Writing in the tradition of great American investigative journalism, Taibbi deconstructs "the great college loan swindle" that is destroying the lives of millions. Taibbi illustrates his theme by telling the story of two swindled student debtors: Scott Nailor and Veronica Martish.
Scott Nailor, a thirty-seven year-old school teacher, has contemplated suicide because he is chained to college loans he will never pay off. Nailor borrowed $35,000 to get a degree from the University of Southern Maine, which qualified him for a job as a school teacher.
This debt, which might seem modest to some people, was barely manageable on Nailor's salary as a school teacher, which initially paid just $18,000. He and his wife consolidated their student debt, which had grown to $50,000. Then the couple declared bankruptcy, but they did not discharge their student loans.
Today, Taibbi wrote, Nailor makes monthly payments of $471 a month on student-loan debt that has grown to $100,000. None of his payments go to paying down principal. "I will never be able to pay it off," Nailor told Taibbi. "My only escape from this is to die."
And Taibbi also tells the story of Veronica Martish, a 68-year-old veteran from the Vietnam War. In 1989, she borrowed $8,000 to take courses at Quinebaug Valley Community College. Due to family problems, Martish fell behind on her loan payments and entered a loan rehabilitation program. By this time, her $8,000 had grown to $27,000 due to fees and interest tacked on by one of the federal government's debt collectors.
Martish told Taibbi that she had paid a total of $63,000 on her $8,000 student loan, but has yet to pay off the principle. By the time she dies, Martish estimates her loan balance will have grown to $200,000. "Nothing ever comes off the loan," she explained. "It's all interest and fees."
These stories may seem incredible to you, but in fact they are all too common. In fact, the bankruptcy courts have chronicled similar experiences when student-loan debtors stagger into bankruptcy court. Remember Brenda Butler, who paid $15,000 on $14,000 in student loans? Twenty years after graduating from college, she owed $32,000--twice what she borrowed. A bankruptcy judge refused to wipe out her student loans. She should stay in a long-term repayment plan, the judge advised--a plan that will not end until 42 years after Butler graduated from college.
And how about Alan and Catherine Murray, the Kansas couple who borrowed $77,000 to pay for undergraduate and graduate degrees? They made $54,000 in loan payments--about 70 percent of the principle. Yet 20 years after finishing their studies, their accumulated student-loan debt had ballooned to $311,000--more than four times what they borrowed.
Millions of people have seen their student loans grow exponentially due to fees and unpaid interest. When that happens, a debtor's only option is to sign up for an income-driven repayment plan (IDR) that can last from 20 to 25 years. But these plans generally set monthly payments so low that the payments don't reduce the principal on the debt. College debtors on IDRs see their loan balances grow larger and larger with each passing month even when they faithfully make their loan payments.
This was the situation Scott Nailor found himself in. No wonder he contemplated suicide.
And it gets worse. When all those millions of people in IDRs make their last monthly payment, the remaining balance on their loans will be forgiven; but the IRS considers the forgiven amount to be taxable income.
Does anyone in Congress give a damn? I don't think so. And Secretary of Education Betsy DeVos, whose family has profited from the debt-collection industry, certainly doesn't give a damn.
And so America descends into an era of shocking exploitation perpetrated by colleges, the federal government, and the debt-collection industry.
I will end this reflection by quoting a paragraph from Taibbi's searing essay:
It's a multiparty affair, what shakedown artists call a "big store scheme," like in the movie The Sting: a complex deception requiring a big cast to string the mark along every step of the way. In higher education, every party you meet, from the moment you first set foot on campus, is in on the game.
|Donald Trump and Betsy DeVos: the "big store" scheme|
Butler v. Educational Credit Management Corporation, No. 14-71585, Adv. No. 14-07069 (Bankr. C.D. Ill. Jan. 27, 2016).
Murray v. Educational Credit Management Corporation, CASE NO. 14-22253, CHAPTER 7, ADV. NO. 15-6099 (Bankr. D. Kan. Dec. 8, 2016), aff'd, No. 16-2838 (D. Kan. Sept. 22, 2017).
Matt Taibbi. (2017, October). The Great College Loan Swindle. Rolling Stone.