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In the universe of individual debt, student loans now take a back seat to nothing.  It is estimated that student debt in the US now exceeds One Trillion Dollars, a figure that approaches the federal deficit and exceeds outstanding credit card debt.  Debts that will follow many students for decades, ruining their opportunities for better lives and adding an additional drag on our economy, an anchor that will benefit only our largest financial institutions at the expense of small businesses who rely on consumer spending to thrive.  Requiring an entire generation to repay excessive student loans will not provide the stimulus our economy needs to grow and advance.  Instead it will further depress economic growth and set the stage for another financial crisis.

Sadly it isn't just the interest on student loans that is driving this burden on students, many of whom are being priced out of obtaining the higher education and technical skills they need to compete with workers in the rest of the world.  Now, over 900 colleges, in concert with predatory lenders, are coercing recipients of all forms of student aid to enroll in payment/debit card programs that unconscionably extract on millions of dollars of extra fees the colleges and lenders pocket at the expense of the very poorest, unsophisticated and needy students in what is tantamount to consumer fraud.

Colleges and banks rake in millions from the fees, often through secretive deals and sometimes in apparent violation of federal law, according to the report, an early copy of which was obtained by The Associated Press. [...]

"For decades, student aid was distributed without fees," said Rich Williams, the report's lead author. "Now bank middlemen are making out like bandits using campus cards to siphon off millions of student aid dollars."

Colleges pressure students into enrolling in these programs by their colleges, who often delay receipt of student aid by check or direct deposit if students refuse to sign up with the college's preferred provider.  Some colleges even require use of these payment cards as a Student ID.  Once students are enrolled in these payment/debit card programs, the lenders (and also the colleges) share the "financial rewards" generated by the large number of extra fees charged to students in what amounts to a classic financial "churning" operation designed to siphon off funds intended to pay for tuition and other costs of higher education.  Some of the various fees that one prominent lender and participant in this "scam", Higher One, charges students after they are locked into Higher One's college account program include the following:

  1. Lack of Documentation Fee: $50 (charged for failure to provide certain paperwork, a fee the US Dept. of Education has specifically informed colleges is not permitted under Federal law)
  2. Replacement Card Fee: $21 per card
  3. Fees for Using Non-Higher One ATM machines: $2.50 per transaction
  4. Fee for Account overdrawn 45 days: $50
  5. Fees for Overdrawn Account on recurring payments: $29-$38 for each occurrence
  6. Fees for Non-use Higher One Account for 6 months: $10 per mo.
  7. PIN (Personal ID number) Fee: $.50 per mo.
  8. Cash Advance Fee: 3.5% of advance with $5 minimum
  9. Official Check Fee: $8 per check issued

The Schedule for these fees is, not surprisingly, buried in the fine print of the documents provided to students when they enroll. In the rush to pay tuition and other costs, students often overlook or fail to comprehend the extra costs to which they may easily become subject.  Again, we find another "market" solution to a problem that didn't previously exist.  Colleges have disbursed student aid without the use of middlemen for decades.  I know.  My son's college (a large public university) disbursed his financial aid via a direct deposit to the school's own bank account to cover his tuition.  It didn't require him to set up an account with a separate lender and make payments himself.  

Yet across the country 2 out of every 5 institutions of higher education use companies like Higher One to milk their students out of every dime they can, legally or illegally.  Many students have been forced to quit school before completing their education because of the high costs associated with our nation's preferred method of funding higher education.  No wonder America is falling behind in global economy, ranking 48th in the world in math and science graduates.

Can it get worse?  Yes.  Mitt Romney could be elected President and Republicans could take control of both houses of Congress.  Even if President Obama is re-elected, if Republicans retain control of the House, little if anything will be done to rectify the effect of our failure to invest in the education of our nation's youth.  More jobs will be lost, more students will pile up greater debts they cannot repay and more businesses will close due to lack of a sustainable customer base.  But hey, financial loan sharks like Higher One will do just fine.

Originally posted to Steven D on Wed May 30, 2012 at 03:06 PM PDT.

Also republished by Community Spotlight.

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Comment Preferences

  •  All prepaid debit card providers... (4+ / 0-)

    should be allowed to service that market. Some are quite reasonable but indeed some are sharks.

  •  My school uses Higher One. (6+ / 0-)

    Fortunately, I figured out their scheme at the beginning of last semester, so I opted for the paper check option.

    Though they say it delays getting disbursements by 3-4 days, I still seem to get it quickly.

