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View Diary: Obama administration targets for-profit college debt factories (86 comments)

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  •  asdf (6+ / 0-)

    Credit card companies are now required to clearly lay out the terms of the loan: the interest payments, the monthly payment required, how long it will take to repay and how much it will cost to repay.  Student loans are exempt from this requirement.  They are also exempt from bankruptcy.

    So, when you are peddling student loans for your dodgy curriculum, you don't care whether the customer can afford the loan.  The customer cannot discharge the debt. Ever.  
    If customers default, the debtmasters can garnish their pay.
    There is simply no way out of this debt, no matter what the customer's circumstance.

    Schools can charge absolutely outrageous tuition, because the student loan system guarantees those tuitions will be funded. The people making the loans have no incentive AT ALL to be responsible about who they lend to, because payment is guaranteed.

    "YOPP!" --Horton Hears a Who

    by Reepicheep on Fri Mar 14, 2014 at 09:16:28 AM PDT

    •  The people making the loans are us, the taxpayers (0+ / 0-)

      The government guarantees these loans through the Title IV program. The government (taxpayers) gets stuck with the student loan defaults. As usual, they privatize the profits and socialize the losses. The problem is that these schools shouldn't even be able to qualify, or continue to qualify, for Title IV funds with their track records, and that is hopefully what they will fix this time.

      "When people show you who they really are, believe them." - Maya Angelou

      by Pennsylvanian on Fri Mar 14, 2014 at 09:38:49 AM PDT

      [ Parent ]

    •  I'd also like to point out (0+ / 0-)

      that student loans are collaterized and sold to investors, just like mortgage backed securities.  Which means there is even more incentive to originate the loans, because the originator can turn around and sell them off as bundled securities.  The banks have every incentive to make tons of loans available, and no incentive whatever to follow underwriting standards.  

      Bubbles get fueled by over-leveraging and easy credit.  They pop when the credit dries up, and investors can't toss the hot potato to the next guy.

      "YOPP!" --Horton Hears a Who

      by Reepicheep on Fri Mar 14, 2014 at 12:52:57 PM PDT

      [ Parent ]

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