The federal student loan system- absent of nearly every standard consumer protection one can name- has been allowed go unchecked a bit too long...Finally, I can report that at long last, legislation that returns at least some of these protections has been passed.
The problem is, this legislation was passed not by the House, Senate, or other congressional committee. Rather, it was passed by the City of Albany, New York!
Please go to StudentLoanJustice.Org StudentLoanJustice.Org to find out more.
In 1997, under intense lobbying from student loan companies, The Higher Education Act (HEA) was amended, and defaulted student loans became among the most lucrative, and easiest to collect type of debt. These amendments allow for huge penalties and fees to be attached to defaulted student loan debt, take away bankruptcy protection for student borrowers, dissallow refinancing of the debt, and also provide for draconian collection and punitive measures to be taken against student borrowers, including wage garnishment, tax garnishment, withholding of professional certifications, termination from employment , social security garnishment, and others.
According to Harvard Professor Elizabeth Warren in a Wall Street Journal piece by John Hechinger last year, "Student-loan debt collectors have power that would make a mobster envious."
This legislation has reaped massive fortunes for well connected executives in the private sector, and even paid great dividends for the Department of Education (the Department projects that it will retrieve every dollar of principal, plus almost 20% in fees and overdue interest for defaulted student loans.
...Meanwhile, the borrowers suffer. Defaulted student loan debtors quickly find themselves unable to function in society, and are faced with a decision to either continue the paralysis and live in fear, or begin making payments on a massively inflated amount. Importantly, the system encourages defaults. Currently, it is estimated that the true, lifetime default rate for student loans may be 1 in 3 borrowers, or more! (See Studentloanjustice.org for source information for this statistic).
Non-borrowers also suffer due to the massive inflation that this system has caused to happen, and other effects that the lack of meaningful federal oversight has caused.
There is finally some hope, however. After significant work on the city of Albany's resolution over the past week, We are very happy to announce that the resolution passed unanimously last week, with every member of the City Council stepping up to co sponsor the Bill.
The resolution, # 43.42.09R, contains provisions for both loan forgiveness, and also a return of Bankruptcy rights for both federally guaranteed, and private loans.
Our thanks go out to Jim Sano, whose leadership on the council made this happen, and will continue to be a key player as this resolution continues its journey to Congress, and beyond.
Thanks also to Heather, Bonnie, Olnyus, Lars, and the other members of SLJ who showed up to support this important resolution.
Remember: it is important that it took a City council, far removed from Washington D.C. , to recognize this problem, and act. It is important that you alert your local city councils, as well as media, about this development, in hopes that they too, will pass similar resolutions. The passage of similar municipal resolutions is expected in at least 8 other municipalities according to Sano.
Think this isn't a problem? Below are just a couple of stories from real people, chosen at random from the StudentloanJustice.Org site. Go there yourself to see more.
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David
I don't have all the facts and figures about my situation but here's a synopsis. I graduated from chiropractic school (1989) and defaulted on my federal student loans (for the same reasons that others have had to default) that totaled approximately $40,000 (in 1989) and now total $320,000 (based on a collection agency's claim in 2005). I can't renew my license to make a living (much less make payments (they wanted $800 per month in 1996) on the loans) and have experienced feelings of hopelessness, despair, no self-esteem, depression, suicide, etc., etc.
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George
To make my story short I'll try to be brief.
I'm a disabled veteran rated at 100% service connected for several ailments. My doctor from the VA helped me apply for loan discharge under the disability act. Of course the dept. of education denied the request because they disagreed with my doctor's opinion.
I'm a registered nurse by trade. I live in Texas. My nursing license came up for renewal recently. It was denied when I tried to renew it. The Texas State Board of Nursing denied my renewal request citing my defaulted student loans as being the reason for denial. Of course when I contacted them about my loan forgiveness request and showed them the documentation from my doctor, their reply was simply: have Texas Guaranteed release your license for renewal. Even though the Texas Board of Nursing is the licensing agency, they can't renew my license unless another agency that has nothing to do with my nursing license releases it for renewal? Give me a break!
So, now that my loan forgiveness request has been denied, my livelihood has also been denied. They want us to pay them back but they want us to work at Mcdonald's to do it. That way they can keep collecting higher interest and collection payments.
This has to stop. There has to be a fair way to do this. The current legislation only singles out those that have professional or occupational licenses. What about all of the other defaulted loans whose borrowers aren't required to have a professional license? Are they going to pass laws that deny anyone with a defaulted student loan any type of job? I know that sounds absurd but so is the current legislation.
They demand us to pay them back, and then take away our ability to pay by denying us our livelihood.
Are their any legislators out there who are listening?