10
■ i n
street roots
I *M
Jan. 20, 2012
How the student loan industry runs a $90 billion con
BY ALAN PRESTON
bankruptcy.
Those who succumb to defaulting on their
lan Michael Collinge’s first job as an
student loans are not statistical anomalies.
aerospace engineer did not pay him
Collinge cites National Center of Education
quite enough to keep up with the
data that there is a shocking 20 percent
payments on the $38,000 of student loans that
default rate within the first decade after
he’d accumulated earning his degrees. Before
graduation for people who borrowed more
he knew it, he was pulled into a vortex of debt, than $15,000. As their loans are sold from one
default and collection, and within seven years
collector to the next, fees and penalties
of graduation, his loans had ballooned to over
expand exponentially, making the prospect of
$100,000 due to penalties, fees, collection
repayment that much more impossible to
charges and compounded interest.
fathom. Meanwhile, lenders and collectors
Collinge faced three choices: accept his fate
have free license to garnish wages, disability
and spend the rest of his life in poverty, leave
benefits and even Social Security without a
the country or stay and fight. Numerous
court order. Incredibly, it is more profitable
others in his shoes have been so desperate
for lenders when students remain in default
that they have made a tragic fourth choice —
than it is when they pay them back. Collinge
suicide. Collinge chose to go public and fight,
writes: “By 1998, there was a perverse
and so was born one of the nation’s foremost
financial incentive for the student loan
whistleblowers on the student loan industry.
servicing companies to do a horrible job of
His book, “The Student Loan Scam,” has
loan administration. The more ineffective the
become a primer for the uninformed and
companies’ customer service was, the more
unaware.
likely it became that students would default —
Before reading Collinge’s book, I was
and thus, the more money student loan
among the naive. My privileged upbringing
companies would ultimately make.”
provided me a debt-free college education, and
Today, student loans are a $90 billion
I never questioned the standard narrative
industry and these loans have a stranglehold
about student loans: That they were for the
on millions of lower- and middle-class citizens.
benefit of the student and the ticket to
While tuition rates skyrocket, students have to
fulfilling one’s promise in life. “Scam” not only borrow more, only to see their employment
rid me of this myth, it also taught me that the
prospects dim. Rather than truly counseling
collusion among the student loan industry,
students, the higher education system has
higher education and Congress is one of the
become beholden to lenders and has
most glaring economic justice issues of our
incentives to push students to borrow beyond
day.
their means. What has emerged, writes
Collinge begins with a historical
Collinge, is “an unholy alliance between
perspective, detailing the rise in power of
lenders and universities that trampled the
Sallie Mae, the nation’s leading source of
very students they claimed to serve!”
private student loans, into a conglomerate that
“Scam” is a riveting book that exposes the
controlled all aspects of the industry - loans,
student loan industry as self-interested,
guarantees and collections. By 2005, Sallie
predatory and amoral. Although not especially
Mae had become the second most profitable
well written, the book is a well-researched and
company in the country, and its executives
credible account of an industry that is every
were raking in millions of dollars on the backs
bit as exploitative as the mortgage industry
of the borrowers. (Sound familiar?)
that spurred the housing bubble in 2008.
Responding to Sallie Mae’s increasing
Here’s the irony: We are living in a
economic power and influence in Washington,
competitive global economy that demands a
Congress began systematically removing all
highly educated workforce, yet those who
the standard consumer protections afforded to pursue higher education often find themselves
other forms of debt from student loans. Most
buried under a lifetime of debt in order to
troubling, student loans are the only type of
become part of this educated workforce.
consumer debt that cannot be discharged in
Moreover, if students can’t pay their debt,
C O N T R IB U T IN G W R IT E R
A
The Student Loan
Scam by Alan
Michael Collinges,
184 pages
they stand to lose the licenses and
certifications for which they were trained,
creating a vicious cycle of deepening despair
for students and escalating profits for lenders
and collectors.
The full title of Collinge’s book is “The
Student Loan Scam: The Most Oppressive
Debt in U.S. History — And How We Can Fight
Back.” Unfortunately, after absorbing the
author’s argument that this is, in fact,
history’s most oppressive debt, it’s hard to
imagine fighting back at all. Collinge provides
a recipe for action, but the realization that
lenders have immense political power can give
the reader a sense of impotence. The people
who most need to agitate for a political
solution are too often silenced by their own
humiliation and shame.
In his book, Collinge makes multiple
references to his website studentloan.justice.
org, which he developed to create a safe forum
for borrowers to tell their stories and to
educate the public and encourage activism.
Those in the “take personal responsibility”
wing of American politics dismiss Collinge’s
book and Web site as the whinings of a
disaffected liberal who exempts borrowers
from their obligation of debt repayment. Their
vitriolic responses, as seen in the comments
on his blog, are hyperbolic and disingenuous.
Collinge isn’t exonerating the small
minority of borrowers who make irresponsible
decisions about their student loan debt. He is
saying that their choices don’t exist in a
vacuum. From their first interactions with
student loan officers at their colleges (who
receive kickbacks from lenders to steer them
into certain types of loans) to their
subsequent attempts to work with lenders and
collectors (who have no financial incentive to
cooperate), the cards are stacked against
them.
The “Student Loan Scam” is a sobering
must-read for prospective students who are
planning to take out student loans. It’s also a
call to action for both graduates who hold
student loan debt and economic justice
activists.
Reprinted from Real Change Newspaper,
Seattle, Wash.
Portland
coffee
bean
Hearing Voices
IN T E R N A T IO N A L ®
embrace p>uaw diversity
We tip our mugs to Coffee Bean International for donating coffee to Street
w w w .portlandhearingvoices.net
Thank you!
Fallen Off
the Edge
A new book by A r t Garcia
"Fallen Off the Edge" is a chronicle
of one man's experiences after returning
from the Vietnam War. Told through the
eyes of Street Roots columnist Art
Garcia, this book celebrates the major
victories born from a series of
questionable choices. Art's jocular
storytelling takes the reader along with
him in and out of the California prison
system over the course of 10 years until
he found the strength and courage to
pull himself up from the fall.
The book is available online at www.
blurb.com under searchword Art Garcia.
Roots and keeping our vendors warm in the morning'
M irador
COMMUNITY STORE
Canning jars &
equipment,
cookware, kitcher
took & appliances
Organic cotton
sheets, toweb,
& blankets
Food dryers
Juicers
2106 SE Division
m iradorcom m urntystorexom
M on-Sat 10-6 • Sun 11-5
Books on meat-fre
cooking, gardenin
& sustainability