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How Student Loans Have Entered the Predator Loan Category

by yak max

The Consumer Financial Protection Bureau on February 26 sued a for-profit college chain, ITT Educational Services Inc., a first lawsuit of this kind for the CFPB. The lawsuit stated that the college engaged in predatory lending practices that leave students swimming in debt.

The question I have for the CFPB is why stop there?

Students who take out government student loans aren’t faring much better than the students at ITT. Students who manage to graduate at all from ITT’s four-year program take six years, which goes on at most colleges across the nation.

The Institute of Education Sciences reported graduation figures based on how many students finished getting a four-year degree in six years. And, even then, the numbers are not that great: 59 percent of full-time, first-time undergrads got a four-year degree in six years in 2011. That means that 41 percent of students have no degree to show after six years of school and, many of them, have years of piled-on student debt.

Most Students Don’t Graduate in 4 Years

The numbers of students who graduate in four years are shockingly low. According to The Market Ticker, only 32 percent of students graduate from a public college or university in four years. And it’s not all the fault of students. Anyone who has been to college or who has a child in college knows that it is often impossible to get the required classes needed to graduate on time because of scheduling difficulties.

Most parents don’t calculate education costs for six years. We typically assume an undergraduate degree takes four years, which is not the norm. If we think it’s expensive to send a child to school for four years, six years significantly increases what that sheepskin will cost — to the tune of 50 percent more.

Student Loan Debt Hurts the Economy

The amount of student debt our kids are racking up is bad. But it affects more than just the futures of recent grads (and the people who didn’t graduate but spent money on school with nothing to show for it). It affects the economy as a whole. Traditionally, first-time homebuyers were college graduates; now many cannot afford or qualify for a mortgage with student debt dragging them down. And relaxing lending standards is hardly the answer. Was 2008 too long ago to remember?

Students are already defaulting on their student loans. It’s difficult to estimate just how many students are in default. But an article in Time magazine said that 11.5 percent of graduates are late, as of 2013, but that figure doesn’t include the amount of people in forbearance or deferment, which likely doubles the figure to 23 percent.

Student loan delinquencies are on the rise as mortgage and credit card loans are on the decline. And student loans don’t just go away. Interest keeps accumulating, and late fees are tacked on. This can double or triple the original loan amount. If you default on a student loan, the government has many ways of getting its money — short of breaking your legs.

  • It can tank your credit score so you can’t get any other loans.
  • It can take your federal and state tax refunds.
  • It can take 15 percent of your Social Security and Social Security Disability benefits
  • It can garnish your wages without taking you to court first.

So again, I ask, why stop at suing ITT Educational Services, CFPB? You’re supposed to be looking out for consumers, right? There’s a problem with student loans in general, not just with what’s happening with “high-cost private loans.”

More from this contributor:

A Rose by Any Other Name: Subprime Mortgages Are Coming Back

First Person: Unemployment Is Trending Up, But My Son Is Still Underemployed

First Person: Is Consumer Spending Really Up?

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