Sunday, December 23, 2012

Defaults On The Rise

Once again, I bring up the loans that are in default. It is getting worse, much worse. I just received a note earlier this week from a borrower. It was a comment as a matter of fact. They were insisting that borrowers rise up and refuse to pay the predatory lenders. Occupy pushed this agenda as well. And I was under the impression that there would be a debtors' revolt, but I was wrong. Even though more and more people are falling off the grid, thanks to their crippling debt, they have not risen up collectively to revolt. Rest assured, I am not casting judgment on distressed borrowers. However, my forecasting was incorrect. There are many reasons why borrowers have not risen up. First, there are historical circumstances that are peculiar to the U.S. that make it difficult to resist collectively. Then you add to the fact that these borrowers are not revolting in terms of their labor, but a system, a cruel system, that has turned them into a new indentured class. How does an indentured class effectively revolt? This is the tricky question that so many of us can't seem to answer properly. Second, if you default on your federal loans, Uncle Sam punishes you in severe ways. The pain lasts for a lifetime. They garnish your wages. They garnish your social security checks. They garnish your disability checks. They squeeze everything out of you. This is one of the reasons why there are more student loan debt refugees. In fact, I have been receiving more emails from people who have left the country. Interestingly, some of them have told me that lenders, such as Sallie Mae, have actually tracked them down. They have received phone calls overseas. One man told me that he is not too concerned, but did admit that it the call will probably cause restless sleep.

Sadly, there are ways in which we could solve this problem. Can we expect the problem to be changed? Is that asking for too much?


Anonymous said...

We need help so badly. Born citizens of a country should not be forced to leave their motherland for refuge. It should not happen anywhere but it is especially shocking that it is happening in the "free world" (which for those of us who have student loan debt, this nation is anything but free).

Like so many out there, my situation is DIRE. It seems that there is always some big issue keeping Washington busy - this summer it was potential federal furloughs due to Congressional failure to agree. They patted themselves on the backs when they extended the "low" interest rates on student loans (nothing is low when it compounds) but took away grace periods and subsidized loans for graduate students. Now, we are facing the impending fiscal cliff, which we all know will never happen - Washington will wait until 11:59 p.m. on 12/31/12 (or whenever a decision is due) to keep us all on the edge of our seats, watching them. Then we can all applaud these people (who put us in this situation in the first place) for rescuing our nation once again from the brink of disaster.

...and then the students/former students will still be here, waiting for help. Our fiscal cliff will still be here, but everyone will be so damn proud of Congress, that they will have forgotten those of us in shackles who will never have the opportunity to live normal lives. I was really hoping that "our" victories this election would lead to student loan reform. I am beginning to wonder if that's really going to happen.

Cryn, it would be helpful to hear stories about people who have left the country. How did they do it? I looked into it and it requires a large amount of money, something I obviously don't have. How did they do it? What is life really like there? Are other countries as mean to Americans as some say? I wish there were countries out there who would accept student loan refugees. China was right: The United States really does treat her students inhumanely.

Anonymous said...

Somehow I don't think there is any place on the globe that is out of the reach of the collectors.

If there is, it would require a mere changing of the extradition laws to get at them, and given that the US is still a Superpower, I think that is very probable.

My impression is that new legislation is going to involve the Justice Dept. and ramp up collection efforts, especially on older debt.

So things will probably get much worse before they get better.

Rebellion or revolt is a vague concept. Against who or what? Student Lending has always been a shadow industry, and it would be like fighting phantoms.

Also, there is still a very prominent school of thought out there that has no sympathy for, and is very much against Sl debtors and says that they are getting exactly what they deserve.

There is no escape other than to either pay all of the debt off, or to accept that nothing is going to change until major economic forces and world financial trends come into play and/or the SL debt proves to be no longer profitable to interested parties and the bubble proves itself to be unsustainable and it finally bursts (if it possibly ever does)

But in spite of all the articles and the comments and the blogging etc. does anyone really know where all of this is heading?

In any event, and psychologically speaking, my feeling is that being a debtor brings with it much shame, and so people will always be reluctant to speak about it, let alone protest.

Maybe that is what purgatory is. A life of quiet desperation and shame, and not knowing or understanding what is happening or why one is being made to suffer for having tried to improve their lot in life by going to College like they always said we should.

Something like that.

Anonymous said...

Many borrowers need help. Over the past five years, more people have attended postsecondary education than ever before. In the USA, loans are the primary means of financing postsec ed. This means more people in school status, more people repaying, and more people in default. This, however, doesn't mean defaults are on the rise. That is like saying more people are buying defective iPhones than five years ago. There are more iPhones, that is why there are more defective iPhones. It doesn't mean that iPhone consumers don't need better protection and assistance, but it doesn't mean iPhones have declined in quality significantly either. It is hard to get policymakers to pay attention to the needs of former students, but overstating the case also doesn't act as a convincer.

Anonymous said...

@ December 30, 2012 9:05 PM,

Where are you getting these statistics? According to what I have read, they are wrong. Cryn is not overstating anything. And defaults are not on the rise simply because there are more debtors. This is obviously one factor, but you must also acknowledge the 30-40+ year olds who are falling into default. These people have loans that are decades old and yet their default rates are on the rise, too.

I don't mean to be impolite but your statement sounds as if it is coming from the mouth of Sallie Mae.

Anonymous said...

The Occupy movement has some appeal. But they have the wrong target (one of the problems of viewing the world through a narrow ideological lens). The predatory lender involved in grossly inflating the costs of education, enriching a mandarin class of academics and administrators (95% of whom identify as big government, progressive liberals), and imposing untold misery on so many people is not a private bank or lender or servicer. The predatory lender is the US Government. Occupy's ideological bent kept it from "occupying" the true culprit - the US Government - which has become expert in putting poor to middle class people in economic destitution, all under the guise that it is "helping them" (see, e.g. Fannie and Freddie, FHA, and so on). If Occupy were to truly target the source of the problem, well, that would have landed them in the halls of Congress, and in particular before the offices of many, many progressive Democrats. They, and many others, just cannot bring themselves to this realization. Severely cap student lending amounts, make them in certain circumstances dischargeable, and yes, you would see universities almost immediately delivering much cheaper (and with technology) and yet still meaningful educational solutions. Right now, the academic industrial complex, overwhelmingly liberal, makes it living off of the backs of unfortunate student loan conduits. They feel superior to the rest of us and entitled to do so.

Anonymous said...

@ January 3, 2013 12:35 PM

I agree with a great portion of your comment. Please do not forget that private lenders have also made their way into the student loan industry and they treat borrowers terribly - unthinkably terribly, much worse than the federal government. You are correct; both need to be held accountable for their crimes on humanity.

I do have a question for you though: wouldn't a conservative like yourself be pro-reform in order to remove the government from this debacle? Not just for future students, but for the 36 million who are currently and permanently financially disabled?

Having spent many years in higher education, I can tell you that some in the field do feel superior to others. However, I'd say the majority of university faculty are strapped with their own student loans and are fighting to keep food on the table. Those who have not yet achieved tenure oftentimes earn less than minimum wage as their jobs are given on a contract basis.

I think we need to be careful about making generalizations. The point here is that there are many Americans in dire financial straights just because people chose to work hard in college in hopes of securing stable futures for their families. Their households are in states of emergency and they need help. This is what financial slavery looks like in the 21st century.