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Between the Lines: Trashing a Generation

Student loan debt hits $1 trillion; predatory practices triple, quadruple what's owed.

Comments (11)
Thursday, October 18, 2012

By now all the sources that calculate the level of student loan debt agree that it stands at over $1 trillion. Student debt has become the new feeding trough for collection agencies.

The student loan crisis is so severe that you can hardly understand the economics of the next decade or more without taking into account the bubble created by abundant, though not cheap, loan money. The easier it was to borrow for college, the more tuition soared. University presidents' salaries rose; campuses were tricked out with amenities unimagined in older times when the student lifestyle was relatively austere.

Even if it hadn't been for the financial crash, predatory lending tactics and the fact that student loans can't be discharged in bankruptcy would have stolen money from the pockets of a generation—from more than one generation, because parents who sign for certain kinds of loans for their children are on the hook as well. This year, around 115,000 people—nearly twice as many as in 2011—had student loan payments, on their own loans or their children's, deducted from their Social Security checks.

But the crash ruined everything. It made even modest loans difficult and in some cases impossible to pay off. President Obama's rule linking monthly payment to actual income has brought relief to some, but in the total picture, that degree of relief is miniscule. Democrats and Republicans share much of the blame for this situation, for they both treated students as less than people, less than citizens—as children, as deadbeats convicted before the fact.

Through the 1990s, now-House Speaker John Boehner, who once promised lenders that he would "take care" of them, was helping put profits in their pockets with no regard for the future of young people trying to educate themselves. The banks were taking no risk because the government guaranteed the loans, but they could collect mountains of interest, fees and penalties from borrowers even after the borrowers were thrown into default—in some cases for the rest of their lives.

Here's the frightening thing about that trillion-dollar figure: it's impossible to prove how much of it is actually bona fide, how much is original loan principal. Many loans have been inflated through the years by interest that ballooned when people were even temporarily unable to pay, and when borrowers default, the original loan can double, triple or quadruple. Like credit card debt, student loan debt can trap borrowers on a treadmill, leaving them unable to pay down the interest so as to reduce the principal. These examples, submitted by former students in Massachusetts, come from the Student Loan Justice website:

"$21,000 in debts [sic] as of 6/96. Ballooned to $46,000 thru 'consolidation' techniques of Sallie Mae, USA Funds, DCS and DOE as of 02/02. By the time these are paid off I will have paid over $280,000. I have paid $11,000 in the last four years and the principal hasn't even moved by $1,000."

"I worked from day one, freshman year to pay my education. No parental help! I took two small loans, principals $2,200 each. Mass Higher Ed subsequently put me in default when I had a near-fatal illness... Then they were sent to their attorneys. They suddenly jumped from $4,400 to $20,000. I would blink and it was now $30,000... It is now $58,000. I lost my chance to go to med school, can't buy a home, car, nothing."

The lack of foresight on the parts of the government and the universities that is making a generation the victims of usury is monumental. President Obama took an important step by taking the lending function away from the banks, but there will be no large-scale relief until the discriminatory prohibition against discharging student loans in bankruptcy is eliminated. Gambling debts can be discharged in bankruptcy, though student loans can't; there's black humor there, but struggling borrowers can hardly be expected to laugh.

Comments (11)
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I have over $60K in Student Loans from my Bachelor's degree. I received a Graduate Plus loan for the first year of the MBA program, but I was denied the loan for my second and final MBA year. Now I am not able to complete the MBA degree and I am not able to pay back the student loans. With my present BA degree and current job, I will never be able to afford to pay the loans back.

