The best questions came from someone who is smart as a whip and a respectful conversationalist (I also consider him a friend - he's a fellow Maroon, too). Like other readers, he took issue with my scathing critique of the Obama's administration shameful failure to solve the student lending crisis.
The reader wrote:
Just read your blog on the failed Obama administration. Let me ask you, please - what exactly have you been asking the DoE to do? Also, how do you describe the relationship between the DoE, Sallie Mae (and Nelnet), and the collection agencies to which you allude?
I don't understand the idea of this admin being a failed one on the basis of DoE not having a policy on loans. I also see DoE from an entirely different perspective, that being how public schools will be reformed, and I like what I see. I also think Michelle Brown is correct about legislative proscription, and so I wonder what is the alternative response that you seek.
Despite these questions, your work is amazing. I am in awe of how you have deconstructed the lending-industrial complex and identified the touchpoints. I hope you can be as effective from Korea.
I'll start with this piece of evidence, "Not So Honest Broker," from Inside Higher Ed . This article discusses the fact that "the student aid agency's ombudsman's office is staffed by a company, Vangent, that also works with other offices in the department that provide financial advice to borrowers on their loans. Vangent does not collect loan payments on the department's behalf, but some of the company's employees in the ombudsman's office formerly worked in the department's Default Resolution Group Call Center. Those connections, which were identified by a former student loan borrower affiliated with the group Student Loan Justice, troubles not only officials of that group but financial aid experts like Mark Kantrowitz of Finaid.org." (You know it's bad when Kantrowitz is concerned!).
Moreover, people have been reporting back to me after they've called the Ombudsman's office, and what I'm hearing is more than just disturbing. One person informed me that they told her she could get rid of her loans through bankruptcy. Additionally, the student debtor wrote:
The lady at the Ombudsman's office also said something pretty interesting to me, which I am not sure how valid it is, but she said that they cannot do much for the private loans because it is a private loan. So i [sic] told her that is really not just or right because they cannot do much for the private loans yet there is also no relief in [b]ankruptcy court since it is a student loan. She told me that is not true and that it can be discharged since it is a private student loan - that does not seem right to me, but i would love to know if this is true. [my emphasis] Do you know if she was right? [C]an a private student loan be discharged in [b]ankruptcy? I am so desperate at this point --[I] am hopelessly drowning in student loan debt - [I] cannot see light at the end of the tunnel - my only option is literally to die!
What is going on here? I'd like to know! Why on earth is someone at the Ombudsman's office for the Dept of Education misleading people with these sorts of "tips?" Yet another way to brush people off . . . even though there could be an immediate solution to the student lending crisis! Shame on them.
But there's more. Loonin says, "Whether it acknowledges it or not, the government has chosen high pressure collection over a resolution-based system - to the determent of financially distressed borrowers." Indeed, they have gone that way and I know it first hand. I have mountains of evidence to confirm what Loonin has concluded.
Also, whom did the Obama Administration give serving contracts to? AES/PHEAA, Sallie Mae, and Nelnet, which own loan shark collection companies.
What has the Obama Adminsitration put in its student loan bill to help CURRENT BORROWERS stay in repayment and get out of default? Little or nothing, because a switch to 100% direct lending does NOTHING for current borrowers.
Moreover, the Administration is doing nothing to help Senator Sherrod Brown's "Debt Swap" proposal, which would help private loan borrowers.
Secretary Duncan knows full well that the President could send legislative proposals to Congress at any time if legislation is needed. He can mention them in the State-of-the-Union, put them in his 2011 budget proposal, use the bully pulpit, etc., etc., etc.
In short, the Obama Administration knows full well that it is writing off thousands of lives (more liked hundreds of thousands of lives) - these lives are being ruined and they offered us no answers nor hope. That's why it has failed.
Oh, and there is also this article . . .
While I am not currently in a dire situation with my student loan debt, I often fear I will be in a short time. I have over 70k worth of loans with Sallie Mae. Granted, I did choose to attend a private school and while I knew that this meant more $$, I don't feel like I was adequately prepared/informed of what the after-math would be like- namely how completely unwilling Sallie Mae appears to be in being realistic about an individual's capacity to pay. It's not that I won't pay- I most certainly will- but to expect a young professional to pay $800 plus a month is just absurd. I think the big problem lies not only in the sheer lack of oversight on many loan companies, but that there is a serious derth in available funding for middle-class families & students, like myself, and we're pushed to utilize private lenders to fund our educations because Pell & other subsidized or lenient loan options via the Fed. are just out of reach- but don't even get me started about how inaccurate the FAFSA is- that's a whole separate can of worms. So you get these students to load up on private loans and then you completely abandon them when it comes to regulation and restrictions on what these government subsidized (because let's face it, whether their paying them money or not, the government is giving some serious big kicks to Sallie Mae) lenders can do in regards to collection of debts for individuals. It doesn't make any real sense to me for these lenders to go "off the deep end" so to speak and be aggressive with barely-minted young career/professional individuals on seeking payment when it's more likely that if you just had some reasonable payment structures, you'd inevitably get your money back instead of forcing so many people to go bankrupt because they just won't take a lower payment. It certainly doesn't make any sense to me that the government allows/turns their face from this practice, thereby letting hundreds of people ruin their financial lives (which inevitably comes back to bite the economy's ass anyways...).
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