“U.S. Secretary of Education, Arne Duncan: STOP spending a BILLION dollars on student loan collection agencies and START helping student loan borrowers avoid default.”

Debt

The Department of Education is paying $1 billion dollars a year to collection agencies to collect on defaulted student loans when the reality is that almost no one should default if adequate default prevention and aversion counseling strategies were put into effect and adequately funded.

We need your support to protect student loan borrowers from collection agencies, student loan servicers and even schools that have a vested interest conflicting with the “best interest” of the students.

We are asking the U.S. Secretary of Education, Arne Duncan to allocate just $200 million of the $1 billion currently going to collection agencies, to fund a successful default aversion and prevention process both at schools and through independent non-conflicted organizations.

Independent organizations have successfully assisted student loan borrowers in preventing their loans from default by providing students with highly experienced counselors to guide them through the loan repayment process.

Unfortunately, college debt isn’t just taking a financial toll on millions of borrowers. It’s also inflicting staggering costs on the health, careers, emotional well-being and personal relationships of those burdened with big college loans.

We just created this petition: U.S. Secretary of Education, Arne Duncan: STOP spending a BILLION dollars on Student Loan collection agencies , because we care deeply about this very important issue.

I’m trying to collect 100 signatures, and we could really use your help.

To read more about what we’re trying to do  and to sign this petition, click here!

It’ll just take a minute!

Once you’re done, please ask your friends to sign the petition as well. Grassroots movements succeed because people like you are willing to spread the word!

 Thank You.

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Taxpayers Fund $454,000 Pay for Collector Chasing Student Loans

Joshua Mandelman made $454,000 in a single year as a student-loan debt collector — more than twice the pay of the U.S. secretary of education.

His boss, Richard Boyle, chief executive officer of Educational Credit Management Corp., received $1.1 million in 2010, including commuting expenses from his ranch in New Mexico. Five other managers each took home more than $400,000.

ECMC CEO Richard Boyle

ECMC CEO Richard Boyle

Educational Credit Management Corp. via Bloomberg

ECMC, a Minnesota nonprofit group, owes its success to an 18-year-old agreement with the U.S. government. The company charges fees to borrowers and earns commissions from taxpayers — totaling as much as 31 percent — when it collects on defaulted student loans. Those rich rewards, which are approved by Congress, are sparking criticism that ECMC and similar collection agencies are reaping a bonanza from former students’ pain.

The loan program “is enriching collection agencies and undermining a goal we all want for society — to encourage people to go to college,” Robert Shireman, a former deputy undersecretary of education under President Barack Obama, said in a telephone interview.

ECMC is one of 32 little-known “guaranty agencies” that play a key role in the world of higher-education finance. They oversee student loans for the U.S. Education Department, which began its lending program in 1965. The groups guarantee loans made by banks and other private lenders. They promise to repay the lenders if borrowers don’t. If the agencies can’t recover the money, the federal government takes over the loan, shifting the risk to taxpayers.

Scholarship Money

ECMC says it helps keep federal financial-aid programs solvent by recovering taxpayer money. Since its founding in 1994, the company has returned $4.3 billion to the U.S. Treasury, said Dave Hawn, ECMC’s chief operating officer.

The agency’s collectors steer borrowers into affordable payment plans, repairing their credit and turning their lives around, Hawn said in a telephone interview. ECMC also funds more than $20 million a year in college scholarships for low-income students and runs financial-literacy and higher-education counseling programs.

“I’m really proud of what we do as an organization,” Hawn said.

ECMC’s debt collectors earn bonuses as a reward for extracting money from defaulted borrowers. In 2010, the bonuses for top performers amounted to as much as 10 times their base salaries, which ranged from about $33,000 to $46,000, according to the company’s tax return.

Highest-Paid Collector

Mandelman’s $454,000 was more than double his pay in 2006, making him ECMC’s highest-paid collector, tax records show. Four other debt collectors took home between $301,000 and $389,000 in 2010.

In an interview outside his home in Minneapolis, Mandelman, 32, said he works 12-hour days helping borrowers get their finances back on track. Thank-you notes cover his desk, he said.