Posted by Ana Rowling on 10.16.12 at 12:47

I HAVE OVER $130,000 IN PARENT PLUS STUDENT LOANS AND MY STORY IS SO LONG I DON'T HAVE THE ENERGY TO TYPE IT ALL. LONG STORY SHORT AFTER MY WIFE BECAME DISABLED AND WE LOST $45,000 A YEAR IN INCOME WE THOUGHT ABOUT TAKING OUR DAUGHTER OUT OF COLLEGE BUT I KEPT GETTING APPROOVED AND ABLE TO GET A FORBERANCE WELL NOW 6 YEARS LATER SHE HAS GRADUATED CAN'T GET A JOB IN HER FIELD AND WOULD HAVE MADE MORE MONEY IN THE NEXT 30 YEARS BY WORKING AT MCDONALDS WITHOUT ANY STUDENT LOAN DEBT. SO MUCH FOR HIGHER EDUCATION. OH AND PS WE SHOULD BE LOSING THE HOUSE WE HAVE BEEN IN FOR OVER 20 YEARS TO FORCLOSURE DUE TO THIS. MY QUESTION IS WHERE IS THE GOVERNMENT GETTING THE MONEY TO FUND THESE LOANS TO PEOPLE WHO ARE APPROOVED EVEN THOUGH THEY DON'T HAVE GOOD ENOUGH CREDIT TO GET A FEW THOUSAND DOLLAR CAR LOAN. ONLY THING I HAVE GOING IS THEY CAN'T REPOSSES EDUCATION.

Posted by Johnnypc on 10.16.12 at 14:31

I agree! Student loans are bad news for college students. They would be better off working at McDonald's after high school. They can work their way into a management position with benefits and forego the student loan business. Americans need to pay attention and so does Congress. Congress made sure the banks were protected and now us innocent people who have become disabled through no fault of our own are indebted for life to the student loan lenders/our government. The usury is true because they trick you into a refinance and then your balance soars beyond belief, and the degree means nothing except they can't repo your brain unless they kill you. Those of us who have become too ill to work from diabetes, MS, and other chronic illnesses are the fuel for the industry. These lenders are predatory and people trick you into believing that you will earn more with a college degree. I know people who never went to college and they are earning lots more than those of us who did trod the path of higher education and were duped into predatory loans. This is a crime and we are the victims and we need more voices from Maryland to speak out about this issue.

Posted by Connie Wilson on 10.16.12 at 14:52
  1. The interest is capitalized and the debt grows exponentially which makes it virtually impossible to pay off especially in this day and age.

  2. Congress have given the student loan industry collection practices that not only include wage garnishment but disability garnishment without a court order.

  3. Borrowers can have their professional license and driver's license suspended depending on the state.

  4. They can also face termination from public employment as a result of the status of their student loan depending on the state.

  5. The bureaucrats are in the habit of nickel and diming relief instead of offering a comprehensive package that also addresses private loans which can be the most financially debilitating (not just a short term solution.)

  6. After they do that ok fine but the predatory lending still needs to be addressed.

  7. Sallie Mae has also recently come under fire in Connecticut, Florida and Kentucky for legal allegations of violating federal civil rights and lending practices. We still can't got no serious press.

  8. We discharge all types of luxury debt in bankruptcy but not student loans so now add insult to injury...moving along.

  9. Student loans are currently the only loans in our nation's history to be exempted from statutes of limitations, basic bankruptcy protections, state usury laws, refinancing rights, truth in lending requirements and even fair debt collection practices.

  10. Many of the terms of these loans are convoluted. I'm not sure that most of us were aware of this at the time that we signed.

  11. Student loans are the new face of bonded labor and particularly challenging for 1st generation graduates. It is a mortgage on the rest of your life.

  12. You can talk to the debt collection agency and explain that due to extenuating circumstances like illness or job loss for example you are having a hardship and cannot afford to pay it currently. They have been known to repeat back to you “I'll make a note that you have no intentions on repaying back this loan.” The bureaucratic translation is that they put information their way or distort it. They are snakes and I don't like em.

My preference is always to discuss this problem as a whole since I am clearly not the poster-child for student loans despite having a private institutional loan, federal loans and folks with plus loans out everywhere. There are many cases out there that are by far more compelling than mine. I'll stop here.

Posted by Jean Brown on 10.16.12 at 16:25

I borrowed a total of $3650 when I was in college. I didn't graduate because I got sick. Eventually I got better and went to a trade school and then work. I was able to make a payments for a while on my student loans. Then I got sick again. The student loan callers were extremely rude and nasty, one went so far as to tell me I should "strap a mattress on" and head to the corner bar! Another told me my son will inherrit my debt when I die. Of course he'd probably have to inherrit something for them to be able to transfer the debt to him and I have nothing. Worse, I know I'll never be able to have anything.

