Opinion

The Great Debate

To keep grads solvent, take the middleman out of student loans

Occupy Wall Street demonstrators participating in a street-theater production wear signs around their neck representing their student debt during a protest against the rising national student debt in Union Square, in New York

The mounting student debt crisis could cause serious economic damage to the United States. Rising college costs and declining financial aid at both state and federal levels have significantly contributed to the problem. A good deal of responsibility, however, belongs to the financial institutions that service federal student loans, according to a new report.

Millions of students use loans underwritten by the Treasury Department and granted by the Department of Education to help make college a reality. Once the loan is approved, however, borrowers usually deal with third-party servicers — and that’s where the trouble often begins.

In 2010, the Education Department expanded its Direct Loan Program and contracted many for-profit financial institutions to service and administer the loans. Complaints to the department’s Office of Federal Student Aid jumped significantly.

The Consumer Financial Protection Bureau has documented a wide range of complaints, including payments not showing up in payment histories; processing errors that maximize late fees and penalties; misinformation on how payments are applied to multiple loans; misplaced paperwork that results in missed deadlines, and poor customer service that denies borrowers vital information about flexible repayment options.

Borrowers also complain that servicers often make debt management more complicated instead of helping them manage their debt. Servicers, however, are at fault for far more, according to the new report by Eric Fink, associate professor of law at Elon University, and Roland Zullo, an assistant research scientist at the University of Michigan.

from Reihan Salam:

How to fix higher education

America’s elite higher education institutions are the envy of the world. Foreign students flock to the oldest and wealthiest U.S. research universities to take advantage of resources that are unparalleled, thanks to the deep pockets of many centuries’ worth of captains of industry.

Yet when we consider the post-secondary institutions that educate the typical American high school grad, we see a very different picture. While the share of Americans who enroll in higher education has grown substantially in recent decades, graduation rates have been stagnant.

Community colleges promise an affordable education to millions of students, but they often fail to offer the courses students need to complete a degree in a reasonable amount of time. Public colleges and universities churn out graduates who are forced to take jobs that don’t actually require a four-year post-secondary education. Most private non-profits do the same, and they’re also notorious for charging obscene tuition that their graduates can scarcely afford. And private for-profits, which have grown enormously by taking on some of the hardest-to-accommodate students, stand accused of loading up their students with debt without offering them marketable skills.

Occupy Student Debt’s failure to launch

By Chadwick Matlin
The views expressed are his own.
Over the past three months, as Occupy Wall Street has pitched a tent in the American consciousness, doubters have had the same refrain: “But what do they want?” Mothers, uncles, family friends, family of friends, they’ve all asked me—their token 20-something—some version of this. They argued that a movement was not a movement just because it wanted to move somewhere. It also needed to know exactly how it was going to get there. Apparently, all revolutions must now come with a built-in GPS.

A month ago, Occupy Wall Street made a demand. Or, as is the way in the nested hierarchy of OWS, a subcommittee of a committee of the movement made a demand.  They want all student debt in the country forgiven. All $1 trillion of it. And if the government would be so kind, they’d appreciate if it would pay for higher education from here on out, as well.

So this is what they—or at least some of they—want. But what has happened with this proposal, this great demand that we’ve all been waiting for?

Hardly anybody has cared.

In one month, only 2,694 people with debt have signed the Occupy Student Debt pledge, which states the following:

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