“I did well,” said Mandelman, part-owner of the Amsterdam Bar and Hall, a restaurant and nightclub in nearby St. Paul. “I worked hard. I also helped a lot of people.”

U.S. higher-education debt is sounding alarms in Washington as defaults more than doubled since 2003, to $67 billion. Congress is debating whether to halt the doubling of interest rates on some student loans in July. With college costs soaring, outstanding student loans have spiraled over $1 trillion, surpassing credit-card debt.

In March, the Obama administration proposed changing how it regulates the student-loan debt collectors it hires, amid complaints they insist on stiff payments, even when borrowers’ incomes make them eligible for leniency.

The Education Department declined to discuss compensation at ECMC, referring questions to the company.

‘Personal Profit’

“We don’t think anyone working on our behalf should put personal profit ahead of serving the best interests of students,” Justin Hamilton, a department spokesman, said in an e-mail. “Much of the loan-collection work carried out by guaranty agencies is defined by congressional statute. Some of those policies deserve a second look and we welcome a conversation with Congress about how they can help us with that.”

As ECMC’S debt collectors have prospered, so has Boyle, the CEO.

Boyle — a former executive with SLM Corp. (SLM), the largest U.S. student-loan company, known as Sallie Mae — received $271,000 in 2002. His compensation rose to $618,000 in 2004, $852,000 in 2008 and $1.1 million in 2010, making him the highest-paid head of a guaranty agency.

Carl Dalstrom, who leads Indianapolis-based United Student Aid Funds Inc., the largest guaranty agency, got $775,000.

Commuting Expenses

As part of Boyle’s compensation, ECMC pays for his commuting expenses and then reimburses him for the taxes he owes on those expenses, a payment known as a “tax gross up,” according to the company’s tax filing. Besides salary and bonus, his pay includes deferred compensation and benefits.

Boyle lives on a 715-acre ranch in Youngsville, New Mexico, with 26 head of cattle, property records show.

The 64-year-old CEO makes two or three trips a month to ECMC’s headquarters in Oakdale, Minnesota, near St. Paul, Hawn said. Boyle, who declined to be interviewed, also travels to ECMC offices in Sacramento and Indianapolis, Hawn said.

Boyle flies coach on commercial flights when commuting, Hawn said. Until recently, Boyle stayed in an apartment paid for by the company. He now stays in hotels, Hawn said.

Only “a small number” of ECMC’s 90 debt collectors received pay in the $300,000 to $400,000 range, Hawn said. On average, they earn about $77,000 a year, he said.

Incentive Changes

ECMC itself decided that debt-collector bonuses were excessive. Last year, the company changed its incentive policy, making it difficult for collectors to earn more than $150,000 a year. ECMC took action to “get our compensation for that team in line with the market,” Hawn said.

The company stands by its executive pay. Rising management compensation reflects ECMC’s growth, said Hawn, who received $541,000 in 2010.

Since Boyle became CEO in 1999, revenue tripled, to $168 million, as the company took over the portfolios of guaranty agencies in Oregon, Connecticut and California. Under the company’s charter, the Education Department turns to ECMC as the go-to organization to take charge of troubled agencies.

Boyle also used excess revenue to buy related businesses that aren’t tax-exempt, including Premiere Credit of North America LLC, which chases patients for medical bills and parents for child support, as well as students for loan payments.

Directors’ Compensation

When setting executive pay, ECMC directors consider compensation inside and outside the charitable world, Hawn said. Under IRS rules, nonprofit companies must demonstrate they aren’t paying their employees excessively. ECMC directors hire independent compensation consultants to ensure they are in compliance, he said. Fees paid to company directors have about tripled during Boyle’s tenure, to as much as $90,000 a year.

The company benefits financially from federal student-loan collectors’ powers under U.S. law. Unlike those chasing credit- card borrowers, student-loan collectors can confiscate wages without a court order and seize tax refunds and Social Security checks. There is no statute of limitation on collecting student loans, which are rarely discharged through bankruptcy.

In February, an ECMC debt collector phoned Susan Raposa, a 61-year-old special-education teacher, telling her to pay or face wage garnishment, Raposa said. ECMC now seizes $600 a month on behalf of the federal government — keeping $96 — or 16 percent — as its fee.