    24, male, OK-02 (current), TX-04 (born)

    by chancew on Wed May 30, 2012 at 03:17:40 PM PDT

  •  Yes, higher education is one of the established (7+ / 0-)

    flavors of human husbandry, the exploitation of humans by their own kind to their detriment.  Now they're moving on to elementary education.
    Some of the other flavors are

    incarceration
    elder care
    high tech medical
    foster care

    People to Wall Street: "LET OUR MONEY GO"

    by hannah on Wed May 30, 2012 at 03:37:08 PM PDT

  •  kids these days (12+ / 0-)

    The way the roles are typically played, the old timer tells the kid how easy they have it now compared to what the old timer had to deal with. With college costs now, it’s the exact opposite.

    I finished undergrad in 1992 – far from the Golden Age of low tuition and generous grants and scholarships, but compared to now it was wine and roses. Pell Grants actually covered a substantial percentage of tuition. No one had to turn to private lenders. No one had heard of Sallie Mae. No one had to take out a loan from a bank at 12% or 13% because they maxed out what they could borrow through federal student loans.

    If you are in your teens or ‘20s today just be aware: compared to what your parents and grandparents were asked to pay you are getting a rotten deal. State subsidies have shrunk dramatically. Federal grants and loans haven’t increased anywhere near enough to match the price escalation is college costs.

    Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. - Groucho Marx

    by Joe Bob on Wed May 30, 2012 at 03:50:20 PM PDT

    •  Sounds familiar (11+ / 0-)

      Went to college just after you did.

      And my costs were half of what it would cost today.  That is factoring in inflation too.

      The subsidized loans were there, and the banks fell over themselves to offer them up when I went.  Find out now why, they were a no lose proposition for them. They were able to privatize profits and socialize the risk.

      I got a couple of grants, worked, and had loans. It didn't leave much left over but it paid for school, and I was able to crawl out of that debt before the 10 years was up.

      I had a few instances where the lenders lost my check, and I was hit with late fees, but by time they started to get worse, I cut bigger checks and got rid of them.

      Heard Romney wanted the government to return to that system. It only benefits the lenders.

      Not only do the Republicans want to drown government in a bathtub, they want to do it to education, unions, science...

    •  I agree and support many of your points, (5+ / 0-)

      however...in the mid-80s the interest rate on my grad student loan was 10%.  

      This is something we can again thank Reagan for.

      •  True, but it's all relative (1+ / 0-)
        Recommended by:
        Saint Jimmy

        When I took out my first student loans in 1988 I think the interest rate was around 8.5%. Of course, at the same time you could earn a similar rate of interest on a 6-month CD.

        Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. - Groucho Marx

        by Joe Bob on Thu May 31, 2012 at 10:54:59 AM PDT

        [ Parent ]

    •  Actually its not just health care costs (3+ / 0-)
      Recommended by:
      m16eib, Joe Bob, Saint Jimmy

      For the first time in american history the newer generations will have a lower standard of living than the older.

      Education costs as part of total earning's are part of this multifaceted status.

      •  It Depends Upon How You Define... (0+ / 0-)

        a lower standard of living.

        If you are just counting money and using inflation and salaries to compare, you are probably correct.

        But if you ignore money and compare actual lifestyles and quality of life, I would disagree.  For example, 10 years ago my father went in to the hospital for routine testing and came out with an artificial heart valve.  35 years earlier a friend of the family went in for a needed heart bypass with only a 20% chance of survivng.  Clearly, at least in my opinion, my father had a higher quality of life than his father, because artificial heart valves were not available to my grandfather.

        Each generation is now having so many advances that benefit them.  I remember growing up in the 60's we rarely ate out in resturants.  Today, eating out several times a week is just considered normal.  The current generation has cell phones, ipods, etc. that the previous generation did not have.

        Do you think that a 22 year old college grad would really want to live the life that their father and mother had 20+ years before?  My kids would not have traded their llives for mine because they really enjoy the technology that we have today.

    •  I am appalled at how students are used (2+ / 0-)
      Recommended by:
      Joe Bob, Saint Jimmy

      as cash machines for Wall Street. This frog is boiled! We didn't quite noticed as things have gotten worse gradually.

      When I graduated in 1974, I had a little over $4,000 in debt. No small sum, but I went to a private college with grants-in-aide.

      We sent our son to technical college because he's an Aspy and just couldn't take the stress of any debt. Also unemployment is still high, but it's especially so among special needs people. Our daughter's in grad school studying bio-medical research and has a stipend, but she has undergraduate debt.

      I am disgusted that we have let things get this way, but I know my congressman and senators are just fine with things as they are. It's no wonder college students were pepper sprayed while protesting higher tuition rates. Sheep aren't supposed to stage sit-down strikes; they're supposed to do as they're told and take on more debt without a bleat.

