Monday, February 7, 2011

College Students Drowning in Debt

Mike Whitney interviews Alan Nasser at Counterpunch
http://www.counterpunch.org/whitney02042011.html
The most disturbing part of this interview is not the high amount of debt and default rates (which have already) been documented, but rather that the US government profits from student defaults:

"Debt is held by 62 percent of students enrolled at public colleges and universities, 72 percent at private non-profit schools and 96 percent at private, for-profit ("proprietary") schools. It was announced last summer that total student loan debt, at $830 billion, now exceeds total US credit card debt, which is itself bloated to the bubble level of $827 billion. And student loan debt is growing at the rate of $90 billion a year. So we're not talking small change....

"...The Department of Education has its own loan program and, accordingly, a positive interest in defaults. It makes a financial killing on its recovery of defaulted Federal Family Education Loan Program (FFELP) loans.

"In a revealing Wall Street Journal Report ("US Gets Tough on Failure to Repay Student Loans – Education Department Wields Heavy Hand in Some Hard-Luck Cases – No Breaks in Bankruptcy Court", Jan. 6, 2004) John Hechinger reveals that for every dollar the Education Department pays out in default claims, it is able to rake back the entire principal, plus almost 20 percent in interest, penalties and fees. And keep in mind that the value of the default portfolio includes not merely principal plus interest at time of default, but also the interest that continues to accrue after default....."

1 comment:

  1. Hi Majia

    Very interesting post! As a matter of fact, this is a topic that I cover extensively on my blog at InternetEntrepreneurConnection.com

    As a college graduate from Texas A&M University, I was astounded at how financially uneducated I really was after graduation. Through out my entire collegiate career I was always told "you're getting a great education from a great school if you don't have the money BORROW IT , it will all pay off in the end, who cares how much it costs!"

    Today, reflecting back on the very bad advice I received (some even by school officials) I have to say that we as a country a doing a disservice to all of Americas brightest. Did borrowing money for college pay off? Absolutely NOT! because I graduated at the deep end of a recession and my degree in (Technology Management/Business) was useless. HIring freezes across the board in major corporations int he U.S mean I was jobless and the student loan repayment bills started coming.

    Since graduating from college I have drastically increased my financial intelligence (self-educated) and am on a mission to educate others about the importance of educating themselves financially.

    Feel free to visit my blog (http://www.InternetEntrepreneurConnection.com) and share your thoughts! I would love to have the opinions of someone has highly regarded as yourself!

    ReplyDelete