As a single mother, Raposa said she struggled to pay off her student-loan balance — now $47,000 — since she graduated from Bridgewater State College in Massachusetts in 1992.

‘My Fair Share’

“I absolutely want to pay my fair share,” said Raposa, who lives in Raynham, Massachusetts, about 35 miles south of Boston. “But I’m going to live poorer than people on welfare.”

ECMC won’t discuss borrowers because of consumer confidentiality, Hawn said.

Like all guaranty agencies, ECMC receives more money collecting from borrowers like Raposa than it does keeping them from defaulting in the first place.

Agencies get 1 percent of a borrower’s loan amount for preventing a default through counseling. That’s $250 on a $25,000 loan, the current average of a student leaving college, according to the Education Department.

Once borrowers default, or fail to make payments for 270 days or more, the financial rewards for collectors multiply.

Under government rules, guaranty agencies add collection costs — currently as much as 25 percent — to a borrower’s loan balance. They also keep 16 percent of any money recovered.

Hitting the Jackpot

If an agency “rehabilitates” a loan — getting borrowers to make nine payments in 10 months — it gets a jackpot.

By law, the organizations can receive as much as 37 percent of a borrower’s entire loan amount, half in collection costs and half in taxpayer-funded commissions. ECMC says it typically collects 31 percent, or $7,750 on a $25,000 loan. That’s 31 times what it can make for preventing the default through counseling.

In 2010, ECMC generated $131 million from collections, or about three quarters of its revenue, compared with about $17 million from programs aimed at preventing default.

In terms of caseload, ECMC devotes more employees to default prevention than collections, Hawn said. The company averages 77 default-prevention workers for 241,000 delinquent borrowers in need of counseling. It has about 90 debt collectors for 557,000 borrowers in default.

‘Poorly Aligned Incentives’

Guaranty agencies now rely even more on collections after the Obama administration in 2010 stopped private lenders from offering federal student loans. The Education Department has since issued all new loans directly — cutting out a major source of fees for guaranty agencies.

Last year, Education Secretary Arne Duncan, whose annual salary is just under $200,000, asked the guaranty agencies to choose either debt collection or default prevention. He cited “poorly aligned incentives” because agencies make so much more money collecting on defaults.

The request was voluntary, and two dozen agencies submitted proposals. ECMC wasn’t one of them.

American Student Assistance, a guaranty agency in Boston, proposed getting paid based on the loans it keeps current.

“You shouldn’t profit from defaulted borrowers” as a public-service organization, said Paul Combe, who received $364,300 in 2010 as CEO of the agency.

Defaults Prevented

The National Council of Higher Education Loan Programs, which represents guaranty agencies, says the organizations prevented 88 percent of seriously delinquent loans from defaulting in 2009, the most recent year for which data is available.

“There’s no factual basis for this claim that the incentives are misaligned,” Shelly Repp, president of the Washington-based council, said in a telephone interview, referring to Duncan’s comments.

Off a highway interchange in Oakdale, ECMC operates from a two-story brick building in an office park across from a Target store and McDonald’s restaurant. There is no sign out front, or in the reception area.

Prized Pinata

Debt collectors work in a “cubicle farm” in a one-story building attached to the main office, according to Shane Kussatz, ECMC’s former director of collections support. There, supervisors would hang pinatas over top producers’ desks, while automatic dialers and other computer systems helped the company track down more borrowers, he said.

“There was a lot of talk about operating as a nonprofit company,” said Kussatz, who took a buyout in January after 12 years at the company. “At the end of the day, our job was to collect debt. I didn’t fool myself.”

ECMC emphasized collections, according to Paul Fiedler, who worked as a default-prevention counselor from 2004 through 2009 in Richmond, Virginia.

The company asked counselors to call as many as 500 borrowers a month to get them back on track with their payments, said Fiedler. Under the federal program, he could let borrowers defer payments or temporarily reduce outlays because of a job loss or other hardship.

During Fiedler’s night shifts, counselors were expected to stay at their desks, except for bathroom breaks, said Fielder, 67. He left ECMC after it shut down the Richmond office.

“It was an endless job,” Fiedler said in a telephone interview. “I don’t know why they didn’t hire more people. A lot of borrowers fell through the cracks. There were not enough hours in the day to get to them.”

