The Obscene Scandal of US Student Loans

By Shlomo Maital

 

         Americans owe about $800 b. in ‘revolving debt’ (nearly all of that is credit card debt).  At a time when 4 million Americans have been unemployed for over 99 weeks, losing their unemployment benefits, this debt is an enormous burden. 

     What few realize is that ‘student loans’ (money borrowed to pay for college) are far larger and more burdensome, totalling over $1 trillion.  And guess what?  You can escape credit card debt by declaring personal bankruptcy.  But student loans?  Even if you’re bankrupt, Sally Mae will pursue you to the grave. (Sally Mae, or SLM Corporation) is the largest student-loan lender, has lent to over 25 million students, and proudly declares that it is not in any way related to the US Government.  It is a public corporation, run aggressively for profit).   And indeed, they often do.      

     According to the bankruptcy act, “U.S. Federal student loans and some private student loans can be discharged in bankruptcy only with a showing of “undue hardship.””  And ‘undue hardhip’ is almost never recognized by the courts.   With mortgages, most states have a ‘no recourse’ law.  That means, all the mortgage holder (the bank) can do, if you fail to pay your mortgage payments, is to foreclose and take back the house.  But student loans?  No matter what, you will be hounded to pay every cent,  even if you are unemployed, working at a socially-positive low-wage job or working in a poor country as a volunteer. 

        “Sallie Mae turns education dreams into reality for its 25 million customers”, SLM’s website proclaims.  Really?   More like a nightmare.  I know students who have had to decline jobs they truly wanted, because they needed to find salaries high enough to enable them to pay off their student loans.  I know ‘students’ who are still paying back loans decades after finishing their degrees.  Why?   In part because Sallie Mae encourages minimum payments, and the deferred interest piles up into huge debts incredibly quickly.  I know students who have studied finance, and still find it nearly impossible to navigate the purposely-unfriendly website that facilitates early payback.   

    Student loans are disgraceful, because they take no account of the students’ major (including low-paying ones).  According to NY State official Andrew Cuomo, some universities steer students to ‘preferred lenders’ in return for kickbacks.   The Federal Government itself has sued Sallie Mae (!) for overcharging it, and won a large settlement.  So much for privatization.

   Increasingly, college students in the US are squeezed between the bad economy (which makes it hard for parents to pay their tuition) and rising tuition fees.  They are tempted into taking loans, which can total $250,000 for four years’ of study at an expensive private college.  That sum quickly doubles or triples, owing to compound interest.  Right off the bat, at the start of their careers, they are under water with a huge debt burden.  That debt drives their career decisions, not their passions or their interests.  And there is no way in the world to escape that debt, not even bankruptcy, not even fleeing America. (When you return home, they will nail you to the wall). 

     Europe has a lot of problems, heaven knows. But in most European countries, students go to college almost free. (The UK is an exception, where rising tuition fees are slashing college enrollment and damaging Britain’s future).  If you believe that the future of a nation depends on the quality of its human capital, then you have to believe America’s student loan fiasco is an absolute scandal.

   And the worst part?  Nobody seems to be protesting.  Because after graduating, the students scatter, and seem to have no way to organize a protest.

    Can someone organize at least a small protest, perhaps on Facebook, especially at a time when Republicans seem to want to slash higher education budgets even more?      

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