      "The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

      by Lily O Lady on Thu May 31, 2012 at 10:26:49 AM PDT

      [ Parent ]

      •  Better Consumer Education Would Help... (0+ / 0-)

        Teaching young people to prioritize their lives would also help.  If the most important thing for a student is to stay out of debt, they can easily do it.  Unfortunately, we, as parents, sometimes let them think that they can have everything they want without consequences.  And they go deep into debt to get what they want without realizing the long term consequences.

        I have two daughters.  One graduated without debt.  The other graduated with debt.  But, they were both wise consumers and knew what they were doing and what the result would be.

        •  Full grow adults have been sucked into (0+ / 0-)

          debt as well. Remember all the Countrywide ads a few years back? Use the money in your house to redecorate, go on that vacation, or whatever you want!!

          And there were ads appealing to college students about the same time telling them that they could borrow up to $10,000 to buy books, a computer or whatever they wanted. We people are inundated by ads like this and there are even spots on the local news about such things, they seem like the norm. And the norm is normal--do-able.

          I'm not placing the burden on students because tuition is out of this world! It leads the rate of inflation. If you want to go to school, the piper must be paid. And the piper wants a hell of a lot of money!!!

          My daughter has a good consumer education. She leaped into college two years early, which caught us off guard at bit. And she had to go five years because here first two years at one school were spent finishing her high school requirement with college courses instead of satisfying college requirements. And she transferred to finish up to a private college where costs went up and assistance went down each year. We spent thousands of dollars of our retirement funds to pay the portion allotted us.

          We also had to pay our son's tuition for the first 15 credit hours because he was homeschooled. He had a small Hope Scholarship for scoring so high on the GED, but the technical college called it a book fee (it was not) and wouldn't release it to us for tuition. After he had 15 hours with a 4.0 he started receiving the Hope Scholarship, but that was cut, so that we still had all his books and fees to pay.

          The savviest of consumers still has many challenges which get worse every year.

          "The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

          by Lily O Lady on Thu May 31, 2012 at 01:53:10 PM PDT

          [ Parent ]

  •  thanks for adding this piece of the puzzle (7+ / 0-)

    into this conversation.

    This needs  to be stopped.

    It's not a fake orgasm; it's a real yawn.

    by sayitaintso on Wed May 30, 2012 at 08:02:13 PM PDT

  •  When I went to Portland State Univ (5+ / 0-)

    they also required you to pay with only a few select options, if you wanted to pay with a Visa for example--which I wanted to do since my debit card from my bank was Visa--they charged you a ridiculous payment processing fee of around $35-50. There is no legitimate reason for this. The small business I work at gets charged only 7% if we use Am EX, and it is by far the highest fee.

    The fees like this, administration, and ridiculous tuition forced me to move back to a state I have no interest in living in so that I can pay resident tuition.

    The Pin fee should be illegal too. If they can't do these things without charging exorbitant fees they should not be in the business of handling money, but of course their business isn't education, it's extracting money out of students.

  •  Educating myself on this--and recommend the book (2+ / 0-)
    Recommended by:
    Apost8, Lily O Lady

    The Student Loan Scam:  The Most Oppressive Debt in U. S. History - and How we Can Fight Back by Alan Michael Collinge.

    It is a treasure trove of information on just how certain members of Congress (and they are explicitly identified), the banksters, the third-party servicers, the collection agencies,and many universities are all in cahoots in setting this trap for current students.  Even basic information like how people are still fooled that Sallie Mae is a government agency and how that private company trades on that name alone is going to help someone, somewhere.

    The trajectory the student loan industry has taken since I was in college--and just who is facilitating it--is laid out in plain and very enlightening terms.

    Would recommend to both students and parents before borrowing a dime.

    If the plutocrats begin the program, we will end it. -- Eugene Debs.

    by livjack on Thu May 31, 2012 at 05:58:06 AM PDT

  •  This has troubled me since GW Bush (3+ / 0-)
    Recommended by:
    Lily O Lady, Steven D, Saint Jimmy

    The student loans have been set up to milk students.  Generally students are unsophisticated shoppers who are taken advantage of.  I think of students as our future to be nurtured, encouraged and helped along their way to adulthood and a livelihood that will keep our economic engine moving forward. The Republicans and bankers see them as a cash cow to manipulate and deceive.  The schools that allow or even facilitate for their profit are truly evil and destructive.  I have been appalled to see this happen.   We need student loan advocates to help students work their way through the system in a way that most benefits  the students not the banks or schools.  

  •  More legalized robbery in criminal capitalist (0+ / 0-)

    America.  Yee fucking haw.

    One in four people in the United States suffers from chronic anxiety, a mood disorder, or depression—which seems to me to be a normal reaction to our march toward collective suicide. Welcome to the asylum. ~ Chris Hedges

    by Saint Jimmy on Thu May 31, 2012 at 02:50:50 PM PDT

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