righteousness and callous indifference to others. A caste system where money is all that matters whether it is achieved by immoral means and regardless of the victims’ corpses left in one’s wake.

No I am not delusional, depressed or any other medical mental mirage. We all have pain and set backs. We are taught to get up wipe the dirt off and continue the fight. But if the deck is stacked against you and the only one’s being enriched by your labor are the student loan sharks and racketeers, it isn’t worth it. They want to keep you an indentured servant or in debtor’s prison; a prison preventing you from achieving some semblance of dignity, of purpose. Why should they care? When their mistakes catch up with them they can go receive a government handout, which enables them to continue to indenture students and keep you in debtor’s prison, even as they stand on your corpse.

Well it is time for me to remove my scarlet letter. An eternal sleep is calling. A sleep that will allow me to escape this charade. No more pain, no more indentured servitude, free from the debtor’s prison. They can now eat my student loans, I am free.

Author: Rod Ferrara August 2007

Rod Ferrara, at 9:00 am EDT on July 14, 2008

“Students in Financial Crisis”

I wrote an article a few months back about the same theme: http://www.psu.edu/dus/mentor/080227rc.htm

Reed Curtis, at 9:20 am EDT on July 14, 2008

Anyone can get a student loan because no credit check is done by the lender. It’s harder to get approved for a car! In fact, the lender can change your loan at any time without your signature. It happened to me. There is NO consumer protection for borrowers who eventually wind up dealing with loan sharks. It is predatory lending to go after people who have the “dream” without the resources and sell them a bill of goods. Isn’t that what happened with the housing industry? So, how do student lenders get away with this?

Carol Jordan, at 9:50 am EDT on July 14, 2008

student choices

It is wonderful to see an article and so many comments addressing this issue.

I would also like to point out how very young students (18 is very young to understand what borrowing tens of thousands of dollars will be like when it comes time to pay it back)are told by counselors many times over that they don’t need to worry about paying for college, because financial aid is available. Everyone just needs to fill out a FAFSA. This discussion with high school juniors, seniors, and recent graduates needs to be a lot more honest and delve into what that financial aid will really look like and how many years one will potentially be paying it back. A discussion of alternatives like trade school or working part-time in the field of interest while taking classes part-time or other alternatives needs to occur.

jen, at 10:35 am EDT on July 14, 2008

a personal perspective

Financial aid for higher education is a great idea. Unfortunately, the system is predatory and seriously flawed. Loans for college are reverse-qualifying loans, made to young adults who have never had a real job, a mortgage, or a car, and who are financially disadvantaged in the first place. Why else would they be borrowing the money to go to school? In my own case, I first borrowed to finish a bachelors degree in Human Services at a private Catholic university. My first job, at the local public mental health center, paid 16,000 per year, the amount of my student loan debt. I had a one-year old daughter. I could not make the payments and eat. I thought a graduate degree was the solution. I borrowed another 23,000 to finish my Masters, only to find that, even today, jobs as a Masters level therapist pay less than 40,000 per year. So, now, I have paid about 18,000 on my loans, and I owe 106,000 at 8.5% interest. I may never pay this off, but I have not defaulted. I am switching to a teaching career to take advantage of the new ten-year public service loan forgiveness program. I will not be able to marry the man I have finally found and become engaged to if I do this, as he is not willing to marry me with this debt hanging over my head. He is too close to retirement to take that on. He has heard too many horror stories about the draconian collection practices of the the student loan lenders, the worst of which is a friend whose son committed suicide, and they will not stop calling her, trying to collect this debt. Anyway, I would happily return this degree I earned in order to have my life back. I have experienced extreme stress, hopelessness and despair as a result of this debt, incurred naively and trustingly, the student loan program operates with such a benevolent facade. I counsel others to NEVER, EVER, take out a student loan. My daughter has thankfully followed my advice. Too many others have not, and will never see a debt-free day for the rest of their lives.

Rebecca Gibson, at 10:50 am EDT on July 14, 2008

Although student loan companies hold some of the blame for this problem (due to high interest rates and fees), why have colleges themselves not been held accountable? Colleges continue to encourage students to borrow much more than they can afford, with no regard for their students’ welfare. Although colleges may not want to explicitly see their students get hurt, the harm is incidental to what they do want: maximum profit. By aggressively encouraging unaffordable loan and credit debt, colleges operate today with a strategy that I have termed “No Sucker Left Behind.”

