Submitted by Alan Collinge (not verified) on July 2, 2009 - 2:10pm.
Thanks to NAF for at LONG last describing this hidden, predatory network that has benefited tremendously from the misfortune of students, while claiming to be serving their interests. This is probably the most blatant and harmful elements of the student loan industry.
This problem was clear to all who simply looked for a few seconds at it (and those ensnared by it obviously) but it has gone totally unaddressed for too long, and huge numbers of people have been not simply harmed by this government sanctioned theft, but financially destroyed by these entities. I only hope that others dig deeper in future pieces, and expose at least a few examples of the corrupt, conflicted, misleading, and ultimately, hugely damaging behavior that many if not most of these entities engaged in.
If the motivations of the various elements of the Higher Education Finance system were properly directed, these guarantors (if they existed) would be serving in an oversight role over the universities, and the lenders, and would push hard to make sure the students got a quality, low priced education. This would be on behalf of the true guarantor of these loans, the federal government. These entities would be compensated ONLY by the federal government, and only for activities that truly were aimed at Higher quality, lower cost, and less time in school.
Of course, the Federal government would only do this if it had skin in the game in the case of student loan defaults. Currently, it does not...According to the Wall Street Journal in 2004, the Department predicated that it would recover every dollar of principal on defaulted loans, plus about 20% in interest, fees, etc. So at the very least, the Department of Ed is breaking even on defaulted loans, and may be realizing net gains...something that only happens because nearly every standard consumer protection has been stripped from student loans, and only from student loans.
Only by returning at least nominal protections like standard bankruptcy protections to student loans, and ending predatory (and shameful) collection practices such as confiscating the social security and disability income of senior citizens (which usualy doesn't even cover a fraction of the penalties), will the possibility exist for this system to, once again, be oriented where it should have been all along.
If you have any doubts about the economic destruction this predatory creation has wraught in the lives of millions of decent citizens, consider that the true default rate for undergraduate students is probably 30%, perhaps higher. Also, come to studentloanjustice.org, and pick a couple of random borrower submissions to see for yourself the magnitude and scale of the wealth extraction that has gone on.
Excellent Piece
Thanks to NAF for at LONG last describing this hidden, predatory network that has benefited tremendously from the misfortune of students, while claiming to be serving their interests. This is probably the most blatant and harmful elements of the student loan industry.
This problem was clear to all who simply looked for a few seconds at it (and those ensnared by it obviously) but it has gone totally unaddressed for too long, and huge numbers of people have been not simply harmed by this government sanctioned theft, but financially destroyed by these entities. I only hope that others dig deeper in future pieces, and expose at least a few examples of the corrupt, conflicted, misleading, and ultimately, hugely damaging behavior that many if not most of these entities engaged in.
If the motivations of the various elements of the Higher Education Finance system were properly directed, these guarantors (if they existed) would be serving in an oversight role over the universities, and the lenders, and would push hard to make sure the students got a quality, low priced education. This would be on behalf of the true guarantor of these loans, the federal government. These entities would be compensated ONLY by the federal government, and only for activities that truly were aimed at Higher quality, lower cost, and less time in school.
Of course, the Federal government would only do this if it had skin in the game in the case of student loan defaults. Currently, it does not...According to the Wall Street Journal in 2004, the Department predicated that it would recover every dollar of principal on defaulted loans, plus about 20% in interest, fees, etc. So at the very least, the Department of Ed is breaking even on defaulted loans, and may be realizing net gains...something that only happens because nearly every standard consumer protection has been stripped from student loans, and only from student loans.
Only by returning at least nominal protections like standard bankruptcy protections to student loans, and ending predatory (and shameful) collection practices such as confiscating the social security and disability income of senior citizens (which usualy doesn't even cover a fraction of the penalties), will the possibility exist for this system to, once again, be oriented where it should have been all along.
If you have any doubts about the economic destruction this predatory creation has wraught in the lives of millions of decent citizens, consider that the true default rate for undergraduate students is probably 30%, perhaps higher. Also, come to studentloanjustice.org, and pick a couple of random borrower submissions to see for yourself the magnitude and scale of the wealth extraction that has gone on.