I could probably get this published somewhere, but screw it--I'm happy to give this one to the KOS!
I hope that those out there interested in student loans will read it, because the problem in this industry goes well beyond what we have read thus far in the national press.
Go to StudentLoanJustice.Org to find out more.StudentLoanJustice.Org
The student loan system in the U.S. is a perfect example of what can go horribly wrong when free-market interests are allowed to take over functions previously performed by the federal government.
In the past 20 years, the cost of attending college has exploded. Gone are the days where the typical high school graduate could put him or herself through university for a few thousand dollars in student loan debt at most, and be able to pay this debt by working over the summers. Today, the average undergraduate student borrower leaves school with more than $20,000 in student loans, and far more for graduate students. Tuition has increased during this time period at more than double the rate of inflation.
Concurrently, student loans have become the most profitable, uncompetitive, oppressive, and predatory type of debt of any in the nation’s history. This has occurred due to federal legislation since the mid 90’s that was championed by student lender interests such as Sallie Mae (the largest student loan company in America), The Consumer Bankers Association, and a bevy of other individuals and groups inside the beltway who convinced Congress that private industry could finance college educations more efficiently than the federal government. Vast personal fortunes are being made by the interests who championed this legislation- legislation that took away all standard consumer protections from student loans, and allowed for massive penalties and draconian wealth extraction mechanisms to collect this inflated debt.
Regarding consumer protections: there are no standard bankruptcy protections for student loans. The big lenders lobbied intensely for their removal since 1994, and even convinced Congress to remove bankruptcy protections for private, non-federally guaranteed loans in 2005- loans whose interest rates often exceed 18%. This is clear evidence of the sheer muscle (and chutzpah) of the student loan lobbyists.
Also, it is illegal to refinance student loans. Borrowers become captive to the lender they consolidate with for the life of their loan, no matter how high the interest rate, or how badly their lenders treat them.
Most student loan enterprises were exempted from adherence to Fair Debt Collection Practices in 1996, and statutes of limitations were removed in 1999. Even state usury laws were taken off the table for student loans during the same time period.
Congress also allowed lenders to levy massive fees- often as high as 25%- on students having trouble repaying their loans, and provided draconian collection powers including wage, tax, Social Security/Disability garnishment, and even suspension of state professional licenses to collect on this debt. These are powers that no other lending industries, including credit card companies, payday lenders, and lenders for other government loans enjoy.
The payoff of this legislation for Sallie Mae executives is staggering. The company’s stock has exploded by about 1500% over the last decade. Fortune Magazine called Sallie Mae the 2nd most profitable company in 2006- Microsoft was 18th on the list that year. Chairman Albert Lord has made over $225 million, and the CEO’s regularly top the Washington Post’s list of highest paid CEO’s in Washington D.C. Lord recently made a purchase offer for a major league baseball team, the D.C. Nationals, and has built his own personal, luxury golf course in the exclusive suburbs of Maryland. Check out the bonuses:
The company has set aside $3.6 billion in stock for its employees since 1997-roughly $650,000 per employee (this does not take into account the appreciation of the stock).
The company regularly brags to shareholders that its escalating profits are attributable to penalties and fees collected on delinquent debt.
The massive wealth created by this legislation extends well beyond Sallie Mae, however. Non-profit guarantors and collection companies have seen unparalleled growth in the last decade, and executive salaries (and expense accounts) of these organizations have followed suit, as are detailed at StudentLoanJustice.Org.
In addition, even the federal government makes money from delinquent debt- recovering about $1.20 for every dollar it pays out in default claims.
Universities, of course, sit in the catbird seat. The current system has enabled the colleges to increase their tuition, and improve their campuses without regard for the students’ ability to pay these increased costs.
Moreover, it has been found that university officials across the country have engaged in corrupt and illegal relationships with lenders for both institutional and personal benefit.
While the current student loan system in this country works extremely well for universities, banks, and the federal government, the system has effectively crippled millions of decent citizens. These citizens’ attempts to attain the American dream through higher education have, ironically, turned their lives into a nightmare with no recourse.
At this point, readers have no reason to believe that the student loan system in the U.S. is causing citizens to go "off the grid", flee the country, and even take their own lives. But in fact, it is true. The student loan system in the United States has indeed created a broad swath of economic depression across the country, and examination of individual case studies at StudentLoanJustice.Org will confirm this.
The purpose of the website is threefold. First, it is meant to shine a bright light on this problem; the organizations and individuals who caused it to happen, and the people whose lives have been destroyed as a result.
Second, StudentLoanJustice.Org aims to give some hope to those citizens who have had their lives adversely affected by this national crisis, let them know that they aren’t alone, and embolden them to take grassroots action at the local level.
Finally, StudentLoanJustice.Org is intended to show legislators at both federal and state levels that this problem is escalating rapidly, and that there is a critical need for bold, decisive political action that addresses the needs of the population, rather than the fiscal concerns of the banks who have orchestrated this crisis.