Author, No Sucker Left Behind, at 11:10 am EDT on July 14, 2008

It’s a very frustrating situation. My parents make a good deal of money, but because of their own level of debt (and how many non-college childen we had at the time), my FAFSA didn’t lead me to much aid.

At my school, if you mention you need help to pay for school the Sallie Mae application was instantly ripped out. Never is another loan company brought up and the one time I managed to go with another group (at a lower rate) they hassled me about it so strongly that I simply fell back on Sallie Mae again because the stress surrounding all of this and the rest of my life was reaching a breaking point.

To me, this alone should get these colleges in trouble, but nothing seems to come of it.

It’s an odd problem. You need a college degree to get any decent jobs. Yet in Chicago, it’s almost like a college degree is the new high school diploma. Even mediocre jobs require a few years of experience. So you get stuck in a situation where you wonder what you went to college for at all when your friends are making more money serving at a restaurant. It kills your self esteem.

Meanwhile you only get so much forbearance on your private loans (accumulating interesting the entire time). Private loans, at least at Sallie Mae, don’t have any sort of income sensitive payment plans. Currently Sallie Mae alone wants over 50% of my monthly income.

Hilariously, when I called recently to finally get my consolidation going again I was told they had suspended the program and that it was no longer economically beneficial for them or me. For me? Seriously? Do they think I’m that stupid?

People are worried a lot about the housing market and mortgages... Forget unemployment rates, look at how many people are simply underpaid and overworked here considering the degrees they have. When you think about the amount of people with ridiculous amounts of loans that are getting substandard jobs, a lot of them will NEVER be able to get a house. They’ll NEVER be able to sustain a mortgage.

It’s amazing to me how little people in power seem to care about this fact. We never prevent anything here, we just wait until it blows up. I don’t even know if it’s blowing up yet. It certainly seems like it could get a lot worse.

I don’t want to get out of paying what I owe. I just want to be able to put it at a decent rate and pay something that won’t require me to live in the street.

I know this isn’t as eloquent as that of my peers here, but I’m so close to giving up sometimes.

George, at 11:35 am EDT on July 14, 2008

Student Loan

Intered the student loan arena in 1980. Borrowed 7,500. Became ill in 1985-1986. Went to another school in 1987 (summer). Was charged with graduate loan at previous school spring of 1987 which I never received. After intercepting 14,000 in federal income tax I went into loan rehab in 2002 for one year and was told that loan would return to original amount of 7500 with same interest rate of 8%. After completing one year of automatic bank drafts I was sent two payment books one stating I owe 22,000 the other stating I owe 32,000. I paid a 165.00 monthly payment for one year, had 14,000 intercepted, made a montly payment of 96.00 for 3 years, payment increased to 136.00 in 2006 all bank drafts, never late or missed until this date. Anyone can do the math, it gives me high anxiety. I’m sure I will be one of those who get’s their Social Security taken. What do you do? Pay them until you die!!

Linda G., at 12:25 pm EDT on July 14, 2008

Aren’t You Tired Of All Of This Whining?

I have read all of the posts to this “gloom and doom” article, and I cannot resist quoting one of the leading economic intellectuals – some call him an economic genius – of our time; to wit ...

“We have sort of become a nation of whiners ... You just hear this constant whining, complaining about a loss of competitiveness ... America in decline ... despite a major export boom that is the primary reason that growth continues in the economy.”

“We’ve never been more dominant; we’ve never had more natural advantages than we have today ... We have benefited greatly from the globalization of the economy in the last 30 years.”

“Misery sells newspapers ... Thank God the economy is not as bad as you read in the newspaper every day.”

http://www.youtube.com/watch?v=kbPLrqydnIQ

Frizbane Manley, at 12:40 pm EDT on July 14, 2008

Sicko

You need to watch the movie “Sicko” from Michael Moore.

Manny, at 1:55 pm EDT on July 14, 2008

Credit Card to Student Loan Debt

Writing of credit card debt in the 1990s, journalist-turned-economist Doug Henwood writes the following in _Wall Street_: How It Works and for Whom_ (2000):

Economically. . . consumer debt can be thought of as a way to sustain mass consumption in the face of stagnant or falling wages. But there’s an additional social and political bonus, from the point of view of the creditor class; it reduces pressure for higher wages by allowing people to buy goods they couldn’t otherwise afford. It helps to nourish both the appearance and reality of a middle-class standard of living in a time of polarization. And debt can be a great conservatizing force; with a large monthly mortgage and/or MasterCard bill, strikes and other forms of troublemaking look less appealing than they would otherwise” (Henwood 66).