Including monthly bonuses tied to his record of preventing defaults, Fiedler earned in the mid-$40,000-a-year range, he said. ECMC’s Hawn said collectors make more than counselors because recovering money from borrowers is “significantly more challenging.”

Default-prevention counselors clamored for the rare openings in debt-collection, Fiedler said.

“Everyone knew that’s where the big money was,” Fiedler said.

 

 

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We’re trying to collect signatures, and we could really use your help.

U.S. Secretary of Education, Arne Duncan: STOP spending a BILLION dollars on Student Loan collection agencies.

Collection agencies, student loan servicers and even schools have a vested interest conflicting with the best interest of the students. Collection agencies have inherent conflict of interest involved when private debt collectors are given financial incentives to collect the greatest number of dollars possible—rather than help student loan borrowers who have defaulted on student loans to a path toward making affordable repayments and rehabilitating their credit in the process.

Independent organizations have successfully assisted student loan borrowers in preventing their loans from default.

We are asking the Secretary to allocate just $200 million of the $1 billion currently going to collection agencies, to fund a successful default aversion and prevention processes both at schools and through independent non-conflicted organizations.

To read more about what I’m trying to do and to sign my petition, click here:

http://www.change.org/petitions/u-s-secretary-of-education-arne-duncan-stop-spending-a-billion-dollars-on-student-loan-collection-agencies?share_id=QuehbvaQHz&pe=d2e

It’ll just take a minute!

Once you’re done, please ask your friends to sign the petition as well. Grassroots movements succeed because people like you are willing to spread the word!

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The Student Loan Crisis Is Crippling America’s Families — Is The Economy Next?

With student loan debt now topping U.S. credit card debt and few or no options available for distressed borrowers (including parents who co-signed and now face the loss of nest eggs, retirement homes and other assets), America faces the very real possibility of another major economic threat on par with the devastating home mortgage crisis, according to a new survey and report, Student Loan ‘Debt Bomb’:America’s Next Mortgage-Style Economic Crisis,  by the National Association of Consumer Bankruptcy Attorneys (NACBA).

The stats are scary. More than four out of five bankruptcy attorneys say that potential clients with student loan debt have increased “significantly” or “somewhat” in the last three-four years. Overall, nearly 50% of bankruptcy attorneys reported significant increases in such potential clients.

Ninety five percent of bankruptcy attorneys polled said that few student loan debtors are seen as having any chance of obtaining a discharge as a result of undue hardship.

The bad news isn’t just about students, but their parents. Loans to parents for the college education of children have jumped 75% since the 2005-2006 academic year. Parents have an average of $34,000 in student loans and that figure rises to about $50,000 over a standard 10-year loan repayment period.

Of the Class of 2005 borrowers who began repayments the year they graduated, one analysis found 25% became delinquent at some point and 15% defaulted, according to the report.

What’s the culprit in this crisis? Eighty two percent of bankruptcy attorneys said they see the limited availability of student loan discharge in bankruptcy as a “big problem” barring a fresh start for folks who need it the most.  John Rao, an attorney with the National Consumer Law Center and vice president of the NACBA is calling for the restoration of the bankruptcy discharge for student loans, and a reasonable statute of limitations for student loan defaults. “We have to relieve the pressure before this whole thing blows sky high,” said Rao.

English: Day 3 of the protest Occupy Wall Stre...Image via Wikipedia

Student borrowing crossed the $100 billion threshold for the first time in 2010 and total outstanding loans exceeded $1 trillion for the first time last year. It’s not rocket science. It’s the economy. Students and workers seeking retraining are borrowing big bucks through federal and private loan programs to help cover the continued escalating cost of college and training. In many cases, parents responsible for the student loans are in or near retirement years and facing repayment demands. “Take it from those of us on the front line of economic distress in America. This could very well be the next debt bomb for the U.S. economy,” said William Brewer, Jr., president of the National Association of Consumer Bankruptcy Attorneys at a press conference.

The potential impact is huge.”There are repercussions for the broader economy. If consumers are unable to spend because of student loan debt, that’s a drag on the economy,” said Rao.

