Poisoned Ivy: The Student Loan Crisis
The nation’s student loan scandal is one of the most under-reported stories of our generation. The academic establishment has let its costs spiral out of control, while enticing students from modest backgrounds to take on huge debt loads in the hope of better earnings potential later. But once the new grads doff their caps and gowns, they enter a poor job market, made far worse by the leftist economic policies of Barack Obama, the academy’s dearly beloved.
Alas, while the professoriate believes that guilt is a fitting emotion to saddle on America’s struggling middle class, it doesn’t like to do guilt itself. So it is unleashing the debt collectors. Colleges are suing their former students for defaulted loans, (Bloomberg) and the names of the litigants include some of America’s most prestigious universities:
Yale, Penn and George Washington University have all sued former students over nonpayment, court records show. While no one tracks the number of lawsuits, students defaulted on $964 million in Perkins loans in the year ended June 2011, 20 percent more than five years earlier, government data show. Unlike most student loans — distributed and collected by the federal government — Perkins loans are administered by colleges, which use repayment money to lend to other poor students.
While the Perkins loans have a low interest rate at 5%, collection fees can be onerous, ranging from 30 to 40 percent of loan principal, with additional margins tacked on if default cases go to court. For households earning less than $50,000 per year, which is the target demographic of the Perkins program, that is a daunting burden for students and their parents, especially when the promised financial returns of a degree never materialize:
Aaron Graff, a farmer’s son from Denver, graduated from George Washington in 2010 with the help of $62,500 in scholarships over two years, according to his financial-aid award letters. He defaulted on $4,000 in Perkins loans. Graff, 30, said he hasn’t been able to find a full-time job. He earns $800 a month from teaching high-school equivalency courses and restores basements for extra money. He said he is trying to pay off other student loans first because they were co-signed by his parents.
The Perkins debacle is the tip of the iceberg. America’s student loan problem is poisoning higher education. The academy overprices the product, overpromises its returns and underdelivers results, while relying on federal largesse to keep the game going. It is not serving America’s young people well. Shameful. And shame on Barack Obama for the awful economy that makes life so painful for them.