To F. Manley: Commenting on Phil Gramm Henwood writes, “In mainstream speech, ’saving,’ rarely travels without a moralizing subtext, one that apoligizes for vast inequalities by arguing that the poor are profligate, live in the eternal present, and are unable to control their impulses, while the rich are the virtuous opposite of all these things. Or as Texas Senator Phil Gramm puts it in his homey way, society consists of those who pull the wagon (his rich Dallas and Houston constituents) and those who ride in it (the shiftless poor). The middle-classes, obviously, fall somewhere between vice and virtue. From this black-is-white premise, it follows that the rich should be lightly taxed, and the poor, soaked; this is the rationale behind consumption taxes like sales taxes and VATs, which spare the saver and punish the consumer” (Henwood 70).

I add that credit card debt followed Americans into the next century; 9/11 has distracted us from the mass movement manifested in Seattle in 1999. It also distracted us from Enron, Worldcom and other corporate criminal practices that are anything but the manifestation of a “few bad apples,” and has landed us in illegal wars (expensive in more ways than one!) the mortgage and the student loan crisis.

It looks to me like class warfare has long been declared by the rich against the poor. Nor should politics be about Republican versus Democrat, liberal versus conservative: It should be thought of as top versus bottom.

James W. Gettys, at 2:20 pm EDT on July 14, 2008

Sarcasm is a lost art

Cathey, check out the youtube clip before responding.That aside I’m not sure I’d compare this to the Holocaust.

mythbuster, at 2:25 pm EDT on July 14, 2008

Loans

Yes Frizbane, I am tired of it.

No Cathey, I think that a holcaust surviver might be the first to tell you to stop the whining. It is an insult to Holocaust survivors everywhere to even compare.

For the record;

I had both a Perkins loan and a Stafford loan as an undergrad and paid them back.

I had another Stafford loan for grad school and I paid it back, even though my lender at the time sold my loans and I lost all of my incentive benefits.

I did not use it to by new furniture for my dorm room, a new entertainment center or a spring break trip to Florida.

I used it for tuition, room and board.

I worked three part time jobs (simultaneously)as an undergrad and worked fulltime as a grad student as well.

That having been said, I do agree that consumer protections should be built back into student loans just like other loans.

For those people who have legitimately tried to pay and run into trouble outside of their control I am empathetic.

The problem with the Blog media is that telling your story here we are only getting one side as lenders have to respect your privacy. I am fairly certain that most of you did not do something that you were supposed to do at the time you were supposed to do it.

Most students can and do pay their loans back. Having said that, I would like to see more grants and work-study for college.

I cannot understand why a college degree is the one thing that people think they can get without paying for it. You won’t drive a car of the lot without the dealership getting their money up front.

For the women who asked if it was unsual for a college to ask a student to apply for a loan at registration: No, it is not! And how did you think you were going to pay for it? If you can’t pay the tuition bill out of your pocket, how were you going to pay?

The taxpayers get to subsidize a loan for you in addition to all of the other tax breaks, grants and loans. You only have two responsibilities, learn your major so that you can graduate, and PAY BACK your loan.

R.F., at 2:30 pm EDT on July 14, 2008

A rude awakening

The worst part of it all to me is that moment you realize that unless you win the lottery, you will never save anything for the rest of your life even if you can somehow manage not to default...that your future is work without end with no chance of keeping anything. This is slavery. Tack on some unexpected health care costs (especially of you don’t have insurance and maybe even if you do) and you might be homeless. But it is even more than that...I am now dating someone and the idea of getting married has been floating around a little. But my credit is shot and I worry that being married might taint her good credit with my bad credit. Can we afford to be formally married and take that chance? If her credit is damaged then we would really be in danger. If you are lucky enough not to have kids can you imagine a time in your life when you will feel financial secure enough to make that investment? What if you did and then got divorced as so many do? Now you are paying alimony and child support and huge loan payments and maybe credit card payments too!...what if you just can’t make it? Sounds like some commenters here have actually been homeless for a while. At my lowest moments I have contemplated suicide with a gun to my head. But my father co-signed on one of the loans! Killing myself would just transfer the burden to him.

