Sent to DS from a friend
Oct. 17, 2009
I told you earlier that I would explain the student loan racketeering industry better than I did before. That is difficult to accomplish, however, given the sheer magnitude of the problem, and the number of years that this malignant problem has been rotting American society in the shadows, outside the illumination of national news media oversight. You might want to read the book “The Student Loan Scam” by Alan Collinge, available at Amazon.com, to learn the details. However, Collinge tends to be unreasonably diplomatic, and he is only concerned with seeking justice for student loan debtors (to his credit). I, on the other hand, seek both justice for students, and the criminal prosecution and imprisonment of certain student loan industry executives, corrupt members of the U.S. Congress, and certain individuals at the U.S. Department of Education. This corruption not only rots the core of our national principles of self-governance, but it presents a clear and present danger to the traditional American way of life itself. As I hope you’ll recognize here, the implications of what Al Lord, Congressman John Boehner, and others have done to student loan debtors, goes far beyond the student loan racketeering issue itself. It threatens our ability to compete effectively in a globalized economy.
In the same way that billions of manufactured (fake) dollars made available by credit (debt) cards caused prices to rise in the 1970’s, tens of billions of fake dollars made available by “guaranteed” student loans caused tuition costs to rise dramatically, even as the quality of American education has declined substantially. That is simple supply and demand at work. When people have more money to spend, prices rise–regardless of the source of that money, and regardless of the quality of the product that people demand (remember, the Pet Rock was once in demand…). As tuition rose, the cost of books skyrocketed to obscene proportions, and so did the rent in college towns–especially in towns where the college was the main attraction, the main employer, and the main influence over local business and government.
These increased funds, courtesy of student loans that produce money out of thin air (i.e., dissociated from the reality of our economy), helped even mediocore colleges like the University of Kansas quickly build up $1+ billion endowments, which they used to promote their athletic teams, build impressive structures, provide outrageously high salaries to administrators, and so on. That money did not go toward improving the actual quality of education, and only small amounts went toward providing financial aid to future students–often in the form of yet more student loans. Indeed, when I was a graduate teaching assistant at KU, some of my students were functionally illiterate. Personally, I never gave a damn whether KU students could throw a basketball back and forth or not. If a self-described “major research institution” like the University of Kansas cannot even clear the low hurdle of basic functional literacy, it has no right to claim that it has put even a dollar of its tremendous wealth toward improving the education of its students. Thanks to easy student loan availability, institutions of higher learning have been transformed into nothing more than businesses whose product is “education”. And just like any other industry’s product, it may be useful or not, valuable or not, legitimate or not, healthy or not. It may be built of the highest quality, or it may fall apart inside the box. The only thing that matters is supply and demand, and demand is often generated by marketing, rather than the quality of the product. When education itself becomes a competitive “product”, rather than a crucial pillar of competent society, we are left with functionally illiterate students, and bullshit marketing slogans where the very institution that matriculates those illiterate students into our society has the audacity to describe itself as a “major research institution”.
In college towns where rent (and often other costs) rose because the students suddenly had access to relatively large amounts of money from student loans, the entire character of the community changed from a real, stable, income-based economy, to a superficial, unstable, debt-based economy. Since the fake money from student loans filled the gap, low-wage employers of students no longer needed to raise wages to compensate for the increasing cost of living. The cost of living to income ratio skyrocketed in these communities, and by the government’s definition of “poverty”, college towns began to show up in “most impoverished communities in America” lists, leaving places like Detroit looking like Monte Carlo by comparison.
This meant that students who graduated or otherwise left school were in a precarious position: many owed massive amounts of student loan debt, combined with few job prospects, an economy dominated by low-wage jobs, and unreasonably high rents and strong competition for housing. This situation gave all the power to landlords. One thing I noticed during my decade of research on this, is that the land owners in established college towns tended to have consolidated their power, so that landlords, lawyers, local judges, the college/university, and the local Chamber of Commerce worked together to secure their own interests at everyone else’s expense. This symbiotic (incestuous) relationship among the local power brokers often wreaked havoc on the entire community, either overtly, or with so much subtlety that the established adult population of those communities had no idea what was even going on, and they blamed phantoms like “liberals” or “conservatives” for their increasing woes, instead. In all fairness to these hard-working, decent people in those communities, how else could they explain why the world they knew was disintegrating around them, in the absence of a competent and responsible news media that aggressively exposes the fraud of higher education in general, and the student loan racketeering industry in particular? This is what I mean when I say that everyone in America has been victimized by the student loan racketeering industry. For it is ultimately the uncaused cause of our unprecedented decline in the quality (and upward mobility potential) of American education, which has dramatically impacted EVERY American.
