This is a clip from Tavis Smiley recent Symposium on Poverty in America. You can watch the entire CSPAN show here. Hats off to CSPan, btw.
Suze tells it like it is
"The banks can screw you, with the interest rates they are charging you, and you do not have any rights whatsoever to say "I cannot afford this"
I hope you will share this with others to help young people and their families better understand the risks inherent with the current student loan system.
This 2007 article points to several issues of collusion between schools and lenders. I believe this has been addressed:
College-loan scandal prompts need to search for alternatives
Kalman Chany, president of Campus Consultants agrees with Suze.
Over four years of college, dependent undergraduates can take out up to roughly $19,000 in Stafford loans and their payments will be roughly $200-plus a month, Chany says.
For most students, that's reasonable, he says. If their parents are not willing to help out, students should think long and hard before going into additional debt.
"If they were thinking about taking out private loans to go to school, I would say you should think seriously about going to a cheaper school" or a school that provides more financial aid, Chany says.
In the same article:
Some schools have accepted payments from lenders for placing their names on, at the top of or exclusively on their preferred-lender list for private loans.
On Thursday, it was revealed that Matteo Fontana, a senior official in the U.S. Department of Education, also owned stock in the former parent of Student Loan Xpress. Matteo oversees private-sector lenders that participate in the government's Federal Family Education Loan Program. He was placed on leave Friday.
In 2009, it was reported that the Justice Department filed criminal charges against Mr. Fontana.
Also in 2009 the report "TOO SMALL TO HELP The Plight of Financially Distressed Private Student Loan Borrowers was released by The Student Loan Borrower Assistance Project (SLBA).
This is a Must Read for anyone thinking of undertaking student debt.
Recommendations to Improve Assistance for Private Loan Borrowers
1. Mandate Loss Mitigation Relief
2. Restore Bankruptcy Rights
3. Loan Cancellations for Fraud Victims
4. Re-Regulate the Industry
The lenders that created this mess can and should be part of the solution. This report shows that so far, they have not done much on a volun- tary basis to provide assistance. Yet without re- lief, student borrowers will never be able to help fulfill our social and economic need for a produc- tive, educated work force.
MEDICAL STUDENT LOANS: The Health Education Assistance Loan (HEAL) has been in operation since 1978. HEAL loans were discontinued in 1998 and HEAL refinancing terminated September 30, 2004.
However, many of these loans have still not been repaid. As a result, the Department of Health and Human Services bans these Dentists/Doctors from providing care to indigent patients.
IF a Dentist/Doctor defaults on a HEAL loan, that Dentist/Doctor will be banned from working with Medicaid/Medicare recipients.
Listen to this story of a Dentist that graduated with $136,000 debt, paid in $100,000 and still owes $300,000. One of the loans was a HEAL Loan.
The US Department of Health and Human Services provides an online list of all the Doctors who have defaulted on HEAL loans:
Defaulted Borrowers List
Here's a case where a HEAL borrower seeks loan discharge in bankruptcy court. What is interesting is this.
the government, through the Health Resources and Services Administration (HRSA), paid the insurance claims filed on behalf of the lenders and took assignment of the loans.
The lender was paid. The taxpayers are now on the hook. But check out the interest and late fees:
He (The Appellant) made only 10 payments, a total of $2,090.
His liability as of October 31, 1988 was $53,556.51 in principal,
plus $1,964.29 in interest and
$7,156.16 in late charges, which have continued to accrue at a rate of $16.51 per day and $7.15 per day respectively.
Again, $7,156.16 in late charges, which have continued to accrue at a rate of $16.51 per day and $7.15 per day respectively means that the daily interest rate is accruing is $16.51 and the daily late fee of $7.15.
$16.51 a day times 365 days equals $6,026.15 a year interest; and
$7.15 times 365 equals $2,609.75 a year
$8,635.90 divided by $53,556.51 equals 16% per annum or more if interest on the interest is accumulated.
LET'S NOT GET LOST IN THE WEEDS OF THIS ONE EXAMPLE.
The above example is ONLY provided simply to demonstrate just how impossible it will be for millions of Indebted Students to ever pay off their Student Loan, and more importantly, to show that WE, the taxpayers own a lot of this debt.
THE LENDERS ARE OFTEN PAID OFF BY THE FEDERAL GOVERNMENT.
And, if this is so, then something can be done about it.
At the very least, HHS can change their policy regarding the BAN of providing care to Medicaid and Medicare patients. Wouldn't it make more sense to incentivize those who are faced with insurmountable debt because of interest and late fees to PROVIDE CARE in hard to serve communities as a way of paying back that debt? Again, the key word is incentivize, not force indebted Doctors and Dentists to provide care where care is most needed: In clinics and hard to serve areas.
