- An earlier article compared the 1950s to today, saying:
- It was a different time, good and bad. Elected in 1952,
Eisenhower was still president. Unemployment was low. Anyone wanting work
found it. Most years the economy grew during a post-WW II expansion. Inflation
was low. The average new car cost $1,500, a typical home under $10,000.
College was affordable. Harvard's 1952 full year tuition was $600. Four
years later it was $1,000 - for a full, two-semester year. During the period,
anyone could attend evenings at $5 a course and get a Harvard degree for
about $175, astonishing but true.
- America was unchallenged economically, its manufacturing
base offering high paying/good benefits jobs. Union representation was
high. Southern and northern US cities were segregated. They still are,
all 1960s civil rights gains lost plus most good jobs and benefits. Alaska
and Hawaii additions grew America to 50 states.
- The Korean War left an unsettled armistice. Cold War
politics settled in. Developing "mutually assured destruction (MAD)"
and accommodation prevented WW III. Censure ruined Joe McCarthy, and by
May 1957 he was dead at age 48. The CIA's first coup deposed Iran's Mohammad
Mosaddegh. A generation of terror followed. A year later, another toppled
Guatemala's Jacobo Arbenz Guzman, fueling decades of genocide against its
- Throughout the decade, few followed Vietnam events, its
defeat of France, and America's growing involvement in what became three
decades of war. Palestinian Territories weren't occupied, and during the
period Israel was young, growing, but mostly out of the news and public
mind. Times indeed changed, for the worse, not better, including college
- Harvard tuition for the 2010/2011 academic year is $35,568.
Add room, board, health insurance fees, books and supplies, local transportation
(if needed), plus miscellaneous and personal expenses raises the total
to nearly $60,000. Moreover, with annual tuition/fees hikes, incoming freshmen
may need $70,000 for senior year expenses.
- According to an October 28 Los Angeles Times article
titled, "College costs increase faster than inflation:"
- "State budget cuts and declines in philanthropy
and endowments help push (college tuition costs) up much higher than general
inflation across the country this year, amounting to an increase of 7.9%
at public campuses and 4.5% at private ones, according to a new study by
the nonprofit College Board."
- In fact, some schools, like the University of California,
raised fees by 32%, then announced a further 8% hike. The University of
Illinois announced a 9.5% increase. Other public and private schools followed
suit, some by over 10% when fewer students can pay it. The College Board
said for the decade ending in 2008, tuitions rose 54% after 49% in the
- Student Loans/Debt Information
- The Project Student Debt web site (http://www.projectonstudentdebt.org/)
has a wealth of information on student loans and debt. Using US Department
of Education data for the 2007/08 academic year (the most recent available),
it said two-thirds (or 1.4 million) of 2008 college graduates had student
loan debt, a 27% increase from 2004, breaking down as follows:
- -- at public universities, it was 62%;
- -- for private nonprofit ones, 72%; and
- -- at private for-profit institutions, 96% were debt
- In 2008, graduating seniors had an average debt burden
of $23,200, a 24% increase from $18,650 in 2004. At public universities,
it was $20,200. For private nonprofit ones, $27,650, and at private for-profit
- However, given how government data is manipulated, true
totals are far higher and rising exponentially. Many graduates have debt
burdens approaching or exceeding $100,000. If repaid over 30 years, it
amounts to a $500,000 obligation, and if default, much more because debt
obligations aren't erased.
- Moreover, regardless of inflation changes, tuition and
fees rise annually. As a result, future costs are less affordable. Greater
debt burdens are created, and for many students, higher education is out
- For most others, completing college includes debt bondage
because of what Valley Advocate.com writer Stephanie Kraft called "Killer
Loans" in her October 14 article, saying:
- "....a large segment of the population is squeezed
for interest payments and fees on loans taken out to pay for college, or
for graduate or professional school."
- The numbers are staggering - $96 billion loaned annually
to attend college, graduate, trade or professional schools, excluding "shadow"
borrowing. It includes tapping home equity, retirement accounts, other
sources, and credit cards. A 2005 Smith College survey found 23% of students
use plastic for college tuition and fees.
- In the past decade, student loan debt ballooned over
four-fold. In 1977, about $1.8 billion was borrowed. By 1989, it was $12
billion, and in 1996 $30 billion. According to the Student Loan Debt Clock,
its cumulative principle and interest exceeds $877 billion, surpassing
credit card debt for the first time last June, and will exceed $1 trillion
in early 2012.
- At its present rate, it increases $2,854 per second,
entrapping most borrowers and forcing others to default. According to the
Chronicle of Higher Education (CHE) last September:
- "The percentage of borrowers defaulting on their
student loans (rose) for a third year in a row, reaching an 11-year high
of 7 percent," based on US Education Department data - again grossly
understated to hide a serious problem for millions.
- The data is based on the number of graduates defaulting
within two years of graduation so only capture "a sliver of the defaults
that occur over the life of a loan," according to a CHE analysis.
It estimates that one in five government loans entering repayment in 1995
defaulted. For community college graduates, it's 31% and at for-profit
- Yet little is reported on the scope of the student loan
racket. The web site Student Loan Justice explains it (http://studentloanjustice.org/argument.htm),
- "The federal student loan system has become predatory
due to the Congressional removal of standard consumer protections and....sanctioned
collection powers that are stronger than those for all other loan instruments
in our nation's history."
- As a result, student borrowers are greatly harmed by
unmanageable loan demands. Along with inflation and annual tuition/fee
hikes, most graduates face an enormous burden, with no consumer protections,
even in default. Once entrapped, escape is impossible. Debt bondage is
permanent, and future lives and careers are impaired.
