A Guide to Managing Your Student Debt

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College Conspiracy is the most comprehensive documentary ever produced about higher education in the U.S. The film exposes the facts and truth about America’s college education system. ‘College Conspiracy’ was produced over a six-month period by NIA’s team of expert Austrian economists with the help of thousands of NIA members who contributed their ideas and personal stories for the film. NIA believes the U.S. college education system is a scam that turns vulnerable young Americans into debt slaves for life.

The Student Loan Debt in the US has surpassed the 1.3 trillion dollar mark. Every year, 60% of students who graduate, graduate with an average of $30,000 in student loans.

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We assist students that don’t wish to spend the many hours required for researching, completing, processing and following up on the different Student Loan Relief Programs, Federal or State Congressional Bills.

The Department of Education has put in place programs to assist student loan borrowers on repaying their student loans. These programs make it much more affordable to pay for student loans and offer loan borrowers great financial benefits.

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The Self-Serving Apologists for Student Debt-Serfdom

by Charles Hugh-Smith

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Everyone who isn’t blinded by self-interest sees that the cost of higher education in America–and the way we pay for it, by turning students into debt-serfs– is unsustainable. Those benefiting richly from the bloated, ineffective bureaucracy see no alternative, of course; their self-serving handwringing would be laughable if it wasn’t so destructive to the nation and the economy.

Greg Mankiw, professor at Harvard, recently offered up a typical helping of self-serving handwringing: Three Reasons for Those Hefty College Tuition Bills. Mankiw squeezes out a few insincere (but necessary for PR purposes) alligator tears over the soaring costs of a college degree, and then trots out the usual justifications for maintaining the status quo, which just so happens to reward him so well.

Let’s dismantle his bogus justifications one by one

1. Mankiw predictably trots out the Gold Standard of justifying the absurdly high cost of an often-ineffective and useless college degree: those with college degrees earn $1.5 million more over a lifetime of work than those without degrees.

On the face of it, this offers plenty of justification for $120,000 piles of debt for degrees in Critical Studies, etc.: that extra $1.5 million will easily fund the cost of a 4-year degree.

But this data is completely out of date. Yes, a college degree offered substantial lifetime wage increases back when four years of college cost about as much as a new car, not a new house, i.e. the current cost; but as recent graduates have discovered, a four-year college degree offers little advantage, and substantially underperform journey-person wages for skilled trades workers such as pipefitters, plumbers, etc.

The exception is of course highly technical degrees in engineering, computer science, biotechnology, etc. But this reality has led to a systemic over-supply of graduates with STEM degrees (science, technology, engineering, math), as the economy does not create paid positions in these fields simply because more people have studied these subjects.

As I often note here (and in my book that proposes a much cheaper and more effective system of higher education, The Nearly Free University and the Emerging Economy: The Revolution in Higher Education), employers can only hire employees if the business will earn a profit from their labor–and opportunities to earn a profit in STEM fields are not as abundant as boosters of the status quo claim.
The economy has changed profoundly and structurally in the past 15 years, and the breezy cliche that a college degree automatically boosts lifetime earnings by $1.5 million is no longer supported by current realities. Just having a college diploma offers little advantage, especially when compared to those with real-world skills. Even those with STEM degrees find themselves in a Darwinian struggle to get a job in these fields, a struggle that forces many to get deeper in debt to secure a Masters or PhD.

But alas, tens of thousands of other under-employed college graduates had the same idea, and the job market is over-supplied with graduates holding Masters and PhDs.

Yes, if a student slaves away for 7 years to secure a PhD in computer security, he/she will likely enjoy multiple job offers. But the number of such positions is vanishingly small in an economy of 140+ million workers.

The reality is a college degree no longer offers the leverage it once did, due to simple supply and demand: millions of other people have degrees now, too, including advanced degrees, and the job market doesn’t create jobs just because people have degrees.

2. Next, Mankiw claims (with zero factual justification) that teachers enlightening a small groups of students in a classroom (i.e. the standard educrat model that pays Mankiw his fat salary and hefty benefits) is the best and thus the only way to teach.

In other words: garsh, I’m sorry costs are soaring (phony handwringing), but this is the way it has to be; there is no alternative (TINA). This is self-serving rubbish: the better and much more cost-effective way to teach real skills that employers actually need is directed apprenticeships taught by working professionals, accompanied by nearly free digital resources and courses.

I describe this model in detail in my book The Nearly Free University and the Emerging Economy. Not only does this model offer an order of magnitude reduction in cost (there is no longer any need for a costly campus or hundreds of highly paid administrative staff), it also teaches students real skills in the emerging (i.e. real) economy.

Yes, there will still be a need for the top 200 research universities, but these institutions offer little to nothing to the vast majority of undergraduates who are currently entering debt-serfdom for ineffective or even useless 4-year degrees.

3. Mankiw then invokes every entrenched special interest’s favorite high-concept defense for their morbidly high-cost/ineffective bureaucracy: Baumol’s Disease, which holds that the cost of violin lessons rises because as the productivity of manufacturing and commoditized services rises, alas, teaching violin is a one-on-one process that is necessarily unchanged from 1741.

Mankiw conveniently overlooks the sordid reality that the academic establishment that rewards him and his fellow smug handwringers so amply depends on an underpaid army of academic ronin, teachers with few benefits and zero security known in the polite self-serving circles of academia as adjunct professors.

Please consider this chart of the University of California system’s employment of professors and administration. If we extrapolate the lines into the present, it appears that there are far more highly-compensated seat-warmers in the university administration than there are professors teaching in the classrooms.

In 13 short years, the number of senior administrators shot up by 142% while the number of tenure track professors rose by 29%.