The most obvious sign of trouble in these “college towns”, was increased homelessness among college students and graduates. In my research I was absolutely shocked by how well-educated America’s homeless population really is. The problem is SO serious, I was traumatized by it for many years. There are some truly hard-working and brilliant people living on the streets of America. It’s a shame that the only homeless people we actually see are the drunks, and drug addicts, and beggars. There are a lot of Ph.D’s living on American streets, and student loans are the primary (though not the only) cause. Homelessness is like a scarlet letter on even the most qualified graduates’ resume, because there is an inherent prejudice and fear against the homeless in American society (unlike many other societies, where the homeless are treated with dignity and charity). Indeed, there is a general contempt for the homeless in the United States that resembles racial hatred–and this hatred and fear has absolutely no relation to the reasons WHY a given person or family became homeless.
There are a host of reasons why homelessness will prevent even a gifted college graduate from ever getting their foot in the door of the career they’ve trained for years to enter. But that’s another story. The consequences for students who never become homeless, but instead are forced to struggle daily just to survive, are very similar. The main point is that it doesn’t take very long for graduates, dropouts, and throwaways who suddenly find themselves with no more money from student loans, to default on those student loans. Once they default, they owe the entire debt, plus a horrendous amount in mysterious “fees” that suddenly materialize out of nowhere, all payable immediately on demand. Yet no college graduate who financed school on qualified student loans can come up with $30,000, $60,000, $80,000 or $120,000 less than a year after they left school, especially if they couldn’t even find a good-paying job, and were forced to settle for sustenance wages just to avoid homelessness. Many students enter responsible adulthood owing $400-$1200 per month, for ten years, just to service their student loans. Yet many of these students have difficulty finding a job that pays even this amount per month in total, right out of college. The demand that defaulted debtors pay the entire amount immediately, upon demand, is fundamentally absurd. Indeed, it is downright idiotic, if not insane–unless you understand how the student loan industry profits more when it *encourages* a percentage of its debtors to default. This is the key that distinguishes the truly reasonable student loans that benefited our parents, from the self-serving, oppressive, criminal student loan racketeering industry that exists today.
What happened to the student loan industry since 1993 is essentially the establishment of the same racket that Enron executives were prosecuted, imprisoned, and reviled for. The main difference is that Enron executives were on their own, while student loan industry executives enjoy unrestricted protection from the government itself. Enron executives signed contracts for services that they had no capability or intention of delivering. Then they used clever accounting to add the total anticipated revenue for that contract to their books immediately, as if that revenue had already been collected in full. Wall Street saw that “revenue” in its financial statements, and Enron’s stock price soared, transforming its executives into some of the wealthiest men in America, virtually overnight, without those executives actually doing a blip of real work. This new status as a profitable stock and a “darling of Wall Street” granted Enron substantial leeway to carry on the ruse, and to keep their bubble inflated, indefinitely. Wall Street, which is inherently a socially irresponsible institution that is concerned only with self-interest, rather than public interest, turned a blind eye to the obvious, because it profited from doing so, and it would only suffer by raising an alarm. Only when Enron’s scam was exposed publicly did the bubble finally burst, and the entire racket collapsed. And only then did people realize who the real victims were, and just how devastating their loss had been. Many people were wiped out completely by Enron. Even many of the employees who helped to make Enron such a “success” were destroyed.
