Apr 7, 2021
numbskullery
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numbskullery
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Why are "freedom of speech" and "the right to bear arms" the only amendments buffoons are aware of?
Tell Congress to Protect Predatory Lending!
I was fortunate enough to have parents willing and (mostly) able to foot the bill for nearly all of my expensive liberal arts education. I escaped Reed College with a single $5,500 student loan, plus $500 in interest that had accrued since taking out the loan during my sophomore year. My good fortune continued, as I was able to land a job out of college that allowed me to pay back the full amount after only six months. I thought I knew how lucky I was to be debt free. That is, until I saw Amy Goodman’s interview with Alan Michael Collinge, author of The Student Loan Scam, and creator of the documentary film “Default: the Student Loan Documentary.” Collinge’s interest in student lending began when his $38,000 in student loans ballooned to over $100,000 after Sallie Mae, in response to a request for forbearance, put his loan in default. Collinge exposes the seedy—and seemingly illegal—activities that even conservative publications like the National Review concede, “should evoke cringes from Americans of all political stripes.” In my view, the most egregious abuse by student lenders is their penchant for intentionally defaulting loans, which cost young borrowers tens of thousands in fees, and wreak havoc on credit scores. According to Collinge’s book, there are more than 5 million such defaulted loans in America. And thanks to intensive lobbying on the part of lenders, student loans have the unique status of being the only type of loan to be non-dischargable in bankruptcy. This post is not intended to plug Collinge’s work—though it is certainly worthy of attention. Rather, I am laying the foundation to share with you an email that my partner received from her student loan provider, Citibank.
Citi: Learn about legislation that impacts you May 7, 2009 Dear AMANDA, Thank you for the opportunity to help you obtain the education of your choice. As a student loan provider for the past 50 years, Citi has provided financial aid assistance to millions of students and parents nationwide. Given the challenging economy and continued increases in the cost of higher education, it is critical that the U.S. student lending system serves the best interests of students and their families. If you believe that competition and choice among student loan providers is valuable, you have an opportunity to make your voice heard. *Why Get Involved?* The government budget outline proposes offering federal student loans solely through the federal government's Direct Lending Program starting July of next year. While this proposal will not impact a borrower's ability to obtain a federal student loan, it will eliminate your ability to choose a student loan provider. It will also substantially increase the national debt since each and every federally-insured student loan will be funded by the Federal Treasury through the issuance of treasury securities. This proposal impacts you as a citizen - both as a taxpayer and as a borrower. *Why Does Competition And Choice Matter?* Without private lender involvement through the Federal Family Education Loan Program, students and their families will not enjoy the benefits that competition has made possible for more than 40 years. This competition has provided not only a choice of lenders, but also innovative products and services, such as: * a variety of borrower benefits that lower your cost of borrowing * financial literacy programs that educate you on how to borrow responsibly * web-based tools and resources to advise you about your financing options * default prevention services to help you pay back your loans Competition also has driven increased customer satisfaction as a result of the responsiveness, personal attention and on-campus support that student loan lenders have provided to borrowers and schools nationwide. *Make Your Voice Heard* If you value the ability to shop for, evaluate and choose your student loan provider, make your voice heard by contacting your Members of Congress and by signing one of the online petitions that support borrower choice and competition in federal student lending. Sincerely, The Student Loan Corporation
It does not take more than a shallow understanding of the student loan scheme—or the wider state of the banking industry in general—for that second paragraph to prompt some head scratching. I was particularly bewildered by this line: “it is critical that the U.S. student lending system serves the best interests of students and their families.” Hard to disagree with that, no? And how do we ensure that this is the case? “If you believe that competition and choice among student loan providers is valuable, you have an opportunity to make your voice heard.” Uh... The next paragraph is similarly perplexing. The idea seems to be that the proposed legislation would not make it harder to receive an educational loan, but what it would do is… increase the national debt? It is so nice to know that Citibank is looking out for Joe Taxpayer, what with the $75 billion they’ve received from the government so far. (Sort of reminds me of Karl Rove's recent advice to Obama on how to be more bipartisan.) Economists generally use “competition” and “choice” to illustrate how multiple suppliers of the same product or service will often drive prices down for the consumer. While using the terminology, Citibank does not attempt to make this claim, and with good reason: The government sets the interest rate for subsidized Stafford loans. While it is theoretically possible for financial institutions to forgo portions of their entitled cut of the interest, a quick survey of the web reveals that not one of the nation's top 10 loan providers does so. Further, the National Review article linked to above does an excellent job of summarizing how lenders actually collude with colleges and state governments to discourage competition. We are then expected to believe that financial literacy programs, web-based tools and resources, and “default prevention services” (haha?) all owe their existence to “competition” and “choice.” What kind of education does Citibank think it is buying its customers? Most unbelievable of all is that the email then attempts to cajole its reader into contacting congress and signing a petition to “support borrower choice and competition in federal student lending.” As both a sender and recipient of political email, I can attest to the indifference that meet most attempts to mobilize. But for a bank to email its customers—no shortage of whom they are screwing—and ask them to contact their representatives in support of a pro-bank piece of legislation, makes it patently obvious why our financial institutions are doing as poorly these days as they are.
Here they are:1) Raising the debt ceiling does not authorize one single penny in additional public spending.2) For Congress to 'decide whether' to raise the debt ceiling, for programs and tax rates it has already voted into law, makes exactly as much sense as it would for a family to 'decide whether' to pay a credit-card bill for goods it has already bought.That is all.
James Fallows, "The Two Sentences That Should Be Part of All Discussion of the Debt Ceiling."