Dated January 27, 2010 I opened an electronic communication from the Department of Education's Direct Loan Servicing Center. The purpose of the correspondence was to inform me that my annual student loan statement was now available.
Upon reviewing the statement I realized that I paid nearly $4400 on my student loans last year. One might say this was admirable.
However, despite my efforts my balance actually grew nearly $500. Anyone see something wrong with this picture?
Now, this is more than just a little depressing. It's enough to make me just want to give up and stop paying these loans altogether. Here's why: my student loan payments currently account for 20% of my monthly net income. That percentage will only grow over time and barely touch the principle in the near future.
Out of this frustration I am reminded of how things have gone so terribly wrong in this country. How did we ever get to a place where our students were so far in debt after college that the only ways of alleviating that debt in the near term were to land a very high paying job (preferable), win the lottery (unlikely), leave the country (heart breaking), or pass away (unthinkable). We all pretty much planned on the good paying job - but in this economic climate how many of us actually find it anymore?
The major point I would like to make here is that our priorities have become so twisted that our national agenda is more in line with a wealth building economy for the few than it is with a working economy for the many.
I refuse to give up and will continue fighting but I must say that President Obama's recent attempts to help students and student debtors, while admirable, falls far short of the help we really need and deserve. With over $550 billion dollars in outstanding student loans our President's best option is to reduce payments with IBR ( from 15% down to 10%) and reduce the number of years one would pay in IBR from 25 down to 20 years.
Sounds nice right? The problem is that this idea is akin to putting a band aid on a bullet wound. Yeah it will hold for a second or two but you will eventually bleed out if you don't get some real help and fast.
So to my President I say thanks but no thanks! Read my site Sir and you will find that the ideas for forgiving student loans and reducing or eliminating the interest rates on these loans will go much further to help student loan debtors and stimulate the economy than some cheap ploy to win our silence.
I for one won't be silenced! I need the President I voted for to stop being such a wimp when dealing with people across the aisle and start fighting for me and the future of this country. Working class Americans deserve more than speeches and rhetoric - we deserve results. Take of the kid gloves and start knocking some Republicans and Democrats around and get us back on track. George Bush used the bully pulpit of the presidency to do some very bad things - its time to use it for good.
Thanks for listening to my rant.
Warmest Regards,
J. Densmore
Thursday, January 28, 2010
Sunday, January 24, 2010
The Coalition of the Meek
As I read whatever I can about the student loan dilemma my eye is occasionally caught by stories from outside this parochial sphere. While these other stories are about different industries altogether the central theme seems to be germane to the student debt industry.
Whether one has freshly returned from watching the film "Food Inc.", reading an article about utility companies involved in the setting of energy prices in California a few years back, the pharmaceutical price fixing that President Bush included with any free trade agreement he made or the ongoing collusion in the health care industry to prevent competition one thing becomes clear. The same kind of behavior persists across many industries - big companies are seeking unfair and illegal strangle holds on the American people by marginalizing their livelihoods and thus their ability to fight back and maintain their liberties.
Now - I know that sounds like a bold statement and quite honestly sounds a little too paranoid for my taste. But the fact remains that we are seeing the erosion of the American way of life under the guise of capitalism - the very same thing we espouse as almost as fundamental to America as democracy is.
Don't take my word for it though. Do some digging and learn on your own. The stories I mention above are only a few that exist out there and that in and of itself is a shame because we are quickly loosing a handle on this crisis.
So let's review for a minute the stories I mentioned above. We have a student loan industry that was developed to make student loans available to more students for the express purpose of educating the American people and making us more competitive in the Cold War and the international economic environment as a whole. Instead, today we have a system solely in place to make executives at student loan and collection companies rich and that sells education as a way out but in reality is a quick dead end road into debt for many. I think this characterization qualifies the industry for the stamp of failure. Sure the loans are available but is the American public reaping the full benefits it was supposed to? I think not if we are trapping our intellect in debt and dead end jobs.
Food Inc. - watch this movie and tell me if the treatment of farmers by large seed production companies and chicken producers is legal and or fair. In these industries - it seems that antitrust laws are being broken but the lobbyists of these firms are so powerful the markets and the government have been corrupted beyond the sight of the law. Watch it and you decide.
If anyone recalls the energy crisis in California a few years back when brownouts were common it subsequently came to light that some of the energy companies were purposely rotating their maintenance schedules to drive up the price of energy by creating the desperate situation that arose. Uh gee - let me think the last time I checked that is not capitalism or a free market system in effect - its called collusion and it is illegal.
And for anyone who was watching at the time, go back and read the Free Trade agreements that President Bush made with Canada, Australia and some South American countries. Each of those agreements has pricing statements for pharmaceuticals. These statements generally require these countries to maintain pricing on pharmaceuticals in keeping with American prices. For a free trade agreement I have to wonder how price fixing serves the American public in the slightest.
And I am sure this is not the limit of what is out there. My point is generally that each of these industries have lost their way - falling away from the competitive, free market principles that as Americans we hold dear toward serving the interests of a selective few who only care about pumping profits at the expense of the general public.
So it is with sincere encouragement and hope that I suggest the following. It is my belief that leaders of each of the activist movements in these industries start to communicate with one another. Start comparing notes and I think you will find that we have so much in common. That each of our interests and needs are in reality all of our needs. We should pool our resources, financial and intellectual, and fight together to change the way business is being conducted in this country and hence the world. By working together in one industry at a time we just might be able the get the change we all so desperately seek and need in all of them.