Even in the best of economic times, when jobs are plentiful, young people with considerable debt burdens end up delaying life cycle events such as buying a car, purchasing a home, getting married and having children,” pointed out Rao.

To put the heart-wrenching picture in perspective, Dave Ingham, a disabled Vietnam vet who co-signed for  student loans for his son, shared his story at the press conference. “I have been personally and gravely affected by the student loan bankruptcy crisis and I know our family is one only of many thousands across America facing these issues.”

He and his wife live in a condo outside Minneapolis. She barely receives $500 a month in social security. The couple’s 35 year-old son lives with them, otherwise he would be homeless. He defaulted on his student loans as he has been out of work since October of 2009. “He is on medication for depression and anxiety. He keeps looking for work, but when an employer does a credit check they see the default, so he doesn’t get the job. It’s a vicious cycle,” said Ingham, who is being sued by a collection agency representing Sallie Mae. “My wife and I stand to lose our assets, including our condo. I realize my son made a mistake by being taken in by predatory lenders, but that does not mean his life and ours should be allowed to be ruined by these people.”

Stay tuned, there are likely to be many more stories from the student loan front.

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To Pay Off Loans, Grads Put Off Marriage, Children

To Pay Off Loans, Grads Put Off Marriage, Children By SUE SHELLENBARGER

Wall Street Journal, April 17, 2012, 7:02 p.m. ET

 

Student-loan debt is having a sharp effect on people’s lifestyles. Four-figure monthly loan payments are handcuffing grads at all levels of the work force. Sue Shellenbarger has details on Lunch Break.   Between the ages of 18 and 22, Jodi Romine took out $74,000 in student loans to help finance her business-management degree at Kent State University in Ohio. What seemed like a good investment will delay her career, her marriage and decision to have children.

Ms. Romine’s $900-a-month loan payments eat up 60% of the paycheck she earns as a bank teller in Beaufort, S.C., the best job she could get after graduating in 2008. Her fiancé Dean Hawkins, 31, spends 40% of his paycheck on student loans. They each work more than 60 hours a week. He teaches as well as coaches high-school baseball and football teams, studies in a full-time master’s degree program, and moonlights weekends as a server at a restaurant. Ms. Romine, now 26, also works a second job, as a waitress. She is making all her loan payments on time.

They can’t buy a house, visit their families in Ohio as often as they would like or spend money on dates. Plans to marry or have children are on hold, says Ms. Romine. “I’m just looking for some way to manage my finances.”

High school’s Class of 2012 is getting ready for college, with students in their late teens and early 20s facing one of the biggest financial decisions they will ever make.

Total U.S. student-loan debt outstanding topped $1 trillion last year, according to the federal Consumer Financial Protection Bureau, and it continues to rise as current students borrow more and past students fall behind on payments. Moody’s Investors Service says borrowers with private student loans are defaulting or falling behind on payments at twice prerecession rates.

Most students get little help from colleges in choosing loans or calculating payments. Most pre-loan counseling for government loans is done online, and many students pay only fleeting attention to documents from private lenders. Many borrowers “are very confused, and don’t have a good sense of what they’ve taken on,” says Deanne Loonin, an attorney for the National Consumer Law Center in Boston and head of its Student Loan Borrower Assistance Project.

Danielle Jokela will have paid $211,000 for $79,000 in student loans by the time the debt is paid off in 25 years.

More than half of student borrowers fail to max out government loans before taking out riskier private loans, according to research by the nonprofit Project on Student Debt. In 2006, Barnard College, in New York, started one-on-one counseling for students applying for private loans. Students borrowing from private lenders dropped 74% the next year, says Nanette DiLauro, director of financial aid. In 2007, Mount Holyoke College started a similar program, and half the students who received counseling changed their borrowing plans, says Gail W. Holt, a financial-services official at the Massachusetts school. San Diego State University started counseling and tracking student borrowers in 2010 and has seen private loans decline.

The implications last a lifetime. A recent survey by the National Association of Consumer Bankruptcy Attorneys says members are seeing a big increase in people whose student loans are forcing them to delay major purchases or starting families.

