Student Loan Reform In Danger

The New York Times reports today that aggressive lobbying by top student lenders like Sallie Mae may derail Obama’s plans for reforming the student loan industry. 

Obama’s plan is to cut out federal subsidies to private lenders and loan the money directly to students instead, a plan that a Congressional Budget Office analysis says could save approximately $80 billion dollars over the next ten years.  That money would then go to “expanding direct Pell Grants to students, establishing $10,000 tax credits for families with loans, and forgiving debts eventually for students who go into public service, administration officials say.”

Unsurprisingly, the student loan industry is, like virtually every other industry/political group/person who is anti-Obama, mounting the now-familiar “Bolshevik Plot” defense:

The Irony of Trying to Discharge Your Student Loans

Wow.  Just read this post over at The Jobless Juris Doctor about a woman who was denied her petition to discharge her student loans because she had recently been offered a position at a bank making $80,000 per year.  The irony?  The job offer had later been revoked due to her poor financial situation…which was the result of her student loans.  The court did not find this relevant.  Amazing.

Mama, Don’t Let Your Babies Grow Up To Be…Lawyers?

Myself a law grad with crippling student loan debt, I was particularly excited to discover the new-ish blog, Big Debt, Small Law.  The blog is written by a graduate of Seton Hall University School of Law who is, to put it mildly, extremely angry about the career/salary prospects for law school graduates from non-top-ranked schools in comparison to tuition costs.  From the About page:

Today’s law school deans are the modern day “Wizards of Oz.” They know full well (perhaps better than anyone) the gruesome market and long-shot odds that their grads will soon face, yet allow personal greed to trump all tenets of honesty and fair disclosure. And no, you can’t get away with blaming the “recession” for the struggles of your grads. Not here. We graduated in 2005, at the zenith of American economic hegemony, and faced a market not significantly different from what exists today. The truth is this: Small firms in most US markets pay south of 50 K, offer minimal (if any) health benefits, and provide baptism by fire “training” at the expense of clients who can ill afford it.

I’m Back!

A little over a year ago, I stopped posting to this blog due to personal issues and a career change that required a significant time commitment.  Recently, I decided to check on the blog and discovered that even with no new posts, I continue to receive a significant number of hits.  Clearly, student loans and their accompanying problems remain a significant issues, and now that my schedule is more regular, I’ve decided that it’s time to get this back up and running.  So, thank you to my readers, and I’m happy to announce that I’m back, and you can expect regular posts from here on out!

Student Sells Sex – To Professor – To Pay for Tuition

A University of Michigan law student who needed extra money for tuition and couldn’t get a loan because of the credit crunch has been charged with soliciting sex for money on Craigslist.  From the Ann Arbor News:

The student told police she was advertising sex acts online via Craigslist to help pay tuition costs. For an in-state student, U-M Law School tuition is $41,500 a year; out-of-state students pay $44,500.

But the creepiest thing about this story is that the prostitution came to light after she accused one of her clients, Yaron Eliav - who just happens to be an associate professor in Michigan’s Department of Near Eastern Studies – with assault.  Since this blog is focused solely on student loan issues, I won’t go into the salacious details here, but if so inclined, you can read them for yourselves at the links above.

Some New Jersey Borrowers Now Forced to Make Loan Payments While in School

I think this is the most depressing story I’ve yet seen since the economic crisis really started hitting the news a few months ago.  NJ.com reports that NJ Class Loans, a state-sponsored lending agency, will now require new borrowers to make student loan payments while they are still attending classes:

The state agency overseeing more than $1 billion in college financial aid will no longer allow students to defer payments until after graduation — a move that could affect thousands of students at a time when it is getting increasingly difficult to secure loans elsewhere.

I have heard of private loan companies doing this, but I’ve never yet seen this done in a loan program sponsored by the government, and I think it’s appalling.  I worked between 10 and 30 hours a week nearly every semester I was in college plus sometimes as many as 50 hours a week during the summers, and I never would have been able to make it if I’d had to make loan payments while in school.  My work money paid for rent, and books, and food.  I don’t know what kind of money college students are making in the minds of these policy-makers, but when I was in school you were considered very lucky if you found something a dollar or two above the minimum wage.  I think a lot of people are going to wind up dropping out of college if this becomes a trend.  Very sad.

Arne Duncan is Obama’s Choice for Secretary of Education

The Associated Press is reporting that Obama will name CEO of the Chicago Public Schools Arne Duncan as his choice for Secretary of Education on Tuesday morning:

Duncan has run the country’s third-biggest school district for the past seven years. He has focused on improving struggling schools, closing those that fail. Obama highlighted this work by choosing for the announcement a turnaround story for Duncan — Dodge Renaissance Academy, a school Duncan closed and then reopened.

Duncan is a 1987 graduate of Harvard, magna cum laude, who played professional basketball in Australia for four years before returning to the United States to direct the Ariel Education Initiative, which focused on increasing educational opportunities for inner-city youth.  Apparently, Duncan is popular with both the pro-No Child Left Behind  faction and the teachers’ unions. 

Well, I’m a little disappointed.  I was hoping, in spite of indications to the contrary, that Obama would appoint someone whose major focus was reforming higher education.  I did find this quote from Duncan on the Huffington Post, in which he mentions student loans:

“Oh, there are lots of challenges and, obviously, huge opportunities,” Duncan said. “I think there’s a huge amount of work that has to go on on the early childhood side. There’s a huge amount you’ve got to do in the K to 12 sector. And higher ed, particularly the student loans, presents some huge, huge challenges.”

Not exactly a call to arms, and he could easily be talking about access to loans during the credit crunch rather than more radical reforms decreasing the necessity of huge debt loads for college students, but I will hold out hope until I’m proven wrong.  More as this one develops.

A Lifetime of Debt

Writer Magdalene Perez has a great op-ed piece in The Stamford Advocate describing her student loan debt – about $57,000 that she expects to be paying on until she is 50 years old.  Things ain’t how they used to be, she claims.  Talking about her grandparents:

Having a simple business degree instantly changed their lives. Joe got a job at a tire company in Minnesota, and with just one income he supported his family, which quickly grew to include four kids. In less than six years, the family had enough money to buy a house, which they quickly traded for a larger one.

Magdalene sees a bleaker picture for her own generation:

Is College Still Cost-Effective?

News-record.com has a great human interest story on how young, college-educated adults are fairing in the current recession.  As you may have guessed, the answer is, not great.  The article talks about people graduating college and not being able to find a job, getting laid-off, and putting off purchasing homes and cars because of the economy.  And one story in particular touches on the problem of student loans: 

Joining the Army – a Good Alternative to College?

This article out of HattiesburgAmerican.com, a Mississippi newspaper, tells the story of Ebonee Ervin, an 18-year old who has decided to drop out of the University of Southern Mississippi because she can no longer afford the tuition; she’s joining the army instead.

The article also talks about a general upswing in the number of students who are leaving school early amid financial woes: