Showing posts with label student loan debt. Show all posts
Showing posts with label student loan debt. Show all posts

Wednesday, June 28, 2017

Another Attorney General Jumps on Department of Education: Essay by Steve Rhode

North Carolina Attorney General Josh Stein has joined to voices of others from around the country who are disappointed the Department of Education has decided to delay the July 1, 2017 regulations that would have helped to protect students with federal student loans from fraudulent schools and colleges. See this.

Stein said, “Education is one of the best reasons I can think of to borrow money. But unfortunately, there are some in our world who take advantage of those who are vulnerable – and that includes student borrowers. As North Carolina’s Attorney General, protecting people, including students is my top priority.”

“That is why I find this news deeply troubling. The rules, which were to take effect on July 1, would protect student borrowers – delaying them is misguided and irresponsible.”

“These delayed rules were hard-fought and sound consumer protection measures born out of the problems that other attorneys general and I have seen plague student borrowers time and time again.”

The delayed protections include: 

  • Prohibiting schools from forcing students to pursue complaints in arbitration rather than in court; 
  • Prohibiting schools from requiring students to waive participation in class action lawsuits; and 
  • Providing automatic relief and group relief for defrauded federal student loan borrowers in certain circumstances, including following legal actions by state attorneys general. 
Delaying the rules is a win for for-profit schools that provide a poor result and a loss for student loan debtors who have their futures financially damaged.

Steve Rhode

Steve Rhode

Get Out of Debt GuyTwitter, G+, Facebook

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. 

Sunday, June 11, 2017

"Meet The Three Headed Debt Monster That's Going to Ravage the Economy," writes MN Gordon

A three-headed consumer debt monster is about to ravage our economy, writes MN Gordon in an Acting-Man essay that was republished on And what are the three heads?  Auto loans, credit card debt, and student loans.

As Gordon points out, all this massive debt is backed by essentially no collateral. Regarding credit-card debt, Gordon says this:
[C]redit card debt has been run-up purchasing 72-inch flat screen televisions, avocado toast, and combination platters at Applebee's. How does a creditor recover the cost of a meal that was consumed 2 years ago?
Of course, auto loans are secured by the cars that are purchased on credit. But, as Gordon put it, new cars lose value "nearly as fast as fresh tomatoes turn to rot." Thus, a repossessed car is rarely worth as much as the debt it was  meant to secure.

And of course student loans form the third and most vicious head of the three-headed consumer debt monster. As has been often reported, student loans have now outstripped credit card debt and auto loans as the biggest sector of consumer debt (excluding home mortgages).

The federal government issues more than $100 billion in student loans every year, and student loans are backed by absolutely no collateral.  How do you repossess a law degree from Thomas Jefferson Law School or a liberal arts degree from Vassar?

The entire postsecondary education industry--from Harvard University to Bob's Barber College--subsists on federal student-aid money. The for-profit colleges get almost 90 percent of their revenues from the federal government. Most for-profit colleges could not last a month without regular infusions of federal cash.

And although no one wants to admit it, at least half of the outstanding student-loan debt--totally $1.4 trillion--will never be paid back. The Department of Education is hiding the true default rate by putting borrowers into economic hardship deferments, forbearance programs, or long-term income-driven repayment plans. But the reality is this: most of the people in these shell-game programs will never repay their loans.

One might think that all this federal cash is adequate to sustain America's colleges and universities, but they are continually searching for more money. Nationwide, tuition rates have gone up nearly every year for the past 25 years. Tuition costs for graduate programs have reached insane levels because the federal government put no limit on the amount a student can borrow to get an MBA or law degree.

And where has all this student loan money gone? As Gordon observed, "it has been dispersed into oversized professor salaries, oversized lecture auditoriums, and oversized sports complexes."

Most of us would feel better about the runaway cost of higher education if our universities and colleges were providing real value for students' tuition dollars--if a college degree or graduate degree led to a good job and a better life.

But average wages in real terms have gone down over the past 30 years. Although the higher education industry repeatedly points out that the wage differential between high school graduates and college graduates is increasing, most of this growing gap is explained by declining wages for non-college graduates.