Looking back, Ms. Romine wishes she had taken only “a bare minimum” of student loans. She paid some of her costs during college by working part time as a waitress. Now, she wishes she had worked even more. Given a second chance, “I would never have touched a private loan—ever,” she says.

Ms. Romine hopes to solve the problem by advancing her career. At the bank where she works, a former supervisor says she is a hard working, highly capable employee. “Jodi is doing the best she can,” says Michael Matthews, a Beaufort, S.C., bankruptcy attorney who is familiar with Ms. Romine’s situation. “But she will be behind the eight-ball for years.”

Private student loans often carry uncapped, variable interest rates and aren’t required to include flexible repayment options. In contrast, government loans offer fixed interest rates and flexible options, such as income-based repayment and deferral for hardship or public service.

Steep increases in college costs are to blame for the student-loan debt burden, and most student loans are now made by the government, says Richard Hunt, president of the Consumer Bankers Association, a private lenders’ industry group.

Many private lenders encourage students to plan ahead on how to finance college, so “your eyes are open on what it’s going to cost you and how you will manage that,” says a spokeswoman for Sallie Mae, a Reston, Va., student-loan concern. Federal rules implemented in 2009 require lenders to make a series of disclosures to borrowers, so that “you are made aware multiple times before the loan is disbursed” of various lending options, the spokeswoman says.

Both private and government loans, however, lack “the most fundamental protections we take for granted with every other type of loan,” says Alan Collinge, founder of StudentLoanJustice.org, an advocacy group. When borrowers default, collection agencies can hound them for life, because unlike other kinds of debt, there is no statute of limitations on collections. And while other kinds of debt can be discharged in bankruptcy, student loans must still be paid barring “undue hardship,” a legal test that most courts have interpreted very narrowly.

Deferring payments to avoid default is costly, too. Danielle Jokela of Chicago earned a two-year degree and worked for a while to build savings before deciding to pursue a dream by enrolling at age 25 at a private, for-profit college in Chicago to study interior design. The college’s staff helped her fill out applications for $79,000 in government and private loans. “I had no clue” about likely future earnings or the size of future payments, which ballooned by her 2008 graduation to more than $100,000 after interest and fees.

She couldn’t find a job as an interior designer and twice had to ask lenders to defer payments for a few months. After interest plus forbearance fees that were added to the loans, she still owes $98,000, even after making payments for most of five years, says Ms. Jokela, 32, who is working as an independent contractor doing administrative tasks for a construction company.

By the time she pays off the loans 25 years from now, she will have paid $211,000. In an attempt to build savings, she and her husband, Mike, 32, a customer-service specialist, are selling their condo. Renting an apartment will save $600 a month. Ms. Jokela has given up on her hopes of getting an M.B.A., starting her own interior-design firm or having children. “How could I consider having children if I can barely support myself?” she says.

 

When Debt Takes Over

Potential consequences of taking out too many student loans

–Delays in buying a car or purchasing a home

–Postponement of marriage and childbirth for financial reasons

–Parents feel pressure to take out loans or otherwise help with payments

–Risk for parents who co-sign loans of losing homes, cars and other assets

–Little ability to discharge student loans in bankruptcy

–Inability to get credit cards or home or car loans

–Inability to rent a home because of high debt-to-income ratio

–Being forced to deal with private collection agencies in the event of default

–Having liens placed on bank accounts or property in a default*

–Facing collection fees of 25% of amount owed in a default

–No statute of limitations on collection efforts

–Having wages garnisheed

–Possible loss of state-issued professional licenses

–Reduction of Social Security payments**

–Seizure of tax refund**

*Used primarily by private lenders

**Government loans only

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U.S. Bank exiting student loan market

U.S. Bank exiting student loan market New Mexico Business Weekly by Mark Reilly, Managing Editor – Minneapolis / St. Paul Business Journal

Friday, April 6, 2012, 10:18am MDT

U.S. Bancorp will exit the private student loan market.  

U.S. Bancorp will exit the private student loan market, the Minneapolis/St. Paul Business Journal reports.

In the paper’s print edition, reporter Jim Hammerand explores the bank’s decision to pull out of the market, which is seeing more defaults and new oversight from the U.S. Consumer Financial Protection Bureau.

Meanwhile, U.S. Bancorp is expanding elsewhere: You can also read about the company’s efforts to build its wholesale banking division.

U.S. Bankcorp is the third-largest bank in New Mexico by local deposits, and has 11 branches in Albuquerque.

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Biden Admits Government Subsidies Have Increased College Tuition

Biden Admits Government Subsidies Have Increased College Tuition

Real Clear Politics, February 6, 2012

Vice President Joe Biden admits that the government intervening with the free market and providing subsidies for students to attend college have contributed to the increase in college tuition.

“By the way, government subsidies have impacted upon rising tuition costs. It’s a conundrum here,” Biden said to a student who asked about the government’s intervention in the free market system.

Biden was talking about the importance of tackling rising college costs at Florida State University in Tallahassee Monday morning.

Student: Good morning Mr. Vice President. I was wondering how do you feel about the idea that government subsidies and interference with the free market, for example, by artificially increasing availability of student loans is at least partially responsible for rising tuition costs. And now we’re facing a possible student loan bubble and subsequent collapse just as we’re coming out of the housing crisis.

Vice President Joe Biden: Well, say the first part of your question again about how we’re artificially creating what?

Student: By manipulating variables in the free market and giving out government subsidies that maybe is partially responsible for rising tuition costs.

Biden: By the way, government subsidies have impacted upon rising tuition costs. It’s a conundrum here. But if we went the rate your view of the free market route what we would have done is we would have not of done that. We would not have increased pell grants, for example. And there would be 9 million fewer students in college today.

And there would be hundreds of thousands and millions of students who would not be in college who don’t get Pell grants because there was no ability for them to borrow money through Perkins loans and/or have the tax deduction.

So you are right, in a pure free-market the college tuition would have to be lower because there would be fewer people going to school, they wouldn’t have as much coming in. But the end result is we would probably have — we go for the better part, half a generation, of going 16th in the world maybe down to 20th in the world.

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Please STOP unfair collection practices and start helping student borrowers avoid default!

U.S. Secretary of Education, Arne Duncan

Please STOP unfair collection practices and start helping student borrowers avoid default!!!

By: Student Loan Counselors at R&B Solutions

 

Good Morning ~

Collection agencies, student loan servicers and even schools have a vested interest conflicting with the best interest of the students. Collection agencies have inherent conflict of interest involved when private debt collectors are given financial incentives to collect the greatest number of dollars possible rather than help student loan borrowers who have defaulted on student loans to a path toward making affordable repayments, and rehabilitating their credit in the process.

Independent organizations have successfully assisted student loan borrowers in preventing their loans from default.

Our organization has successfully:

•           Established ourselves as advocates for students

•           Provides independent comprehensive advice

•           Counseled more than 1 million student loan borrowers

•           Saved 7 billion dollars in student loans from going into default

•           Served communities as a trusted counselor without conflict of interest

•           Cured 90% of delinquent student loans upon contact with the borrower

 

(We are not a lender, student loan servicer or a school)

We are a mission focused organization giving quality advice to students.

We are asking the Secretary to allocate just $200 millionof the $1 billion currently going to collection agencies to fund a successful default aversion and prevention processes, both at schools and through independent non-conflicted organizations.

Goal: We need as many people as possible to sign this petition so we can present this case to the U.S. Department of Education.

Please show your support and sign this petition.

That’s why I signed a petition to Arne Duncan, U.S.Secretary  of Education.

Will you sign this petition? Click here:

http://signon.org/sign/us-secretary-of-education?source=s.em.cp&r_by=4165419

Thanks!

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Obama Plans Overhaul of Student-Loan Debt Collector Practices

Obama Plans Overhaul of Student-Loan Debt Collector Practices             By John Hechinger -             Mar 31, 2012

Bloomberg

 

The Obama administration proposed requiring that debt collectors let student-loan borrowers make payments based on what they can afford, rather than on the size of their debt.

The U.S. Education Department, which hires private collectors, said yesterday it would mandate that the companies use a standard form to gather debtors’ income and expenses. If borrowers protest, they would be offered an income-based formula, which can result in payments as low as $50 a month for an unmarried person with $20,000 in income and $20,000 in loans.