- Congress ended bankruptcy protections, refinancing rights,
statutes of limitations, truth in lending requirements, fair debt collection
ones, and state usury laws when applied to federally guaranteed student
loans. As a result, lenders may freely garnish wages, income tax refunds,
earned income tax credits, and Social Security and disability income to
assure defaulted loan payments. In addition, defaulting may cause loss
of professional licenses, making repayment even harder or impossible.
- Under a congressionally established default loan fee
system, holders may keep 20% of all payments before any portion is applied
to principle and interest due. A borrower's only recourse is to request
an onerous and expensive "loan rehabilitation" procedure whereby
they must make extended payments (not applied to principle or interest),
then arrange a new loan for which additional fees are incurred. For many,
permanent debt bondage is assured. No appeals process allows determinations
of default challenges under a process letting lenders rip off borrowers,
many in perpetuity.
- "This fee system and associated rehabilitation schemes
have provided a massive revenue stream for a shadowy nationwide network
of politically connected (lenders), guarantors, servicers, and collection
companies who have greatly enriched themselves at the expense of misfortunate
- As a result, millions of students and families have been
gravely harmed, relegated to lifetime debt bondage. Yet industry predators
thrive. The fee system is their "lifeblood," providing on average
60% of their income through "legalized wealth extraction" - a
congressional sanctioned extortion racket like Wall Street and unscrupulous
investment companies scam customers.
- Lenders thrive from defaults, deriving income from debt
service and inflated collection fees. A conspiratorial alliance of lenders,
guarantors, servicers, collection companies, and government prey on unsuspecting
borrowers. Lifetime default rates approach up to one-third of undergraduate
loans, higher than for subprime mortgages. "This is, in fact, is higher
than the default rate of any known (US) lending instrument...."
- A Brief History Federally Guaranteed Student Loans
- In 1965, the Higher Education Act (HEA) let millions
of students afford college with federally guaranteed loans and scholarships.
It was later amended six times to benefit lenders at the expense of borrowers.
- In 1978, the Bankruptcy Reform Act was the first comprehensive
change since 1898. It established federal bankruptcy courts, substantially
revamping former practices. It also made it easier to file, and prohibited
discrimination when declared.
- Bankruptcy discharges release debtors from personal liability
for certain types of debt. In other words, debtors no longer must pay those
discharged permanently. Collection actions are also prohibited, although
the debt remains. Bankruptcy doesn't eliminate it. Non-dischargeable debts,
however, stay legally enforceable despite bankruptcy discharge. In 1990,
the non-discharge period was extended to seven years.
- In 1998, Congress eliminated federal Title IV, HEA student
loan debt dischargeability in bankruptcy. Education loans are the only
ones affected by a federal "no-escape" provision. In 2005, the
Bankruptcy Abuse Prevention and Consumer Protection Act made all student
loans (federal and private) non-dischargeable.
- As a result, avoiding debt bondage in bankruptcy is impossible,
unleashing the current predatory system for lenders like Sallie Mae. In
2009, the Department of Education reported over five million student loans
in default. So are at least another one million private ones, and these
numbers are likely underestimated.
- In addition, as explained above, prior protections were
removed, including statute of limitations on collections, truth in lending,
fair debt collection practices, the right to refinance, and state usury
law prohibitions. Washington corrupted the system for lenders at the expense
of student borrowers.
- An Example of Systemic Predation
- Sallie Mae (SM) is the largest student loan originator,
servicer and collector, managing over $180 billion in federally guaranteed
and private loans from over 10 million borrowers. If they can't repay after
270 days, loans are in default. Washington pays SM the balance plus interest.
For repayment, collection agencies like General Revenue Corporation (GRC),
the nation's largest, impose 25% loan collection fees plus 28% commission
charges on borrowers, and can garnish wages and other income for payment.
- No statute of limitations applies. For GRC and other
predators, a steady profit stream is assured at the expense of borrowers.
Even schools benefit by raising tuition and fees far above inflation rates
and income growth, making college more expensive, less affordable, and
assuring higher future defaults on greater amounts.
- Obama's student loan overhaul was a scam. Effective July
1, 2010, it does little to mitigate lenders' ability to rip off borrowers
in perpetuity, yet he called it "one of the most significant investments
in higher education since the GI bill." He lied.
- The 1944 Servicemen's Readjustment Act (the GI Bill)
covered most college or vocational training costs for 7.8 million returning
vets plus a year of unemployment compensation. In addition, 2.4 million
got VA-backed low-interest, no down payment home loans at a time their
average cost was under $5,000, enabling millions of families to afford
them, many with government help. In contrast, Obama's Student Aid and Fiscal
Responsibility Act enriches providers, not borrowers, given chump change
- A Final Comment
- More than ever, higher education is out of reach for
millions. Most others require substantial scholarship and/or student loan
help. During times of economic crisis, families are greatly burdened to
assist financially. A 2008 National Center for Public Policy and Higher
Education study said they contribute, on average, 55% of their income for
public, four-year institutions, up from 39% in 2000, and higher still today
to meet rising school costs.
- As a result, today's higher education means crushing
debt burdens at a time systemic high unemployment and fewer good jobs make
repaying them onerous to impossible. America's ownership society is heartless,
favoring capital, not popular interests, a policy with strong bipartisan
- Stephen Lendman lives in Chicago and can be reached at
firstname.lastname@example.org. Also visit his blog site at sjlendman.blogspot.com
and listen to cutting-edge discussions with distinguished guests on the
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