We did what we were told to do and “followed our dreams”, but we are now trapped by what was meant to be an investment in our futures, not a noose.
Obama’s recent student loan “reform” has done nothing for those in default, or those of us with private (bank-backed) loans through Sallie Mae, Citibank, and so on.
It is crucial for our politicians and media to understand the difference between federal and bank-backed loans when discussing the student loan crisis. Bank-backed loans have been stripped of consumer protections, such as deferment for the unemployed, fair debt collection practice requirements, or any meaningful options for lowering interest rates and monthly payments. There are no refinancing rights.
For example, Sallie Mae, America’s largest private lender, assigns low-income students variable interest rates of up to 25%. This is exploitation, pure and simple, sugarcoated in pamphlets distributed by our college financial aid offices.
Neither federal nor private loans can be discharged in bankruptcy, even for the disabled, whose Social Security checks can be garnished even when living below the poverty level.
(However, back child support payments and gambling debt can be discharged in bankruptcy, so in the eyes of the law, it is better to be a deadbeat parent who went wild in Vegas than a low-income student who tried to get an education.)
If we default, we cannot rent or buy homes, or even find jobs with the 60% of employers that check credit. Our professional licenses (i.e. nursing/teaching) can be revoked. And with the fees assigned to defaulted loans that double the amount owed, getting back on one’s feet is nearly impossible.
We could not all be mythical bootstraps college students. Tuition costs have risen 600% between 1980 and 2010. Wages, of course, did not keep up. The predatory for-profit student loan industry has lobbied Congress to strip away necessary consumer protections, allowing our debt to snowball out of control.
Lenders need to be held accountable for standing in the way of true reform that would actually assist struggling student debtors.
Congress, start caring about the younger generation and reenact the reforms you dissolved in 2005. It is in America’s best interest to be on our side, even if we don’t have Sallie Mae’s lobbying dollars.
For more information on how the predatory student loan industry profits from lack of consumer protections and pushing students into default, check out Default: the Student Loan Documentary and studentloanjustice.org.
If you’d like to sign Robert Applebaum’s petition calling for total student loan forgiveness, please go directly to his SignOn.org petition or visit forgivestudentloandebt.com.
Note: OccupyStudentDebt.com, launched on 10/29/11, is not affiliated in any way with the ill-conceived campaign urging borrowers to voluntarily default on their student loans that was launched in late November 2011.
We strongly advise anyone with student loan debt NOT to participate in this form of protest, especially given that the law, as currently written, allows lenders and collectors to profit from defaults.
Not only would voluntarily defaulting do nothing to solve the underlying problem of out-of-control student loan debt, but defaulting can result in any number of detrimental outcomes, including, but not limited to the consequences listed above.