Personally, I have been paying about $1100 per month for about 4 years on 180,000 in loans. Yes, $180,000. It used to be over 190,000. Who would ever lend you so much money without collateral? Someone with no risk of loss I guess. Trying to hit a homerun with higher education has definitely been the great mistake of my life. I always think about that bumper sticker that says something like “if you think education is expensive you should try ignorance.” I think that catchy phrase was dreamed up when education was a lot cheaper. At this point, and with the job market that I have battled since my first graduate school graduation, I would gladly trade back my education for some ignorance if the debt would go along with it. Even debtor’s prison for a few years seems like a good deal if you can come out debt free. Or six years of indentured servitude. Indentured servitude ends. Slavery does not and that is what some of us are dealing with.

Personally, I have not yet defaulted although I know that will change. There is no chance that I will ever pay off my loans even without the added 20 to 50% that will get tacked on after default. I was in real estate doing well until everything started to collapse last August. My loans are on educational deferrment for a few years, (went back to Tech school...no more loans this time though)but when I get out I know that I will never be able to make the payments. (which will probably be around $1300 per month by then because of the staggered repayment schedule) I will go into default. I am already in bankruptcy and have lost everything. My credit score is already basically a zero. It was over a 730 a year ago. Hopefully, if enough awareness is raised about this problem the law will change but I would not hold your breath. Sallie Mae donates a lot of money to our legislators you know.

Given that I basically have no future I have looked into some pretty big alternatives to what had been my formal “life plan". Some of you may find it interesting to note that there are a few states in the US that do no allow wage garnishment and so even though you can’t get rid of the debt, they can’t take it out of your paycheck. (SS garnishment is another issue though) Also, Canada does not use the same credit reporting agencies as the US and so credit (both good and bad credit) does not follow you if you can manage to emmigrate to Canada.US Student loans will follow you to Canada, but US loans reduced to a Canadian civil judgment can be discharged in a Canadian bankruptcy as far as I know. This will not wipe out your US debt, but at least you could live free in Canada.

It is just amazing how all this has happened. It is incredible for me to think that I would have been better off skipping college and grad school and delivering pizzas...no debt, no outsourcing and you can even make more money net of the payments you won’t be making.

A.T., at 3:00 pm EDT on July 14, 2008

Buoyed by public subsidies?

It currently costs about $18,000 to attend the state university I graduated from. My cost, corrected for inflation, was less that half of what students pay today. This change is dominated by spectacular tuition increases that are partly due to a decrease in the “public subsidy” (in constant dollars) in the past 25 years. There are quite a few large state universities where that subsidy is only 20% of the cost of instruction.

This doubling (in real terms) of the cost resulted from seemingly tiny % increases compounding over several decades and, IMO, the favorable comparison between the quality of state universities and private ones so it still looks like a good deal — if only because private tuition has gone up even faster.

CCPhysicist, at 5:35 pm EDT on July 14, 2008

In Default and Frightened

I suddenly found myself a widow, and all I could find were minimum wage jobs in factories. Friends,family members,and even a lawyer encouraged me to go to college. I was accepted, worked very hard and found myself constantly on the Dean’s List,elected to the Student Government,and I graduated with honors. Then I went to seminary for a couple years. Again, I achieved a very high point average. I was so stupid! Although I was given grants, awards and scholarships, I needed to take out Student Loans. In my case with PHEAA. So, when life did a few numbers on me...like having to quit graduate school to help take care of a parent with multiple and terminal health problems. Despite trying to pay back a portion while working a part time job, I was defaulted, let go of that job, and have never been able to find anything substantial since because of BAD CREDIT. The original $15,000 I borrowed is now $36,000 and growing daily. The collectors are allowed to use all kinds of methods to collect that would put the MOB to shame. Right now I am very worried. I am out of work and unable to find even a part time job. Not one dime has been saved toward my retirement (I am 55 years old). My 86yr old mother has now been diagnosed with Stage 4 Cancer. She has a low-income, and nothing will be left when she passes, including a roof over my head. I continually pray that I can find another job. Bankruptcy protection needs to be allowed for people who have my problem, whether it is a private loan or a government one..like mine.Life can get worse and worse if one has unexpected circumstances. Private or goverment loans.,,,not worth it.

Ellen, at 7:30 pm EDT on July 14, 2008

Exactly why is it that I cannot refinance my students loans? Yes, I have some private professional school loans, but why are these exempt from refinancing? I believe that you can even refi your auto loan. They say that your home is the largest investment that you will ever make. In the case of some former students, their student loans are quite substantial also.

