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Congress has removed nearly every consumer protection from student loans

Grandmothers’ Social Security Garnished for Student Loans

The Social Security program … represents our commitment as a society to the belief that workers should not live in dread that a disability, death, or old age could leave them or their families destitute.  -President Jimmy Carter, December 20, 1977.

[This law] assures the elderly that America will always keep the promises made in troubled times a half century ago … [The Social Security Amendments of 1983 are] a monument to the spirit of compassion and commitment that unites us as a people. -President Ronald Reagan, April 20, 1983.

So said Presidents Carter and Reagan, but that was before 1996, when Congress voted to allow federal agencies to offset portions of Social Security payments to collect debts owed to those agencies. (31 U.S.C. §3716.) Now, we read of horror stories like this:

I’m a 68 year old grandma of 2 young grandchildren. I went to college to upgrade my employment status in 1998 or 1999. I finished in 2000 and at that time had a student loan balance of about 3500.00.

Could not find a job and had to request forbearance to carry me. Over the years I forgot about the loan, dealt with poor health, had brain surgery in 2006 and the collection agents decided to collect for the loan in 2008.

At no time during the 6-7 year gap did anyone remind me or let me know that I could make a minimum payment on the loan. Now that I am on Social Security (have been since I was 62), they have decided to garnishee my SS check to the tune of 15%.

I have not been employed since 2004 and have the two dependents…. I don’t dispute that I owed them the $3500.00 but am wondering why they let it build up to somewhere around $17,000/20,000 before they attempted to collect.

Her debt went from $3,500 to over $17,000 in ten years?! How could that be?

It seems that Congress has removed nearly every consumer protection from student loans, including not only standard bankruptcy protections, statutes of limitations and truth in lending requirements, but protection from usury (excessive interest). Lenders can vary the interest rates and some borrowers are reporting rates as high as 18-20 percent. At 20 percent, debt doubles in just three and a half years; and in seven years, it quadruples. Congress has also given lenders draconian collection powers to extort not just the original principal and interest on student loans, but huge sums in penalties, fees and collection costs.

The majority of these debts are being imposed on young people, who have a potential 40 years of gainful employment ahead of them to pay the debt off. But a sizeable chunk of US student loan debt is held by senior citizens, many of whom are not only unemployed but unemployable. 

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A huge student loan scam — With the help of Virginia Foxx, R-N.C., for-profit colleges are massively ripping off U.S. taxpayers

Earlier this year, the U.S. House of Representatives voted to pass a bill with the impressive, everybody-can-get-behind-this title “Protecting Academic Freedom in Higher Education Act.” Sponsored by the ultra-conservative North Carolina Republican Virginia Foxx, the bill ostensibly took aim at an issue close to small-government-loving hearts: intrusive federal regulation of for-profit colleges — fast growing, highly profitable outfits like DeVry University or the online-only University of Phoenix.

Like so many of the bills passed by the House since Republicans gained the majority in the 2010 midterm elections, the bill was designed to repeal specific actions taken by the Obama administration. In this case, the issue at hand was the Obama administration’s efforts to ensure greater “program integrity” in the for-profit educational sector. Specifically, a new federal definition of what constitutes a legitimate academic “credit hour” and a new requirement that all online providers of post-secondary education be accredited in each and every state in which they do business.

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The $1 Trillion Student Loan Rip-Off: How an Entire Generation Was Tricked into Taking on Crushing Debt That Just Enriches Banks

Young people accepted a home mortgage worth of debt before they ever even had a regular income based on phony promises.

By Alex Pareene | sourced from Salon

Thanks to the horrific 2005 bankruptcy bill, one of the most nakedly venal modern examples of Congress serving the interests of the rentiers and creditors over the vast majority, debtors cannot discharge student loans through bankruptcy. The government is shielded from the risk, and creditors are licensed to collect by almost any means they deem necessary, giving no one in charge any real incentive (beyond basic human decency) to fix the situation.

[FULL STORY]