Ripping Off Young America: The College-Loan Scandal

[interestrateripoff]

http://www.rollingstone.com/politics/news/ripping-off-young-america-the-college-loan-scandal-20130815

The topic? Student loans. Unless Congress took action soon, he warned, the relatively low 3.4 percent interest rates on key federal student loans would double. Obama knew the Republicans would make a scene over extending the subsidized loan program, and that he could corner them into looking like obstructionist meanies out to snatch the lollipop of higher education from America's youth. "We cannot price the middle class or folks who are willing to work hard to get into the middle class," he said sternly, "out of a college education."

Flash-forward through a few months of brinkmanship and name-calling, and not only is nobody talking about the IRS anymore, but the Republicans and Democrats are snuggled in bed together on the student-loan thing, having hatched a quick-fix plan on July 31st to peg interest rates to Treasury rates, ensuring the rate for undergrads would only rise to 3.86 percent for the coming year.

Though this was just the thinnest of temporary solutions – Congressional Budget Office projections predicted interest rates on undergraduate loans under the new plan would still rise as high as 7.25 percent within five years, while graduate loans could reach an even more ridiculous 8.8 percent

..

Next up is the government itself. While it's not commonly discussed on the Hill, the government actually stands to make an enormous profit on the president's new federal student-loan system, an estimated $184 billion over 10 years, a boondoggle paid for by hyperinflated tuition costs and fueled by a government-sponsored predatory-lending program that makes even the most ruthless private credit-card company seem like a "Save the Panda" charity. Why is this happening? The answer lies in a sociopathic marriage of private-sector greed and government force that will make you shake your head in wonder at the way modern America sucks blood out of its young.

In the early 2000s, a thirtysomething scientist named Alan Collinge seemed to be going places. He had graduated from USC in 1999 with a degree in aerospace engineering and landed a research job at Caltech. Then he made a mistake: He asked for a raise, didn't get it, lost his job and soon found himself underemployed and with no way to repay the roughly $38,000 in loans he'd taken out to get his degree.

Collinge's creditor, Sallie Mae, which originally had been a quasi-public institution but, in the late Nineties, had begun transforming into a wholly private lender, didn't answer his requests for a forbearance or a restructuring. So in 2001, he went into default. Soon enough, his original $38,000 loan had ballooned to more than $100,000 in debt, thanks to fees, penalties and accrued interest. He had a job as a military contractor, but he lost it when his employer ran a credit check on him. His whole life was now about his student debt.

..

Tuition costs at public and private colleges were, are and have been rising faster than just about anything in American society – health care, energy, even housing. Between 1950 and 1970, sending a kid to a public university cost about four percent of an American family's annual income. Forty years later, in 2010, it accounted for 11 percent. Moody's released statistics showing tuition and fees rising 300 percent versus the Consumer Price Index between 1990 and 2011.

It's a long article.

So in damaging someone's credit record they have effectively stopped that person potentially from ever earning enough to pay any of it back.

Economic suicide which generates short term profit at the expense of long term economic stability?

Edited August 22, 2013 by interestrateripoff

[Sancho Panza]

This was an excellent piece as ever from Taibbi and well worth the long read.

[corevalue]

I only get a 404 error at the link.

[Frugal Git]

I only get a 404 error at the link.

Try here

great article.

[interestrateripoff]

I only get a 404 error at the link.

I've edited the link now.

[PopGun]

Don't worry kids, you won't have to pay a penny till you're earning over £21k, and even then it will only be a small % of your paye...

until we change the rules...SUCKERS!!

[miggy]

That's a great article and damning if true. It's not so much the amounts, it's the way that you really are a slave until paid off.

For those who didn't read it, a core claim is that you can't discharge the debt and it comes off even disability income. High loans for a degree you need for a lot of jobs, high interest rates, and locked into repaying it whatever your income or status.

[PopGun]

That's a great article and damning if true. It's not so much the amounts, it's the way that you really are a slave until paid off.

For those who didn't read it, a core claim is that you can't discharge the debt and it comes off even disability income. High loans for a degree you need for a lot of jobs, high interest rates, and locked into repaying it whatever your income or status.

I love the way by having a default/bad credit can stop you getting a decent job, or even fired, a bad debt caused by the ridiculous loans required for a degree required for the job in the first place....

[ska_mna]

Bookmarked for a full read later.

Off the first page, this might ring a few bells:

It's not the cost of the loan that's the problem, it's the principal – the appallingly high tuition costs that have been soaring at two to three times the rate of inflation, an irrational upward trajectory eerily reminiscent of skyrocketing housing prices in the years before 2008

[MongerOfDoom]

So in damaging someone's credit record they have effectively stopped that person potentially from ever earning enough to pay any of it back.

Economic suicide which generates short term profit at the expense of long term economic stability?

That's not really supported by the example. A 38k student debt would cost something like $100 a month to service. You'd have to be seriously down on on your luck to not be able to pay that much for what clearly would have been several years. Of course, today's students are looking at repaying very substantially more than that.

[Venger]

That's not really supported by the example. A 38k student debt would cost something like $100 a month to service. You'd have to be seriously down on on your luck to not be able to pay that much for what clearly would have been several years. Of course, today's students are looking at repaying very substantially more than that.

7/03/2014

The Student Debt Crisis Is Being Manufactured To Justify Debt Forgiveness

http://www.forbes.com/sites/jeffreydorfman/2014/07/03/the-student-debt-crisis-is-being-manufactured-to-justify-debt-forgiveness/

Saw her on cover of.. Sunday Times magazine, I think, last week, in a Presidential type pose.

Schools pay Hillary $200K to speak as costs rise

CNBC.com staff | @CNBC

8 Hours Ago

Hillary Clinton continues to rake in big payouts from speaking engagements, and now universities are coming under fire for paying her asking price while hitting students with even more costs.

At least eight universities, four of which are public, have shelled out hundreds of thousands of dollars for Clinton to speak on their campuses in the past year, The Washington Post reported. As tuition increases and budgets shrink at many schools across the U.S., some students have spoken out against what they call a waste of funds.

Read MoreHillary's money problem: How she made it

Schools including the University of Connecticut, the University of California at Los Angeles, and the University of Nevada at Las Vegas agreed to pay more than $225,000 for the former Secretary of State to speak, the Post wrote.

UNLV, which has agreed to pay $225,000 to have Clinton speak in October amid plans to raise tuition by 17 percent over four years, has seen backlash from its student government, which wrote Clinton a letter asking her to return the payment to the school. UNLV's student body president Elias Benjelloun told the Post students are "outraged" by the "reckless spending."

Some members of the Democratic Party have made college affordability a larger part of their agenda, and the backlash comes as Clinton may seek the Democratic nomination for president in 2016.

http://www.cnbc.com/id/101810953

[fluffy666]

That's not really supported by the example. A 38k student debt would cost something like $100 a month to service. You'd have to be seriously down on on your luck to not be able to pay that much for what clearly would have been several years. Of course, today's students are looking at repaying very substantially more than that.

That depends if the lender is willing to take IO payments. Sounds like the lender in question wasn't.