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The foreclosure crisis and the staggering unemployment rate have been the looming economic stories of the past two years. However, student loan debt should not be ignored. Universities, colleges, banks, and other student loan finance services have all taken advantage of our nation’s youth in order to pad their bottom line. With foreclosures and other credit problems, there is a way out. The student loan problem is one that a person can never be freed from.
Lenders have nothing to fear when giving out money for school. The loans are guaranteed by the government. If a person defaults on the loan, the lenders are not forced to go through collection agencies where they will likely never see their money. Oh no. They have the government in their back pocket. The government will punish defaulters by garnishing wages, withholding tax refunds, or even docking social security checks. For-profit colleges are often the worse culprits of the scam. They don’t work for students. They work for CEO’s and shareholders, and they have rewarded top executives very handsomely.
Senator Tom Harkin (D-Iowa) and his committee investigated the for-profit college crisis last year. Harkin stated that for-profit schools often use deceptive recruiting techniques, have overpriced programs, and end up with huge profits while the most vulnerable students are left with staggering debt. Very similar to the subprime mortgage collapse, for-profit colleges are using the lure of higher education to entice prospective students to take out huge student loan debts that they cannot afford. Schools used misleading recruiting tactics to convince would be students that they will be able to afford the loan payments after graduation. A recent General Accountability Office investigation revealed that all 15 schools that the office visited this past spring were using deceptive recruiting practices to convince students to enroll.
For-profit schools also have very poor success rate. A recent investigation looked at 16 large for-profits schools and found that 57 percent of students who enrolled in 2008-2009 had dropped out, most within four and half months. Even at the largest for-profit college, more than 64 percent of those seeking an associate’s degree dropped out within the first year. But these for-profit schools are still raking in record high profits despite their lack of success.
“CEOs at for-profit education companies are rewarded with mega-million-dollar, taxpayer-funded salaries, even as the low-income students targeted by these schools struggle with staggering debts,” Senator Harkin wrote in a blog for The Hill. He goes on to mention that the college Strayer, a chain of for-profit schools, receives three-quarters of its revenue from U.S. taxpayers. The chairman and CEO of Strayer received $41.9 million last year, nearly 60 times the compensation of Harvard’s president.
It is clear that there has been no federal oversight and the student loan industry is as corrupt as the mortgage industry. Other than Sen. Harkin though, most lawmakers are silent on the issue. I have written to many members of Congress about the issue and have never received a personal response. Just the same old canned crap. How long will America’s young adults be forced to suffer before the government steps in and cleans up the mess that greedy colleges and student loan companies have left behind?