Tuesday, December 13, 2011

Their stories: Slaves to Student Loans

They tell their stories with anguish, with anger, with hopelessness and with numbers. They are the victims of a student loan system designed to guarantee big profits to lenders for years to come while enslaving borrowers with outrageous terms of repayment.

You can see their pictures and read their words at a new Occupy Student Debt website. There's the 27-year old woman with $100,000 in debt who can't find a job paying more than about $12/hour. She wants to send her useless diploma to Sallie Mae.

There's the widow who went back to school at the age of 48 to get a Master's Degree and the chance at a better job as a school teacher. She's now 55. She figures that she'll be 77 before she pays off her loan.

There's the 63-year old father of 3, a physician no less, who even pre-paid tuition to lock in lower rates. But college for 2 of his children ended up costing more anyway, and he's now stuck with $42,000 in loans that carry interest rates of more than 8%, with payments in the early years going only for interest, not to pay down principle. He compares that to the terms of his home mortgage and home equity loan, both with interest rates under 4% and terms that make prepayment a smart idea.

These stories show how the banks succeeded in getting the U.S. Congress to make student loans immensely profitable for lenders and uniquely onerous for borrowers.

With interest rates so low now, refinancing a home mortgage, for example, can save a home owner lots of money, as long as they have a good enough credit rating to convince a bank to do the refinancing. You can also declare bankruptcy if you fall behind. You'll lose most of what you own, but at least you'll be able to start fresh.

But no, there are no opportunities to refinance a student loan at lower rates. Lenders have no reason to offer them. Nor can you go bankrupt. The law doesn't allow it. There is no escape.

Read their stories. 400 of them so far. Each one proof that our elected representatives care much more about banking industry campaign contributions than the plight of their constituents.

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