Swimming With Student Loan Sharks

I recently filed an analysis of the student loan Ponzi schemes bouncing around the halls of the public and private sector, in honor of all of the poor kids heading back to school for the fall semester. I remember it like it was yesterday, and in fact it pretty much was yesterday that I finally paid my own loans off. Years, and tens of thousands of dollars, later. Check your wallets!

Swimming With Student Loan Sharks
[Scott Thill, WireTap]
"Student-loan debt collectors have power that would make a mobster envious," Harvard professor and contract law and bankruptcy expert Elizabeth Warren told the Wall Street Journal in 2005. From wage and tax garnishments to withholding of professional certifications and even termination of employment, they have at their disposal an arsenal of weapons to strike fear into the heart of college students and grads just trying to get through finals or get jobs without losing their sanity.

As it is, for millions of students not born into well-to-do families, loans are lifelines to a better future. But the more time passes and costs for college skyrocket, the more those lifelines become nooses choking off solvency and possibility, in the end leaving students to wonder why they bartered their futures for four or five years away from their parents in the first place.

Plus, it's not like lenders such as Sallie Mae, Citigroup, JP Morgan, Bank of America and others, or their sketchy strategies to recoup current or defaulted student loans, are innocent angels doing good works for the good of their clients. With the relatively recent explosion of debt markets, where government-subsidized companies from the private sector scoop up student loans and then package and monetize them to close deals on everything from employee stock bonuses and even purchases of baseball teams, students have become prime targets for those who hugely profit from past-due payments.

Debt collection and collateralization, after all, are behind the recent implosion of the housing and credit markets at the hands of shady lenders offering too-good-to-be-true subprime loans to anyone within shouting distance. And the student loan scams and scandals of 2007 are the same damaged animal, just calibrated for college rather than suburban castles or McMansions...
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