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The www.FedPrimeRate.com Personal Finance Blog and Magazine

Thursday, August 28, 2008

StudentLoanJustice.org

Student Loan Debt
Student Loan Debt
Was reading the New York Times on Sunday and came across an article about the StudentLoanJustice.org website. It's a web space you must visit at least once if you or a member of your family has student loans. Site is chock full of content that's both shocking and engaging. This site is not just a place to read up on the injustice that exists in the American student loan industry, it's also the official website of the StudentLoanJustice.org Political Action Committee (PAC).

Here's a clip from the site's "about" page:

"StudentLoanJustice.Org is a grassroots organization started in March, 2005. The purpose of StudentLoanJustice.Org is to give borrowers who's lives have been adversely affected by the predatory, uncompetitive laws that have been passed by Congress since the 1990's a place to tell their stories, to conduct research about higher education legislation, higher education lenders, the effect these have had on the lives of citizens, and to cause a solution to be legislated. Without advertising, revenue, or staff, StudentLoanJustice.Org has grown to thousands of members across the country comprising every state in the Union..."

When I defaulted on my student loans, it was because I didn't want to make the payments. I was trying to get ahead in life. I didn't think the government could or would take every penny I had in my bank account. But that's exactly what happened; I learned a hard lesson.

The U.S. economy is languishing right now, and I'm certain that a consequence of the economic downturn will be lots of Americans defaulting on their student loans in the months ahead. Many will have legitimate reasons for defaulting, like an unexpected illness or unemployment. And here is a very ugly truth I learn at the StudentLoanJustice.Org site: Sallie Mae CEO Albert Lord made more than $230 million in compensation since the late 90's, and a significant portion of that money came from the fees associated with borrowers defaulting on their student loans. Lord got so fat from student loans that he put in a bid to purchase the Washington Nationals baseball team.

Now, if a CEO grows a company's profits during his tenure at the top then, yes, he should get a generous bonus. If a company goes from grossing $3 billion per year to grossing $35 billion, then a bonus of $500 million is OK with me.

But banks that are in the business of making student loans are not like banks that make business loans, originate mortgages or issue credit cards.

If a borrower suddenly finds himself in financial dire straits and can't make payments on his/her student loans, that person can't get the debt discharged via bankruptcy, thanks to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 [1][3]. Default on your loans, and the fees will pile up (don't forget about the interest.) Those fees go to student loan specialists like Sallie Mae, and make CEO's like Mr. Lord very rich. To me, it's obscene that a CEO can get rich in this way.

There are some interesting articles and OpEd's here.  You can share your student loan horror story here.

Many Americans have shared their student loan horror story with StudentLoanJustice.org here. It's truly amazing how many defaulted due to hardship only to find that their student loan debt has doubled, tripled and even quadrupled due to interest and fees. No, it's not amazing, it's disgusting.

In a recent blog entry, I was second guessing my decision to use a significant chunk of my savings to payoff my student loans. After reading unnumbered horror stories at the StudentLoanJustice.org site, all my doubts have disappeared. Yep.

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