In my opinion I believe that the business of giving and collecting student loans is one of the biggest scams in American business. Institutions lend you massive amounts of money so that you can pay the university or college that you decide to attend a ridiculous tuition fee. Whether you finish your schooling or not you have to pay back that money; Even if you find yourself in a low income job after the fact. The lender usually makes you an offer that you can’t afford, and they are able to bully you because the law is on their side. “Can’t afford to pay huh?” They say. “Well, we will just take it and there is nothing that you can do about it. We will also do it at this ridiculous interest rate to make sure that you are paying us WAY too much and for the rest of your life unless you happen to hit the power ball.” That is actually what they should say, and the truth is that the whole process is a money making scheme backed by the law.
If you are like me then you attended a highly recommended business school. My particular university promised a 98% job placement upon my graduation. This never happened of course, and it isn’t like I’m just in the unlucky 2% that the school unfortunately was unable to place in a career. ALL of my friends that attended the same university and achieved graduation were also not placed in jobs and were forced to go out themselves and find a source of income. It wouldn’t be so bad if their degrees weren’t rendered useless. I say that the degrees are useless because not a single one of them found a job that involved their degree and they are currently working in positions that they could have gotten right out of high school. So there is their degree; hanging on a wall; sitting on a dresser. A forty to sixty thousand dollar piece of paper that is completely useless, and now they have to find a way to repay that money. It will prove to be quite a challenge when their income from the job they found themselves doesn’t even pay thirty thousand dollars a year. Does the lender care? No. They don’t really care how you pay it back or if you have a low income job. The fact is they are counting on it. Then they can get you on a ridiculous repayment plan that will give them a steady source of income for the next twenty or thirty years. It’s not their problem if you can afford to repay the loan of not. All they know is that they can take whatever they want to get the money back, and there isn’t a damn thing you can do about it. Depending on your tax return to catch up on your rent? Too bad they’re taking it. Need that money to get your car fixed so you don’t lose your job due to no transportation? Too bad they’re taking it. If you are like me then this happens and often you sit around wondering why you wasted the time going to school. All you did was amass a gigantic bill that is going to follow you the rest of your life. It ruins your credit; your chance at ever owning your own home, and owning a new car ever again. It can even ruin your chances at landing a good job since employers now check your credit report as a means of determining if they hire you or not. Pretty soon you start to realize that going to college has completely ruined your life and that it has become the bane of your existence. A change needs to be made with this situation. There is a large part of the American population that is in the same boat as I am, and it is effecting everything.
Student loans work in a fairly simple manner. You pick the lender who is willing to pay the most money for your schooling. You agree to a certain interest rate and whatever other options there might be and you go to class for a certain number of semesters until you graduate. Six months after you graduate you must begin to repay the student loan. If you still can’t afford to start making payments, then you can defer the loan for a period of time. The only thing is that the interest keeps piling on and there is only a few times that you are allowed to defer the loan until it is commanded that it be repaid. If you can’t pay the loan at that point then it goes into default status. This is where you get screwed, and where the crooked business aspect of the student loan really shows it’s ugly face.
A collection agency purchases your student loan from the company that lent you the money. The original lender decides that they aren’t going to get the money from you and they sell your loan to a collection agency and are then done with it. Makes sense right? It takes the problem out of the lenders hands and they get their money back and it’s now someone else’s problem right? Wrong. The collection agency buys your loan from the lender for a fraction of how much you actually owe. So the lender takes a loss on the loan. It is bad for the lender but at least they get some money back instead of nothing at all. The collection agency buys your loan for somewhere around forty to fifty cents on the dollar, so if you owe a $40,000 student loan then the collection agency bought that loan for half of what you owe or most likely less. Even though they bought the loan for substantially less, they still aim to collect the original balance but this isn’t the end of it. The collection agency adds a “default status fee” for whatever reason and add fifteen percent to your original balance. Another words, your $40,000 debt is now $46,000. Poof, they just made six thousands dollars just because your loan is now in their hands. It doesn’t end there of course because there is the interest rates which are immediately applied right after and continue to apply monthly making the balance rise and rise. In the very first month that your default student loan landed in the hands of the collection department its balance rises $10,000 or more dollars then it was before going default. If you thought you had a mountain to climb with the $40,000 then you can’t wait to get that letter from the collection agency stating that the loan has now gone up ten grand over night.
