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Michael Miller

Viewpoint

By Michael Miller
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Drilling Down: The Student Loan Crisis

For months, there has been a television, radio and newspaper blackout across this country regarding the “Maple Spring” in Quebec, right on New York’s border. Since Feb. 13, a student strike has closed colleges throughout the province. Hundreds of thousands have participated in peaceful rallies and nightly marches. The spark was tuition increases. The Quebecois government refuses to negotiate and has attempted several times to brutally break it up. This is front-page news around earth, except here.

Despite efforts to protect us from unproductive thoughts, student loans may explode as an issue this long, hot summer.

The number of Americans carrying student loan debt exceeds the combined populations of New York and Florida. Most of these loans are owed to the federal government. Those borrowers have some deferment and payment options, but the government can seize tax refunds and Social Security benefits, garnishee wages and charge large collection fees. Some 6 million Americans owe banks, loan companies, state agencies or collection firms. It isn’t a fair fight.

So a bunch of whining, deadbeats took crazy enormous loans? Well, they aren’t and, in many cases, they didn’t.

For students graduating in 2012, the average debt will be over $27,000. It’s $34,000 if you add in loans from parents. That’s a mean average. For each student getting through college with no debt, there’s another with maybe $54,000. But that’s just a starting point, because even if you make all payments, you will typically end up paying about twice the original debt. Now it’s $108,000. It’s easy to miss a payment or two if you’re unemployed, low-paid or an unpaid intern. Or get hurt, or your child gets sick. Now all kinds of penalties are applied. Big penalties. But it gets way worse.

Once it looks like bad paper, loans are often sold to collection agencies, which tack on their own penalties and soon that $108,000 is $216,000. There are thousands of horror stories like this. Stories about $15,000 in debt that balloons to $150,000.

The agencies that hold the debt are under no obligation to negotiate or to compromise or to let up, ever. Once they have squeezed out what they feel they can, they might sell the debt to someone else, and the treadmill continues. Some companies offer “loan rehabilitation,” which usually means that for several years you make no payments while interest and sometimes penalties continue to accrue. Now some people with “average” loans are looking at half a million dollars or three-quarters of a million dollars in debt. The financial lives of some of these borrowers are over and done. They didn’t rob a convenience store. They were encouraged by our government and by colleges to take out loans as a good investment.

We have removed all leverage for borrowers. There is no bankruptcy option for student loan debt. There is no statute of limitations. These collection agencies are scary. Last week it was revealed that one hired agency has embedded employees in hospital emergency rooms, pressuring patients with outstanding bills or iffy credit scores to pay up front or to just walk away without treatment.

There are people in retirement homes being hounded by debt collectors for overdue payments on their college loans. Some were co-signers, parents.

The colleges steer students towards loans. The federal education department actually makes $1.22 for every dollar paid out in default claims. Perhaps the most positive accomplishment of the Obama administration has been the removal of banks as federal loan middlemen, freeing up $87 billion in fees over a decade. It couldn’t get through Congress on its own and was buried in the Affordable Care Act. Governor Romney calls this a “government takeover” of student loans and vows to put things right for banks.

In anticipation of the Republican National Convention this summer, the Tampa City Council is creating a “clean zone” around the convention center, into which no one can bring slingshots, squirt guns, string more than six inches long or light bulbs. But Governor Scott has refused to ban firearms outside the center, in case “law-abiding citizens” need to protect themselves from protestors.

Yes, it may be a long, hot summer.

Michael Miller is a freelance writer, designer and strategic consultant who has worked in state and local government. Email: millercolumn@optimum.net