The shortfall in classroom staff has been filled by adjunct professors, educrat doublespeak for poorly paid academic ronin, academics with Masters Degrees and Doctorates who have few realistic chances to secure a tenured teaching position. These academic ronin are typically paid $40,000 or less and receive few if any benefits and no security. Their total compensation (wage/salary plus benefits) is a third or even a quarter of what tenured professors receive.
Their career track has little future; they may be able to switch universities, just as Samurai ronin in Japan might attach themselves to a feudal lord for a time, but their employment will always be contingent and short-term.

Mankiw’s claim that college costs are the inevitable result of Baumol’s Disease is pure self-serving rubbish: Mankiw’s grandiose position atop the academic heap is supported by the toil of a vast army of poorly paid academic ronin, while soaring costs can largely be attributed to entirely useless (in terms of actual learning of useful skills and knowledge) administration and lavish campus facilities–costs that have nothing to do with Baumol’s Disease and everything to do with American higher education being a cartel, i.e. an exploitative, parasitic racket that fails most of its students miserably.

The emerging economy enables a 90% reduction in the costs of higher education and a highly adaptive structure of directed apprenticeships in every academic field. The way to learn how to do anything, from journalism to multimedia to pipefitting to philosophy is to start right in under the guidance of a working professional in the field: as Emerson noted, do the thing and you shall have the power.

If we want a vibrant, adaptive, resilient economy, we need to ditch Mankiw and his entire parasitic cartel for a higher education system that actually serves the economy and the nation, rather than an entrenched cabal of self-serving insiders.

Three Reasons for Those Hefty College Tuition Bills

Economic View

By N. GREGORY MANKIW DEC. 18, 2015

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What should we do about the high cost of higher education? As we pick the next president, that question should feature prominently in the public debate. The economic prosperity of our children and grandchildren hinges on finding the right answer.

Today’s economy leaves little doubt about the value of college. According to the Bureau of Labor Statistics, in 2014 the median worker with a bachelor’s degree (and no advanced degree) earned $69,260, compared with $34,540 for the median worker with only a high school diploma. Over a lifetime, that difference accumulates to about $1.5 million.

Increasing educational attainment is also the best way to combat growing income inequality. Over the last 40 years, the wages of skilled workers have increased substantially compared with the wages of the unskilled. Most economists agree that a leading cause is skill-biased technological change — the tendency of new technologies to increase the relative demand for skilled workers. College is the main institution that can offset this trend by turning unskilled individuals into skilled ones.

Even those who do not attend college benefit when more of their fellow citizens do so. A person who becomes educated leaves the pool of the unskilled. Those left behind face fewer competitors. With fewer unskilled workers vying for the available jobs, wages at the bottom of the economic ladder are bid up.

Although increasing college attendance makes a lot of sense, both for individuals and for the nation, the financial hurdle to doing so is higher than ever. The College Board reports that published tuition and fees at a typical private, nonprofit college, adjusted for overall inflation, have increased by 70 percent over the last 20 years. What gives?

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Three forces are at work.

The first is called Baumol’s cost disease. Many years ago, the economist William Baumol noted that for many services — haircuts as well as string quartet performances — productivity barely advances over time. Yet as overall productivity rises in the economy, wages increase, so the cost of producing these services increases as well.

Education is a case in point. How we teach and learn has benefited from some technological advances, such as PowerPoint presentations, online courses and the innovations of outfits like Khan Academy. But after 30 years as an educator, I am convinced that the ideal experience for a student is a small class that fosters personal interaction with a dedicated instructor. In other words, best practice remains the approach that Socrates used to teach Plato 2,500 years ago. But because society over all is now richer, today’s Socrates expects a reasonably high standard of living, and that implies hefty tuition.

Credit Nicholas Little

The second force increasing the cost of education is the rise in inequality. Educational institutions hire a lot of skilled workers: It takes educated people to produce the next generation of educated people. Thus, rising inequality has increased not only the benefit of education but also the cost of it.

The third force at work is what economists call price discrimination. Businesses of all sorts have an incentive to charge different prices to different consumers based on their willingness and ability to pay. Movie theaters, for example, charge children less than adults for a ticket.

Colleges have increasingly followed this practice by raising published prices and offering more financial aid based on a family’s resources. I often joke that Harvard should complete the process by setting tuition at $1 billion a year. But that sticker price applies only to the children of Bill Gates. Everyone else gets a special price, just for you.

OPEN Interactive Graphic

Interactive Graphic: Student Loan Calculator

The impact of increasing price discrimination is clear in the data. That 70 percent figure for the 20-year increase in published tuition and fees shrinks to 32 percent for the average net price. The expansion of financial aid explains the difference. Yes, the 32 percent increase in cost is still sizable, but for those who qualify for aid, it is a lot smaller than is sometimes suggested.

So what should we do about the cost of education?

One approach is to make higher education a right. Senator Bernie Sanders, who is seeking the Democratic presidential nomination, advocates free tuition at public colleges and universities.

Apart from favoring government-run over private colleges, the main problem with this idea is that there is no way to really make education free. The Sanders plan just shifts the cost from the student to the taxpayer. In light of the looming unfunded liabilities already on the government’s books from existing entitlement programs, mainly for older adults, creating a new one for the young seems problematic.

Another approach is to find better private mechanisms to finance higher education. Senator Marco Rubio, who is seeking the Republican nomination, wants to establish a legal framework in which private investors help pay for a student’s education in exchange for a share of the student’s earnings after college. In essence, the student would finance college less with debt and more with equity. The Rubio plan does not let the student get away without paying, but it does help spread the risk from the educational investment.

Whether private money would show up for this is an open question. Investors may worry about adverse selection. Future poets might be willing to pledge a fraction of their incomes, while future bankers might pass on the opportunity.

