Toronto A trillion dollars in student debt is on the books in the USA. The Department of Education paid $1.4 billion to bloodsucking debt collection agencies last year. Debt collectors refer to the process as “lip smacking,” an “oil well” of opportunity, and so forth. The government claims it will collect almost 85 cents on the dollar and finance professors say 50 cents on the dollar is more likely. The costs of the debt collectors is larded on to the debt held by the borrowers, so for the government it is a pass through with no guilt and no pain, but for citizens chained to the debt by their dreams it is more weight taking them to the bottom. Debtors refer to their student debt as a “modern debtors’ prison” and something that they will take to their grave and never escape. The leading institutions that have amassed the debt are in many cases on-line universities led by the University of Phoenix, Kaplan (owned by the Washington Post), and a host of others that come close to being predatory “educational” institutions that working people have grasped for and then found no lifeline.
All of this was a front page story in the New York Times. Ok, they didn’t use the words predatory, but the information was unmistakable. They also didn’t have much to offer in the article that might indicate in this economy that there is any hope or relief in sight. There needs to be!
One easy solution that wouldn’t change the world but would make a difference is to forgive all of the interest payments on student loans which is what is done in Canada for example. Talking in the car about the ACORN Canada organizers student debts largely from graduate programs or similar situations, all agreed that they got the money back on their taxes. It would help.
Having the Department of Education act to reduce fees and penalties would also make a huge difference. I’ve argued in the past that as a matter of protecting and advancing citizen wealth more of us need to do everything we can to get people with this debt away from collectors and before judges where the odds are amazingly good that the grossness of the added-on debt will be reduced to something closer to the original obligation or put on a basis where some form of payment can be made. Frankly rather than have the DOE pay bloodsuckers $1.4 billion, the DOE needs to move to adjust the debt for any good faith and full realization effort to bring the debts current and pay them off as performing loans. Heck even the IRS in many cases waives interest and penalties, so why can’t the DOE?
Thirdly, the DOE and the rest of the government have to protect students. Recently I dealt with a family in Phoenix where in a couple of years a young man to his shock ended up in debt $50,000 to one of these heavily investigated and fined so-called educational operations that claimed they were training him to design video games, but kept baiting and switching him from one course to another because they couldn’t deliver leaving him still without a degree but with a mountain of debt.
We can’t build the economy of the future on this kind of flimflam and debt, and men and women trying to navigate the changing financial fortunes of the country are paying the price. We need a student debt bailout for the millions who are drowning now.
