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Predatory Lending Biting Back
With calls from student loan providers for a bailout growing louder every day, it's worth remembering that the lenders have brought a good part of these problems onto themselves. Investors are wary of purchasing student loan asset back securities, and, and least when it comes to those made up of private loans, they have good reason. Lenders have dumped lots of bad loans made to subprime borrowers going to dubious schools onto the marketplace, knowing full well that much of this debt was likely to go into default.
Case in point: as we noted last week, there has been in recent years a proliferation of unlicensed, unaccredited trade schools that do not participate in the federal student aid programs and therefore go largely unregulated. The growth of these schools of dubious quality has been fueled by student loan companies that have willingly and irresponsibly "partnered" with these institutions to provide high-cost private loans to often at-risk students that these schools tend to attract. The lenders have then turned around and, like subprime mortgage lenders, securitized the loans, shifting the risk of the loans onto unsuspecting investors.
Low-income and working class students who enroll in these schools have paid a high price for these policies.
Take Silver State Helicopters for instance. On Super Bowl Sunday, the Nevada-based company, which owned unaccredited flight academies across the country, shut its doors without warning and filed for bankruptcy liquidation. As recounted by The San Diego Union-Tribune, the 2,500 students enrolled in the flight academies were "left in the lurch." Because the schools did not have the proper accreditation to qualify to participate in the federal student aid programs, the company directed students to take out expensive private loans to cover the $70,000 tuition that they were required to pay up front. Unfortunately, Silver State students are now stuck repaying these loans for training they did not ultimately receive.
But Silver States' entire existence depended on the willingness of loan companies -- in this case, the infamous Student Loan Xpress and the Pennsylvania Higher Education Assistance Agency (PHEAA) through its national brand American Education Services -- to make and service private loans to students lured into unlicensed, unaccredited, and ultimately "fly-by-night" schools (forgive the pun). In fact, the company appears to have gone immediately belly up the minute the lenders revealed that they would no longer provide private loans to its students because the lenders would not be able to securitize them as a result of the credit crunch.
The student loan industry is desperately seeking a bailout and offering neither borrowers nor taxpayers anything in return. Don't Silver States' students deserve a bailout too? Don't taxpayers deserve protection against another student loan - proprietary school debacle, as we had in the late 1980s and early 1990s? We at Higher Ed Watch think both student borrowers and taxpayers deserve better.
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bail out the student borrowers instead!
If we were allowed to file bankruptcy on the student loans, those of us in default could get out from this nightmare of eternal debt.
There's an estimated $500 billion bucks in student loans out there, and another $900 billion in credit card debt. Allowing those of us drowning in debt exacerbated by predatory companies and high interest rates to escape would have a very positive effect: unable to rack up more debt, we would be forced to spend only what we made. This would help stimulate the economy.
Personally, I don't have any credit cards, but my $55,000 student debt has snowballed into a quarter of a million through interest, so-called consolidation fees, and late charges. A quarter of a million dollars? Where am I supposed to get that? Do you have any idea how much the payment on a quarter mil IS? It's insane!! I can't even get a real job because my credit rating is so bad. What's worse is, they refuse to show me the math to even verify that this HUGE amount is correct. "We got it off the computer, so it must be correct." Well, they got my name off the computer, too, and it's spelled wrong, so why can't the money be wrong too?
Put the money back into our pathetic overworked hands so we can put it back into our communities. Why bail out a couple score of huge companies who are doing just fine for themselves? Bail out the borrowers who've been thumb-screwed and give our falling dollar just a little bit of help at the same time. It's not like we're rich people trying to cheat these companies or anything, most of us are just barely eking out a wage as it is and honestly need this relief.
personal attacks
Many Americans tuned in to watch the most recent “town hall-style” debate between presidential candidates Barack Obama and John McCain. My assumptions about politicians did not change much. No matter how direct a question is, politicians of any party cannot give a genuine or spontaneous answer. Instead, we are given pre-written responses that typically don’t answer the question we’re really asking. The reviews of the debate seem to be the same: BORING! The New York Times explained that the debate was “90 minutes of forced cordiality,” and I can’t say I disagree. And the Boston Globe depicted the debate as “mercifully free” of personal attacks. Consequently, the debate was also free of much of the tension that grabs TV viewers’ attention. McCain continued to toot his own horn: he restated the importance of his experience, his “stay the course” stance on the war in Iraq, and his oil drilling policies. Obama proceeded to criticize the Republican economic policies that he believes are to blame for the economic recession. Even after the debate, I think most Americans still have no concept of how the candidates would actually act in the face of a pending economic catastrophe. American needs a sound economic proposal. Obama’s stance on “predatory lending” – effectively sanctioning payday advance lenders – is not a sensible solution to the real economic problems we face.
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Stimulus $250 for what?
I owe quite a bit on student loans. I would have made more payments when I was in school if I hadn't felt that citibank was being so dishonest with me, with their monumental interest rates and their predatory policies concerning students who don't realize that they would be better off without an education if they have to borrow money for it.
This month I was sent a letter from the Treasury Dept that I am eligible for the $250 stimulus I guess that was supposed to stimulate the economy. However, the entire $250 was sent directly to the Student Loan Corporation. Perhaps I'm just a worthless needle in the haystack that the government takes for granted that they can keep draining and harassing me for the rest of my life.
Of course, this is right after the Treasury Dept, garnished my social security check as they do every month a whopping $160. It doesn't matter if I have any needs to buy new shoes, or to pay the electric bill or my rent, or buy medicine or food. It only matters that the Student Loan Corporation must make an enormous profit. Does the student loan corporation need new shoes and I can't imagine how they stimulate the economy anyways. They just hold all that money that they garnish from people like me so that they can make billions of dollars in interest on it and float away in their golder parachute.
Sincerely wishing that I had never gone to school and borrowed money for it -- my mother warned me and i should have listened to her.
Previous comment an example
The previous comment is an example of the people who have been failed by the various Student Loan policies that have been produced and the loans offered by lenders. I absolutely agree with the tone of the article and the previous commenter that rather than bailing out the lenders, it is the taxpayers and the students that should be compensated.