So today I put forth a call to everyone out there willing to join the Coalition of the Meek. Separately we might be dismissed but together our voices might finally be heard and heeded.
I hope this finds you all well.
Warmest Regards,
J. Densmore
Whether one has freshly returned from watching the film "Food Inc.", reading an article about utility companies involved in the setting of energy prices in California a few years back, the pharmaceutical price fixing that President Bush included with any free trade agreement he made or the ongoing collusion in the health care industry to prevent competition one thing becomes clear. The same kind of behavior persists across many industries - big companies are seeking unfair and illegal strangle holds on the American people by marginalizing their livelihoods and thus their ability to fight back and maintain their liberties.
Now - I know that sounds like a bold statement and quite honestly sounds a little too paranoid for my taste. But the fact remains that we are seeing the erosion of the American way of life under the guise of capitalism - the very same thing we espouse as almost as fundamental to America as democracy is.
Don't take my word for it though. Do some digging and learn on your own. The stories I mention above are only a few that exist out there and that in and of itself is a shame because we are quickly loosing a handle on this crisis.
So let's review for a minute the stories I mentioned above. We have a student loan industry that was developed to make student loans available to more students for the express purpose of educating the American people and making us more competitive in the Cold War and the international economic environment as a whole. Instead, today we have a system solely in place to make executives at student loan and collection companies rich and that sells education as a way out but in reality is a quick dead end road into debt for many. I think this characterization qualifies the industry for the stamp of failure. Sure the loans are available but is the American public reaping the full benefits it was supposed to? I think not if we are trapping our intellect in debt and dead end jobs.
Food Inc. - watch this movie and tell me if the treatment of farmers by large seed production companies and chicken producers is legal and or fair. In these industries - it seems that antitrust laws are being broken but the lobbyists of these firms are so powerful the markets and the government have been corrupted beyond the sight of the law. Watch it and you decide.
If anyone recalls the energy crisis in California a few years back when brownouts were common it subsequently came to light that some of the energy companies were purposely rotating their maintenance schedules to drive up the price of energy by creating the desperate situation that arose. Uh gee - let me think the last time I checked that is not capitalism or a free market system in effect - its called collusion and it is illegal.
And for anyone who was watching at the time, go back and read the Free Trade agreements that President Bush made with Canada, Australia and some South American countries. Each of those agreements has pricing statements for pharmaceuticals. These statements generally require these countries to maintain pricing on pharmaceuticals in keeping with American prices. For a free trade agreement I have to wonder how price fixing serves the American public in the slightest.
And I am sure this is not the limit of what is out there. My point is generally that each of these industries have lost their way - falling away from the competitive, free market principles that as Americans we hold dear toward serving the interests of a selective few who only care about pumping profits at the expense of the general public.
So it is with sincere encouragement and hope that I suggest the following. It is my belief that leaders of each of the activist movements in these industries start to communicate with one another. Start comparing notes and I think you will find that we have so much in common. That each of our interests and needs are in reality all of our needs. We should pool our resources, financial and intellectual, and fight together to change the way business is being conducted in this country and hence the world. By working together in one industry at a time we just might be able the get the change we all so desperately seek and need in all of them.
So today I put forth a call to everyone out there willing to join the Coalition of the Meek. Separately we might be dismissed but together our voices might finally be heard and heeded.
I hope this finds you all well.
Warmest Regards,
J. Densmore
Tuesday, January 19, 2010
Affordable, Attainable or Wisely Avoidable?
If the purpose of bankruptcy is to allow relief from financial burdens when lasting unforeseen hardships arise or mishaps occur what does this say about students and student loans when this basic protection is not there?
Because of their educations are students being expected to be clairvoyant - are they supposed to know, with 100% certainty, that things are going to work out ahead of time? Are they supposed to be able to see and avoid every conceivable pit fall that could arise? That cannot be what our government intended when it began its involvement in the student loan business or when it wrote the first bankruptcy laws - yet here we are expecting just that from our students.
Yes, student loan borrowers took a risk that the purchase they were making (in the form of education) was going to benefit them to the degree that they could achieve a better social and economic position in life. Few, if any, took loans out with the intention to defraud anyone. The problem with education, or anything investment for that matter, is that there is no guarantee of return. What is the saying in investing - past performance is no guarantee of future return?
For students to guarantee a return on their investment they would have to know so much as to be gods. For example, just on a macroeconomic scale one would have had to know that American (and now International) banks were leveraged so poorly, that CEO's, COO,s and CFO's were cooking the books, that gasoline would reach $4 a gallon, that automakers would continue selling gas hogs beyond their utility, that wars in IRAQ and Afghanistan would be so costly, that 9/11 would occur and wreak such havoc with the financial markets, that Katrina would occur, and that the wealthiest country on the planet wouldn't be able to afford health care for its citizens. That’s expecting a little much I think.
They would also have had to know on a personal or microeconomic level that their choice of profession would continue to be in demand, that they would remain healthy, that they could handle the full pressure of the educational albatross before them (even though they have never attempted anything so demanding before), that they wouldn't experience significant familial or personal hardships so as to not be able to continue and that they would find the support they would need to successfully graduate and find employment. And the list could go on and on.
The point here is that life happens. When one purchases an education life does not stop happening. While we might hope that students are better equipped to deal with life's ups and downs because of their educations they are not, in fact made gods, because of their educations. Students still suffer the same human frailties as everyone else.
