Student debt has crippled a generation

I saw this tweet from Elizabeth Warren

so I went to the Google to find news coverage. The Times has an editorial.

Education Secretary Betsy DeVos is inexplicably backing away from rules that are meant to prevent federal student loan borrowers from being fleeced by companies the government pays to collect the loans and to guide people through the repayment process.

On Tuesday, she withdrew a sound Obama administration policy that required the Education Department to take into account the past conduct of loan servicing companies before awarding them lucrative contracts — and to include consumer protections in those contracts as well.

These companies aren’t the loan companies, they’re the collecting agencies – one of those carbuncles of capitalism that are such nice little earners for people whose only talent is carbuncling.

The department is doing the loan industry’s bidding at a time when student debt has crippled a generation financially and the country’s largest loan servicing company, Navient, is facing several lawsuits accusing it of putting its own interest before that of the borrowers it is supposed to help.

A suit brought by the Consumer Financial Protection Bureau claims that Navient saved itself money by steering borrowers into costly repayment strategies that added billions in interest to their balances.

See there? That’s carbuncling. The goal of the federal student loan program should not be to make repayment more expensive in order to enrich the “loan servicing” companies.

And, the Times goes on, it’s even worse in the case of Sallie Mae.

The Illinois and Washington attorneys general argue that Sallie Mae engaged in predatory lending, saddling people with private subprime loans that the company knew in advance were likely to fail because borrowers would not be able to repay them. The two attorneys general — part of an investigative coalition of 29 states — argue that borrowers deserve to have these tainted private loans forgiven.

Oh um – private subprime loans that the company knew in advance were likely to fail because borrowers would not be able to repay them – that sounds so familiar. What does that remind me of, hmmmmmm…

The scenario outlined in the court documents bears a frightening resemblance to the subprime mortgage crisis of a decade ago — when mortgage companies caused millions of borrowers to lose their homes by steering them into risky, high-cost mortgages they could never hope to repay.

Poor people. People with less money than rich people and middling people. They get the high interest loans because of the risk factor, so they get fucked over when it all goes smash. Apparently this is what we do here – we look for ways to make poor people pay extra for being poor, and then we gaze very hard in another direction when the poor people are left penniless and in debt and with nowhere to live.

The Illinois and Washington lawsuits argue that Sallie Mae used subprime private loans to build relationships with exploitative schools that then helped the company make more federal loans to their students. Those loans were the jackpot for the company, the lawsuit argues, because they were guaranteed by the government, which steps in to reimburse the lender when a borrower defaults.

This is what profit-making “universities” do – it’s what they’re for. They provide basic vocational training at inflated prices to students who take out federal loans…and then end up ruined when they can’t pay the loans back. It’s a systematic con game, and it’s disgusting.

And DeVos is undoing Obama administration efforts to rein all that in. More power to the carbuncles!

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