Karen, at 5:15 am EDT on July 15, 2008

Documenting the State Role in Tuition Increases

Due to the luck of having pack-rat parents, I was able to make a rough estimate of how college costs have changed at one particular state university in the last 40 years or so.

http://doctorpion.blogspot.com/2008/07/inflated-inflation.html

Some numbers are crude estimates, but the signal is much too big to be obscured by any background noise. State budget cuts do not explain the rise in tuition when inflation is taken into account.

CCPhysicist, at 5:15 am EDT on July 15, 2008

Student Loans

If the government can bail out the crooks in the sub-prime debacle and the people with brains of guinea pigs (I can buy a $400,000 house with no money down and a job that pays $20,000 a year) why won’t they look at the student loan industry? They are essentially failing a generation of people with their high handedness. I have written senators, the Dept. of Finance, virtually anyone I could think of and been told, too bad, we cannot (cannot not will not) help you. This is a federal thing and we cannot interject. Even lawyers won’t touch it, now THAT tells you something. How many defaults are there? And how many people are paying, but cannot afford a car or the basic necessities? This is reality...it’s criminal.

Ellen Frisch, at 10:20 am EDT on July 15, 2008

Thanks to All of You!

I just wanted to thank Mr. Carey and all of you who have added comments to this story. I work in an “open access” institution, meaning that my college accepts many students who are in every way underprepared for college, and who are pursuing college for purely pragmatic reasons. In the past year, my faculty has been struggling with the fact that too many of our students work too many hours and are therefore at high risk for dropping out. A traditional teen college student with no major responsibilities can PERHAPS handle a 25-hour-per-week job on top of 40 hours of classtime and study, if need be. A 30-year-old with two kids is less likely to be able to manage such a load.

And so, my colleagues and I, ourselves indebeted until we die, tend to advise overworked students to consider a loan. Your comments have convinced me that this, too, is a dangerous proposal. But my state’s statistics (and my professional experience) don’t support the idea that most part-time students ever finish, either. Many have discussed belt-tightening on the part of colleges. It seems that our students will have to embrace at least tempory penury, too. We can’t avoid the idea that many work too much or borrow too much in part because they want to live beyond their means.

Dr. K, at 12:25 pm EDT on July 15, 2008

I see a need for statistics

I have looked in vain for actual statistics regarding what these beneficent student loans often look like ten, twenty, thirty years down the road. It would be interesting and useful to see some hard numbers on amounts borrowed, amounts still owed despite what’s been paid, among other things. Anyone have any ideas how to go about this? The stories are so numerous and so overwhelming. I think the devastation is much more widespread than one would imagine. If anyone has ideas about how to gather and assimilate this type of info. please post ideas here. Perhaps we could collectively pull this off.

Rebecca Gibson, at 2:55 pm EDT on July 15, 2008

gee thanks, jeff

Little late for that, for those of us who’ve already sold our soul to the devil, I mean student loan program.....

Rebecca Gibson, at 5:55 pm EDT on July 15, 2008

wage garnishment

This is an excellent article. The problem has many facets. Borrowers have many grievances, from the terms of the loan to the methods of collection.

My interest is in garnishment of wages. Originally, the law provided for 10% garnishment of disposable wages. Then it was 15%. Then, Department of Education determined that if there were two student loans, one could garnish 15%, the other 10%. Furthermore, anyone whose wages are garnished is effectively in debtors’ prison. While your employer cannot fire you, there are many avenues financially that are closed to you.

My advice is that people who are aggrieved address one issue at a time. And unite.

Harold Sewell, at 7:50 pm EDT on July 15, 2008

Contact a Senator

I wrote an email and included this URL to Illinois Senator Dick Durbin. I think last year he introduced a bill that would have been a major help for student loan debtors but as far as I know the legislation died in committee. I wrote to remind him of the past effort and to say to keep doing something. You should all write him (as he is a friendly ear) as well as all other senators and congressmen. Maybe in mass we could make up in numbers what Sallie Mae has in dollars. (your dollars)A T

A T, at 10:05 pm EDT on July 15, 2008

A few years back colleges rarely had luxurious rec centers with climbing walls, heated pools, dorms which resembled condos, and gourmet food in the dining halls. Has anyone noticed the positive correlation between all the bells and whistles at the typical undergrad institution and the student loan mess? Maybe we need to go back to entertaining oneself with 2 or 3 friends and uno cards or a chess board in the hall of a cinder block dorm.