Fortunately, some students make it through the process of schooling and the concomitant hardships of life, and go on to reap the benefits of their education. That is every students dream! And we are all happy for those that make it.
But for those that don't make it or don't make it far enough to see the full return on their investment why then should the current system expect students to be any more omniscient than the average borrower? Nobody wants businesses to fall short of the desired success but they do. Nobody wants students to fall short of their desired success but they do. Life happens, mistakes get made. Every type of borrower, be it individual, small business, or corporate giant has access to basic financial protections through bankruptcy – to protect their futures if they stumble and fall. All borrowers everywhere in the United States have these protections - EXCEPT ONE - the student loan borrower.
Did our leaders really intend there to be so much risk involved when they tried to make higher education available to just about everyone? Did they really intend for students to be buried under mountains of debt with no way out?
At this point all I can say is maybe they did. They don’t seem to be in a hurry to get students out of this terrible situation nor do they seem to care. And now – it seems a generation of Americans may actually forgo college because the price has become just too high. I guess our leaders have failed to make a college education affordable and attainable after all. From what I now gather a college education is quickly becoming avoidable,and wisely so. After all, why should someone risk their entire lives - marriage, children, home - for an education that only comes with one guarantee - you will pay your loans back - even if it kills you.
Because of their educations are students being expected to be clairvoyant - are they supposed to know, with 100% certainty, that things are going to work out ahead of time? Are they supposed to be able to see and avoid every conceivable pit fall that could arise? That cannot be what our government intended when it began its involvement in the student loan business or when it wrote the first bankruptcy laws - yet here we are expecting just that from our students.
Yes, student loan borrowers took a risk that the purchase they were making (in the form of education) was going to benefit them to the degree that they could achieve a better social and economic position in life. Few, if any, took loans out with the intention to defraud anyone. The problem with education, or anything investment for that matter, is that there is no guarantee of return. What is the saying in investing - past performance is no guarantee of future return?
For students to guarantee a return on their investment they would have to know so much as to be gods. For example, just on a macroeconomic scale one would have had to know that American (and now International) banks were leveraged so poorly, that CEO's, COO,s and CFO's were cooking the books, that gasoline would reach $4 a gallon, that automakers would continue selling gas hogs beyond their utility, that wars in IRAQ and Afghanistan would be so costly, that 9/11 would occur and wreak such havoc with the financial markets, that Katrina would occur, and that the wealthiest country on the planet wouldn't be able to afford health care for its citizens. That’s expecting a little much I think.
They would also have had to know on a personal or microeconomic level that their choice of profession would continue to be in demand, that they would remain healthy, that they could handle the full pressure of the educational albatross before them (even though they have never attempted anything so demanding before), that they wouldn't experience significant familial or personal hardships so as to not be able to continue and that they would find the support they would need to successfully graduate and find employment. And the list could go on and on.
The point here is that life happens. When one purchases an education life does not stop happening. While we might hope that students are better equipped to deal with life's ups and downs because of their educations they are not, in fact made gods, because of their educations. Students still suffer the same human frailties as everyone else.
Fortunately, some students make it through the process of schooling and the concomitant hardships of life, and go on to reap the benefits of their education. That is every students dream! And we are all happy for those that make it.
But for those that don't make it or don't make it far enough to see the full return on their investment why then should the current system expect students to be any more omniscient than the average borrower? Nobody wants businesses to fall short of the desired success but they do. Nobody wants students to fall short of their desired success but they do. Life happens, mistakes get made. Every type of borrower, be it individual, small business, or corporate giant has access to basic financial protections through bankruptcy – to protect their futures if they stumble and fall. All borrowers everywhere in the United States have these protections - EXCEPT ONE - the student loan borrower.
Did our leaders really intend there to be so much risk involved when they tried to make higher education available to just about everyone? Did they really intend for students to be buried under mountains of debt with no way out?
At this point all I can say is maybe they did. They don’t seem to be in a hurry to get students out of this terrible situation nor do they seem to care. And now – it seems a generation of Americans may actually forgo college because the price has become just too high. I guess our leaders have failed to make a college education affordable and attainable after all. From what I now gather a college education is quickly becoming avoidable,and wisely so. After all, why should someone risk their entire lives - marriage, children, home - for an education that only comes with one guarantee - you will pay your loans back - even if it kills you.
Saturday, January 16, 2010
My Next Move
Right now I am seeking other student loan blogs and forums out there to connect to and interact with. So if anyone has any good recommendations please contact me and I will check them out as soon as I can.
At the time being I am starting to look into learning more about personal finance. If I come across something interesting and relevant I will be sure to share it here.
Since it is tax season once again don't forget that your student loan interest is tax deductible under some circumstances. Be sure to visit the IRS website to learn more.
If there are urgent issues that anyone wants me to look into or expound at length about please contact me. Otherwise, have a great weekend!
Regards,
J. Densmore
At the time being I am starting to look into learning more about personal finance. If I come across something interesting and relevant I will be sure to share it here.
Since it is tax season once again don't forget that your student loan interest is tax deductible under some circumstances. Be sure to visit the IRS website to learn more.
If there are urgent issues that anyone wants me to look into or expound at length about please contact me. Otherwise, have a great weekend!
Regards,
J. Densmore
Wednesday, January 13, 2010
The Writing on the Wall
At the present time, it appears very little is going on in any of the student loan reform movements to address the needs of student borrowers. It may be because the President and Congress have an economy in recession, a war going on, and a fight over health care before them. I get the feeling however that the same would be true without these distractions.
If I were to read the writing on the wall, more specifically the Sunday newspaper and Alan's book, then things can't be going very well for student borrowers in terms of debt and default.
The first sign was something I read in Alan Collinge's book, The Student Loan Scam, which I have translated into the following bar graph. As one can see, the use of federal student loans is growing rapidly - which in turn, by the percentages, translates into more student loans in default or struggling to tread water. The graph shows the amount of federal student loans made in 1979, 1989, 1996 and 2008 respectively. This is only for federal loans, not for any private loans that are not covered under the federal umbrella.
To go along with this rise in student debt, the front page of the classified jobs section of The Buffalo News for Sunday January 10, 2010 had four large ads that each occupied 1/4 of the page. Two of these were ads were for collections services promising all kinds of benefits including 50% commissions, vacation pay, health insurance, paid holidays, day care and the list goes on. One of these ads was specifically seeking people with experience in student loan collections!
This is the first such time that I have seen a job ad for a collection agency seeking people with this kind of specialty. I was also shocked at the kind of benefits these places were paying. Business must be good for student loan collectors.
This can only mean its not going so well for many student loan borrowers. Furthermore, the brazen front page nature of the ad, seeking specialty in student loan collections, seems to imply that student loan borrowers are acceptable collection targets, social castaways that should have known better.
I think student loan borrowers need to work together to make our voices heard. We will continue to be the treated as the forgotten unless we make people understand why our debt deserves the same protections as every other form of debt.
If I were to read the writing on the wall, more specifically the Sunday newspaper and Alan's book, then things can't be going very well for student borrowers in terms of debt and default.
The first sign was something I read in Alan Collinge's book, The Student Loan Scam, which I have translated into the following bar graph. As one can see, the use of federal student loans is growing rapidly - which in turn, by the percentages, translates into more student loans in default or struggling to tread water. The graph shows the amount of federal student loans made in 1979, 1989, 1996 and 2008 respectively. This is only for federal loans, not for any private loans that are not covered under the federal umbrella.
The steep rise in the amount of federal loans being made would indicate that students are taking on more debt to get their college degrees. Though it is certainly true that more and more students are going to college these days I don't think the growth in numbers of college students accounts for this increase alone.
To go along with this rise in student debt, the front page of the classified jobs section of The Buffalo News for Sunday January 10, 2010 had four large ads that each occupied 1/4 of the page. Two of these were ads were for collections services promising all kinds of benefits including 50% commissions, vacation pay, health insurance, paid holidays, day care and the list goes on. One of these ads was specifically seeking people with experience in student loan collections!
This is the first such time that I have seen a job ad for a collection agency seeking people with this kind of specialty. I was also shocked at the kind of benefits these places were paying. Business must be good for student loan collectors.
This can only mean its not going so well for many student loan borrowers. Furthermore, the brazen front page nature of the ad, seeking specialty in student loan collections, seems to imply that student loan borrowers are acceptable collection targets, social castaways that should have known better.
I think student loan borrowers need to work together to make our voices heard. We will continue to be the treated as the forgotten unless we make people understand why our debt deserves the same protections as every other form of debt.
Monday, January 11, 2010
Educate Yourself and Get Active
I can't emphasize enough that all student loan borrowers need to become active participants in the student loan reform process. It's the only way we are going to get the changes we need to live free once again.
If you are a New Yorker then here is the contact information for your Senators:
Senator Charles E. Schumer http://schumer.senate.gov/new_website/contact.cfm
Senator Kirsten Gillibrand http://gillibrand.senate.gov/contact/
I can't recommend enough the book by Alan Collinge, entitled The Student Loan Scam: The Most Oppressive Debt in U.S. History - and How We Can Fight Back. I know that I have already mentioned his book, (previous story here) but after rereading it I knew it deserved mention again. Alan's book does a fantastic job of explaining why students with public or private loans are in the same situation and how Sallie Mae has, almost single handedly, twisted the student loan system into the monstrosity it is today.
Read the book and then reread it - because there is so much information in there that you may only truly know its value with a second read.
I would like to take this opportunity to thank Alan and everyone at StudentLoanJustice.org for all that they have done to get this movement started and to become a voice for us all.
Regards,
J. Densmore
If you are a New Yorker then here is the contact information for your Senators:
Senator Charles E. Schumer http://schumer.senate.gov/new_website/contact.cfm
Senator Kirsten Gillibrand http://gillibrand.senate.gov/contact/
I can't recommend enough the book by Alan Collinge, entitled The Student Loan Scam: The Most Oppressive Debt in U.S. History - and How We Can Fight Back. I know that I have already mentioned his book, (previous story here) but after rereading it I knew it deserved mention again. Alan's book does a fantastic job of explaining why students with public or private loans are in the same situation and how Sallie Mae has, almost single handedly, twisted the student loan system into the monstrosity it is today.
Read the book and then reread it - because there is so much information in there that you may only truly know its value with a second read.
I would like to take this opportunity to thank Alan and everyone at StudentLoanJustice.org for all that they have done to get this movement started and to become a voice for us all.
Regards,
J. Densmore
Thursday, January 7, 2010
Bankruptcy in Context
Let's begin our discussion today with a quote:
"...financial problems happen to the best of us and the fact of the matter is that once we find ourselves in trouble, bankruptcy could be the most responsible decision one could make."
This quote, taken from Blog.LegalHelpers.com, represents the reality of the financial world we live in here in the United States. Bankruptcy is a decision that must be looked at logically if the need arises. The costs and benefits of this process must be weighed carefully before a proper decision can be made. It is not something that should ever be rushed into.
Bankruptcy can be a second chance to get one's financial life straightened out. Many famous people have had to turn to bankruptcy at one time or another to reset their financial situation. Many of them went on to be very successful subsequently.
Some of these famous people include:
I bring this up here because somewhere in their great wisdom - our elected officials have seen fit to remove this option for student loan borrowers - without any evidence to show that student loan borrowers represent a particularly egregious subset of the population prone to cases of fraud and misrepresentation.
Ironically, students and former students are more likely to be the kind of people to learn from their mistakes and therefore stand to benefit the most from a second chance.
"...financial problems happen to the best of us and the fact of the matter is that once we find ourselves in trouble, bankruptcy could be the most responsible decision one could make."
This quote, taken from Blog.LegalHelpers.com, represents the reality of the financial world we live in here in the United States. Bankruptcy is a decision that must be looked at logically if the need arises. The costs and benefits of this process must be weighed carefully before a proper decision can be made. It is not something that should ever be rushed into.
Bankruptcy can be a second chance to get one's financial life straightened out. Many famous people have had to turn to bankruptcy at one time or another to reset their financial situation. Many of them went on to be very successful subsequently.
Some of these famous people include:
| P.T. Barnum (1855) | |
| H.J. Heinz (1875) | |
| Milton Hershey (1882) | |
| William McKinley (1893 - $130,000) | |
| Mark Twain (Samuel Langhorne Clemens,1894) | |
| Oscar Wilde (1895) | |
| Henry Ford (1901) | |
| Walt Disney (1923) | |
| Larry King (1960, 1978) | |
| Mickey Rooney (1962) | |
| Jerry Lee Lewis (1988) | |
| Johnny Unitas (1991) | |
| Wayne Newton (1992) | |
| Donald Trump (1992, 2004) | |
| Kim Basinger (1993) | |
| Burt Reynolds (Chapter 11 - 1996) | |
| MC Hammer (1996) | |
| Debbie Reynolds (1997) | |
| Sherman Hemsley (1999) | |
| Mike Tyson (2003) | |
| Sammy Kershaw (2007) | |
| Ulysses S. Grant | |
| Thomas Jefferson | |
| Tony Martin | |
| Lawrence Taylor | |
| Abraham Lincoln | |
Ironically, students and former students are more likely to be the kind of people to learn from their mistakes and therefore stand to benefit the most from a second chance.
Wednesday, January 6, 2010
Read This Book - Recommend This Book Now!
Dear Readers,
I will keep this post short and sweet. Go out and buy or borrow The Student Loan Scam: The Most Oppressive Debt in U.S. History - and How We Can Fight Back by Alan Collinge.
This book confirmed the reality of just how perverse and pervasive corruption has become in every aspect of the student loan industry - including the federal government.
Right there on page 12 was the confirmation that the collection agency that the U.S. Department of Education turned my loans over to, PIONEER CREDIT RECOVERY, was and is, in fact, a front for Sallie Mae and all its sick fraudulent games. If you recall, it was PIONEER that wouldn't let my loans out of default (full story here) until the Office of the Ombudsman intervened (contact them here if you need help).
So, please read this book. If you happen to know anyone about to go to college then recommend this book. I wouldn't let anyone in my family go until they read this book, nor should you!
READ IT! I can't say that enough.
I will keep this post short and sweet. Go out and buy or borrow The Student Loan Scam: The Most Oppressive Debt in U.S. History - and How We Can Fight Back by Alan Collinge.
This book confirmed the reality of just how perverse and pervasive corruption has become in every aspect of the student loan industry - including the federal government.
Right there on page 12 was the confirmation that the collection agency that the U.S. Department of Education turned my loans over to, PIONEER CREDIT RECOVERY, was and is, in fact, a front for Sallie Mae and all its sick fraudulent games. If you recall, it was PIONEER that wouldn't let my loans out of default (full story here) until the Office of the Ombudsman intervened (contact them here if you need help).
So, please read this book. If you happen to know anyone about to go to college then recommend this book. I wouldn't let anyone in my family go until they read this book, nor should you!
READ IT! I can't say that enough.
Monday, January 4, 2010
Student Loan Bankruptcy: Where are the checks and balances?
The sobering news today is that new filings for bankruptcies soared in 2009 coming in 32% higher than the previous year. So it appears that the more stringent bankruptcy codes passed in 2005, which made it more expensive and difficult to file bankruptcy, can't hide the enormous amount of economic stress that many people in this country are under.
While I hope to see more information about the specifics of these bankruptcies in the coming weeks, this steep increase does make me wonder how many of these filings are related to unaffordable student debt.
My interest in this topic was also directed somewhat by a statement that I recently came across on another site. The statement read something like this:
"Bankruptcy laws create a check on the activities of lenders."
Now I know it may sound naive but I found this to be a surprisingly novel and interesting thought. Most times when you hear about bankruptcy it is with some negative connotation, the implication being that the filing entity or person has failed in some way and now they will get away without having to pay what they borrowed. The borrower is often seen as the only offender.
However, the individual who made that post apparently grasped something that the writers of bankruptcy law, in their wisdom, must have also understood and taken into account. Namely, that the lender shares a significant burden of the responsibility involved in any loan or extension of credit.
The law therefore finds creditors to be responsible parties in the financial transactions they are involved in. This puts the onus on lenders to properly screen their borrowers and determine their eligibility for the loan based upon the borrower’s present and future ability to pay. Theoretically, the lender is supposed to assess the loan's risk based on the borrower's current assets and the potential future reward of the borrower's investment. If either of the borrower's qualifications is deficient then the loan is not supposed to be made.
If the lender determines the borrower's qualifications to be worthwhile then they usually make the deal. Both parties sign contracts, with good intentions, and off they go. Now I am not a banker but this is probably where the risk-reward ratio comes in and the interest rates are established.
If the lender makes a good risk and the borrower does repay he then makes a reasonable - and sometimes substantial profit. But if he makes a mistake and something happens that cannot be foreseen and the borrower cannot repay - then he may lose. This is where I fail to feel for the lender - it’s their business to make intelligent investments. It’s also part of the risk they accept.
As I see it, all bankruptcy law does then is to enforce the later outcome - which is to say the lender loses his investment in part or in its entirety when the borrower can't pay. And as anyone who has ever filed or witnessed a bankruptcy filing - bankruptcy law also punishes the borrower - through damaged credit scores and limits on future filings, neither of which makes for a light sentence.
However, these checks and balances are not present with student loans. The normal system is short-circuited presumably to make more loans available to students. Lenders are protected in many cases by a federal guarantee which obliges the federal government to cover these loans if the borrower can’t. The federal government then enforces payment by the borrower through all sorts of means, regardless of their ability to pay or lead a normal life. In the case of both public and private student loans - borrowers cannot file bankruptcy either. So, it has become essentially a win-win for lenders - they get paid, must get paid in most instances, even if the investment goes sour for the borrower.
While this may not have been the intention of our leaders when this system was first established it has become a problem for millions now. For the borrower of student loans, it seems - its do or die. Either the student loan debtor makes it and pays the loans back or they die and the loans don't get paid back. In the case of private loans – the loans are not discharged even at death - meaning lenders can go after spouses, parents and estates depending on the situation.
Ironically, student loans have therefore become one of the most risky investments anyone can make. At the end of the investment the student may not even have the piece of paper they invested in, may not be able to get a job with the investment they made and can be left with no hard assets to sell after the investment. Despite all this and more, they are forced to pay back even if the lender knew the investment was financially unsound because for them they never risked anything in the first place. While initially intended as a good and proper thing to do, the student loan finance system has backfired and is now enslaving generations of its citizens to financial profiteers.
While I hope to see more information about the specifics of these bankruptcies in the coming weeks, this steep increase does make me wonder how many of these filings are related to unaffordable student debt.
My interest in this topic was also directed somewhat by a statement that I recently came across on another site. The statement read something like this:
"Bankruptcy laws create a check on the activities of lenders."
Now I know it may sound naive but I found this to be a surprisingly novel and interesting thought. Most times when you hear about bankruptcy it is with some negative connotation, the implication being that the filing entity or person has failed in some way and now they will get away without having to pay what they borrowed. The borrower is often seen as the only offender.
However, the individual who made that post apparently grasped something that the writers of bankruptcy law, in their wisdom, must have also understood and taken into account. Namely, that the lender shares a significant burden of the responsibility involved in any loan or extension of credit.
The law therefore finds creditors to be responsible parties in the financial transactions they are involved in. This puts the onus on lenders to properly screen their borrowers and determine their eligibility for the loan based upon the borrower’s present and future ability to pay. Theoretically, the lender is supposed to assess the loan's risk based on the borrower's current assets and the potential future reward of the borrower's investment. If either of the borrower's qualifications is deficient then the loan is not supposed to be made.
If the lender determines the borrower's qualifications to be worthwhile then they usually make the deal. Both parties sign contracts, with good intentions, and off they go. Now I am not a banker but this is probably where the risk-reward ratio comes in and the interest rates are established.
If the lender makes a good risk and the borrower does repay he then makes a reasonable - and sometimes substantial profit. But if he makes a mistake and something happens that cannot be foreseen and the borrower cannot repay - then he may lose. This is where I fail to feel for the lender - it’s their business to make intelligent investments. It’s also part of the risk they accept.
As I see it, all bankruptcy law does then is to enforce the later outcome - which is to say the lender loses his investment in part or in its entirety when the borrower can't pay. And as anyone who has ever filed or witnessed a bankruptcy filing - bankruptcy law also punishes the borrower - through damaged credit scores and limits on future filings, neither of which makes for a light sentence.
However, these checks and balances are not present with student loans. The normal system is short-circuited presumably to make more loans available to students. Lenders are protected in many cases by a federal guarantee which obliges the federal government to cover these loans if the borrower can’t. The federal government then enforces payment by the borrower through all sorts of means, regardless of their ability to pay or lead a normal life. In the case of both public and private student loans - borrowers cannot file bankruptcy either. So, it has become essentially a win-win for lenders - they get paid, must get paid in most instances, even if the investment goes sour for the borrower.
While this may not have been the intention of our leaders when this system was first established it has become a problem for millions now. For the borrower of student loans, it seems - its do or die. Either the student loan debtor makes it and pays the loans back or they die and the loans don't get paid back. In the case of private loans – the loans are not discharged even at death - meaning lenders can go after spouses, parents and estates depending on the situation.
