The Student Loan Mafia

“Student debt collectors have powers that would make a mobster envious”.

Thus spake Elizabeth Warren back in 2014 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. Five years ago  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 $25,000 a year. A commuting full time student still must fork over about $14,000 a year.  And that’s the in-state tuition for New Jersey residents.  Out of state rates are significantly higher.

Tuition was maybe $2,500 a semester for a commuting student in the year 2000 when my eldest daughter was attending.  I asked her if she wanted to live on campus or would rather I bought her a new car.  She chose the car.

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.

Monmouth University, a smaller private college is now charging $36,732 in tuition and fees per year while room and board is an additional $13,451 per year bringing the total cost to almost $50,000 per academic year.   When my youngest daughter attended Monmouth as a commuting student it was affordable particularly considering she won a scholarship which paid one third of the tuition at the time.

College tuition rates and “fees” have soared out o 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.  Neither is Monmouth.  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 were  free colleges – The City University of New York was one of them – 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 $7,090 a year for New York state 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.  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.

As a result many students are fleeing the country after graduation.  Yes, indeed it has gotten that bad for some.

Chad Haag left the U.S and his student loan debt to take up residence in India where he married the young woman on the elephant.

Chad Haag considered living in a cave to escape his student debt. He had a friend doing it. But after some plotting, he settled on what he considered a less risky plan. This year, he relocated to a jungle in India. “I’ve put America behind me,” Haag, 29, said.

Today he lives in a concrete house in the village of Uchakkada for $50 a month. His backyard is filled with coconut trees and chickens. “I saw four elephants just yesterday,” he said, adding that he hopes never to set foot in a Walmart again.

Haag’s student loan balance of around $20,000 isn’t as large as the burden shouldered by many other borrowers, but, he said, his difficultly finding a college-level job in the U.S. has made that debt oppressive nonetheless.

“If you’re not making a living wage,” he said, “$20,000 in debt is devastating.”

Student loan borrowers are packing their bags and fleeing the U.S. for other countries where the cost ofliving is often lower and debt collectors wield much less power over them.  Although there is no national data on how many people have left the United States because of student debt, borrowers tell their stories of doing so in Facebook groups and Reddit channels.  Advice is also offered on personal finance websites.

A number are teaching English in China where, they earn a little over$1,000 a month their employer covers the cost of rent and board.  Others are in Ukraine, Taiwan and Japan.

Of course the debt collectors will be waiting for you if you ever return.  And when you are old and gray they will garnish your social security checks even if you are overseas.

The situation has finally drawn the attention of the political class and we now hear much talk about writing off or cancelling student loan debt from the progressive left.

At a minimum the government should begin by reinstating bankruptcy and other protections 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 college education.  Why bother, although of what use or purpose is a state university if the students in that state cannot afford to attend?

And don’t chase the co-borrowing parents if the student borrower is dead.  Sheesh.  I thought the Gambino’s were bad,

About toritto

I was born during year four of the reign of Emperor Tiberius Claudius on the outskirts of the empire in Brooklyn. I married my high school sweetheart, the girl I took to the prom and we were together for forty years until her passing in 2004. We had four kids together and buried two together. I had a successful career in Corporate America (never got rich but made a living) and traveled the world. I am currently retired in the Tampa Bay metro area and live alone. One of my daughters is close by and one within a morning’s drive. They call their pops everyday. I try to write poetry (not very well), and about family. Occasionally I will try a historical piece relating to politics. :-)
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4 Responses to The Student Loan Mafia

  1. beetleypete says:

    The once free university education is now subject to fees here too, so we are beginning to see the problem of student debt. Some universities are seeing such a shortfall in applicants, they are opening offices in countries like China, trying to attract foreign students with money into their institutions.
    Best wishes, Pete.

    Liked by 1 person

  2. Maggie says:

    My cousin, who teaches college, told me years ago that higher education was one of the biggest businesses in the U.S. I thought it was exorbitant when my kids were attending, but now it is crazy. And now businesses are forming to try to take advantage of the crisis by offering solutions (which is a misnomer) for the debt problem. I hope the push to go back to educating in the trades continues to grow,

    Excellent post.

    Liked by 1 person

  3. LOL! I am sorry for laughing.

    Liked by 1 person

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