Unfortunately, there are no easy answers here. We can hope that future technologies will significantly reduce the cost of college. If they do not, as is likely, we will need to find better ways than we have now to pay for a system that is increasingly valuable but also increasingly expensive.

N. GREGORY MANKIW is a professor of economics at Harvard.

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A version of this article appears in print on December 20, 2015, on page BU7 of the New York edition with the headline: 3 Reasons for Those Hefty College Tuition Bills. Order Reprints| Today's 

I graduated and found out I have $200,000 in debt

Every once in a while, when I’m feeling overwhelmed, I watch college commencement ceremonies on YouTube.

These rituals remind me how perverse our higher-education system is—and of the empty idealism that colleges and universities sell us:

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We are here today, donning our ceremonial robes and caps, to recite the traditional vacuous platitudes and wish you well in paying off high-interest student loans for which we are in no way held accountable. 

Let us now further romanticize our fair institution by singing the alma mater and conveniently forget that tuition has gone up 1,120 percent since 1978. Good luck out there, kids!

I’m a consumer of those vacuous platitudes and a victim of this system. After finishing my master’s degree in 2008, I found out—as in, I didn’t already know—that I had $200,000 in student debt.

Some well-paying professions might make this amount manageable, but for a bioethicist like me, it’s been crushing. Many things had to go wrong for this to happen—or right, if you’re a school or a lender. Although the hefty amount I owe is unusual, my experience is not: Motivated by an idealistic view of education and career and vulnerable to predatory, disingenuous, or at least negligent institutions, young people and their families too often take on large amounts of student debt.

No matter how much they owe, the consequences of that debt can be outsized. These young people may have to abandon their educations early; pay back far more, after interest, than they took out; manage exceptionally exploitative loan terms; shoulder serious, chronic mental distress; delay important life decisions; and participate less in the economy than they otherwise would.

I don’t question the importance of higher education. But the detrimental effects of crushing debt shouldn’t be the shared experience of millions of young people and their families. Currently, about 40 million Americans owe $1.2 trillion in student loan debt, and it continues to grow. According to the Institute for College Access and Success, students who borrow graduate with an average debt of $29,000 for a bachelor’s degree.

In 2014, 69 percent of graduates had student loan debt, and from 2004 to 2014, the average college debt grew at more than double the rate of inflation. Even with smaller amounts of debt than mine, starting a life quickly becomes very hard. So how do people get to this point? We’ve debated student debt for decades, but our understanding of how it shapes a young person’s experience—from naïve teenager to indebted young adult—is still limited. Here’s what happened to me.

 

Flickr / UC Davis College of Engineering

When I was 17 I was just starting to get the hang of school. My siblings and I had the privilege of expecting we would attend private colleges, which seemed reasonable—others in our family had done it, friends had done it, so we should be able to do it. My grades weren’t good enough for Connecticut’s Wesleyan University, so after getting rejected I quickly applied binding early decision to one of its conference rivals, Connecticut College, where my brother was a senior. I was very eager—and very fortunate—to get in. It was one of the most validating moments of 17-year-old Sam’s life.

Despite its cost, Conn sold my family on its purportedly outstanding financial aid. When I was a freshman in 2003, the comprehensive fee, including tuition, room and board, and other fees, was about $40,000 a year; it climbed to about $46,000 by 2007, my senior year. A decade later, the comprehensive annual fee at Connecticut College (and many private colleges) is more than $60,000 per year.

And about half the students pay full price. That must be because a bachelor’s degree from a private college is $80,000 more valuable than it was 10 years ago, right? No, that’s crap. These days, I can’t imagine any bachelor’s degree that is worth $240,000. But my parents couldn’t know tuition would rise so much, and my brother seemed to fare OK there—he got substantial grant funding that helped him leave with much less, and more manageable, federal debt.

I knew that my parents were financially stressed because of a fire that destroyed most of our home when I was 15 and because my dad had been struggling with his career for a few years. Given my brother’s experience, we expected that Conn would help us make school affordable.
Like many colleges websites, Conn’s website even says, “Don't let financial concerns discourage you from applying to Connecticut College. We offer generous financial aid.” In my parents’ attempt to protect me from the brunt of their financial hardship, they minimized my understanding of what it would take to pay for school.

When I began college I knew Conn had given us a fair amount of grant funding—money that didn’t need to be paid back—and I believed my parents and small federal loans were covering the rest. I visited the financial aid office to sign for these federal loans each semester. Like so many students, I thought signing loan documents was just a routine. Having no appreciation of financial adulthood, I didn’t really understand what these loans were or what repaying them would actually entail—and in a very different student loan terrain than their college days, my parents didn’t either. But I thought I understood.

I was in the right place, talking to the right people, doing what I was told was necessary. The college made no serious effort to explain my loans until an exit interview at the end of senior year.
Having followed the common advice to study what I loved, I had abandoned my initial plans to focus on biology and majored in music performance, but also minored in philosophy and was a few courses short of pre-med. By my senior year, however, I realized I was drawn to a subfield of applied ethics called bioethics, which deals with controversial ethical issues in science and medicine. Well-meaning faculty could only advise me on careers in academia. Academia was the setting I knew, so that became my plan: build an academic career in bioethics.

At my exit interview, the college reviewed only my federal loans with me. There was no mention of any private loans. And because student loans are deferred as long as you’re in school, I hadn’t received a bill. Everything they described to me was still an abstraction.

If only I had been friends with 2016 Sam in 2007, then maybe I would have done things differently. But I wasn’t. So, still unaware of my total debt, I went on for a bioethics master’s degree to bolster my chances of getting into a good Ph.D. program.

After starting courses at the University of Pennsylvania, I took out $70,000 in loans for tuition and living expenses, which I supplemented with income from part-time jobs. The associate director of the program suggested I work at Penn full-time and do the degree part-time for free. Looking back, that was obviously sage advice, but I thought the sooner I started a Ph.D. the better.

Save that one brief comment, no one, in five years of higher education, advised me differently or really broke down the cost of my education choices. Why would they? Schools benefit immensely from this ignorance. In fact, several students, faculty, and friends—many of whom had high-paying jobs—told me not to worry about my loans and that I’d pay them back without undue stress.

After completing my master’s in 2008, I got a job working as a contractor science policy analyst at the National Institutes of Health in Bethesda, Maryland. I was lucky to land a good, bioethics-related job in a very bad economy. Like most people with loans, I started getting repayment letters within six months of leaving school.

I already knew that I had about $70,000 in federal loans from Penn and some federal loans from Conn—but I had no idea I also owed $100,000 in Sallie Mae–serviced private loans.

P for Reading Is Fundamental Jack Remondi, President and CEO of Sallie Mae, accepts the Legacy of Literacy Award at Reading Is Fundamental's 2014 The Cat In The Hat Gala Thursday, April 24, 2014 in Washington, DC.

I was shocked. It turned out that my parents and Conn had had me ink them during my semesterly flurry of document-signing without discussing them with me. Now I was making $50,000 a year in an expensive region with close to $200,000 in loans. I was completely unfamiliar with the—at the time very limited—repayment options. It was a nightmare.

The decisions were unwise, certainly. But while I was in school, my parents were too stressed and embarrassed to take stock of my loans. They wanted me to focus on doing well and felt, as do many middle-class families, that they were in a financial Catch-22: They made too much to get enough aid but not enough to cover the cost of college. Financial aid awards come once per year, giving them little time to plan, and again, they expected similar aid and tuition rates as my brother.

They’d lost much of their savings dealing with career challenges and the house fire. They didn’t want to take me out of a school I was heavily invested in. Given the grant funding I received every year from Conn, even if they had pulled me out and sent me to our flagship state school—the University of Wisconsin—the full cost there still could have left me with a fair amount of debt.

I now saw what my trust and ignorance had cost. So I was angry. But I felt especially betrayed by the well-manicured dream factories that had educated me.

 

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When I first started receiving loan statements, I was so distraught and confused that I missed a few months of payments and got a delinquency reported on my credit—not an uncommon occurrence for postgrads. After months of receiving inconsistent information from Sallie Mae, I got my payments in order. I made interest-only payments for my private loans because the interest rates were too high for me to make full payments. (Some of my loans had rates of 8 to 9 percent—compare that with the less than 4 percent for which one currently can get a mortgage.)

I enrolled in the new income-based repayment program for my federal loans, and for years I tried to refinance my private loans to lower my interest rates. I attempted to refinance about half a dozen times but was rejected each time for having a weak credit score, delinquency, and too low a salary.
Some relief came in 2011 when I started a new job as a contractor bioethicist in NIH’s Division of AIDS. This was very fortunate, given the economy and the limited career options for someone with a master’s in my field. My salary jumped to about $70,000, an increase of almost 50 percent. I was grateful but keenly aware that this meant something very different for me than it would have without the unrelenting scythe of my debt.

With every bump in salary comes a bump in payments. My current payment is about $1,500 a month—that’s almost 40 percent of my take-home pay—and despite having paid more than $75,000 toward my loans, I still owe about $190,000. Remember, I started with $200,000 in debt. With more than eight years of some of my private loans at 8 and 9 percent interest, and my federal loans at more than 6 percent, Sallie Mae and the federal government have made it very hard to make progress.

democracynow.org

My debt may take decades to pay off and ultimately cost more than twice my original balance. Depending on my income, my payments could peak at almost $2,000 a month. Without a substantial boost in salary, there’s no way to get ahead of my debt. How do I get that salary? The surest way for me to move up in my field would be to get a funded Ph.D., but that would entail deferring my loans and allowing my interest rates to add almost $50,000 to my current balance.

Is it worth leaving the field that I’ve already invested so much in? What about jobs or programs that offer loan repayment? Unfortunately, many of these jobs (for example, some federal ones) are very difficult to get (I’ve tried and am still trying), and many programs (such as Peace Corps) aren’t worth the cut in income.

I also worked for a for-profit contractor for part of my time at NIH, so several years of my time there don’t count toward the public service loan forgiveness program. Can I transition to a career that makes more money but is stable and reliable? How do I stay nimble in this economy when education is so expensive but so essential? Will I ever be able to afford a family?

Plagued by these questions and by years of significant and unrelenting stress over managing my debt, I hit a low point last year. In preparation for a speech I gave at one of Sen. Elizabeth Warren’s student debt press conferences, I learned about “auto-default”: Under Sallie Mae loan contracts, your loans are automatically placed into default and sent to collections if a co-signer dies. My grandmother—who is 93 and has Alzheimer’s—is a co-signer on some of my private loans.

 

hollywata via flickr

According to my loan contract, when she dies all $100,000 of my private loans will go into default. This means that I could be required to pay the full loan amount immediately or risk being sued, having assets seized, wages garnished, and my credit wrecked. In most circumstances, student loans cannot be discharged in bankruptcy—and, under some contracts, if you start bankruptcy proceedings, your loans can be placed into default.

After screwing over a lot of people, this insane policy got slammed with media coverage, forcing Sallie Mae to modify it, but it wasn’t clear if these changes applied to me. So I spent several months trying to get out of this trap. I could barely focus on anything else. I had several Sallie Mae reps confirm that when my grandmother dies, I would auto-default and owe $100,000.

I thought maybe I should get a lawyer, flee the country, or sell a kidney. I was finally put in touch with a rep from Sallie Mae who sent me an official letter stating that, essentially, because my grandmother had no assets I would continue to make my payments as I had been.

Fortunately, after that, I was also able to refinance some of these loans with a good, financially stable, and not-likely-to-die-soon friend (thanks, Steve) as a co-signer. After six years of attempts, I was actually able to start paying more of my principal balance.

My situation has finally stabilized, and I should be able to avoid default, though things haven’t improved otherwise. My payments are still crushing, they will be around for decades, and they severely limit my life choices.

 
Flickr / Rory MacLeod

And all of this to go to school.

Yes, I’ve been more fortunate than many: I was educated at elite schools, I live in a city with a strong economy, and I’ve had two good jobs. But I still struggle to find ways to retool myself for higher-paying careers that would help me dig out from my debt faster or to advance in my current path. My parents and I are working on ways to improve my situation. But, like many baby boomers, they are burdened with their own financial responsibilities, like taking care of my grandmother and their own health and saving for their retirement. It’s true that my parents and I made poor financial choices, but they were ones that the system strongly encouraged.

I’ve worked hard to take responsibility, make my monthly payments, advance in my career, and live modestly. While I’ve been lucky enough to avoid some of the most disastrous consequences of having student loans, like default, I will still spend the majority of my emotional and intellectual energy trying to find a way out of this, rather than trying to forge a career and a life.

The amount I owe is uncommon, but my story is not. The data show that millions are struggling with large amounts of student debt—debt that will result in some of the painful experiences I have gone through. So at a minimum, I hope this serves as a lesson to stay informed and temper your academic ambition with consideration of the financial costs and the investment you’re making.

 

Reuters/Larry Downing 

 U.S. President Barack Obama talks about the rising costs of student loans while at the University of Iowa in Iowa City.

But that doesn’t get to the heart of the systemic problem: Education is outrageously expensive and too risky; schools indoctrinate students and their families with lofty ideals and benefit from their ignorance without accountability; and students and their families can borrow at unprecedented rates, allowing schools to continue hiking tuition.

Though its advent was surely well-intentioned, our loan system is confusing and exploitative. In a country we often think of as a meritocracy, it’s appalling that we have an education system that frequently does more to punish students for getting educated than it does to reward them.

Ultimately, like many other enlightened countries that recognize education as a critical public good—foundational to the economy and a just society—we need to move toward free public education, including graduate school. Where will this money come from? Given the billions we spend on federal student loan programs and the disgusting amounts of money many college presidents and administrators make, I’m sure there’s plenty of money that could put us in the right direction. To start, we need more substantial efforts to refinance and forgive student debt. There are millions of people like me who would like to get on with their lives.

Read the original article on Slate. Copyright 2016. Follow Slate on Twitter.

Student Loan Defaults Hit $121 Billion

Student Loan Defaults Hit $121 Billion; 40% Of All Borrowers Not Making Payments

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(DETROIT)  Federal student loan defaults have hit an astounding $121 billion, with about 40 percent of all borrowers not currently making any payments, according to a government report.

“This is a slow-moving disaster,” Jason Delisle, director of the Federal Education Budget Project at New America, told the Detroit Free Press. “Why no hearings on Capitol Hill? Why isn’t the administration talking about it more?”

The U.S. Department of Education highlighted the report in a self-congratulatory news release about an increase in the number of students who are enrolling in income-based repayment programs. In December 2015, there were 4.6 million borrowers using income-based repayment plans, which represents a 48 percent increase from the year prior, and a 140 percent increase from two years ago, according to the news site.

“Today’s analysis suggests that the administration’s efforts to help struggling borrowers are having a positive impact,” U.S. Education Secretary John King Jr. said. “While we see promising signs of progress, we know we have to work to do to ensure that every borrower in distress has a clear path to avoid default. And I will continue to fight to ensure that students have access to an affordable education that helps them get ahead, rather than drowning in debt.”

Many folks, however, simply don’t have the money to make their payments, the Free Press reports.

Detroit 26-year-old Gail Menesko told the news site a divorce forced her to quit cosmetology school to care for her two children, and it’s been nearly a year since she made a payment on her student loans.

“I want to pay, but other things are a priority now,” she said.

Menesko is now in default, a category reserved for borrowers who don’t make a payment in more than 270 days.

“Twenty percent of all federal load borrowers have defaulted on their loans, according to new data released by the federal government last week,” the Free Press reports. “That translates into $121 billion of loans in default. That same data show 40 percent of all borrowers are not making any payments, and are in some sort of forbearance, delinquency or default.”

Market Watch highlighted other interesting threads in the federal student loan data.

“Despite more programs available to federal student loan borrowers to manage their loans, borrowers are still struggling. In fact, between October 1 and December 31, 2015, private debt collection companies hired by the Department of Education garnished more than $176 million in wages from defaulted student loan borrowers in order to pay back their debts …,” the news site reports.

“These are people who can’t afford to pay their student loans and they’ve garnished $176 million in three months from them,” Chris Hicks, a student debt researcher and consultant for progressive organizations, told Market Watch. “You have to wonder what conditions people are living in when they’re seeing that much of their wages garnished.”

In more extreme cases, debt collectors hired by the federal government have used the U.S. Marshals to arrest student loan defaulters and haul them into court to answer for their debts.

Houston resident Paul Aker told Fox 26 he was arrested at his house in February by Marshals in full combat gear, who dragged him to a federal court building over an unpaid $1,500 student loan debt from 1987.

And source with the Marshals office told the news site Aker’s arrest is just the beginning.

“I was told by sources with the U.S. Marshals Service that they have 1,200 to 1,500 more arrests right here in our community that they will make for old student loan debt,” Fox News reporter Isiah Carey said

College students become commodities

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College students become commodities as investors front tuition in exchange for future earnings

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Working with us, you’ll be able to save time and money by getting your student loan consolation paperwork completed by our team of experienced student loan relief processors. Our trained personnel will work with you closely through the entire process. We will prepare all the required documents in order to submit your application to The Department of Education for your consolidation.

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by Thomas Dishaw
The innovations they come up with to keep you in debt are mind-boggling. ISAs income-share agreements are the latest financial tool branded as an alternative to students loans. Investors (corporations)  will front the cost of your college education in exchange for a percentage of your future earnings according to this Washington Post report:

In one novel alternative to private student loans, investors could front students the money to pay for college in exchange for a percentage of their future earnings. But what are the dangers to students who accept these so-called income-share agreements? Who would benefit the most?
This week, Purdue University took a step toward answering some of those questions by partnering with Vemo Education, a Reston-based financial services firm, to explore the use of income-share agreements, or ISAs, to help students pay for college.
Through its research foundation, the school plans to create ISA funds that its students can tap to pay for tuition, room and board. In return, students would pay a percentage of their earnings after graduation for a set number of years, replenishing the fund for future investments. Purdue is relying on Vemo, along with nonprofits 13th Avenue Funding and the Jain Family Institute, to flesh out the terms.
There’s nothing new about ISAs. Economist Milton Friedman floated the idea in the 1950s, and a handful of Latin American countries use the agreements. Yet they have been slow to catch on in the United States. A handful of small companies and nonprofits, including Cumulus Funding and 13th Avenue, are piloting programs or offering contracts on a limited basis, but the market is in its infancy.
Last year, Sen. Marco Rubio (R-Fla.) and Rep. Tom Petri (R-Wis.) introduced legislation to create a legal framework for ISAs that set the maximum length of a contract at 30 years, capped income at 15 percent and stated that the agreements are not loans. The bill stalled in committee but brought attention to the nascent market.
Purdue president Mitch Daniels, the former governor of Indiana, championed income-share agreements in a recent Washington Post op-ed, calling the contracts “a constructive addition to today’s government loan programs and perhaps the only option for students and families who have low credit ratings and extra financial need.”
He wrote:

From the student’s standpoint, ISAs assure a manageable payback amount, never more than the agreed portion of their incomes…Best of all, they shift the risk of career shortcomings from student to investor: If the graduate earns less than expected, it is the investors who are disappointed; if the student decides to go off to find himself in Nepal instead of working, the loss is entirely on the funding providers, who will presumably price that risk accordingly when offering their terms. This is true “debt-free” college.

Is it really? Income shares certainly don’t function like traditional debt in that there is no explicit principal balance or interest. And the repayment terms are in many ways more flexible than even the most generous of the government’s income-based repayment plans.

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What Happens If You Don't Pay Off Your Student Loans?

Relief from student loan debt for public service workers

Listen to Bruce Mesnekoff of South Florida Weekly with Gerrard Campbell and Karen Curtis

Debt Dodgers: Meet the Americans Who Moved to Europe and Went AWOL on Their Student Loans

By Alexander Coggin

January 17, 2016

It's difficult to overstate how crushing America's student loan debt situation is. The amount of money adults in the US owe due to educations is over $1.3 trillion and jumps up by more than $2,000 every second. The average borrower owes $28,000, though some owe much more than that. Many former students, trapped between low wages and the high cost of education, can barely afford to keep up with interest payments, let alone start paying off the principal.

Some people are put in so desperate a spot they have attempted to bail on their loans by fleeing the country and hiding out from the banks and collection agencies that will inevitably start looking for them.

It sounds slightly unbelievable, not to mention probably a bad idea from a long-term personal finance point of view, but these debt dodgers are real. I've met these Americans in Berlin, my adopted city. I haven't been able to find any statistics on how many of them there are, but I'm not the only one who's noticed the people fleeing US because of their student loans.

"It's a phenomenon that I'm quite familiar with actually," says student loan lawyer and author Adam S. Minsky. "In my experience, people leave because there's a sense of hopelessness and they see greater opportunities overseas, usually through a combination of higher pay and lower living expenses. They think they'll be better positioned to either pay their loans in real time, from abroad, or to save up and be in a better place to address the loans a couple of years from now."

Many of the students I talked to fear the possible consequences of this strategy, but so far none of them have faced any repercussions. And according to some experts, they may never.

Joshua R. I. Cohen, who calls himself The Student Loan Lawyer, tells me that this plan could work for some people, albeit only if the debt dodgers plan to never live in the US again. Students who move to a foreign country and stop paying off their loan debt "will only feel consequences if they're working for a US company on foreign soil," Cohen says.

If you're living abroad, earning a living from a foreign company, not paying US taxes, and not collecting social security, then loan companies can't touch you, nor will the government chase you after you move abroad.

"The federal government doesn't have really strong tools for collecting debt from people who move overseas," says Mark Kantrowitz, another expert on student loans who serves on the board of the Journal of Student Financial Aid. "In theory, you could live the rest of your life in another country."

Of course, if your family co-signed your loan with you and remain in America, they'll still be on the hook. And this strategy relies on you not wanting to go home again. If these former students ever decide to come back to the US, "the debt will still be there—it never goes away," says Cohen. "All they're doing is putting off what could happen if they come back to the US."

To get more insight about debt dodging, I spoke to several Americans who moved to Berlin and stopped paying their loans. All names have been changed.

Brian, 29

$40,000 in debt

I took out loans when I went to school in California. I received enough scholarship money at the time to cover half of the tuition and the loans covered the remainder. I did not have a plan for paying them off, nor did I consider how I would make it work once I graduated. I needed to go to school and it was the only solution at the time.

When I decided to move abroad, I think in the back of my head I thought that it would save me from having to pay them off. I saw the interest rise and my deferral period lapse and the anxiety just kept rising. I'm sure that Germany and America have some sort of reciprocity when it comes to this kind of stuff, just like they do with taxes, but I try not to think about it.

The loans are about to default, and I'm worried about the consequences. I've blocked the loan company's emails from my inbox. I'm sure they will go after my parents soon, but that won't do much because they don't have any money either.

I think at this point I owe about $40,000. I really, truly, honestly don't want to pay it back. Sure, I realize the responsibility I took on when I signed the papers and agreed to take out the loans, but I should have never had to do it in the first place. I feel some sort of civic duty not to pay them back, as if my small protest will make any kind of difference.

I think I know two friends that have completely paid off their loans and have received an awesome amount of confidence because of it. I am very proud of them, but I don't think I'm one of those people. I would rather spend my money on things that I need like food and shelter than to give it back for a service that should have been provided for me.

Vanessa, 29

$45,000 in debt

I got my associate's degree and then transferred to a private university in New York. They didn't accept all of my credits, so I had to do about three years of study. I think it was $53,000 a year at the time. My mom and I applied for a loan through a private bank called Sallie Mae, among others. Every American knows that bank, the name Sallie Mae sounds so friendly; she's just your cute aunt making soup.

Within 48 hours I had $30,000 in my bank account. It was shocking because I had never had that much money in my bank account before. I remember that after paying my student stuff it was just gone, as if I never even had it. And I didn't live on it. I had a part-time job my entire education.

I moved to Berlin the day of my graduation. I got my loans deferred for one year and then my parents deferred it for a bit because you have a short grace period, usually six months to a year. When we tried to consolidate them we met a lot of resistance because they were from so many different banks. But I've never paid back the federal loans. My parents didn't co-sign on them. The only reason that I've ever worried about the debt from the private lenders is because it affects my parents. I don't give a shit about the loans in my name.

A year ago, I was working at a fancy restaurant in Berlin and made a lot of money in tips. For about ten months, I was paying some of the loans, but I don't have that job anymore so I had to stop.

Debt collectors haven't badgered me in Berlin. They haven't found me in Germany. But when I go home, my phone rings non-stop. I always think it's an old friend trying to hang out with me, but it's really Sallie Mae. It rings like every hour.

I have this shame on the part of my parents because I really did not want this for them. When I thought about going to college, this is not what I had in mind. I really thought that they were going to be so proud of me. I was the first child in my family between my parents to graduate college. But then I realized that we weren't thinking about the debt when we were signing up for school. And sometimes I think living in New York City and going to a private university maybe wasn't the best idea. I could have gone somewhere else and gotten a political science or history degree and only been in $50,000 dollars worth of debt. But I'm happy that I got that education. It's the education I wanted.

If I don't have the money, then I don't have the money to pay for loans. I need to eat and live and not be a slave to this debt. But I'm scared. When I look back, I wonder what I could have done differently.

Mario, 34

$160,000-plus in debt

I wasn't even meant to go to college. It was never my intention. And then all this shit happened where I took a year off, and I realized, Fuck, I don't think I can work overnights at a Target stocking shelves for the rest of my life. So I ended up finding this film school in California.

I couldn't afford this private school, so I told my parents I really wanted to do this and they co-signed the loans for me. I wanna say it was like $30,000 each year. It's a ridiculous amount of money.

I was, for sure, intending to pay the loans back. Our mentors and teachers told us that we would pay this education off for a long time, but everyone in America is doing it so it's almost like eating breakfast. That's how Americans are raised.

This idea that you can't afford college so you just make loan payments when you get out of school is crazy. I started to question how could you start something when you're starting in a hole?

Debt is not the main reason I moved to Europe. I moved for my career, but in the back of my mind it was a way to start a clean slate. At the same time, I could never really escape because my parents were co-signers. My parents own a home and were planning on leaving it to us as inheritance. They were nervous about having their house taken away from them because of me not paying student loans, and subsequently signed the house over to my sister so they wouldn't own anything the bank could come after.

To be honest, I just don't see myself living in America again—for reasons outside of student debt. My parents are moving back to El Salvador, where they're from, and then I'll have no ties to America. I don't really like America or the direction it's heading. For now, I don't need to care about going back there.

I encourage whoever I can to study abroad. It's so much cheaper. Starting your life with even $30,000 or $50,000 in the hole is not a good hole to start in.

Zoe, 31

$35,000 in debt

I got a full ride to college and I didn't have to take out loans until the end of my freshman year. I got a D in a class and I lost half of my scholarship. So I could have had no loans. My biggest mistake in life was messing up that one year in college.

When I left, I had maybe $24,000 in loans. My intention was to get forbearance for like a year and then start paying the loans. And I knew I would be paying the loans until at least my late 30s. My brother, who is six years older than me, was still paying his loans at the time, and even my dad was paying his loans then—he got his master's degree when we were kids.

After school, I went through my grace period and forbearance application and started paying the loans off. I was working and had a really good job. I think I was paying like $100 or $150 a month. I decided my senior year that I would move abroad after graduation. The last six months in the States I wanted to get all of my loans in order because I knew I wasn't going to be paying them when I moved to Europe.

I got all of them up to date, and right before I left I told the loan companies I was moving and gave them an email address. Once I moved abroad, though, I just stopped paying. Once you move abroad, you just kind of turn off that whole part of your life off. They can't touch you; you're elusive. But they started calling my parents, my grandparents, my past employers. And I was just living my life in Europe, kind of oblivious to it.

It wasn't until about six months ago that I started paying my loans again. I realized that I'm 30 and I just can't dip out on my loans forever. And maybe I'll want to move back to America at some point. I don't want to have this burden if I do.

