The Biden Administration opened a can of worms when it suspended federal student loan payments during COVID. Now three years later, with the federal student loan payments resuming again after the pause for COVID, media and the left are already whining about the hardship so many college graduates face if they are forced to pay back the loans.
Rather than working while in college, many student loan holders lived on the loans – and lived well. Rather than attending a college they could reasonably afford, they (and their parents) wanted the Harvard, Yale, Princeton, Dartmouth, USC, Stanford… (fill in the blank) experience. They felt they deserved it. They were entitled to it because high school counselors told them so.
The mainstream media agrees, because everyone deserves a Stanford/Harvard/USC education, no matter the cost, suitability, aptitude, or competency.
NBC ran with this headline Sunday:
Student loan payments restart today, forcing borrowers to take on more debt and put off saving for retirement.
Student loan payments restart today, forcing borrowers to take on more debt and put off saving for retirement. https://t.co/phJ9EfVAAi
— NBC News (@NBCNews) October 1, 2023
Having to pay back loans you knowingly accepted is now considered “forcing borrowers to take on more debt and put off saving for retirement.” Oh the hardship.
ABC ran a story over the weekend about a 33-year old man who has $200,000 in college loan debt for a Masters Degree in Social Work. Since the loan repayments were suspended during COVID, he married, bought a home, and had a baby… but will now have to resume the college loan payments, and isn’t happy about paying them back.
How did we get to this outrageous sense of entitlement? There are many couples like our family who did not succumb. Our four sons never had student loans because we planned ahead, saved and payed the tuition/books/housing out of cash flow, and then required them to live within their means and to work part time: 2 went to community college and on to state university. One went to PGA school, and one had a 4-year military academy scholarship.
But all too frequently, middle and working class parents have been enticed to provide a Harvard-like college experience for their children. They were told that their kids deserved it – every kid deserves it – and are entitled to it. Commensurately, the elite universities were accepting untold numbers of affirmative action applicants, and waving student loan documents in their faces, telling them that it was the only way to pay for 4 years at Dartmouth, Princeton or Stanford.
Even California’s public University of California and California State University systems are financially out of reach for many families – even though they are public state colleges universities. It’s all part of the student loan-university scheme – raise college tuition, then make students loans more available and necessary.
Now the media claims that it is a “privilege” to be able to pay the loans back. Only doctors, lawyers, elite engineers and high finance graduates making 6-figure salaries right our of college are “privileged” enough to pay the loans back.
For those who either didn’t go to college, went to Community College and/or attended the local state college and paid for it while working two jobs, this isn’t resonating.
The student loan scheme ballooned during the Obama Administration when Congress and then-President Barack Obama did a takeover of the private student loan market by eliminating private banks from student loan lending in favor of the federal government lending directly to students.
The federal government took over nearly all student loans, forced students to make years of payments only to fall further behind, then handed the enlarged debt to the U.S. taxpayer, Ben Johnson reported last year at the Washington Standard:
The federal government largely nationalized the student loan industry in 2010 via a piece of legislation related to Obamacare, the “Health Care and Education Reconciliation Act of 2010.” The U.S. government now holds 92% of all student loans — and the nation’s total student debt has more than doubled, from $811 billion in April 2010 to $1.748 trillion in April 2022.
Part of the reason the figures have surged — and students start life so indebted — is due to Democratic (and occasionally, Republican) policies that made it impossible for most people to ever pay off their student loans structured. In their haste to have the U.S. taxpayer underwrite the maximum amount of college tuition, they transformed most student loans from a fixed-rate loan — like a mortgage or car loan — to a plan based on the student’s post-graduation income. Gradually, the borrower’s share of his college loans shrank, while the taxpayer’s increased.
In California, ahead of the Obama era federal takeover of student loans, EdFund was created in 1997 by the California Student Aid Commission as a 501(c)(3) non-profit, public benefit corporation,” to administer all activities associated with its participation in the federal student loan program.”
Today, EdFund provides all operational and administrative services related to the Commission’s participation in the federal student loan program, and is a growing national provider of student financial aid services.
EdFund ran into trouble for its collection policies and punitive practices, as well as for excessive salaries paid to executive officers.
A 2007 San Francisco Chronicle article covered how in certain circumstances, EdFund’s practices took an original loan of $37,000 and could drive the repayment cost well over $100,000:
“It’s a very oppressive system,” said Elena Ackel, a senior attorney at Legal Aid Foundation of Los Angeles. “The system is incomprehensible. People get frustrated when they’ve paid the principal (on their loans) and they still owe more than the original amount.”
Ackel and other critics say the crux of the problem is that nonprofit guarantors like EdFund are making tens of millions of dollars annually on the backs of struggling defaulted borrowers.
In 2006, a EdSource article reported that the California state auditor found that the EdFund organization made questionable spending decisions and exercised lax oversight. The auditor found that EdFund spent excessively on entertainment, travel, and executive bonuses, at a time when the loan program faced an $8.3 million operating deficit. The California Student Aid Commission was cited for lax oversight of EdFund.
Gov. Arnold Schwarzenegger tried to sell EdFund for $1 billion, and to erase the state budget deficit, but the U.S. Department of Education blocked his plan.
Today, EdFund, headquartered in Rancho Cordova, California, “processes more than $9.3 billion in student loans in the United States annually (including Consolidation loans) and manages a portfolio of outstanding loans valued at $29 billion.”
Student loans are an industry bolstered by the federal government. They created this mess and are now agitating to erase loans, forcing taxpayers, and those who already paid off their loans, never had student loans, or never went to college to pay them off.
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