CONgress Acts in a Bipartisan Way!..Or Did They?

The House is expected to vote and possibly pass a student loan bill that passed the Senate last week by a vote of 81 to 18. The new bill would tie the student interest rate to market rates instead of the current 6.8 percent on federal loans taken out for the 2013-2014 school year. Rates on the subsidized Stafford federal loans doubled to 6.8 percent on July 1 because the bipartisan CONgress could not agree on a way to keep them at 3.4 percent.

Is this a victory for students and taxpayers as Rep. John Kline, Republican chairman of the House Committee on Education and the Workforce, has said?

It’s a victory to a manufactured problem, and a small one at that. You know, the actual financial ramifications of the interest rate having doubled was only about somewhere between $1,000 and $3,000 over the life of the loan for affected undergraduates to begin with. So it was really not that big of a deal to start out with. This whole fiasco has been essentially a distraction to the fact that there are structural problems with the student lending system that CONgress has yet to deal with and absolutely needs to in a very critical way.

Do you know why anybody or everybody can get a student loan? Well, when it comes to student loans, the lending system has turned functionally and structurally predatory because of the fact that the most standard consumer protections that American citizens have every reason to expect and exist for every type of loan don’t exist for student loans. They’ve been removed by CONgress. This includes bankruptcy protections, statutes of limitations, and truth in lending requirements. This, in turn, has created a very serious and unprecedented collection industry that has been given power that no collection industry has ever enjoyed. This has created a debt system where it’s quite frankly more profitable for the lending side when loans default rather than remain in good stead.

This is very dangerous, and it has enabled the inflation that we’ve seen. It has enabled a cavalcade of corruptions across the system. While it has greatly enriched the universities and allowed them to raise their prices willy-nilly and also enabled horrible inexcusable absent government oversight, it has not helped the students.  As we have reported here in previous articles, it’s the sticker price, and until CONgress deals with the structural problem, the price of college will only continue to rise.

How massive is this problem? Currently students across the country are over $1 trillion in debt, which is more than credit card debt. In 2005 we owed less than $400 billion as a nation in student loan debt, and that was a huge amount at the time. Here we are eight years later, and we currently owe about $1.2 trillion in student loan debt. The availability of student loans has raised the price of college faster than health-care costs, faster than even home prices before the bubble and bust in 2008.

CONgress manufactured this crisis by removing, number one, bankruptcy protections, but also statutes of limitations, state usury laws, and other fundamental consumer protections that enabled the debt spiral to begin. Similarly, Congress can very quickly solve this situation by returning at a minimum the standard bankruptcy protections that should have never been taken away. By doing this, they will force the lending side to have skin in the game on the side of the borrowers rather than on the side of the banks. In that environment, we could expect the Department of Education to begin cracking the whip on the schools to get serious about lowering their prices, improving their quality, and so forth. This is how a free-market system works. Even the most ardent conservative economists would agree with that approach.

We can only hope that the affected citizens will take this very seriously, because it is a guarantee that if the citizens do nothing and expect the PTB in Washington, D.C., to do their work for them, it will not get done. This is incumbent upon the citizens to fight this battle for themselves, unfortunately, because we are on our own.

This is one issue that I think does involve all of us, every single family with kids in school. We need to organize a giant lobby, since that seems to be the only thing that matters to the gangsters on the Hill. Only this lobby wouldn’t deal in campaign cash, it deals in votes. They still do count votes in Washington. This is an issue that isn’t left or right, liberal or conservative. Parents and students, this is one project you could work on together. Moms and Dads could the write the petitions and present to CONgress and kids can organize the whole movement through social media and texting? DO IT!

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Dealing with the World

If an optimist is someone who believes we live in the best of all possible worlds, and a pessimist is someone who fears that this is true– then clearly, if the world is the same regardless, the difference is purely in the point of view of the optimist or the pessimist.  Ultimately, it’s all in one’s perspective — a perspective each of us can choose.  The key to our dilemma is choosing our perspective wisely.

Finding our way in this new world with its rapidly changing paradigm shifts is our challenge.  Since our perceptions will dictate the reality we live in, then most certainly the knowledge we have of the “truth” behind these changes is the essential tool in helping us make the right decisions about the future we desire.

Education and communications are key to developing our understanding in a way that reflects the “reality” around us.  Education unfortunately, even in developed countries, is not going the right direction. Now, when we need understanding and knowledge more than ever, we are seeing a decline in the quality of the education our children, and even adults, are receiving.  This is occurring, in spite of the vast amount of resources being expended.  To give you an example of how distorted things have become say in the US, take a look at this; the average per capita expenditure for a child going to school in the poorest areas of LA, Lennox, is about $5,000/yr.  A student going to a private school in LA has about $32,000 a year spent for that education. But the really startling number is the cost to incarcerate a youth in LA, $125,000/yr. Can anyone tell me what’s wrong with picture? What is clear is that if this knowledge were “common” I believe we, as the community, would most definitely begin to re-prioritize our agenda and our public monies.

Our higher educational system has become nothing more than another “money-making” corporate endeavor, instead of a system to produce the business, professional, and political leaders we so desperately need now.  Here are some facts to consider. Young households are being hit particularly hard by student loan debt.  In America today, 40 percent of all households that are led by someone under the age of 35 are paying off student loan debt.  Back in 1989, that figure was below 20 percent.  According to the Federal Reserve, the total amount of student loan debt has increased by a whopping 275 percent since 2003. Since 1986, the cost of college tuition has risen by 498 percent.

 Yet with staggering numbers, the quality of that education is heading exactly in the opposite direction. At most U.S. colleges and universities, the quality of the education that you will receive is very poor.  Just check out some numbers about the quality of college education in the United States from an article that appeared in USA Today….

-”After two years in college, 45% of students showed no significant gains in learning; after four years, 36% showed little change.”

-”Students also spent 50% less time studying compared with students a few decades ago”

-”35% of students report spending five or fewer hours per week studying alone.”

-”50% said they never took a class in a typical semester where they wrote more than 20 pages”

-”32% never took a course in a typical semester where they read more than 40 pages per week.”

What is more tragic is these impacts are not just an issue of our young people.  Consider this recent finding concerning the impacts of the unmitigated disaster on the elderly. According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees’ Social Security checks on those grounds. That’s nearly double the pace of the department’s enforcement in 2011; it’s up from around 60,000 cases in all of 2007 and just 6 cases in 2000.

If we have any hope for a future worth living, we must begin to make this knowledge a part of our daily dialogue.  Our priorities need to be re-aligned with what is important for our future, and education is the essential key to determining the nature of that future. Begin the discussions in your schools, homes, and PTA meetings.  The more we know, the more we can do to make our children’s future the legacy we wish it to be for them.