Much Needed Student Loan Reform Passed by Congress…

 

In a follow up to a recent post, Congress has voted to overhaul U.S. college student aid by slashing subsidies to predatory lenders, using the money instead to boost student aid assistance by $20 billion. Industry analysts saying it would dampen the profits of lenders such as Sallie Mae, Citigroup Inc, Bank of America Corp and many others. After months of scandals involving kickback schemes and conflicts of interest among lenders and college officials, the bill is expected to shake up the student loan industry – an $85 billion business. 

This is one of the few positive things this Congress has done recently to help the middle class. College costs have soared in recent years in the United States, forcing students to rely increasingly on loans and driving growth for banks and specialized student lenders through unscrupulous and dishonest lending practices.

Massachusetts Democratic Sen. Edward Kennedy said it cuts, “the outrageous subsidies the government gives to lenders” and gives the money to students.

The bill calls for a 0.55 percentage point cut in the “special allowance payment” subsidy to for-profit companies that make federally guaranteed student loans. The bill also would cut interest rates on need-based loans in half, to 3.4 percent, over four years; raise the annual student Pell grant ceiling to $5,400 a year by 2012; and cap student loan repayments at 15 percent of monthly income. The bill however does include a controversial test program that will require lenders to bid for the right to make federal PLUS loans to students’ parents on a state-by-state basis. The bill also would offer forgiveness of student loan debt after 10 years for some borrowers who go into public service careers, such as being a teacher or police officer. And finally, it would cut federal student loan default insurance to 95 percent in 2012, from the current 97 percent. 

Of course lending industry flunkies and/or Republicans have criticized the legislation, saying it unfairly punishes loan companies, while some Republicans were critical of the way the student loan bill has been steered through Congress by the Democrats (God forbid the Democrats push legislation through that actually helps working families).

The bill is incomplete though because it excludes some measures aimed at cracking down on the improper marketing practices behind the recent loan scandals and omits provisions that would reform confusing forms students must fill out to get financial aid. 

My question is – does the bill help those currently trapped in student loan debt they cannot escape? Millions are drowning in debt incurred over the past five to seven years at the hands of criminal lenders. Are these people being helped at all? As a nation, we can ill afford to cripple the student loan system by allowing capital to hemmorage from it much like the home mortgage system. Of course the final obstacle is Bush’s signature which is never a given when the plight of the middle class is on the table.

On to the Next Credit Repayment Crisis…Student Loans…

 

Student loans have become the newest and most profitable predatory credit market in America. We’re already painfully aware of the ongoing home mortgage meltdown. Well…get ready for the next disaster as we continue speeding down Our- Economy-Is-Slowly-Becoming-Unglued boulevard. Government and worst of all, private students loans, are the most profitable, oppressive, and predatory type of debt of any in the nation. Kudos to the corporate fat cats who master minded these gems. This situation has occurred of course due to due to Republican legislation that was largely paid for by strong arm lobbying courtesy of Sallie Mae, the largest student loan company in America. As you might have already ventured to guess, vast fortunes are being made by unscrupulous Sallie Mae executives, and others who paid for this legislation, on the back of low and middle class college students. Additionally, many of the students now living with this high debt have not been able to capitalize on their educations, so the loans are being deferred or defaulted on altogether. To turn the old anal plug even further, these debts are exempt from bankruptcy, are not subject to cosumer protections like credit cards are and are not subject to the same collections rules that other debts are. This has effectively crippled millions of middle class people who want to repay their original debt, but are prevented from doing so by staggeringly higher amounts being demanded from them by both “non-profit”, and “for-profit” student loan companies. The situation amounts to usary, which is illegal the last time I checked.  This latest scheme to defraud the middle class of this country by the power elite has and will continue to contribute to the slow economic destruction that will eventually undo our very culture. More to come on this topic in the future.

Check out these links for more info…

Sallie Mae Reaps Benefits From Ties to Key Agency, Paul Basken, Chronicle of Higher Education, May 7th, 2007

Law favors gambler Over Grad, Dave Newbart, Chicago Sun Times, May 6th, 2007

Probe Launched on Sallie Mae Collection Tactics, Amit Paley, The Washington Post, April 27th, 2007

Lending to Students a Gold Mine for Creditors, Davbid Washburn, San Diego Times Union, April 24th, 2007

Stock Options Provided to Financial Aid Officer by Student Lender, New America Foundation, April 4th, 2007

Press Release, Attorney General Andrew Cuomo, State of New York, March 15th, 2007

Student Debt Mayhem, Jennifer C. O’Donnell, Port Folio Weekly, March 6th, 2007