The Fraud At The Heart Of Student Lending Exposed - The One Sentence Everyone Should Read

[Roland99]

The Fraud At The Heart Of Student Lending Exposed - The One Sentence Everyone Should Read
http://www.zerohedge.com/news/fraud-heart-student-lending-exposed-one-sentence-everyone-should-read

A key reason why a preponderance of the population is fascinated with the student loan market is that as USA Today reported in a landmark piece last year, it is now bigger than ever the credit card market. And as the monthly consumer debt update from the Fed reminds us, the primary source of funding is none other than the US government. To many, this market has become the biggest credit bubble in America. Why do we make a big deal out of this? Because as Bloomberg reported last night, we now have prima facie evidence that the student loan market is not only an epic bubble, but it is also the next subprime! To wit: "Vince Sampson, president, Education Finance Council, said during a panel at the IMN ABS East Conference in Miami Monday that lenders are no longer pushing loans to people who can’t afford them." Re-read the last sentence as many times as necessary for it to sink in. Yes: just like before lenders were "pushing loans to people who can't afford them" which became the reason for the subprime bubble which has since spread to prime, but was missing the actual confirmation from authorities of just this action, this time around we have actual confirmation that student loans are being actually peddled to people who can not afford them. And with the government a primary source of lending, we will be lucky if tears is all this ends in.

More bullets from Bloomberg:

[Fuddnik]

1. Two words that should never appear in the same sentence.

"Student" and "Loan".

One of these days we'll join the rest of the civilized world and have free, or close to free education, all the way to the doctoral level.

[Pacifist Patriot]

4. Absolutely!

[Pacifist Patriot]

5. self-delete (dup)

[chalky]

8. +1. Education should be seen as an investment in our collective future,

and not as status symbol that can only be attained with mountains of money.

[Roland99]

13. But all that learnin' just makes a bit of know-it-all liberals, don'tcha know?!

[hfojvt]

11. it will never be free - ever

I wnet to a State University in 1980 for five years. It cost about $10,000 for tuition for the five years, and it cost $15,000 for room and board.

Even if tuition was "free" (or rather paid for by taxpayers) - room and board are still gonna cost money, generally more money than tuition.

[Selatius]

12. Nothing is ever free, but if we spent money on higher education like we do on war, then...

this wouldn't be an issue at all. Our spending priorities have been warped by corporate interests.

[closeupready]

2. For starters, they need to make student loans dischargeable in bankruptcy.

That way, borrowers don't get off "scot-free", but can get out from under massive debt that keeps the economy from taking off.

[Lance_Boyle]

17. how do those borrowers *not* 'get off scot free?'

You can't return the education you financed. Why should someone who borrowed for tuition get to keep the education when someone who borrows for manufacturing equipment doesn't get to keep that equipment in bankruptcy?

[Pacifist Patriot]

3. No longer? Yep, that does indeed tell us there was a point in time when it was done.

[TheGunslinger]

6. Anyone believe they'll really stop pushing loans on people who can't afford them?

[Roland99]

7. not me.

[Lydia Leftcoast]

9. We oldtimers remember the National Defense Student Loans,

administered by the federal government.

The interest was 2%.

If you enlisted in the military, joined the Peace Corps or VISTA, taught K-12 school, or (I think there were other qualifying jobs, but I can't remember what they were), 10% of the principle of your loan was forgiven, up to a maximum of five years. If you taught in a federally designated poverty area, 20& of your loan was forgiven each year, which means that your loans would be totally forgiven if you taught school in Appalachia or an inner city or, as some of my classmates did, in some rural areas of Minnesota.

These loans were killed off either in Nixon's second term or Ford's term.

[hedgehog]

10. There was also some kind of subsidy for those taking nurse's training.

Not to mention that you could work a summer job and pay your way through a decent state university. My husband and i both lived at home and commuted for 4 years and graduated with no debt at all!

[Lydia Leftcoast]

15. When I started at the University of Minnesota (I later transferred to a private college)

basic annual tuition, not including books, lab fees, and living expenses, for a full-time student was $375, or 300 times the minimum wage. A student could easily earn that during the summer, figuring that full time for 3 months would be 640 hours.

In comparison, annual tuition at the University of Minnesota is now about $11,600, or 1450 hours at an $8/hour job. A full-time summer job wouldn't even cover half of that, and that's just basic tuition. Books and lab fees are now much more expensive than they were forty years ago.

[nc4bo]

14. Huffington Post did an interesting article on the Goldman Sachs education loan scheme...

Disgusting and predatory and typical.

hhttp://www.huffingtonpost.com/2011/10/14/goldman-sachs-for-profit-college_n_997409.html

Education Management Corp. was already a swiftly growing player in the lucrative world of for-profit higher education, with annual revenues topping $1 billion, but it had its sights set on industry domination. So, five years ago, the Pittsburgh company's executives agreed to sell its portfolio of more than 70 colleges to a trio of investment partnerships for $3.4 billion, securing the needed capital for an aggressive national expansion.

One of the new partners brought an outsized reputation for market savvy, deep pockets and a relentless pursuit of profits -- the Wall Street goliath, Goldman Sachs.

After the deal closed and Goldman became a partner, employees soon noticed a drastic shift in culture. Longtime admissions managers were replaced, ushering in an era in which recruiters were endlessly hounded by supervisors about hitting weekly enrollment targets. The admissions staff nearly tripled, requiring expanded floor space to accommodate a sales force of more than 2,600 across the country

[Aerows]

16. The best part of all of this

Is you can't even use bankruptcy to wipe out Student loans. They follow you forever until you pay them off. If you can't get a job when you get out of college, you can pretty much forget about having enough credit to buy a pack of bubble gum.