It is significant to note that many have claimed the human misery caused by the Enron scandal (or the Madoff scandal) can never be quantified. Yet we cannot even compare the tremendous suffering that these scandals caused to the misery, suffering, and loss of productive life that so many student loan debtors have been burdened with at the very beginning of their responsible adulthood, and which often torments them for the remainder of their natural lives on earth–the only life that they will ever live. I will say it again later, but the student loan racketeering industry constitutes a modern day human atrocity. It is one of the most devastating events that has ever happened to the United States. But just like those Enron executives and the Wall Street brokers who remained silent out of greed and fear, student loan executives and the corrupt government officials who serve them believe they can keep this bubble inflated, and therefore hidden from the public, forever. Sorry folks, but if you think forcing our grandchildren to borrow trillions of dollars to hand over to the same incompetent and corrupt bankers who caused the present financial crisis was a crime against humanity, you’re going to need a brand new language to adequately describe the situation that will exist when the student loan racketeering bubble finally bursts. And it WILL burst. The question is, when it bursts, will we reward the same student loan executives and corrupt government officials who caused this catastrophe, just because we remained ignorant of what was really going on as it happened? Or will we aggressively pursue, prosecute, and imprison those individuals TODAY, to minimize both the damage they’ve already done, and to serve as a warning to corporate criminals who might want to run a similar scam on future generations?
Led by Sallie Mae’s CEO Al Lord, the student loan industry essentially copied the Enron model, by making it as easy as possible for students to default on their loans. Once a student defaults, the entire amount becomes due at once, and that entire amount may be recorded as immediate revenue on the books, because it is ultimately guaranteed by the government. Worse, student loan companies are legally allowed to add arbitrary “collections fees”, and they cannot be compelled to explain where those fees came from. Attempts to get the Department of Education to compel a student loan company to itemize and legitimize these fees clearly reveals the incestuous relationship that exists between the student loan industry and the Department of Education (an already incompetent government agency that produces functionally illiterate college graduates). These unexplained, but perfectly legal fees can quickly cause a students’ debt to double, or triple, or worse. The effective interest rate that results from this debt multiplier is higher than any scam the credit card industry has ever run. The only other place where this degree of usery has been seen in modern times is in criminal enterprises, e.g., the mafia, which also relies almost entirely on “collections” to accomplish its goals. The modern student loan industry is a textbook example of racketeering, a classic manifestation of extortion. However, because this racket is founded on federally-guaranteed loans, the risk of investigation and criminal prosecution of student loan executives is unusually low. At least until Congress cleans up its own internal incompetence and corruption, and demands investigation/prosecution of the student loan racketeering industry. Or until the U.S. Attorney’s office ceases to serve as hired thugs for this racket, and investigates and prosecutes the responsible parties whom they currently serve, instead.
The fact that student loan companies can’t collect much of this debt is ultimately irrelevant, for several reasons: 1) most of these loans are “guaranteed” by the government (i.e., taxpayers, without their INFORMED knowledge) in the case of default anyway, 2) bankers can write off these bad loans for tax breaks–and then collect those loans anyway, to benefit twice from the same loan, 3) defaulted student loans are repackaged as profitable commodities (benefiting some lenders yet a third time), and 4) student loans are treated differently than any other consumer loan: the entire burden is placed on the borrower, with no risk or accountability whatsoever for the lender. Unlike any other consumer debtors in the United States, student loan borrowers are denied even the most basic consumer protection rights. Indeed, they are denied many basic HUMAN rights.
More important, by virtue of the borrower’s status as a student who presumably has no life experience, no responsible work history, no career or political “connections”, and nothing else to lean upon for support, the victims of this particular scam are literally powerless, by definition. If Rockefeller’s children received student loans, they’d have the power to make Congress listen when they tried to expose the student loan racketeering industry. But student loans are only given to “middle class”, poor, and impoverished students, whose families have no political power or influence, almost by definition. A small number of powerful people have established a federally-subsidized and federally-protected racket that exploits the inherent weaknesses of a huge class of young and naive citizens who live in poverty or near-poverty (which includes much of the so-called “middle class” today). Moreover, this system is not only protected and enforced by the federal government, it is in fact MANDATED by the federal government, because a defaulted federal student loan is regarded as the equivalent of cheating American taxpayers. The defaulted student loan debtor is perhaps the most powerless citizen in the United States. Even a ghetto dweller with no education–and therefore no educational debt–has more real power to seek justice when they are scammed by any other industry. This remains true even if that ghetto dweller is burdened by a mortgage, a car loan, and credit card debt, because those loans are accompanied by standard consumer protections that student loan debtors alone are not entitled to.
