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In the 11 years that I have been working on the student loan issue, not one college president has decried the fact that every standard consumer protection has been stripped uniquely from the student loans that fund their institutions.
They also have never offered up a solution to remedy the widespread financial (and other) harms that have resulted from this.
The uniform and universal silence from the leaders of our nation’s universities — particularly as the country’s student loan debt has exploded to well over a trillion dollars — reflects terribly on them, the schools they run, and the academy, generally.
Recently, this silence was broken, at long last by Leon Botstein, president of Bard College in New York. He called for Hillary Clinton—who to this point has promoted a very cautious and unimpressive fix for the student loan crisis—to fight for total forgiveness of all student debt. Botstein wants her to follow this up with a new lending system that features far more robust forgiveness provisions.
While Botstein makes no mention of the indefensible, unconscionable, and unconstitutional removal of standard consumer protections that caused this crisis, he is to be loudly applauded for piercing the veil. More importantly, the solution he proposes deserves serious consideration.
Clearly, the economic stimulus that would be created by erasing nearly $1.5 trillion in student debt would be tremendous. The borrowing capacity that would be freed up for tens of millions of voting citizens and their families would provide an immediate and dramatic increase in purchases of homes and other big-ticket items.
The sustained flow of cash that would otherwise have gone to the Department of Education in monthly installments would instead be going back into the economy for years and decades to come. On this basis alone, the proposal should be considered very seriously.
Bard assumes, however, that Donald Trump and the Republicans would oppose such a proposition. I think he may be wrong.
Any Republican looking closely at the current system will recognize that it has become a big-government monstrosity. It’s one that has jettisoned free-market mechanisms, and one that has enabled a hyper-inflationary spiral unmatched by every other market in the U.S.— including healthcare, housing and other inflationary sectors.
Trump himself has lamented the fact that the federal government profits something like $50 billion per year on the program. Republicans in Congress have no doubt noticed the Department of Education fighting hard behind the scenes to keep free market protections away from its cash cow. There is nothing about this that any true conservative could like.
Consider further: A recent study by the Institute for Higher Education Policy found that an astonishing 63 percent of borrowers who left school in 2005 were not able to make payments on the debt 5 years later. Given that students at that time were borrowing less than half of what they are now borrowing for school, it is likely that this level of non-payment is at least as high, if not higher today.
This calls for bold, courageous action — perhaps bolder than simply returning protections like bankruptcy, statutes of limitations, and others.
Returning these protections is obviously a valid solution, but ultimately, writing off all student loan debt may be the better way to go, so that tens of millions of citizens are left hopeful and optimistic instead of financially devastated, and embittered by the stigma that accompanies a bankruptcy or other expensive, stressful workout.
While no one can tell the future on this issue, one thing is quite certain: If both Clinton and Trump don’t step up courageously and continue to push non-starting, or non-existent agendas as they have to this point, the student loan bubble will burst, public confidence will dissipate, and the entire lending system will likely evaporate into a mist of illegitimacy, and much could be lost with it.
No president would want that blowing up in their faces. Both Clinton and Trump should address this now, rather than later.
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This post was originally published on The Hill and is republished here with the author’s permission.
Alan Collinge is Founder of StudentLoanJustice.Org, and author of the book The Student Loan Scam (Beacon Press)
Also by author Alan Collinge here on The Good Men Project:
What Good Men Need to Know About Student Loans
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Photo credit: StudentLoanJustice.org
Let’s face it. This is only an issue because 60% of people going to school are women. If this had been men, there would be demands they pay back every cent. I have no issue with making the loans at least partially subject to bankruptcy laws. I say partially because how many lenders would be willing to lend a $100,000 unsecured loan to an otherwise unworthy borrower. The loan is taken out with the expectation that future earnings will be sufficient to pay it back not because the borrower is currently qualified to repay it. I would suggest expanding the… Read more »
I definitely feel the fool for letting a for-profit college (two of them, actually, and one is already bankrupt that I continue to pay loans on) take me for so much money that I will never own a home or get married, have kids, have additional pets, or anything because I can’t afford it. If I had been given the opportunity to file bankruptcy during the recession on these loans, I could have gone back to school for something different since no one in my field of 20+ years was hiring. But with those ballooning, compounding loans, I will never… Read more »
very important point: “Recently, this silence was broken, at long last by Leon Botstein, president of Bard College in New York. He called for Hillary Clinton—who to this point has promoted a very cautious and unimpressive fix for the student loan crisis—to fight for total forgiveness of all student debt. “
Of course, as long as students don’t have to pay it back, colleges could charge what they want. As long as students don’t have to pay it back, colleges can kick back a little of the profit and ensure a steady stream of customers.
I remember hearing of a college that offered their students free pizza if they came to a rally demanding that government continue to fund their for profit institution.
All of this is absolute nonsense. Why do you think tuitions are sky high? Hint. Because the government underwrite them. The law of unintended consequences. And y’all bought into it hook line and sinker and now your complaining about it. Writer above. YOU signed the contract. You chose your field and now you bemoan your fate. Sorry. Have no empathy here. You’re an adult, even at 18. If you buy an unaffordable car, do you think the bank will forgive it? You signed for it. Not my or anybody else’s issue. If you’d gotten reasonably wealthy as a result of… Read more »
Mark the contract I originally signed were at a time before all consumer rights were stripped away, and my interest payments were then fully tax deductible. My field was booming. It was a wise decision at the time. I didn’t realize the lenders sought to put students in default and wouldn’t work with them on payment plans because they easily got recouped frim the Government. I realize this won’t sway your opinion, but perhaps you might do a bit more study on the issues before simply labeling as a problem of personal responsibility. It is a far more complex issue,… Read more »
@ Candace What happened to you was wrong. The laws should not have been retroactively changed to your detriment. I don’t know that I agree with the predatory lending thing although I see your point. If I were to apply for a credit card, I’d get 9% interest and a credit line of $5,000. They would also base the decision on what I made and what I reasonably cab be expected to pay back. Student loans are also essentially unsecured since they can’t seize and sell your degree. They do get much netter repayment terms so added protections for the… Read more »
Btw Candace. No lender EVER wants you in default. Sure they could work out new terms but why would they for your advantage? If you provided someone something and they violated the contract, would you? Of course not and you know it too. Can we stop this nonsense of all of the victim hood?
Mark, no one comes out of college thinking they won’t be able to pay back their loans. What happens is life… And more recently banks screwing up the economy. Then you find out that although crefit card companies will make deals on what you owe (lump sum discounts or the entire amount over time with no more interest), student loan companies will not and don’t have to. You scrstch your head eondering how you missed the fine print on the student loan contract that stated consumer protections do not apply including bankruptcy. The issue is you didn’t miss it. It… Read more »
First of all Candace, I’m not immune to your plight. But you have to remember, this was a government sponsored program that gave you the money you needed and you were beholden to them as such. Now changing the terms to not including bankruptcy is another issue. Btw if that’s true, which right now to me it may or may not be. Doesn’t the above sound just like welfare? Government money to you, now I get to say what you do? . Funny how that works. But I have and am paying back about 40k of student loans for my… Read more »