Mark Smith, at 5:10 am EDT on July 16, 2008

For Every Cloud...

Let’s see... greedy leaders and lenders, irresponsible students, a seemingly uncaring and negligent government... looks like we got the makings of a dysfunctional college financing system!

Someone has already suggested that the folks who have posted their nightmares here didn’t do something when they were supposed to... so I won’t go there other than to say nothing happened that wasn’t disclosed BEFORE signing the PROMISE TO PAY. The devil is in the details.

And someone else has posted a link to a site that shows that our government has recognized that there IS a problem and has taken steps to make things better, so no need to go there, either.

Who should pay for college? Should it be the government? Should the average taxpayer be subsidizing folks with above-average incomes who have over-borrowed?

Believe it or not, there IS some good news! At my school, the default rate is under 5% which tells me that 9 1/2 of every 10 students who PROMISE TO PAY do so. The system can and does work for most students. For every nightmare posted here there are many more success stories.

Pollyanna, Collection Manager at Major University, at 3:00 pm EDT on July 16, 2008

pollyanna your name suits

rules changed post signing of papers. .ie backrupcy changes in the 90’s

I am fairly certain none of that was in writing and to require the average person to wade through the tiny printing when college officers and ones own parents are saying “go ahead is pollyanna-ish “everyone should read carefully. hehe”

or to even have the guts to call and say “we have a problem” when they are calling hounding you when you get home from work. . .how are we supposed to have deduced that the sharks would help us in our stupid twenties?

your numbers are skewed. . .5%. . yeah and we only have 4% inflation.. .if ya don’t count food and fuel.

d naylor, at 4:10 pm EDT on July 16, 2008

Rules changed after the fact

Agreed. The rules changed after I signed the papers. Private loans became immune to bankruptcy in 2005, fully two years after my last loan. Unlike Federal loans, there are no loan forgiveness programs for private loans. One of the posters even said that he filed bankruptcy and Sallie Mae pushed his loans into default status even though bankruptcies do not affect student loans by law. How is that even legal?

I find the high-minded moralistic approach (ie you should have read before you signed or that by your inability to pay these honest debts you have committed a great moral transgression) to be a bit out of place here given the context. As if Sallie Mae was some hardworking grandmother who had scrimped her whole life to lend you some college money at reasonable terms and now you have let her down since you can’t pay and so she is going to suffer because of your failures) Consider some of the real life details:

What difference does it make if you read the contract or not when you have no power to negotiate either way? You take it or you leave it. Further, often companies reserve the right to change contract terms at any time with and sometimes without notice. How is this honest? As an education is the only way to make it anymore(that is what they always tell us) you either sign up or put on your McSmile and start flipping.

Further, the idea of the lazy, irresponsible student and the honest lender paving the road to your American dream is dated to say the least. Why is it that only the borrowers are expected to uphold their end of the deal and Sallie Mae and others get to hide behind one-sided, self-serving, non-negotiable, byzantine contractual clauses?

Why is it ok to apply a payment that is one day late entirely to this and next months’ interest amount thus preventing any current principal from being repaid and then charging you a late-fee on top of that?! They are not only stealing your money, they are stealing your future. These contract arrangements are unconscionable whether they were disclosed or not.

An educated population is important for the country as a whole and yet individual educations are always looked at as a private benefit. If you are making so much more money over a life-time then you are paying a whole lot more money in taxes over your life time as well. Your education and abilities are a benefit to the entire country, not just yourself.

The government says education is important and yet if you make anywhere near enough to pay back your debts you don’t even get to deduct the interest on your loans against your income tax — much less the actual cost of your education.

I wish the government cared as much about bailing out students as it does major corporations headed by multi-billionaire CEOs who are too big to fail. There is an entire generation of people here who will never have a chance to begin saving anything meaningful to pay for their un-affordable retirement or ballooning health care costs because they spent all of the productive years padding the pockets of Albert Lord so he can afford to buy a professional baseball team or some jerk working a state job at the collections dept of a major university with a state retirement. You can’t have a democracy with a slave class. Sooner or later this is going to come home to roost.

It is time that we as a People really considered who “our” government is actually serving here and who writes the rules and for who’s benefit. These mega-corps are so big they can afford to buy not just the vote of one corrupt politian, but the votes of many. Meanwhile, the Supreme Court consistently limi