Of course, higher education's defenders like to point out the intrinsic value of a university degree--a better appreciation for culture, an enhanced ability for civic involvement, greater tolerance for people with opposing points of view.  The late John Kenneth Gailbraith, some old white guy from Harvard, expressed the intrinsic value of education as follows:
Education is, most of all, for the enlargement and the enjoyment of life. It is education that opens the window for the individual on the pleasures of language, literature, art, music, the diversities and idiosyncrasies of the world scene. The well-educated over the years and centuries have never doubted their superior reward; it  greater educational opportunity that makes general and widespread this reward.
But this is bullshit. It was bullshit when Galbraith wrote it, and it is overripe bullshit today. Our colleges and universities--our elite universities in particular--have become cesspools of racial and sexual-identity politics, Brownshirt-style intolerance for diverse political ideas, and Orwellian breeding grounds for groupthink.

In short, over a period of less than 50 years, our nation has constructed a higher education system that forces millions of Americans to take out student loans they cannot pay back in return for overpriced educational experiences that do not lead to better jobs or to better lives.


MN Gordon. Meet the Three-headed Debt Monster That's Going to Ravage Our Economy. Republished at, June 10, 2017.

Friday, December 4, 2015

Let's admit it: Bernie Sanders' "College for All Act" proposal has some good ideas

Image result for "The walking dead" images
Bernie Sanders' "College For All Act" proposal: "That's not gonna happen."
In an old episode of The Walking Dead, an armed wacko asks Sheriff Rick if he and his buddies can join Rick's tribe of survivalists. "That's not gonna happen," Sheriff Rick rasps with his impeccable Georgia accent.  And then Rick shoots the wacko dead with his trademark service revolver.

Something similar might be said about Bernie Sanders' "College For All Act" proposal. That's not gonna happen. Nevertheless, Bernie has come up with some good ideas that are worth examining.

First, and most importantly, Bernie proposes free college tuition for Americans to attend 4-year public colleges or universities. That's a great idea and would actually cost Americans much less than we are spending now in federal student aid.

But, as I said in a previous blog posting, the for-profit college industry and the private non-profits are happy with the status quo and couldn't survive a week without federal financial aid. The only way Bernie's free tuition plan could work would be to shut down the present student-aid program, and that's not gonna happen. So Bernie's College For All Act is--as I said earlier--Dead On Arrival.

Bernie's college funding proposal has some other good ideas, however. Along with a lot of other responsible people, Bernie proposes a simplified Student Aid Application process. Last year, Senators Lamar Alexander and Michael Bennett proposed a FAFSA form that only has two questions.  Almost everyone agrees that the present Student Aid Application process is confusing and overly complicated, so we should listen to Bernie when he says the process should be simplified.

Bernie also proposes lower interest rates and an unlimited opportunity for students to refinance their student loans at lower interest rates. This is a great idea because, as a recent New York Times article made clear, it is the accruing interest on student loans, not the amount that students originally borrowed, that is crushing millions of student-loan debtors. The Times told the story of Liz Kelly, who borrowed about $25,000 to get an undergraduate degree and then borrowed more to go to graduate school. The total amount Kelly borrowed was less than $150,000, but she now owes $410,000 due to the interest that accrued while her loans were in forbearance or deferment.

Critics will say that lower interest rates and easy loan consolidation will cost taxpayers billions, which is true. But let's face it: The people whose loans have ballooned out of control due to accrued interest and fees will never pay the loans back anyway. Do you think Liz Kelly will ever pay off the $410,000 she now owes?

There is one huge caveat to Bernie's proposal to allow students to refinance their loans. There are now 41 million outstanding student-loan debtors, and many of them took out multiple loans. Allowing millions of borrowers to refinance their loans would create an administrative nightmare. In my opinion, it would make more sense to just forgive the interest on those loans or give overwhelmed debtors reasonable access to the bankruptcy courts.

But, as Sheriff Rick said to the armed wacko, "That's not gonna happen." Apparently, our national government would rather create a real-life class of The Walking Dead than take responsible action to give honest but unfortunate student-loan debtors some relief.

Image result for the walking dead images
The Walking Dead: These folks will never pay off their student loans.

Lamar Alexander & Michael Bennett. An Answer on a Postcard. New York Times, June 19, 2014, p.  A25. Accessible at:

Kevin Carey. (2015, November 29). Lend With a Smile, Collect With a Fist. New York Times, Sunday Business Section, 1. Accessible at: