Recipe for Disaster

At this point in my search for solutions to the crisis in the student loan financial system I find that I can no longer avoid talking about the type of economy we have in the democracy we live in.

I will keep this simple so here goes - why do we think it's in the best interest of our democracy to let capitalism run through every aspect of our economy like a runaway train?

All the Enronesque scandals should prove that capitalism is not something that belongs in every aspect of our economy. It has ruined health care and it is quickly crippling the student loan financial system. The time has come - I hope we can all see this - to end the use of capitalism as the answer to all our economic needs.

We need to protect the future of our society from the greed and avarice that has so tainted the late 20th and early 21st century. Higher education should NOT be a system of winners and losers -  a dichotomy that capitalism inherently creates. Rather - it should be a system where we efficiently and cost effectively educate our bright minds to keep us competitive in the global marketplace and human society as a whole. With such an emphasis on information and technology for the future - we are getting the higher education system so wrong that we may soon find ourselves out of the race to stay relevant - let alone competitive. Creating massive debt for our students before they are given the chance to create a better life for us all does not make sense in a sustainable economy.

I fear that we have become so blinded by the 'strong shall survive' dogma of purist capitalism that we are no longer able to see the precipice that we are headed for. We have taken some of our brightest minds and wrapped them up in so much debt to the point that their intelligence has been neutralized - leaving our greatest national treasure laid to waste.

Wake up America - student loan borrowers everywhere are living in a disaster area called their lives. And the student loan system is on the brink of collapse because of a job market that may require, according to the federal government, 2 to 5 years to improve. In the midst of all this - our leaders in Congress and the White House are silent on the issues.

Does anyone else have a different recipe for disaster?

Hitting the Mainstream

Recently the Wall Street Journal online has brought some attention to the perils of student loan debt with a few articles. They can be found here: The $555,000 Student-Loan Burden, The Student Loan Effect.

This mainstream attention to the student loan crisis is a much needed shot in the arm if Congress and the White House are ever going to take notice and lend a hand.  And while this spotlight may not always lead to a positive experience for student loan borrowers it is a necessary step in the right direction.

If one takes the time to read some of the comments left by readers of either of these articles, it will be quickly realized that many people have unflattering things to say about student loan borrowers. I would like to suggest to student loan borrowers everywhere that these are precisely the people we need to hear our message. These are precisely the people we need to educate and change from distracters into supporters.

In order to get people to support our cause we need to first meet the negative comments head on and challenge assertions and assumptions about student loan debt and the student loan industry. Until each and every one of us with student loan debt begins to get active in this way - those of us out here ringing the alarm bells will remain those crazy, lazy people just spouting off about their problems.

So please get active. Write your Congressmen, your Senators, your President. Write to your local newspaper. Comment on blogs and newspaper articles. Write your student loan company. Speak to whomever will listen because our collective voices can make a difference and effect a change in consciousness on this issue but WE have to make that happen.

Join me in making this happen - comment here today. And let today be the start of your own voice for relief from student loan debt.

Warmest Regards,
J. Densmore

Tis the Tax Season

In preparing my taxes for fiscal year 2009 I have come to an understanding of some things I thought I might share with all of you. Forgive me if you already know this.

If your long term struggle is to pay off other debt or your student loans first then here are some tax tips.

Your student loan interest is tax deductible up to $2500 per year. This deduction taken before your itemized or standard deductions - so you get to take the deduction whether or not you itemize.

Taxes and interest on your home are only deductible if you itemize so pay your home mortgage off first - especially if your interest rate is higher on your mortgage.

Something else to keep in mind - if your student loans are federal - it is again in your best interest to pay the home of first. In this way - if you pass away - your spouse is protected from your debt - because federal loans are forgiven upon death.

If anyone has any other tips or thoughts on the issue please feel free to post your follow-up comments here.

Warmest regards,
J. Densmore

The Unforeseen Consequences of Student Debt

When you set out to achieve your dreams to get the college education that your parents didn't get or couldn't have the benefit of remember this - the fairytale of the magical college diploma leaves out a few things.

When I decided to seek a graduate degree I thought it was the right thing to do for my future. I had a dream of helping people and to get there I was going to need an advanced degree and the help provided by student loans. I know now that I was so very naive - that nothing comes without a price in this world. All too late I am learning that my dream was a mirage and that student loans can be the worst thing to ever happen to you.

My wife and I are at a turning point in our lives. We are both getting older and time is running out for us to have children of our own. Complicating this picture is the fact that she is stuck in a dead end job that offers no retirement and no possibility for advancement or significant pay increases. Her current job pays modestly and provides little in the way of personal reward or intellectual stimulation either. It is deadening to the soul for her to stay there but - like so many Americans - it has kept food on the table and kept her out of debt.

So before us is the fact that I have approximately $120,000 in student loans that are choking my income - our income - and there is no real relief in sight. With the 'repayment' plan I am on, the payments will only rise over time making our financial situation only more difficult. (The new IBR plan Obama proposes offers us no hope because her income is still part of the formula). My own job will see some modest pay increases over the next few years but not in the way to make any significant disposable income available.

Before us then is a choice to have children or not OR for her to back to school or not OR for us to play it safe and not do either because of the depressed state of the economy and my student loans.

It seems that we are damned no matter what we decide. We could send her back to school but the program that she has been accepted to will cost $30,000 over the next two years. Because of the intense nature of the program she would have to quit her job. All for the 'POSSIBILITY' that she would have a better job in two years and POSSIBLY a better rate of pay and maybe a pension and maybe some personal reward to it.

And as I have urged others to be specific - her plan is to get a specific degree targeted for a specific salary at the end of a specific time period. But all of it is predicated on a bunch of 'ifs' and 'assumptions' and should anything go wrong - we would be totally, and irrevocably screwed financially. For us to lose her salary would put an immense pressure on our already strained income and modest savings. All for a dream and a bunch of assumptions.

I don't want to focus too much on the job issue because this would cause us to ignore our desire to have a family. There is little money for this however or time even left to make the decision before it is made for us.

So our lives are at a crossroads - what do we do? Do we risk a soul killing job in the hand for a dream in the bush? Do we have children right now and throw caution to the wind and assume somehow everything will be all right? Maybe the government would help us - yeah right!

How, in one of the wealthiest countries to ever exist, did we get here?

The greatest pain for me is that my student loans are at the center of all this. Without these loans she could go back to school. We could have had a child already. Money would not be at the center of every ache in our hearts if it wasn't for these loans - and for the stupid, childish decisions I made earlier in my life.

I don't mean to sound completely sour on higher education mind you. While I have benefited on an intellectual and personal level from my education however, it hasn't been worth it financially, socially or familial-y. If I had it to do over again with what I know now - I would have foregone college from the start and waited until I had the money in hand before ever thinking of a higher education.

The government's help with plentiful student loans and no protections in the event that life's inevitable missteps would occur have shackled my future to the point of choking the life out of it. It is very likely that my wife and I will not be able to afford to have children or be able to send her to college. All because I signed on the dotted the line years ago and didn't really know the true cost of those loans. But as former President Bush was quoted to have said when asked about his drug use in his youth - "When I was young and stupid I was young and stupid."

That being said - my gift to anyone starting out is a word of advice. Given the state of the economy as it currently is - unless you have an inside line on a job when you graduate or parents to pay for college and save you the debt - WAIT to go to college. Wait until you have the money because there are very real, unforeseen consequences of student debt just as there will be unforeseen happenstances in life.

The unforgiving and enslaving system of financing higher education that we currently have in place is not to be trusted. Understand this - because your entire life and your hope of finding immortality through your own children just might depend on it.

J. Densmore

Send Letters to Your Congressmen and Senators

In light of President Obama's pledge to help student loan borrowers I submit the following form letter for use in contacting your own local representatives in Congress.

"Dear Senator, Congressman, Congresswoman etc.,

President Obama mentioned in his State of the Union Address that no one should have to go bankrupt to pay for an education.

Given the President's desire to help student loan borrowers I would like to know your stance on student loan borrowers' issues.

Do you support student loan forgiveness as a way to stimulate the economy? Do you support returning bankruptcy protections to all student loans - both public and private? Do you support the call to reduce the rate of interest on all student loans down to 1% - the same rate banks are allowed to borrow money at?

If you don't support any of the aforementioned proposals, just what help for over-indebted student loan borrowers do you support?

Furthermore, from what interests within the student loan industry have you accepted contributions, if at all?

I would appreciate it if you could give my inquiry its due respect and respond directly to my request - and not through the use of an assistant or intern.

Regards,
Your Name Here"

A Working Economy or Wealth Building Economy?

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

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

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.

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

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.

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.