Reform Student Debt, Inc. Fights Back

Loan sharks. From a different era…the 1930’s after the crash. Banks closed. Businesses needed money to continue. Members of the Mob made that money available, lending at interest rates no bank was allowed to charge. Loan sharks.

They exist today in a different form. They are the Federal Government and banks providing money for student loans; they are the colleges, recipients of that money, swimming with the sharks to make certain monies are available.

Unlike the 30’s, lending laws exist today that protect the lenders of these loans, not the borrowers. And those laws are meaner and more crippling than anything the mobsters might have done to those who were late paying or tried not to pay up.

INTRODUCTION
Shark Fin imageStudent loans…Never have so many people been subjected to the most punitive financial arrangement ever seen in America.

Today more than 43 million people owe one and a half trillion dollars in student loan debt. That is more than all the credit card debt in America and closely follows car loan debt and mortgage debt in sheer dollar volume.

But unlike those loans which are governed by laws with strong consumer protections, student loans lack any government protections whatsoever. In fact, all the laws governing these loans have been designed to assist the lenders – not the borrowers and contain elements never before found in any other loan agreements. These elements are all enforced by laws.

Something else is true. And it is important. When Sen. Elizabeth Warren of Massachusetts, began talking about student loans several years ago, there was shock at the numbers of people involved and the size of the debt accumulating every year. No one knew.

Our culture, more ‘open’ than ever before, allows for discussion about everything. Media is open to frank conversations about sex, family dysfunctions, bodily functions…everything.

But the one thing we do not talk about is how much money we owe for what we possess. You may admire a friend’s house or a new car, even ask about the price, but never about the amount of a mortgage or car payment. You can congratulate a relative about a college his child is attending but never about the amount of tuition or whether he had to secure a loan to get the kid in.

And that silence, the silence about loans for education, not only hid the size and reasons for this staggering human and financial disaster, but is a barrier to the solutions that must come to change the arithmetic and the status of millions of lives.

Learning of the millions of people owing hundreds of billions of dollars in student loans was stunning… but that is only half of the story.

The other half – completely hidden until now – is how it all got that way.

loan shark image 2THE POWER OF THE MONIED
It began with President Lyndon Johnson’s wish to help make college education possible for all Americans by providing government backed low interest loans. It continued, as Richard Nixon and Congress developed “Sallie Mae” a quasi-governmental agency which would make money for student loans available to banks…giving them more funds to work with.

From that point, everything began a slow downward turn for every single eventual borrower to pay for college tuition. Successive Presidents and Congresses driven by forces with something to sell, supported punitive laws that would turn student loans into money-making, profit-driven avenues for the Federal government, for the banks and eventually for the colleges themselves. Tuition began to rise as student loan monies became more readily available. Budget-reducing Governors could slash State funding for public universities because no matter the tuition increases that then followed, loan monies would cover it.

From the years of Pres. Gerald Ford in 1976 all the way through to George W. Bush, student loans slowly and deliberately became unrecognizable from any other loan that could be made for any other reason.

All consumer protections were removed: Federal Debt collection. Fair Lending Act. Fair Trade and Consumer Protections laws…all removed.

Bankruptcy could never be declared. Never.

All usury laws were eliminated. Banks could charge any interest they wished.

Late fees were unregulated. Renegotiated loans could be charged even greater interest
then the primary loan.

Garnishment rates…up to 50% of a person’s salary could be grabbed with no borrower recourse.

And all of this was legal; the laws of the land. And citizens silently accepted these severe and unprecedented laws without protest.

THE STORIES
Money for college tuition was available. The Federal government had loans to offer. Banks had loans to offer. College admissions departments were quick to steer anxious parents to local banks which had available loan monies. So begins the accumulation of student loan debt which has reached astronomical proportions.

And with the passing years, come the stories of being caught in the shark tank. First a few at a time and now a tsunami of stories…stunningly almost all the same. A four year college loan of $40,000. The student graduates only to find that because compound interest began at the moment the loan was signed, the amount she owes is now $75,000. She gets a job, begins paying back the loan. She loses the job, delays payment, then renegotiates – and she owes $90,000. She estimates that in ten years she will have repaid the bank $128,000 and still owes the $40,000 principle.

There is no controlling the actions of a bank – or even the Federal government. In one story a man seeks forgiveness for his wife’s $22,000 loan taken 15 years ago from the Federal government to gain a nursing degree. At the end of 15 years she had repaid the government $75,000 in interest payments and still owes the principle of $22,000.

The Federal government responded to the plea for loan forgiveness by informing her that

  1. She had to have accumulated 140 payments without missing a payment date
  2. She had to either be a teacher seeking an advanced degree or a student studying to become a teacher.

Otherwise according to the rules, no forgiveness could be granted.

Reform Student Debt Official LogoREFORM STUDENT DEBT, INC,
Reform Student Debt, Inc. is a national, non-profit organization established to repeal and reform the predatory laws which have meant a ‘debt sentence’ to tens of millions of Americans seeking an education.

In order to fight off the efforts of the loan sharks to maintain the status quo, the organization recognizes that it will have to mobilize public opinion, pressure lawmakers to act to solve the problem and initiate demonstrations again and again throughout the country to get political office holders to reform these punitive laws.

43 million people are involved. That number alone is enough to get the job done if people care enough to come out to fight back and demand reform. These are not just young people now in college…or those who recently graduated. These are millions of people in their 30’s and 40’ years out of college who are still paying off student loans.

It’s time to recognize that they have been used to make money for the government, banks and colleges who have colluded to make a profit from those who sought an education.

Google Reform Student Debt.org and you will see exactly what the challenges are and what you can do to support this effort and get involved.

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