In terms of collections, student loan companies enjoy the perfect working environment. They may violate the Fair Debt Collections Practices Act with impunity, because their victims, by definition, are utterly powerless. The FDCPA ostensibly fines student loan companies that violate the act. On paper, debtors are legally allowed to seek small awards from student loan collectors, for each violation. However, in practice, the legal costs of pursuing these trivial awards against a multi-billion dollar industry make the effort prohibitive, and nearly impossible. In fact, the only law firm I’m aware of that specialized in litigating student loan company violations of the FDCPA, only did so for less than a year before abandoning that focus altogether. The reason they gave me is that “it’s impossible to win against the student loan companies, even when they break the law. The government that is supposed to regulate them, protects them from prosecution–or even bad publicity, instead” (paraphrased).
Given that student loan collections practices appear to be deliberately designed to terrorize and debilitate debtors so that they cannot make sober, rational, informed judgments to improve their situations, the purpose of student loan collections appears to be nothing more than an attempt to ensure that debtors default, and remain in default. If these tactics do not work, and the debtor is able to maintain their payment schedule and repay their loans in full, then the industry loses nothing. However, it enjoys tremendous additional gains when student loan debtors are NOT able to repay their loans on schedule, or in full, because of the arbitrary “fee” multipliers that student loan collectors cannot be legally compelled to explain, but debtors are legally obligated to “repay”, even though they never borrowed the money that these arbitrary fees represent.
In effect, when a student who has every desire to repay their student loans in full suffers from an unforeseen setback that delivers them into the non-criminal offense of loan default, they are punished with a doubling or tripling of the amount they owe, which cannot be called anything but usury. However, when a student loan company exhibits an ongoing, systematic and deliberate pattern of violating the Fair Debt Collections Practices Act and, literally, terrorizing debtors (some to the point of fleeing the country, or committing suicide), the worst punishment it can receive is a $1500 fine for each infraction that can be proven in a court of law by a victim who, by definition, is too poor to wage any kind of significant legal battle against a multi-billion dollar industry that wields unlimited control over the most relevant government officials.
This situation constitutes a bona fide atrocity, which impacts an incalculable number of American citizens every day of their lives, with no national news media demand that the government investigate the situation, let alone prosecute the perpetrators of this human atrocity on American soil in the 21st century.
Student loan collections are unreasonably vicious and insincere, and they utilize well-established techniques of human manipulation that are designed to terrorize, intimidate, and WEAKEN their targets. These collections practices do not seek to “help” students, but are entirely self-serving to the industry. From the student loan industry’s perspective, it matters not whether the debtor pays their debt in full the next day, or if they never pay a dime throughout their entire life. It is the act of aggressively ATTEMPTING to collect the debt that makes money for the industry. Every time they send a threatening letter to a homeless debtors’ post office box, and every time they put a struggling debtor’s job at risk by calling them at their place of employment, the collectors may add yet another arbitrary “collection fee” to the borrower’s debt. Every time they add another fee to a borrower’s debt, their “revenue” increases, since payment is ultimately guaranteed by the government, even though the debtor never gave their INFORMED consent for these additional charges. This increased “revenue” on its financial statements causes the company’s stock price to rise. For example, Sallie Mae’s stock has returned 1900% since 1995–a truly stupefying rate of return that is utterly inexplicable for nearly any legal industry, let alone any industry that ostensibly does nothing more than gently “help students” by servicing high-risk, low-interest loans. Only criminal enterprises typically enjoy such a return on investment.
The reason for Sallie Mae’s tremendous profitability becomes clear once you understand how the student loan racket works. Student loan companies have transformed their industry from a high-risk, low-return venture that benefits students, into a low-risk (guaranteed by the federal government), high-return (via arbitrary and unlimited fees) industry that benefits student loan companies, where the victims possess none of the standard consumer protections that apply to every other form of consumer debt. Among other injustices, student loans are not eligible for discharge in bankruptcy–even if the debtor becomes homeless or disabled, and student loan collectors may garnish up to 25% of a debtors’ earned wages and intercept federal tax refunds and other federal disbursements–while continuing to add arbitrary “collection fees” to the debt. In many cases, the borrower’s debt may actually continue to RISE indefinitely, even as they forget what a federal tax refund check looks like, and one-fourth of their earned wages is garnished by student loan collectors, week after week, month after month, year after year.
