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.
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.
After remaining relatively stable for several years, the student loan default rate is now on the rise. The Wall Street Journal reports today that the downturn in the economy, especially the credit crunch, is forcing more student loan borrowers into default and the numbers could rise even further:
The fear is that default rates on student loans will increase, as seen in the mortgage and credit-card worlds. SLM Corp., or Sallie Mae, the largest private student lender, reported a delinquency rate of 9.4 percent in September, up from 8.5 percent a year earlier. “It’s clearly because of economic conditions,” said spokesman Tom Joyce. “The credit crunch has washed onto the student-loan beach.”
Until now, the default rate on federal loans has remained relatively stable. The most recent statistics, from 2007, show only 5 percent of students defaulting within two years after they leave school and begin repayment. Experts think that rate could begin rising as the effects of the credit crunch and slowing economy take hold.
In spite of yet another article on the problems of student borrowers, I’m beginning to think that the people in charge, or at least those reporting on them, don’t understand how troublesome the situation really is. The article mentions some measures that students are taking to avoid default: getting second jobs, borrowing from parents, and, naturally, going to Vegas and hoping for the best. Um, hello? When people’s best option for making their loan payments is a lucky hand at blackjack, it may be time to start rethinking what we’re doing to America’s youth.
The article points out that even as the ability to pay plummets, student loan debt is higher than ever. It also notes (very briefly) that student loans are one of the only debts with no bankruptcy protection. But the solutions it offers are just more of the same – deferments, forebearances, and refinancing. Even though some of the people interviewed for the article specifically note that their deferments or forebearances have run out, they are still being told to simply get a deferment or forebearance. As for refinancing, it’s been widely reported, including on this blog, that the current credit crunch has drastically restricted that possibility. And all of these options mean more debt since the interest will continue to pile up the longer payment is delayed.
It’s clear that the current options for student loan relief are simply not good enough. We need something revolutionary, a radical and total shift in the system. How about a moratorium on interest? How about a bail-out for those who have made good faith efforts to secure employment? How about reinstituting bankruptcy protection after 10 years? Something, ANYTHING, besides the old “Just put it off until later and pay double” mantra. That’s what got us into this mess in the first place.
The New York Times reports that bankruptcies rose nearly 8% between September and October, due to the ongoing economic crisis, particularly dropping home values and the credit crunch. Over 100,000 filings were made in October, the first time the number has gotten that high since the new, harsher bankruptcy law was passed in 2005. Additionally, people filing for bankruptcy have more debt than in past years:
A recent study found that the typical family who filed for bankruptcy in 2007 was carrying about 21 percent more in secured debts, like mortgages and car loans, and about 44 percent more in unsecured debts, like credit cards and medical and utility bills, than filers in 2001.
I was struck that this article didn’t mention student loans at all or the fact that it is nearly impossible to clear them in bankruptcy. The people interviewed certainly had sympathetic stories – homes lost to foreclosure, medical bills, etc., but I wondered about the other people out there – those who are having some of the same issues and can’t get relief through bankruptcy. How are they going to survive?