Ironically, student loans have therefore become one of the most risky investments anyone can make. At the end of the investment the student may not even have the piece of paper they invested in, may not be able to get a job with the investment they made and can be left with no hard assets to sell after the investment. Despite all this and more, they are forced to pay back even if the lender knew the investment was financially unsound because for them they never risked anything in the first place. While initially intended as a good and proper thing to do, the student loan finance system has backfired and is now enslaving generations of its citizens to financial profiteers.
Saturday, January 2, 2010
Need for More Appropriate Advertisements
Hi everyone,
If you are an avid blogger, blog reader or postmaster or even someone with some novel ideas that happened on to my site I am open to new and different options for advertising on this blog.
Frankly speaking, while the ads on this site are subject appropriate I don't think they serve the readers of my blog to the utmost possible. I will be working with Google Ads to update this to the extent possible since they have been so helpful to date. I feel I owe them that.
I am also thinking of just getting rid of them altogether since they haven't produced any income whatsoever.
However, if someone has some ideas to direct the advertisement in a more positive fashion I am all ears.
Regards,
J. Densmore
If you are an avid blogger, blog reader or postmaster or even someone with some novel ideas that happened on to my site I am open to new and different options for advertising on this blog.
Frankly speaking, while the ads on this site are subject appropriate I don't think they serve the readers of my blog to the utmost possible. I will be working with Google Ads to update this to the extent possible since they have been so helpful to date. I feel I owe them that.
I am also thinking of just getting rid of them altogether since they haven't produced any income whatsoever.
However, if someone has some ideas to direct the advertisement in a more positive fashion I am all ears.
Regards,
J. Densmore
Friday, January 1, 2010
A New Year and a New Commitment
In reading and learning more on this topic of student debt and loans I am moved to comment on the ingenious nature of the relationship between education and student loan programs.
When I first became a college student back in the fall of 1987 student loans were a way to get a college degree if your family didn't have the money to support you in that endeavor. In my family, as in many others, neither of my parents had ever gone to college but both had always wanted to and so for their son it was a must. For them a college degree was some sort of Holy Grail to a more prosperous life.
So the mindset was, and still is today, that student loans provided the opportunity to get that almighty college degree. Somewhere along the way however, things have changed. I am not sure quite when it happened but at some point the generalized, non-specific college degree became worth little more than toilet paper. Alright, maybe it was worth about the same as a respectable high school diploma but certainly no more.
As such the liberal arts degree in whatever color became essentially useless as a means to get a job, let alone a better life than your parents had. Nobody wanted them. I know this because I had one by the spring of 1992 and nobody would hire the green college kid with the B.A. in Economics, not even as a bank teller.
Since that time things have not improved much. Sure there was the technology boon of the 1990’s that made some millionaires, even some billionaires, but that ride crashed in the early part of 2000 along with the NASDAQ.
Today, we have high unemployment in both blue and white collar sectors with little hope on the horizon of getting people back to work. Looking retrospectively at the last 20 years since I was first a college student, it has dawned on me that educational institutions charge even more for the same degrees today. The same degrees that will get you nowhere. These colleges still provide no real support to get people respectable jobs and absolutely no guarantee that the expensive piece of paper on the wall will even do them any good.
And yet, here we are still churning out students with no place to go for good jobs with useless degrees in an environment that encourages taking on more debt with ever increasing availability of student loans, both public and private. The almighty dogma of the great college degree still persists too. Only now – even those with specific, professional degrees are finding themselves up to their necks in debt as they wait in line apply for their unemployment benefits.
We have created a system of higher education that in many cases, is failing our country and our citizens. As a culture we need to take stock of our priorities and get our financial systems in line with them, not the other way around.
For the past 20 years, at the very least, we have had a system of exploding student debt and useless higher education matched to do only one thing – to make money for some financial profiteers at the expense of the bright eyed, eager college student who thought he or she was on a path to making a good and decent life for themselves.
Sure, I can write this blog – so my two B.A. degrees and my M.A. degree (and nearly a PhD.) have served some purpose – but was it worth the immense debt I have amassed? Certainly not – because insulating pipes, which is what I do now, doesn’t require or make great use of the excessive education I have. And while it's most certainly a respectable living requiring considerable skill, the health risks it poses are certainly not the dream my parents hoped for I think. I am however resolved to making a career of it now and it does keep my head above water so for that and all the wonderful, hardworking people I have met and worked with I am so very thankful. I do wonder though, how many others like me are out there doing something similar.
The truth is, I believed in a bill of goods, namely that a college education could change my life for the better. I believed that student loans were a means to an end and that I would be able to pay them back when I was done. What I now realize was that despite how smart I thought I was there was a bigger picture. For some politicians and lobbyists out there, there were profits to be made and that take on things was just outside my field of vision. As I see it now, it must have been designed to be that way, no system this cruel could exist without intention.
I was not given the protections I deserved when I made my investment. I was not informed of the uselessness of the degrees that I found myself getting and the mountain of debt that I was accumulating that would be forever outside my reach to repay. There should be a system of informed people in place to protect our college students from this kind of predatory behavior – the kind that is so devious that even some of the brightest among us have been perpetually enslaved to their student loans with no hope of getting out from under them.
These people can’t afford to marry. They can’t afford to buy a home. They can’t afford health insurance. They can’t afford to have children. They can't afford to make any moves that will jeopardize repaying these loans that might even improve their circumstances. They can't afford to risk anything. They have none of the protections that every other type of borrower has – the right to redress when their debts have ruined their lives – stolen their lives – right before their eyes.
