“Student debt collectors have powers that would make a mobster envious”.
Thus spake Elizabeth Warren and, if anything, she is understating the student loan crisis. We used to jail loan sharks. Now they run the likes of Wells Fargo.
Student debt as a category is now the second largest burden in the nation, trailing only home mortgage debt. This year it surpassed total credit card debt. Tuition rates have climbed astronomically, the amounts borrowed follow and the percentage of defaults has sky rocketed.
As a former New Jersey resident and a father I am familiar with Rutgers – the State University of New Jersey. Tuition, room and board for a full time undergrad student at the New Brunswick campus has reached almost $26,000 a year. A commuting full time student still must fork over about $14,000 a year. And that’s the in-state tuition.
Tuition was maybe $2,500 a semester for a commuting student in the year 2000.
So a NJ resident student who plans to live on campus at the state university needs to plan on spending in excess of $100,000; twice that at the smaller, private Monmouth University. College tuition rates and “fees” have soared out of control mainly due to the easy availability of student loans – the ever increasing cost of college covered by borrowings leaving the kids in ever increasing debt.
Now mind you – the banks of the old Raritan ain’t Princeton. Rutgers is the state university.
How did we get our kids into this mess? Well, we weren’t watching.
Once upon a time we as a people invested in education. Once upon a time there was a free college – The City University of New York – supported by all of the people of the city, rich and poor alike. I went to that free college because I had no money. It wasn’t open enrollment mind you – you had to qualify to get in. I was admitted on a trial basis – I had to do two semesters with a B average to matriculate. But I never had student debt; I bought my first house on Staten Island at 25 years old.
While CUNY is no longer free, at $6,030 a year for New York City residents it’s a bargain indeed.
I know lots of college grads and professionals who can’t buy a house or raise a family because of student debt.
Today, in the era of never ending war, tax cuts and tax breaks for the one percent and corporations, states are starving their public colleges, passing the cost on to the consumer. Arizona had the highest rate of tuition increase in public universities and the largest decline in funds earmarked for that purpose.
It all started as a good idea in 1965, part of Lyndon Johnson’s “Great Society”. Poverty would not be a barrier to education. In the decades that followed, changes in the law turned student debt into the zombie debt that never dies. There is no statute of limitations on student debt collection efforts. It lives forever.
In 1978 stories surfaced of some doctors and lawyers filing bankruptcy and discharging their student debt immediately after graduation; default rates at the time were less than 1%. No matter. Congress immediately passed legislation that forbid discharge in bankruptcy for the first five years after graduation.
In 1990 the discharge rule was extended to seven years. In 1998 Congress completely eliminated the ability to discharge debt in bankruptcy. It also eliminated the ability to discharge the debt due to crime or fraud. Student debt is the only debt for which there is no Federal escape clause.
In 2005 the discharge rules were extended to include PRIVATE lenders. Nice.
Guess who was behind those rule changes?
This mafia like loan sharking is all your government – see chart above under “How it Works”. There are no rules – they will garnish your wages without a court order, stop your IRS refunds and take money from your social security checks.
Parents who co-sign these loans are on the hook forever – recently cases have come up where debt collectors have hounded the parents of dead students. No forgiveness even in death.
Boomers with defaulted student loans of their own or as co-signers of defaulted loans of their children will soon find that government collectors will seize/reduce their social security checks as they approach retirement, seeing that they have only enough to live at the poverty level. You will pay.
Hell, the government won’t even let you refinance to a lower rate. You can refinance your house – but not your degree.
So what do we do about this shit? More that 25% of government student loans are in default; at two year colleges it’s 40% A cottage industry of for profit “colleges” has sprung up, preying on the unskilled, making a living off student loans. One need only watch the ads playing during the likes of the Maury show to see what I mean.
During the great mortgage crisis a few years back, some 25% of home loans in some states were in default – but one could seek relief in bankruptcy court. The lenders were bailed out. I don’t see any bailout for student loans – after all, it’s the government doing the loan sharking and creating the future wage slaves.
At a minimum we should pressure government to begin by allowing refinancing to lower rates. Subsequently, bankruptcy and other protections should be re-instated with perhaps no discharge for the first ten years. I would expect a deluge of bankruptcy filings. Alternatively, consider forgiving any unpaid debt after twenty years of payments. I won’t even bother discussing the possibility of free tertiary education. Why bother.
And don’t chase the parents if the student borrower is dead. Sheesh. I thought the Gambino’s were bad.