The past two years I've been banking on this rumored Obama loan forgiveness bill that still hasn't really been passed. I guess I'll continue at this rate until they go away? I don't mean until I pay them off. I mean until the government's like, "You don't have to pay those loans anymore, you millennial! We know you're not good for it."

For more of Alexander's work, visit his website.

Americans are flooding the government with appeals to have their student loans forgiven on the grounds that schools deceived them with false promises of a well-paying career—part of a growing protest against years of surging college costs.

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In the past six months, more than 7,500 borrowers owing $164 million have applied to have their student debt expunged under an obscure federal law that had been applied only in three instances before last year. The law forgives debt for borrowers who prove their schools used illegal tactics to recruit them, such as by lying about their graduates’ earnings.

 

The U.S. Education Department has already agreed to cancel nearly $28 million of that debt for 1,300 former students of Corinthian Colleges—the for-profit chain that liquidated in bankruptcy last year. The department has indicated that many more will likely get forgiveness.

The program could prove to be one of the few lifelines for hundreds of thousands of Americans buried in student debt after attending disreputable schools that failed to land them a decent job. Federal law prohibits student debt from being discharged in bankruptcy, except in rare circumstances, and the Supreme Court last week declined to hear a case that could have expanded bankruptcy options.

The sudden surge in claims has flummoxed the Education Department, which says the 1994 forgiveness program is overly vague. The law doesn’t specify, for example, what proof is needed to demonstrate a school committed fraud. Last week, the department began a monthslong negotiation with representatives of students, schools and lenders to set clear rules, including when the department can go after institutions to claw back tuition money funded by student loans. 

Education Department officials say they are still trying to grasp the potential bill that will be footed by taxpayers. They say the cost of forgiveness could ultimately be in the billions of dollars.

“We just don’t know” the potential scope, said Ted Mitchell, the Education Department’s undersecretary. “This is new territory for us.”

Mr. Mitchell added that borrowers are entitled to forgiveness—as well as potential reimbursement of repaid loans—if they have been defrauded, regardless of the taxpayer cost. “The law is clear about giving students redress when they’ve been defrauded,” he said.

Andrew Kelly of the American Enterprise Institute, a conservative think tank, said there is a danger that the program will become overly broad, encompassing not just instances of outright fraud, but also cases in which borrowers simply regret taking out the debt because they can’t find a job, through no fault of the colleges. 

“It gets much more difficult when students say, ‘Well, I was told this would improve my job prospects.… I don’t have a job, and I’m mad about it, and I think I’m defrauded,’” Mr. Kelly said.

The surge in applications reflects the growing savvy of student activists, who discovered the law last year after it had largely sat dormant for two decades. Education Department officials say the agency failed to draft rules after the law was passed in the early 1990s and lacked the urgency to do so because it had only received five applications—three of them granted—before last year.

The clamoring for forgiveness represents the fallout of a college-enrollment boom—driven by a surge in students attending for-profit colleges—that caused student debt to nearly triple in the past decade to $1.2 trillion, New York Federal Reserve figures show. Seven million Americans have defaulted, government data show.

So far, almost all of the borrowers applying for forgiveness under the 1994 program attended for-profit schools. Three-quarters went to Corinthian-owned institutions, while hundreds of others attended the Art Institutes, owned by Education Management Corp.; and ITT Technical Institutes, owned by ITT Educational Services Inc. All three have been the subject of federal investigations into illegal recruiting tactics in recent years.

An Art Institutes spokesman declined to comment. Corinthian Colleges was liquidated in bankruptcy last year; the company denied allegations of illegal recruiting tactics.

ITT said it wants “to assist students with a legitimate grievance.” But it added that it believes the company has been unfairly targeted by the Obama administration in what it characterized as a broad campaign against for-profit colleges.

In letters to the Education Department, borrowers speak of frayed lives after taking on huge debts to attend schools that they say provided inept instructors and failed to land them the industry jobs they promised.

“I feel robbed of my life,” wrote one student who said she owes $114,000 in federal student debt—most of it in her mother’s name—for her time at a branch of the Art Institutes chain of for-profit schools. “Even after paying my student loans on time and in full every month for over seven years, I’ve barely made a dent.”

Syd Andrade’s story is emblematic. He said in an interview that during his high-school senior year, he received a call from an Art Institutes recruiter promising “great facilities, great teachers, use of industry-standard software” for a game-art design program.

Mr. Andrade, who graduated from the company’s Tampa, Fla., location, said the classes used outdated software and were taught by an instructor who knew less than the students. “Most of the time spent in her classes were us teaching her,” he said. “It was a group effort of everyone trying to learn together.”

The school had also promised to help him land an industry job, he said. But when he graduated in 2011, the school placed him in an $8-an-hour job working behind the counter at a local Office Depot. He said they did the same for his girlfriend, another graduate of the school.

Mr. Andrade and his girlfriend moved to Austin, Texas, where he now makes $44,000 a year working in technical support for a major media company, outside his desired field. “They promised us to get jobs in the field, and most of us ended up at Office Depot,” he said.

The Art Institutes spokesman, Bob Greenlee, declined to comment.

The case of Mr. Andrade, who is trying to document the school’s actions, points to tough decisions facing the Education Department. Many students say recruiters verbally made misleading promises and cited fraudulent job-placement data, but the students often lack documentation to prove it. Moreover, consumer-protection laws vary by state, and a recruiting practice might be legal in one state but illegal in another. The Education Department has hired a special master to sort through existing claims as it drafts permanent rules.

Read  More:http://www.wsj.com/articles/thousands-apply-to-u-s-to-forgive-their-student-loans-saying-schools-defrauded-them-1453285800?mod=e2tw