Stop killing kids softly with loan rip-offs
COMMENTARY | April 17, 2007
Danny Schechter sees student loans as a noose around the neck – a collision between desire for a college education and an $85 billion-a-year industry with substantial corruption.
This essay first appeared on mediachannel.org.
By Danny Schechter
The tragic shooting massacre on the Campus of Virginia Tech is being discussed and debated intensely on every media outlet. At this writing, there are more questions than answers and it seems as if American society produces these “lone gunmen” with increasing frequency.
For years, students killing students has been a national epidemic at the high school level with inadequate intervention. I did a story for ABC News decades ago on the more than 300 students who died from gun violence in inner-city Detroit in just one year.
Shoulders were shrugged, tears were shed and little was done. They were indifferently written off as ghetto victims. The epidemic of killing went on, sometimes even celebrated by gangsta rap songs or encouraged in TV, a spasm of kill-kill-kill TV and movie violence.
And now this shocking event has elicited shock from none other than President Bush, whose Iraq War has produced a daily carnival of violence, murder and mayhem. Yes, there is a relationship because killing seems to be an approved way of solving problems and expressing our political ideas.
But that’s not what I am writing about. There will be no shortage of pundits rationalizing the easy availability of guns or trying to minimize the larger implications of this crisis.
Students are being targeted on campuses in other ways that have also been approved of at the highest levels. In the spirit of Roberta Flack’s song “Killing Me Softly,” the daily damage is being done with a fountain pen—or a computer program—not a weapon.
I am talking about they way student loans have become a noose around the necks of a whole generation of students, making our colleges and universities likely sets for the next edition of one of those crime scene shows.
In collision: the quest for higher education and the quest by self-interested lenders for higher profits in an 85 BILLION dollar student loan industry.
What’s coming out now is a nest of corruption in the very institutions that have set themselves up as moral exemplars and educators. An investigation in the State of New York - and where’s the FBI on this with a national probe - has found lenders dishing out all kinds of cash to self-styled educators in the form of illegal kickbacks, referral fees, gifts, trips and other goodies. As some individuals take payoffs, students have to increase their payouts. New York State is cracking down.
You know there is more to this by the way lenders are rushing to settle various complaints to avoid criminal charges. Anya Kamenetz writes on Huffington Post:
“Student lenders pay various kickbacks to financial aid offices to drive business their way, rather than negotiate the best deals for students. With barely a few letters sent, six schools have agreed to repay students $3.27 million on private loans, while Citibank, one of the largest student lenders, is paying $2 million into a financial education fund.
No one is admitting any wrongdoing. But cash speaks louder than words. $5 million, in an $85 billion industry, is a small price to pay to deflect further scrutiny of the obvious conflicts of interest inherent in this system. To take another example, lenders have been involved in marketing ‘enrollment management’ software to help financial aid offices allocate grant aid to the most attractive students, leaving needier students to borrow more.”
On Capitol Hill, the Washington Post reports:
“Of all the industries under attack on Capitol Hill — and there are plenty of them — the business of providing student loans is perhaps the most threatened.
The private student loan industry and its leading company, Reston-based Sallie Mae, are battling against congressional Democrats and President Bush, both of whom would like to pare back the lenders’ sizable federal benefits.”
As these investigations mount, Sallie Mae is going private to make it harder for investigators to get at the full depths of their role in sleazy practices that have included working overtime to undermine cheaper federal loan programs with bribes and intimidation.
Note the words “reduce public scrutiny” in the paragraph that follows.
The Washington Post reports:
“Sallie Mae, the nation’s largest student loan company, announced yesterday that it would be bought by a group of private investors in a $25 billion deal that could reduce public scrutiny of the lender at a time when the student loan industry is under siege.
The enormous deal underscores the potential for profit that Wall Street sees in the $85 billion-a-year student loan industry, even as Congress considers slashing billions of dollars in federal loan subsidies and an expanding nationwide probe reveals fresh conflicts of interest in the student lending world.”
Of course, two big banks are part of the deal, which is being financed—get this—with debt worth $16.8 billion. This corporate debt will finance mechanisms for getting students in debt. Who will try to stop this tendentious transaction?
There’s more to these nefarious maneuvers reports the Cato Institute, a libertarian think tank:
“The chairman of the Senate education committee urged the Bush administration to block student loan companies from accessing a national database that holds confidential information on tens of millions of students,” reports The Washington Post. “The request by Sen. Edward M. Kennedy (D-Mass.), came after The Washington Post reported on inappropriate searches of the database that could violate federal rules and raise concerns about data mining and abuses of privacy.”
And so, add spying to the list of other charges of practices that menace students and make their lives harder.
Student loans are only part of the problem, as I document in my film IN DEBT WE TRUST: America Before the Bubble Bursts. Students who lack experience in managing their money are easy targets for avaricious credit card companies. Together, the lenders and loan sharks are leaving students with an average of $20-30 THOUSAND dollars in debt before they leave school at age 22. This means they cannot volunteer for public interest groups but have to get the best jobs they can top start paying back right away.
Talia Berman offers some reasons for why this is happening in Wire Tap Magazine:
“Student debt is climbing for three reasons: Interest rates have begun to rise, tuition is skyrocketing, and student aid programs are stuck in 2003.
2006 has been the worst in history for government action against student borrowers. In February, President Bush rolled out the Deficit Reduction Act, which cut $12 billion in federal student aid money. Part of the plan includes a hike in interest rates on federal student loans and loans taken out by parents. The interest rate on Stafford Loans to students rose from 5.3 percent to 7.14 percent on existing loans and to 6.8 percent on new loans. Interest rates for Parent Loans for Undergraduate Students (PLUS) loans increased even more dramatically, from 6.1 to 7.4 percent on existing loans and to a whopping 8.5 percent on new loans.”
Students have to start fighting back to end practices that have been subsidized by billions of taxpayer dollars. The Campaign for College Affordability is calling on Congress to ease the debt burden on students and families by cutting student loan interest rates in half and making financial aid more effective by raising the minimum Pell Grant to $5,100.
This is an issue crying out for action while our nation cries for the innocent victims at Virginia Tech. Our campuses have to be physically secure, of course, but also economically secure. We all have to learn more about this issue and start speaking out. One way might be to join up with other Americans who are crusading for debt relief at StopTheSqueeze.org.
02/25/2009, 12:03 AM
Even in education, money truly matters. Today majority of students are under debt trouble due to the student loans they are acquiring to support their educational expenses. Somehow, taking out loans is helpful to us whenever we have encountered financial trouble such as for tuition fee compensation. But, of course before we engage ourselves into this kind of financial alternative we must first aware on it. Shares of stock in four payday loan companies went up today after a market analyst upgraded the ratings on those stocks. After New Hampshire became the most recent state to place a mandatory cap on the interest rates payday lenders can charge, Obama is considering making the 36 percent cap a national policy. Many critics say that the fees and interest rates payday loan companies charge are outlandish. However, payday loan companies point out that if the interest rate on all loans is reduced to 36 percent, many smaller loans will only earn pennies in profit.