Alan Collinge went into debt. He took out a reasonable $38,000 to pay for his undergraduate and graduate degrees, but by the time he graduated, interest had caused the debt to balloon to $50,000.
Alan struggled to find work so he went into forbearance, which is a period of time in which the debtordoes not have to make payments (though interest continues to accrue). His debt had risen to $60,000 and Alan--still struggling to find profitable work-- requested another period of forbearance. Sallie Mae, though, put him into default. ("Default" is a nasty word for any debtor. If a lender puts the debtor into default, the debtor's wages can be garnished, the debtor can lose forbearance options, and late fees can be applied among other consequences.)
Soon, Alan would owe over $100,000.
Acknowledging the ridiculousness of having to pay almost three times the original amount of his loan, Alan tried to restructure a fair deal with Sallie Mae. Sallie Mae refused.
So began Alan's crusade to change the student debt industry. Until he and millions of other debtors get a fair deal, Alan has refused to pay back his loans. He created the group Student Loan Justice, and set out to learn everything he could about the predatory lending system that has ruined millions of lives. His research has been featured in The New York Times, The Chronicle for Higher Education, 60 Minutes, and he's written a book called The Student Loan Scam.
As a result of his research, he's become outspoken about the predatory lending system, noting how both corporations and the government profit when students going into default. Not only that, but the number of students defaulting on their loans is far higher than what the Department of Education says it is. (The Department of Education says the default rate is about 5 percent while Alan says it could be as high as 40 percent.) In other words, young people taking out loans are led to believe that 1 out of 20 graduates struggle to pay their student debts when it's actually closer to 1 out of 3.
Alan's solution? Reinstitute bankruptcy protection.
Previous installments
#1. Interview with $200,000-in-debt grad, Kelli Space.
3 comments:
At 14:00 minutes in, Alan raises a good point: Raising the loan limits is BAD!
In fact, besides (#1) the money made by lenders on defaulted loans due to interest & fees, ALSO (#2) the high principal loan itself is bad.
Alan covered #1 quite well, and #2 (high principal loan for sky-high tuition) is being addressed by Alan as 15:30 or so - but bears repeating:
When U.S. Congress raises loan limits, colleges raise tuition to match -- BAD!
Alan does make an excellent (3rd) point I had not noticed a few years ago, but THIS bears repeating too:
(#3) When colleges and lenders know student can declare bankruptcy, then there will be an incentive to help the student AVOID bankruptcy, and (I will add) tuition will probably go down even more, in order to avoid tempting students to give up & default.
Therefore, restoring bankruptcy (like Alan seeks) and eventually phasing out (or greatly reducing) student loans, which Alan hints at (and which I seek) would both help reduce tuition.
The pending bill in congress, H.R. 4170 (2012) introduced by U.S. Rep. Hansen Clarke (The Student Loan Forgiveness Act of 2012) would have a similar effect as allowing bankruptcy: Since students who meet the requirements over the ten-year period an have their loans forgiven, colleges would be less likely to prey on students, who would then be able to defend themselves. – HR4170 (2012), as I understand it, is a common sense bill that should be passed into law.
College used to be high quality and NOT high-priced, back when "easy loans" were not the norm, and we need to return to the ways that worked.
Gordon Wayne Watts
LAKELAND (between Tampa & Orlando), Fla.
At least he got a good education (it seems) with his degree. Its even worse with these god-awful the useless degrees that University of Phoenix and other crap schools put out.
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