Student loans

Guess who’s blocking student debt cancellation? Round up the usual suspects

Millions of Americans can apply to recover between $10,000 and $20,000 in unpaid student loans now that the federal government has opened up its student debt relief website .

The announcement is a welcome relief for U.S. households with student loans, which on average hold close to $59,000 in promissory notes. black and latin Americans are the most affected. They have more student debt than whites and more difficulty paying it off, to research shows.

But the news comes with asterisks:

*Only the poorest borrowers can receive up to $20,000.

* Anyone earning more than $125,000 per year ($250,000 per married couple) is excluded.

* Hundreds of thousands of Americans with private loans outside the Department of Education’s jurisdiction are ineligible.

* Nobody gets anything if Republicans get what they want.

Six Republican-led states are suing to block payments indefinitely or block them altogether. Although they lost In the first round on Thursday, their appeal was immediately upheld when the judge ordered the government to stop processing applications.

No surprise there.

Free-market lawmakers on both sides have for decades followed a familiar playbook to burden Americans with student debt. Cut student tuition subsidies. Give fewer grants. Encourage borrowing. Pass laws prohibiting bankruptcy.

When lawmakers made it easier for families to fund degrees with money borrowed from private lenders, colleges raised tuition and created fee-based financial aid, stuffing “award packages” with loans that ‘they sold to unsuspecting teenagers and their families.

As one nearly 50-year-old student debt holder put it, “What’s the payoff? That you have earned debt and financial bondage for the rest of your life? »

The lenders paid the colleges. The government paid the lenders. The losers are the Americans who have borrowed too much to pay exaggerated tuition fees. Tuition fees at private colleges have increased 800% since 1980 and 230% at public universities since 1988. Almost 33 percent of enrolled students leave university without a degree. Americans hold $1.6 trillion in student debt. Why?

To answer this question, one must travel back in time to the 1980s, deregulation, the decade-long “loan wars” of the 1990s, and the corruption scandals in the area of ​​financial aid from 2000s.

With billions of dollars at stake, the lending industry has come up with “one ploy after another to gut taxpayer-friendly government loan programs,” said US News & World Report in a 2003 expose, Big Money on Campus. . “Like political neighborhood leaders, private lenders used money and favors and their friends in Congress and the Department of Education to get what they wanted. They wanted those checks made out to their name.

Colleges charged what the market would bear, doubling and tripling tuition. For every dollar borrowed by students and their families, schools raised tuition by 60 cents, a Federal Reserve Bank of New York study found.

Student debt has kept “enrollment and tuition down,” US News reported.

In exchange for millions of dollars in bribes and lured by the promise of a quick payday, colleges referred students to preferred private lenders. As lenders flooded the market with cheap money, schools received millions in kickbacks. Corruption was endemic among private lenders, financial aid officers at many colleges, and senior White House officials under George W. Bush.

The heads of publicly traded lenders Sallie Mae and Citibank were gouging billions from families and the government while Bush administration officials turned a blind eye. Private student loans have grown from less than $2 billion to $25.5 billion in a decade. A government analyst stumbled upon the worst financial aid fraud in modern history in the early 2000s.

“I had seen fraud,” he says. “But it was the most daring. I had never seen anything like it before. The United States’ secret fee-based financial aid system is “a national disgrace”, Jon Oberg told a Senate hearing. “If students and families knew how their aid programs were put together, they would march on Washington. The reason they don’t work is that the information is not available.

In 2007, New York State uncovered what the attorney general called “an unholy alliance” between financial aid officers and private lenders. Fraud, misconduct and widespread conflicts of interest between colleges and the $85 billion lending industry had infected the entire system.

Bribing colleges to put their companies on favorite lists, lenders guaranteed them hundreds of millions of dollars in loans. Some colleges even required students to use the loan companies that watered payola financial aid officers.

Lenders have paid financial aid officers to market directly to students at elite colleges including Columbia University, University of Southern California, University of Texas at Austin, Johns Hopkins, University of Pennsylvania and New York University.

Congress and dozens of states passed reforms, requiring colleges to adopt strict codes of conduct. But after the economy collapsed in 2008, news of the reforms barely registered. In 2010, Congress forced commercial banks out of the federal student loan market and restricted federally subsidized student loans.

Last week, 22 million Americans applied for loan forgiveness, President Joe Biden says announcement Friday.

Hours later, acting at the request of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina, an appeals court ordered the government to stop processing the claims. Biden blamed “MAGA Republicans” for “doing everything they can to deny this relief, even to their own constituents,” and vowed not to let them “get away with it.”