And in a classic, cultural cliché - we blame the student debtor because they (and I include myself here) should have known better. Maybe we should have known better but I am not so sure anymore that we could have. The system is just not designed to tell you all these things. And besides, blaming the victim doesn’t change the reality of what is happening here and it will not change what will happen to the next crop of graduating college students, or all those that will certainly follow under the current system.
This game of loaning students money for degrees that will only take them down dead end roads where there dreams will die must end. There must also be an end to the enslavement of those already trapped by their student loans.
To every American, past, present and future – this system is so perverse that it is evil in the worst Machiavellian sense and I pray you have heard this cry for justice.
Bring back the same financial protections to student loan debtors that all other forms of loans have the right to. Consider forgiving these loans to stimulate the economy. Fight for new changes to the way we finance higher education and implement tough controls on colleges who sell degrees that are lemons.
Our future depends on this, now more than ever.
When I first became a college student back in the fall of 1987 student loans were a way to get a college degree if your family didn't have the money to support you in that endeavor. In my family, as in many others, neither of my parents had ever gone to college but both had always wanted to and so for their son it was a must. For them a college degree was some sort of Holy Grail to a more prosperous life.
So the mindset was, and still is today, that student loans provided the opportunity to get that almighty college degree. Somewhere along the way however, things have changed. I am not sure quite when it happened but at some point the generalized, non-specific college degree became worth little more than toilet paper. Alright, maybe it was worth about the same as a respectable high school diploma but certainly no more.
As such the liberal arts degree in whatever color became essentially useless as a means to get a job, let alone a better life than your parents had. Nobody wanted them. I know this because I had one by the spring of 1992 and nobody would hire the green college kid with the B.A. in Economics, not even as a bank teller.
Since that time things have not improved much. Sure there was the technology boon of the 1990’s that made some millionaires, even some billionaires, but that ride crashed in the early part of 2000 along with the NASDAQ.
Today, we have high unemployment in both blue and white collar sectors with little hope on the horizon of getting people back to work. Looking retrospectively at the last 20 years since I was first a college student, it has dawned on me that educational institutions charge even more for the same degrees today. The same degrees that will get you nowhere. These colleges still provide no real support to get people respectable jobs and absolutely no guarantee that the expensive piece of paper on the wall will even do them any good.
And yet, here we are still churning out students with no place to go for good jobs with useless degrees in an environment that encourages taking on more debt with ever increasing availability of student loans, both public and private. The almighty dogma of the great college degree still persists too. Only now – even those with specific, professional degrees are finding themselves up to their necks in debt as they wait in line apply for their unemployment benefits.
We have created a system of higher education that in many cases, is failing our country and our citizens. As a culture we need to take stock of our priorities and get our financial systems in line with them, not the other way around.
For the past 20 years, at the very least, we have had a system of exploding student debt and useless higher education matched to do only one thing – to make money for some financial profiteers at the expense of the bright eyed, eager college student who thought he or she was on a path to making a good and decent life for themselves.
Sure, I can write this blog – so my two B.A. degrees and my M.A. degree (and nearly a PhD.) have served some purpose – but was it worth the immense debt I have amassed? Certainly not – because insulating pipes, which is what I do now, doesn’t require or make great use of the excessive education I have. And while it's most certainly a respectable living requiring considerable skill, the health risks it poses are certainly not the dream my parents hoped for I think. I am however resolved to making a career of it now and it does keep my head above water so for that and all the wonderful, hardworking people I have met and worked with I am so very thankful. I do wonder though, how many others like me are out there doing something similar.
The truth is, I believed in a bill of goods, namely that a college education could change my life for the better. I believed that student loans were a means to an end and that I would be able to pay them back when I was done. What I now realize was that despite how smart I thought I was there was a bigger picture. For some politicians and lobbyists out there, there were profits to be made and that take on things was just outside my field of vision. As I see it now, it must have been designed to be that way, no system this cruel could exist without intention.
I was not given the protections I deserved when I made my investment. I was not informed of the uselessness of the degrees that I found myself getting and the mountain of debt that I was accumulating that would be forever outside my reach to repay. There should be a system of informed people in place to protect our college students from this kind of predatory behavior – the kind that is so devious that even some of the brightest among us have been perpetually enslaved to their student loans with no hope of getting out from under them.
These people can’t afford to marry. They can’t afford to buy a home. They can’t afford health insurance. They can’t afford to have children. They can't afford to make any moves that will jeopardize repaying these loans that might even improve their circumstances. They can't afford to risk anything. They have none of the protections that every other type of borrower has – the right to redress when their debts have ruined their lives – stolen their lives – right before their eyes.
And in a classic, cultural cliché - we blame the student debtor because they (and I include myself here) should have known better. Maybe we should have known better but I am not so sure anymore that we could have. The system is just not designed to tell you all these things. And besides, blaming the victim doesn’t change the reality of what is happening here and it will not change what will happen to the next crop of graduating college students, or all those that will certainly follow under the current system.
This game of loaning students money for degrees that will only take them down dead end roads where there dreams will die must end. There must also be an end to the enslavement of those already trapped by their student loans.
To every American, past, present and future – this system is so perverse that it is evil in the worst Machiavellian sense and I pray you have heard this cry for justice.
Bring back the same financial protections to student loan debtors that all other forms of loans have the right to. Consider forgiving these loans to stimulate the economy. Fight for new changes to the way we finance higher education and implement tough controls on colleges who sell degrees that are lemons.
Our future depends on this, now more than ever.
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