Millennials know the story by heart. Work hard in high school, go to a good college, spend four years to get your degree, and the sky’s the limit. But college is looking more and more like a racket, and according to a new report, student debt has become a $1.3 trillion industry, with 42 million Americans footing the bill.
“I feel I kind of ruined my life by going to college,” said Jacki Krowen of Portland, Oregon. A 32-year-old nurse, Krowen has a student loan balance of $152,000. “I can’t plan for an actual future,” she laments. And there are many who would consider Krowen a success by comparison.
Krowen’s story appears in the cover story of Consumer Reports magazine, which is itself a condensed version of a report from the Center for Investigative Reporting.
This report revealed quite a few bombshells. For instance, the government actually profits off of the massive student loan industry. According to the Department of Education, the federal government expects to earn 20 percent from the loans it made in 2013.
Thirty years ago, the federal government opened the student loan operation to private companies and banks, which seized on the flow of federal loan dollars. The industry has a huge amount of lobbying power, and as a result, student loans can no longer be discharged in bankruptcy, with the exception of only a few rare cases.
While the government and loan industry have profited off of student debt, societal changes have spurred even more demand for the high-cost experiment of college education. Middle-class incomes have stagnated, college costs have soared, and states have dialed back their investment in public universities, for good or ill.
1. “You shouldn’t have to go to war to get a college education.”
After two years of tuition hikes, University of Wisconsin-Stevens Point student Saul Newton found himself with about $10,000 in student loans. “I couldn’t afford it any more,” he recalled. Faced with the painful decision of embracing more debt or cutting short his education, Newton made a drastic move — he enlisted in the military, hoping to return to school under the GI bill.
Instead, he would up fighting the Taliban in Afghanistan’s remote and dangerous Arghandab River Valley. In August 2010, his unit lost the battalion chaplain and four other soldiers to a roadside bomb. “My focus was on doing my job and staying alive,” the student-turned-soldier explained.
Once a month, this brave cadet used the unit’s laptop computer to keep up with his online student loan payment of $100. Unaware that the government offers student loan deferments to active soldiers in wartime, Newton worried that if he didn’t keep paying his loans, his credit would take a massive hit.
Now, he’s advocating for more state funding for higher education in Wisconsin. “You shouldn’t have to go to war to get a college education,” Newton said, in his role as director of the Wisconsin Veterans Chamber of Commerce. Wisconsin has cut its funding for higher education in the past decade, but more government money may not be the best solution.
Next Page: Working for the enemy.
2. Working for the enemy.
Image Via Shutterstock, a recent college graduate with a diploma and a college loan.
Twenty-eight-year-old Jessie Suren worked at a massive call center in Harrisburg, Pennsylvania, making about $12 an hour calling delinquent student loan borrowers and trying to convince them to pay back their loans. Consumer Reports explained that Suren “felt like she was working for the enemy.” She owes about $90,000 in student loans.
Suren recalled angry borrowers cursing her and threatening her, complaining that they were jobless and broke. Some said they or their children were terminally ill. Suren would have to explain what would happen if the borrowers didn’t pay — the loan servicing company American Education Services would take their tax refund and garnish their wages.
“This is going to be me in a couple years,” she would think, after the calls had ended. Eventually, she left the company.
3. Calls at 5 a.m., followed by a lawsuit.
Brandon Hill, a graphic designer from San Francisco, California, was awoken in the wee hours of the morning by Sallie Mae debt collectors. They began calling him “yelling and screaming” about his past-due payments as early as 5 a.m., he alleged.
Hill complained to state regulators in 2013, but then Sallie Mae and Navient Credit Finance sued him for immediate repayment of a combined $73,000 in student loans. “I was sued for complaining,” he alleged. Sallie Mae argued that the company had “acted appropriately” in calling at 5 a.m., because Hill’s cell phone has a Virginia area code, so the collectors assumed he lived on the East Coast (where it would have been 8 a.m., still before appropriate call center hours).
A source from the debt-buying industry told PJ Media that this was violation of regulations. Such violations often occur because the company is not always able to verify the accuracy of addresses. Often when there is only a mobile number to call, collectors will only call within the 12 p.m. to 6 p.m. ET timeframe to ensure they are calling during approved time periods, even in the west coast.
The source explained that there are fewer collectors now than before, because companies decide that the cost of complying with regulations set by the Consumer Financial Protection Bureau (CFPB) is too high, leaving only larger companies who are able to comply. These rules are helpful because while many collectors try to be fair to the customer, they do occasionally cross the line, as happened with Mr. Hill.
Next Page: The Federal Government Doesn’t Care.
4. “The Federal Government [Doesn’t] Care.”
Retired University of Cincinnati Professor Mary Franklin told Consumer Reports that debt collectors threatened to garnish her disability insurance benefits because she had fallen behind on a long-term student loan.
“I tried to explain to them that I was ill,” Franklin recalled. “They said the federal government [doesn’t] care.” She did end up resuming the payments.
The report added that “progress has been made.” Regulations introduced after 2013 limit a student debtor’s federal loan payments to as low as 10 percent of discretionary income, and in 2015 the Obama administration launched a program to see if federal employees could collect unpaid loans while being more helpful and less aggressive than private collectors.
“We need to eliminate the private collection agencies from this process,” argued Deanne Loonin, a lawyer who monitored student debt for the National Consumer Law Center. “They are incentivized just to collect money, not to work out ways that might be better for the borrowers.”
Will all due respect to Loonin, I doubt debt collectors from the federal government would be any more conscientious. Government is part of the problem here, and we should question any claims that making the system public would suddenly solve debtors’ woes.
Student debt is, unfortunately, only one of a huge host of problems in higher education today. Attendance has skyrocketed in part because a high school diploma means less than it once did, and in part because of government incentives which lead more and more colleges to invest heavily in infrastructure and administration, rather than teachers.
At the same time, professors and faculty have allowed themselves to be bullied by “social justice warriors” more focused on leftist visions of equality than on receiving a high-caliber education.
Relying more heavily on students and graduates might help colleges become more focused on giving students a quality education, rather than flashy ways of demonstrating their commitment to government fads of political correctness. Completely private colleges like my alma mater, Hillsdale College, receive no federal funds, and yet compete effectively to provide a quality education.
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