Soaring Tuitions Mean Soaring Student Debts Mean More Defaults

Pre-1980s higher education was good value in the United States, next to nothing for a degree from a public institution. These days students going to these

English: Day 3 of the protest Occupy Wall Stre...

same institutions are being punished with brutal, predatory loan policies from both Congress and private corporations. The government sold students out with the Federal Family Education Loan Program (2007-2008), which sold the loans to private servicers (Direct Loans “regulated” by the federal government). Students had/have no say in which bank bought their loans and now have no say in which servicers buy their loans. The result is that you can get stuck with an unethical servicer, or an incompetent one at best. And there’s not a damn thing you can do about it except to consolidate because except for a toothless ombudsman service, you are strictly on your own unless you pay an attorney to fight for you. But beware. You still don’t have a say who buys your loan, and, depending on the new servicer, things could get worse.

It’s clear that student loans are the next mortgage scam where students are being used as cash cows. Basically students are being fleeced by our own government and by rapacious corporations who service student loans, both private and federal. Yes, these corporations must abide by laws set by Congress, but the mountains of paperwork and bureaucracy involved means that communication can be poor at best. Information is tightly  held by servicers, and the average person has no idea what he or she is dealing with.

Americans owe $1 trillion in student loan debt. How did that happen, and what’s the impact on the nation’s economy? Watch/read the PBS interview with Paul Krugman.

True, you can qualify for various repayment plans, which can reduce your monthly payments depending on how much you earn (income-based repayment plan or IBR). This is somewhat humane considering that it coincides with the fact that there are few or now jobs for graduates in many sectors. My $20,000 student loan will balloon to over $60,000 by the time my IBR expires. All my loans are “subsidized” by the federal government, but the federal government does NOT pay interest even on subsidized loans, even while my loan is in deferment.

This month, when I “consolidated” one of my loans, the servicer who bought them (Sallie Mae) gave my old servicer (ACS – a Xerox company–I wrote about it in another post) $340 more than my principal balance was before the consolidation, so I immediately accrued that extra amount. The reason I know this is because of the discrepancy between my last statement from ACS and my first statement from Sallie Mae is a $340 debit. Maybe it’s my penalty for getting out from under ACS’s abysmal service by “consolidation.” (Consolidation entails two or more loans, so this proves that no one knows what they’re doing.)

Originally the government established Sallie Mae to provide federally backed loans. Today it’s a private company, trading on the stock market.

When the economy goes into a tailspin, the planners’ solution is always the same: stoke up debt. So for them, it’s handy to have a hand on the lever. In fact, since the downturn, they’ve encouraged more and more Americans into college and into debt…. And when the government coerces people into debt, things nearly always go wrong. Source

At this writing it looks like I have no way to challenge that amount. ACS (which has an F rating by the Better Business Bureau) tacked on that $340 to get its chunk of change. It was their way of extracting a pound of flesh from me, my penalty for taking my business elsewhere. I asked Sallie Mae why there was the discrepancy, and the woman I spoke with, Anita, said that is how much Sallie Mae wrote the check for to buy my loan. They don’t care if they paid too much because as far as their concerned, it’s just my money, not theirs.

The reason I “consolidated” this loan was that my original servicer was inept bordering on fraudulent. Before I discovered a secret phone number in the US, I was always routed to a call center in the Philippines (or elsewhere) and spend inordinate amounts of time trying to communicate with people who could barely understand English. They were robotic answering machines who couldn’t think outside the box if their lives depended on it. In addition, any communication with ACS was slow, difficult, and confusing. Their website is prehistoric and not user-friendly at all. It’s as if they could care less about the victim customer. All they want is their profit.

I may have jumped out of the proverbial frying pan into the fire with this consolidation. The only good thing is that my interest rate is supposedly fixed and won’t be affected after Congress is set to double interest rates.

As we all know, US student loan debt has surpassed credit card debt. The huge elephant in the room, like mortgage debt, is how to gouge for profit with predatory lending (historically called “usury”), not how to improve the lives of newly-minted graduate citizens or improve the problem-solving abilities of a nation (and a world) in peril. It’s a punitive system and it’s clearly broken. Student loans should create opportunities for graduates, not cripple them for life.

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