The collection agency can now harass you. They can take your possessions and they can garnish your wages. They can also take your tax return and ruin your credit report. They can do this and there isn’t a thing you can do about it. It’s all a guaranteed money making scheme and the sad thing is that the government backs and gives them the power. Collections bought your $40,000 loan for $20,000 and you are going to pay back at least $50,000 and thats if you have the entire balance right now. They make $30,000 off of your loan if you pay it in the first month. Unfortunately in most cases they make much, much more. Since they are able to strong arm you into paying they offer you repayment options. Sound good right? Like they are willing to work with you on something that you can afford. Nope. They are going to ask for a monthly payment that you can’t afford to make and it does really matter if you can afford it or not because that isn’t there problem. I actually don’t know why they even bother talking about anything. They will just take what they want and you have no say so why even talk to you about paying back the money. The whole situation isn’t even a negotiation because you have no negotiation power at all. They spit out a payment plan, and if you don’t accept it they’ll just take it. You are really between a rock and a hard place and you can’t even call a lawyer because it is all deemed legal by the federal government. Eventually most people agree to the ridiculous repayment offer and struggle for the rest of their lives trying to pay the loan off. Usually the payment plan becomes something around $300 a month for 30 years, which ends up a grand total of over $100,000 in the end. So this student loan collection agency makes more than double what you actually owed originally. There you sit if you are like me. No job placement from your school and a collection agency ruining your life. All for a loan for a degree that can be used as out house wall paper a best, and this collection agency getting rich off of hundreds of thousands of students just like you and I per year.
If I hit the lottery I would certainly start my own student loan collection agency. It’s a sure way to make money. I could buy loans from lenders for half of what they are owed, but then I collect the original balance plus whatever fees I want to make up plus interest. I can’t lose especially if the government has my back. The government is saying that what I am doing is legal and I can even take it from you whether you disagree or not. I can then call you up and say: “Give me the money or I’ll ruin your life.” I wouldn’t even have to be nice and try to work something out because I know that you’re screwed and I hold all the cards. In fact its just an illusion for you that I call up anyway because it’s just to make you feel like you actually have a say in the matter. Meanwhile, right as I am talking to you, I am taking your tax return and arranging for your paycheck to be garnished. You’re screwed and your school couldn’t even deliver in their promise to find you a job with a descent salary so you could utilize the newly earned degree. They don’t care. The school got paid, the loan company got paid, and now the collection agency gets to have it’s electric bill payed with your money for the next 30 years.
There is only once solution for this problem and that is for the laws to change. There should be some degree of responsibility placed on the colleges and universities of this country to make sure that you didn’t attend their school for nothing. There should also be limits placed on the collection agencies involved and what they can take from you. There should guidelines outlining how and when they can do this based on your level of income and job availability in your field. Some power should be given back to the person that was lent the money so that they can be relieved when the situation calls for it. I understand why these laws were created years ago, and it was because doctors and lawyers making $200,000 a year didn’t feel like paying their student loans back. This is what the laws should focus on and not equally distributed to include everyone that goes to school. Some people went to school for nothing and this problem must be addressed. The economy of this country is suffering because 25% of the population went to school for degrees in fields they can’t find work in, and they are in debt before their life even begins to student loans and collection agencies. The schools do not have to work hard to make sure you get a job with the training they provided. They got paid for every second you were at that school and when you’re finished someone new comes along and the process starts all over again. We need to get together as people that are tired of putting up with this scam and want legislation changed to help us and the young people of the future from being screwed. What it boils down to is big business making money off of the less fortunate American. It mires everyone involved into a lower class income and we can’t afford anything which leads to an unstimulated economy. Meanwhile we get to read in the newspaper about head officials like the ones at AES PHEAA going on cruises and exotic locations on OUR inflated student loan collections. The whole business is one big scam and it is backed by the law and someone needs to recognize and address this issue.