The Subsidized Student Loan Scam: What subsidy are they talking about, anyhow?

[Better Believe It]

May 10, 2012
How the US Government is Profiteering Off of Struggling Students
The Subsidized Student Loan Scam
by DAVE LINDORFF

Inflation, according to the government’s own statistics, is running at 2.7%. In other words, the government, which is the lender in the case of Stafford Loans, is already making 0.7% on its “subsidized” loans to undergraduates. And the inflation rate has been considerably lower in prior years, so the government has actually been making out like a bandit longer term. If it were to start earning 6.8% on these loans, the Treasury would be raking in huge profits on a loan program which is supposed to be helping make college affordable for lower income and middle-income students.

Remember, unless the government secretly suspects that the Occupy Student Loans movement is going to succeed in convincing millions of students to simply refuse to make payments on the $1 trillion in outstanding student loans, these loans are about the safest financial instruments known to man. Thanks to years and years of legislative actions to chip away the rights of student borrowers, student loans have become more like indentures than simple acts of borrowing money. Student borrowers are not protected by state usury laws, they are not allowed to declare bankruptcy if they cannot pay, the federal government, and any private collection firms that take over defaulted student loans are allowed to garnish not only a borrower’s wages without even having to go to court, but can also claim income tax refunds and even Social Security payments, raising the prospect that former students who cannot repay their student loans could be driven into the street in their old age as their retirement checks are stolen from them. Of course the government can also ruin a borrower’s credit and can prevent a graduate from getting a professional license. The government is even, as I wrote earlier here, pressing colleges to withhold official transcripts from graduates who fall behind in their repayments, making it impossible for them to apply for jobs or for higher degrees (that’s a wretched policy that Obama, currently portraying himself as the friend of college-aged voters, could put an end to with a simple order to his Education Secretary Arne Duncan).

The truth is that both political parties, and particularly the Republicans, want to make money off of student borrowers, while pretending to be helping them to go to college.

Instead of fighting over whether to set the rate at its current rip-off level of 3.4% or to raise it to a truly extortionate 6.8%, Congress and the White House should be declaring a moratorium on student loan payments, to continue until the unemployment rate among recent graduates and among the general working population falls back below 5%.

Read the full article at:

http://www.counterpunch.org/2012/05/10/the-subsidized-student-loan-scam/

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