- Higher education today isn't like it used to be. US students
face crisis conditions. Washington and lenders wage financial war on them.
In addition, dozens of budget-strapped states cut funds to public colleges
- Students are directly impacted by sharp tuition hikes
(double-digit at some schools) and less financial aid. As a result, many
thousands are entirely shut out. Others relying on student loans face permanent
- By end of 2011, student loan debt will top $1 trillion.
It already exceeds credit card indebtedness. Moreover, in the past year
alone, students borrowed over $100 billion, double the amount a decade
ago adjusted for inflation.
- Borrowing is one thing, repaying another. Therein lies
the rub. Many former students end up debt slaves for life. With interest,
collection charges, penalties, and other costs, some burdens exceed $100,000,
Over their lifetime, they can rise five-fold or more for some.
- Repaying graduate school debt pushes it higher. New medical
professionals can owe $200,000 or more at first. An unidentified one said
he'll pay $1,000 a month for the next 30 years. With higher inflation,
monthly costs will rise exponentially.
- Many end up trapped for life because debt can multiply
five-fold or more over its lifetime. As a result, a new medical professional
paying $1,000 a month now may owe $5,000 or more monthly in 30 years, and
if obligations aren't repaid, burdens rise annually.
- A March 2011 Institute for Higher Education Policy study
titled, "Delinquency, The Untold Story" examined repayments from
October 2004 - September 2009.
- It showed only 37% of student loans are paid on time.
Another 15% of students default, 26% are delinquent, 12% use forbearance
to temporarily suspend payments, and 11% defer them because of re-enrollment,
economic hardship or unemployment. However, doing so increases burdens
as interest and other costs rise.
- Moreover, default data greatly understate an exponentially
rising burden, facing growing numbers of students indebted for life and
unable to repay. More on that below.
- On September 12, New York Times writer Tamar Lewin headlined,
"Student Loan Default Rates Rise Sharply in Past Year," saying:
- According to way understated Department of Education
data, "8.8% of borrowers overall defaulted in the fiscal year"
ending September 20, 2010, "up from 7% the previous year."
- According to Institute for College Access & Success
and Project on Student Debt program director Debbie Cochrane, "The
extent of borrower distress is barely touched upon" by these numbers.
- Last spring, the Senate Health Education Labor and Pensions
Committee found "some companies estimated their former students had
staggeringly high lifetime default rates - in one case, 77.7%."
- On November 2, Tamar Lewin headlined, "College Graduates'
Debt Burden Grew, Yet Again in 2010," saying:
- Student loan burdens increased another 5% in the fiscal
year ending September 30, 2011. Average debt hit a record high. At least
two-thirds of the class of 2010 graduated with student debt, besides others
incurred for them by parents or other family members.
- Finaid.org's Mark Kantrowitz said "Student debt
goes up and it doesn't ever go down. We're clearly heading in the direction
of decreased college affordability." Lower income family students
already are greatly impacted.
- Kantrowitz estimates class of 2011 loans by students
and parents at $34,000. Whether or not they graduate, many students have
debt burdens approaching or exceeding $100,000. If repaid over 30 years,
it's multiples higher, and defaulting brings no relief.
- Once entrapped, escape is impossible. Bondage is permanent,
and future lives and careers greatly impaired or ruined.
- Congress ended bankruptcy protections, refinancing rights,
statutes of limitations, truth in lending requirements, fair debt collection
ones, and state usury laws when applied to federally guaranteed student
- As a result, lenders may garnish wages, income tax refunds,
earned income tax credits, as well as Social Security and disability income
to assure defaulted loan payments. In addition, defaulting may cause loss
of professional licenses, making repayment harder or impossible.
- Moreover, under Congress' default loan fee system, holders
may keep 20% of all payments before any portion is applied to principle
and interest. A borrower's only recourse is to request an onerous, expensive
"loan rehabilitation" procedure.
- It requires extended payments not applied to principle
or interest. A new loan must then be arranged, incurring additional fees.
- As a result, many former students face permanent debt
bondage. In addition, no appeals process allows determinations of default
challenges under a process letting lenders rip off borrowers, many in perpetuity.
- A congressionally sanctioned conspiratorial alliance
of lenders, guarantors, servicers, and collection companies enrich themselves
hugely at borrowers' expense. They thrive from extortionist fees and related
schemes. Millions end up scammed.
- Moreover, lenders thrive on bad debts. They derive income
from inflated service charges and collection fees. Today they're more than
ever as default rates soar.
- Lifetime rates now affect one-third of undergraduate
loans, higher than for subprime mortgages. In fact, they exceed other lending
instrument burdens and are rising.
- Obama's new student loan repayment plan (unveiled in
late October) is more scam than relief.
- Since taking office, he created few jobs, did little
for beleaguered homeowners under water on mortgages or facing foreclosure,
and promises harder times head under planned austerity on top of cuts already
- Few students will benefit from his new loan repayment
plan, none facing default. Federal student loan repayment schedules will
be modestly relaxed. Congress already approved them. Students who consolidate
multiple loans may save half of 1% on interest charges.
- Instead of mandated payments up to 15% of annual incomes
over 25 years, indebted students will pay up to 10% over 20 years. Qualifying
students will get debt forgiveness after 20 years.
- Out of 36 million indebted current and former students,
less than half a million choose repayment caps because of onerous terms.
Expect fewer numbers to accept Obama's.
- Pre-2008 borrowers are excluded. So are those with private
loans and others in default. Only federal Stafford, PLUS, and consolidated
Direct Loan and Federal Family Education Loan borrowers are covered it
- As a result, expect few indebted students to be helped.
Total indebtedness will rise, not fall. Rising tuitions and fees will increase
growing burdens. Relief is nowhere in sight. At a time Wall Street practically
borrows free, federal education loans cost 6.8%. Over time, interest burdens
alone increase exponentially.
- The Department of Education scams borrowers instead of
helping. In today's environment, student and other federal loans should
be near interest-free.
- Given a protracted Main Street Depression, austerity
exacerbating it, and budget priorities favoring Wall Street, war profiteers,
and other corporate favorites, expect greater than ever student loan repayment
- Americans face rising poverty, unemployment, home foreclosures,
homelessness, hunger, student debt entrapment, and despair. The very notion
of a fair and equitable society is mocked.
- With no planned relief coming, imagine what's ahead for
millions, including inescapable lifetime student debt burdens.
- Stephen Lendman lives in Chicago and can be reached at
- Also visit his blog site at sjlendman.blogspot.com and
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