The collection companies — which receive commissions of as much as 20 percent of recoveries — are facing complaints that they insist on stiff payments from defaulted borrowers even though the Obama administration and Congress have approved more-lenient plans, Bloomberg News reported March 26. The education department is also reviewing the commissions it pays collectors.

“We definitely feel a sense of urgency to make sure we are doing everything we can to serve the interests of taxpayers and students,” Justin Hamilton, an Education Department spokesman, said in a telephone interview.

The agency first proposed changing the rule governing the treatment of defaulted borrowers a year ago, Hamilton said. After a public comment period, the regulation may take effect as soon as July 2013.

More Favorable

The final proposal, worked out yesterday in discussions with negotiators representing the government, industry and borrowers, was more favorable to the debtors than what the agency originally suggested, according to Deanne Loonin, an attorney with the National Consumer Law Center in Boston.

In particular, for students seeking to “rehabilitate”their loans in default, the proposed rule prohibits basing payments on a borrower’s loan amount, which has been standard practice for collectors, Loonin said in a telephone interview. Current government contracts provide what are among the biggest incentives to debt collectors that extract minimum payments based on loan amounts.

“This regulation is a really important step toward treating very vulnerable borrowers consistently and fairly and giving them the second chance they are entitled to by law,”said Loonin, who represented borrowers in the negotiations.

‘Best Information’

Along with examining incentive payments in borrower contracts, the department is looking at collector scripts and“making sure they’re giving people the best information available,” Secretary of Education Arne Duncan said in an interview on March 28, after testifying about the agency’s budget before a House panel.

With $67 billion of student loans in default, the Education Department hires 23 private debt-collection companies to chase borrowers. The contractors include Pioneer Credit Recovery, a unit of SLM Corp. (SLM), the largest student-loan company, known asSallie Mae.

Companies that collect student loans directly for the department and through state agencies received about $1 billion in commissions last year, according to a review of contracts and agency data.

Sallie Mae, based in Newark, Delaware, will abide by any changes from the Education Department, said Patricia Nash Christel, a spokeswoman.

“We’re proud to offer programs that give consumers the opportunity to improve their credit and provide cost savings for the American taxpayer,” Christel said in an e-mail.

In 2009, Congress expanded a program that lets lower-income borrowers tie payments to their incomes. Debtors pay on a sliding scale tied to their debt, salaries and family obligations.

In October, Obama proposed making payments even lower and forgiving loans after two decades for some borrowers, a change that could take effect as soon as this year.

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Student debt pushing more people toward bankruptcy, lawyers say

Student debt pushing more people toward bankruptcy, lawyers say More than four-fifths of bankruptcy attorneys have seen a notable jump in the number of potential clients with student loan debt, the National Assn. of Consumer Bankruptcy Attorneys says. By Walter Hamilton, Los Angeles Times 11:27 PM CST, February 7, 2012

Student loan debt is pushing an increasing number of young people and their parents toward bankruptcy, according to a survey released Tuesday.

More than four-fifths of bankruptcy attorneys say they’ve seen a notable jump in the number of potential clients with student loan debt, with nearly half the lawyers reporting a significant increase in such cases, according to the report by the National Assn. of Consumer Bankruptcy Attorneys.

Nearly one-quarter of attorneys say the number of potential student loan clients has risen 50% to 100%, while 39% of attorneys report increases of 25% to 50%.

Student debt is rising for obvious reasons: steadily spiraling college costs, financial aid cutbacks at public universities and a stubbornly weak economy that’s making it difficult for graduates to find jobs.

The average student loan debt of 2010 college graduates topped $25,000 — the first time it has exceeded that inglorious mark. Graduating seniors had an average loan burden of $25,250, up 5.2% from the $24,000 owed by the class of 2009, according to the Project on Student Debt in Oakland.

Student loan debt can be overwhelming for people who can’t pay it off. Unlike many other forms of personal debt, student loans cannot be discharged in bankruptcy, meaning the debt can hang over students well into their adult lives.

The bankruptcy attorneys group says worsening debt levels could spur a financial crisis similar to the mortgage meltdown.

“Take it from those of us on the frontline of economic distress in America,” said William E. Brewer Jr., the group’s president. “This could very well be the next debt bomb for the U.S. economy.”

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