Wage garnishment violates the 13th Amendment of the U.S. Constitution, which prohibits “involuntary servitude for non-criminal offenses.” The failure to repay a consumer debt is not a criminal offense, and intercepting a worker’s wages directly from the employer without the employee’s informed consent constitutes involuntary servitude. There is simply other no way to characterize the situation when an employee works at a job, and has his or her wages sent directly to a third party without even passing through that employee’s hands first, except to call this “involuntary servitude”. In essence, this is human slavery–the unconscionable atrocity and stain on humanity’s legacy as a species, which the 13th Amendment sought to eliminate in the United States.
There is obviously much more to this story, but I hope you can now recognize that this is NOT an industry that merely “helps students”, by providing low-interest loans with favorable terms and friendly assistance, so that poor students may gain an education and make a greater contribution to American society throughout their productive lives. Indeed, the student loan racketeering industry has delivered many talented students into poverty, misery, depression, and suicide, while others have fled the country to escape the persecution of this single tyrant. Those expatriates have fled the same country which, a quarter of a millenia ago, invited persecuted debtors from other nations to enjoy its protection from debtors prison. One of the main reasons why the United States became such a great nation, and so quickly, is because it granted those who do not commit criminal offenses a second chance in life. That is why the U.S. Constitution, which is only four pages long, specifically requires Congress to establish a “uniform bankruptcy code” to provide citizens not with an escape from legitimate debts, but government protection from creditor harassment. The American experiment has proved beyond any doubt that, given a truly fair second chance, where lessons learned from the original mistake serve as a benefit rather than a curse, free people can accomplish extraordinary things.
For many highly talented, motivated, and skilled student loan debtors, however, this opportunity to accomplish extraordinary things has been obliterated by the student loan racketeering industry, for the benefit of a wealthy few student loan executives, and a handful of corrupt legislators and Department of Education administrators. The student loan racketeering industry is not about lending, borrowing and repaying money. It is about corruption, tyranny, exploitation, and human slavery. It is a ruthless and devastating manifestation of the most inhuman and inhumane qualities that the American Founders sought to exile from the American continent with the U.S. Constitution, the Bill of Rights, and the establishment of a society that was founded on individual freedom, while specifically prohibiting government/corporate dominance over citizens’ lives.
I urge you to inform as many people as possible about the reality of student loan racketeering. Not only for the sake of terrorized debtors, most of whom deserve something so much better, but for everyone’s sake. For the nation’s sake. By their very nature, “perfect crimes” never receive meaningful publicity in the national news media (or compel action from Congress) until they have been exposed and become a matter of public record. Watergate proved this. The Savings & Loan Scandal proved this. Enron proved this.
We need the President of the United States to appoint a truly independent counsel to investigate the student loan racketeering industry, certain members of Congress, certain individuals at the U.S. Department of Education, and possibly even the U.S. Attorneys Office itself. For the U.S. Attorneys Office is being utilized as statutory muscle by the Department of Education, to transform the American justice system into a powerful weapon that destroy’s the lives of people who have been victimized by the Department of Education own crimes. Corruption and criminal activity among student loan executives, legislators, and DOE employees is troubling enough. But to have American citizens’ main line of defense in the U.S. Attorneys Office betray the American People in this manner, is nothing short of a national security issue. There is nothing extraordinary about this claim. It is standard practice to regard it as a national security issue whenever those who are charged and sworn to protect the people, harm those same people, instead. If that were not true, then the term “security” has no meaning, and the American Founders were senseless when they warned us about all enemies, “both foreign and domestic.”
The student loan racketeering industry needs to be investigated, and its leaders prosecuted immediately, before the devastation and loss of so many skilled and motivated young people begins to reveal its true impact on America’s ability to compete effectively in a globalized economy. As it stands today, even brutally repressive nations like communist China do everything possible to make their educated class as productive as possible, while the “progressive” United States renders much of its educated class impotent and financially enslaved, to the entire nation’s detriment.
Except of course for that handful of student loan racketeers who would deliver their own nation to its final decline, in exchange for a very, very large bag of gold coins.
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