Perhaps this new law can be tweeked to waive the "never defaulted" for doctors and dentists.:
For people interested into going into public service (becoming a teacher, government or nonprofit worker, for example) Congress passed income-based repayment (IBR), which makes the required monthly payment to repay college loans based on your income and after 10 years of public service the balance of your loan is forgiven.
Some light at the end of the tunnel. DIRECT LOANS: Look into these at your school.
The Student Aid and Fiscal Responsibility Act of 2009 (SAFRA) (H.R. 3221)
expand federal Pell Grants to a maximum of $5,500 in 2010 and tie increases in Pell Grant maximum values to annual increases in the Consumer Price Index plus 1%. It would also end the practice of federally subsidized private loans, using all federal student loan funding for direct loans and potentially cutting the federal deficit by $87 billion over 10 years.
Income-Based Repayment Plan
However, using the IBR plan will increase the interest paid.
YOU MAY PAY MORE INTEREST — The faster you repay your loans, the less interest you pay. Because a reduced monthly payment in IBR generally extends your repayment period, you may pay more total interest over the life of the loan than you would under other repayment plans.
And those pesky loan servicers are still in the picture:
YOU MUST SUBMIT ANNUAL DOCUMENTATION — To set your payment amount each year, your loan servicer needs updated information about your income and family size. If you do not provide the documentation, your monthly payment amount will be the amount you would be required to pay under a 10-year standard repayment plan, based on the amount you owed when you began repaying under IBR.
And the usual crap continues.
ACS Education Solutions, which is now a part of Xerox (NYSE:XRX), referred all questions for this story to the Department of Education. The company has been servicing loans under the Direct Loan program since 2003 under a $2 billion contract.
There are many examples in this article, however, here's one example for a Tax Attorney no less:
Federal Program Overcharging Some Repaying Student Loans
A tax attorney in the income-based repayment program who requested anonymity says she spent five months trying to get her monthly bills based on her adjusted gross income. By the time the problem was resolved, $2,500 in new interest charges had accrued on top of the $156,000 she already owed.
Borrowers are being subjected to the same practices that homeowners were plagued with
SALLIE MAE
A very long story, but its reminding me of the Mortgage Backed Securities scam. The lender gets paid via federal loan guarantees AND continues to use Loan Servicers to torment the borrowers.
Tell you what. Is there anyone with a little bit of cash and no qualms about bilking aspiring students that WOULDN'T TAKE THE DEAL:
Loan money to students with high interest and late fees knowing that if the student defaults that the government will pay you THE PRINCIPLE and THE CUMULATIVE INTEREST AND LATE FEES.
There's no risk to the lenders.
Go to minute 2:00 and Listen to Elizabeth Warren's take on Sallie Mae
"The way to encourage students is NOT to double and triple their debt because they default on a student loan."
I'd take any statements from Sallie Mae with a grain of salt, btw.
Student Loans, like the MBSecurities, are what Private/Public partnerships look like.
And it sucks.
And, is it really a coincidence that College tuitions keep escalating beyond the reach of Pell Grants basically FORCING aspiring students to take on debt.
Lastly, beware of Private Colleges like Phoenix:
For-Profit College Group Sued as U.S. Lays Out Wide Fraud
The Department of Justice and four states on Monday filed a multibillion-dollar fraud suit against the Education Management Corporation, the nation’s second-largest for-profit college company, charging that it was not eligible for the $11 billion in state and federal financial aid it had received from July 2003 through June 2011.
In 2003, Education Management’s chief executive was Jock McKernan, a former governor of Maine who now serves as chairman of the board. Mr. McKernan is married to Senator Olympia J. Snowe, a Maine Republican whose 2010 financial disclosure form lists Education Management stock and options worth $2 million to $10 million.
And this:
Education Management, which is based in Pittsburgh and is 41 percent owned by Goldman Sachs, enrolls about 150,000 students in 105 schools operating under four names: Art Institute, Argosy University, Brown Mackie College and South University.
Yep, Open Secrets lists Education Management assets for members of Congress
Olympia Snow's Education Management Assets equal $2,000,002 to $10,000,000
John Kerry's Education Management Assets equal $250,001 to $500,000
Whatever! I believe we will find, like the mortgage scams, that there is collusion at all levels. What will be done for those students that were trapped into private student loans?
The Students are the prey.
Student Loans Owed Now Exceeds US Credit Card Debt
You will find a Student Debt Time Clock. It presently shows over $900,000,000,000 and rising. Almost a $Trillion!