Perhaps some Smart Kosacks have already sniffed this one out. If not, you heard it here first!
Student loans are the only type of loan in this country to be stripped of standard bankruptcy protections. After 9 years of diligent research, and sustained observation, StudentLoanJustice.Org has come to understand with confidence, and shown clearly that the removal of this critical and fundamental consumer protection has turned the student loan system against the public, and the systemic effects of this have been devastating to the public good. While no one wants to file for bankruptcy, this consumer protection is a critical and essential element for any stable, healthy, rationally priced lending system. By removing bankruptcy protections from student loans, Congress enabled a lending environment to take hold where defaulted loans are financially more lucrative than loans which remain in good stead- this is a defining characteristic of a predatory lending system, and cannot be sustained.
The Center for American Progress, A prominent Washington, DC. based think tank, appears to understand, and agree with this view in their most recent policy paper regarding bankruptcy protections for student loans, published last fall.
The CAP makes it sound like they are for bankruptcy protections, but they use a so-called "Qualified Loan" filter which keeps bankruptcy GONE for loans that have "reasonable" interest rates, repayment/deferment options, and that are from schools that pass the "gainful employment" test...This includes, by their definition, ALL FEDERAL LOANS, and probably a majority of all private loans!!!
Legislatively, the citizen's have seen the return of bankruptcy protections be passed over repeatedly in favor of various repayment programs, "gainful employment" rules, and other legislation intended to fix the student loan problem over the years.
The repayment programs, including Income Based Repayment and Public Service Loan Forgiveness, as we predicted, have proven to be looking for every reason to NOT admit people, and will certainly be using every excuse to kick as many of the people they do let into the program OUT of the program. It is being run like a credit card teaser (ie interest rate reduction for making ontime payments), where only about 15% of the people who try for the benefit actually get the benefit.
The Gainful Employment Rule (a law that aimed to expunge poorly performing colleges from the federal lending program, was weak from the outset, would never have helped anyone saddled with student debt even if it had worked as promised, and failed almost completely to achieve what it was intended to achieve, thanks to the Department of Education, which was against the plan from the beginning, and administered it as such.
Since almost the first day that these "alternatives to bankruptcy" were proposed, we predicted (boldly) that they would not work, and would only perpetuate the status quo. We were right. In the absence of bankruptcy protections (which compel the Department of Education to have "skin in the game" on the borrowers side, instead of against them) there is absolutely no chance that the "new" gainful employment rule (recently proposed), or any new repayment plans that might be proposed will work.
The CAP's most recent initiative, dubbed "Higher Ed, Not Debt" appears to be yet another attempt to pre-empt this. While the initiative has not yet put forth any legislation to examine, it has all the hallmarks of yet another feckless effort, at best. At worst, it looks suspiciously like a taxpayer-funded bailout designed to provide private student lenders a vehicle to offload their non-performing private loans!
What is more disturbing, however, are the CAP staff who who are responsible for the Center's higher education policy, David Bergeron, and Joe Valenti. Prior to joining CAP, Bergeron spent 30 YEARS at the Department of Education. His most recent position was as the Deputy Assistant Secretary of Education, and Director of the Office of Post-Secondary Education, which MANAGES THE STUDENT LOAN PROGRAM. The Chronicle of Higher Education actually describes Bergeron as "THE INSTITUTIONAL MEMORY" of the Department of Education.
The other author, Joe Valenti, came to the Center from the TREASURY DEPARTMENT, where he was a "ALEXANDER HAMILTON FELLOW". Alexander Hamilton is credited with architecting the nation's banking/financial system, and wrote a majority of the Federalist Papers. These documents are, among other things, used to justify a strong, centralized government (as opposed to a weak government model). Interesting guy was Hamilton...but he was no progressive.
What is perhaps most distrubing, however, are funders of the Center for American Progress. Below is just a partial sampling:
Bank of America
DeVry Education Group
The Blackstone Group
There is absolutely NOTHING progressive about the paper in question or its authors. Further, there is nothing progressive about the Center's "Higher Ed, not Debt" initiative, or its corporate funders. There is only the stench of corrupted, beltway politics, false advocacy, and elitist duplicity. The Center for American Progress, at least regarding student loans, is a false front, is working against the people, against our freedom, and against progressive ideals. It is a sick joke, particularly for those who have been hurt so badly by the corrupted student loan system.
For the sake of the citizens, the Democratic Party, and the relevance of this nation's democracy generally. We urge the IMMEDIATE DE-FUNDING of the Center for American Progress.
For Questions, Please Contact:
Alan Collinge, StudentLoanJustice.Org