My son is in college now. We have one rule: NEVER, under ANY CIRCUMSTANCES, is he to EVER take out a student loan! I told him that even if it means he can only take one class per semester that he must not take out a student loan. He tells me lots of students are taking out loans right and left, to the maximum amount allowed at his school. He says they are doing it because they have heard a rumor that ALL student loan debt are going to be forgiven. I told him not to listen to them, that IF anything is EVER done about student loans, it will only be loans that were taken out before a certain date, say 2010. It won't be current debts. I feel really sorry for those people who are taking out those huge loans based on false beliefs. At least my son won't be one of them!

Posted by caliblue on 10.16.12 at 22:11

Darn. I forgot to mention that that original $3650 was over $18K the last time I opened a collection envelope. I have tried many times to get payments started again, but they won't accept payments of less than $100 a month! As a disabled woman, who can't get on disability to save my life, $100 a month is just too much!

Posted by caliblue on 10.16.12 at 22:29

I am almost sixty; I graduated at fifty (thinking I could do better than admin work-what a lie that was) and owe more money now on the student loan then when I started. I had two short forebearances because of lack of work. Now I am on disability but still paying $260 a month so they don't take that away from me. And I can't get a descent job because of my health and age. Then when I go into look at the history payment schedule, it appears that the money I am paying is only going to the smaller loan and not being applied to the larger original loan. I'll die owing this money and never be able to breath easily that I have this debt. My husband and I are left with $300 a month for our food and medicine. We can't afford health insurance; We've been trying to get done some of the test I need done by putting it on credit cards so that is compounding the debt situation. I don't know how else to handle things.

Posted by Ginny on 10.17.12 at 3:59

I am nearing retirement age and have $33,000 in student loans to pay back. At this point in time, I will only have Social Security to live on once I retire. Student loan payments will absolutely force me to live a poverty lifestyle. I was not even able to finish school due to the gaps between the times I was in and out of school. Adding student loans as a bankruptcy possibility would be a lifesave for me.

Posted by Karen on 10.17.12 at 6:43

I borrowed $9950 in 2010 to go back to school. That only got me through the first three terms of the year. Plus, I was spending between $200-$500 on books every term. After the third term, I had no choice but to drop out because I couldn't pay for the upcoming term out of pocket. I was unemployed at the time, and though my husband had a great job we had four children to take care of. It was too expensive. Now, almost three years later, I owe almost $14,000. I am unable to pay anything at this time, but I am harassed with phone calls every day. The collectors even calle at work. They have been told by management not to contact me at work, yet they still do so. It has almost costed me my job. If the collectors continue to contact me at work, it probably WILL lose my job. Going back to school is positively one of the worst things I could have ever done, for myself or my family. It has created a debt that has now destroyed my credit and keeps me from getting employment because they believe that if my credit is bad I am going to steal from them so that I can pay my bills. It's a never ending battle.

Posted by AmyCrowe1 on 10.17.12 at 9:09

Today, Thursday Oct. 18 at 10am Student Speakout: Stop the Student Debt Crisis, will be at Holyoke Community College in the Courtyard.

More on Facebook at: http://www.facebook.com/pages/Occupy-the-Airwaves-Radio/221605237913119?ref=hl#!/events/392925824110585/

Posted by Occupy the Airwaves on 10.18.12 at 6:23
Lost a job b/c of student loans... ironic right... I was laid off in 2008 from my teaching position due to a cut in the grant funding at Volunteers of America. I got behind on my student loans at that time for the FIRST TIME... i had been paying before that. Just this month, I was given a job ... the PERFECT job, and then a week later, they took it back because my loans are still in "collection" status because even though im paying on them, I still never paid off the amount I got behind on... I proved my term of unemployment, but still the new employer did not feel that they could break their hiring criteria. (their criteria state you can have 4 negative accounts. since i had 5 separate loans for 5 semesters, i was over their limit... yea it was like that)
Posted by Jessica B. on 10.20.12 at 16:30
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