If corporations are people, then we need to ask what kind of people they are and whether we, as a society, want to continue to incentivize their more nefarious aspects.
So what kind of people are private student loan lenders? Deeply disturbed people. Psychopaths. Mobsters who want to corner the market so that you have no choice but to borrow money from them and then come after you with a metaphorical baseball bat when you can’t pay your debt.
These lenders lack empathy and have no conscience. They delight in your failure because when you default on your student loans, they can add late fees and compound your interest and ensure that by the time you can pay, you will owe thousands – sometimes tens of thousands – of dollars more than you originally borrowed. (Note – this goes for government loans too).
And those in the government who continue to support them? Those are the corrupt policemen who take kickbacks in exchange for their support.
See, the problem with calling corporations people is that they can’t be punished like people. No one is going to put Sallie Mae or Citibank in jail. No one is going to give them a psychological evaluation and deem them unfit for human society. No one is going to pump them full of psychiatric drugs so that they can function at a normal level and stop hurting others.
And when it’s not just a few corrupt people but a large swath of your government that is in collusion with them, how do you fight back? I have some ideas that I will post about soon, but, in the meantime – what are your ideas?
*Update – A commenter has provided a lot of additional information on this issue; I encourage readers of this post to check out the comments section.
Michael Berger, one of the lawyers in the lawsuit against Silver State Helicopters Flight Academy, reported on his blog November 10th that one of the lenders in the case, Citibank, is now offering students 100% loan forgiveness on loans taken out to attend the now-bankrupt school in exchange for being released from future claims. From his web-site:
On November 5, 2008, Citibank began offering 100% loan forgiveness of Citibank SSH student loans in exchange for an assignment of the student’s claims against SSH and against Citibank. We highly recommend that all of our clients with Citibank loans accept this offer. 100% Loan forgiveness has always been our highest goal for each and every one of our SSH clients. It is a complete victory for each and every one of our Citibank clients. It sets the bar high for KeyBank and Student Loan Xpress, the 2 other banks that wrote the majority of the SSH student loans.
I don’t know much about this case, but apparently Silver State had students pay tuition, approximately $70k, up front using loans that the school helped them arrange through private lenders. The school wound up declaring bankruptcy in February of this year, leaving hundreds of students in the lurch. Berger’s firm has been investigating whether there was collusion between the school and student loan lenders.
The Department of Education is going to buy up more student loans from private lenders in an effort to bolster the private student loan market, the New York Times reports. The move comes as investors shy away from the student loan market in the wake of the economic crisis, and large lenders like Sallie Mae stand to benefit the most:
Sallie Mae and big banks like Citigroup and JPMorgan Chase, which make thousands of government-subsidized student loans each year, stand to benefit the most from the government’s program. But so will dozens of nonprofit student lenders that are caught in the same bind. The government’s action will not resolve all worries about student lending. Student loan borrowers this year are finding it more difficult to obtain private loans, which are not guaranteed by the government and which typically carry higher interest rates and less favorable repayment terms.
Thus, in yet another industry, the government is bailing out the people at the top of the hierarchy and overlooking those at the bottom. Part of me understands this – the fact of the matter is, the way our current system is set up, most students need to borrow, and if the lenders can’t lend, that leaves a lot of people unable to get a college education at all. On the other hand, I feel that their must be some alternative to letting tuition costs creep ever higher and forcing everyone to rely so much on loans that such bailouts become necessary in times of economic distress.