July, 2019
Washington -- The nation's student loan crisis continues, but without sufficient understanding as to how it came about or how it might be resolved.
There is little discussion of the people who played a major role in its creation and continue to exacerbate it. In previous posts, I've noted a revolving-door, iron-triangle network between government and industry that operates according to these axioms:
• There is big money to be made in student loans
• So put as many people into student loan debt as possible
• And keep them in debt for as long as possible by whatever means necessary
The first is self evident. The federal government spends billions annually on contractors originating, servicing, and collecting student loans. A private student loan industry also thrives, piggy-backed on the federally based college financial aid application system. Federal student loans provide an especially large share of the revenues of for-profit colleges, including those that are traded on Wall Street. If borrowers can't repay federal loans, it's taxpayers who take the loss, not the colleges.
The second is also evident to anyone who follows how higher education is marketed as "opportunity" and how student debt is sold as "good debt," even to people who have no realistic chance of successfully completing college or paying off their loans. This is particularly true of the for-profit college sector, which often uses unconscionable methods to entice people to take on student debt. (The independent documentary movie "Fail State" illustrates the dark realities of for-profit colleges.) The revolving-door network at the Department of Education has been especially active of late to weaken the nation's college accrediting system so as to continue to grow student debt, and to repeal regulations designed to curtail abuses.
The third should be evident to anyone knowledgeable about how difficult is it for borrowers to get out of debt. The revolving-door network assures that contractors will not be properly supervised or penalized when they violate the consumer protections of student loan borrowers. The network has been instrumental in raising fees on borrowers in default, keeping them in debt longer, and illegally refusing to cancel the debts of borrowers who were defrauded, the debts of borrowers who had earned cancellation through public service, and even the debts of veterans who were totally and permanently disabled.* See a previous post.
What can be done?
First, there should be a wider understanding of the role of the revolving-door network in the student loan crisis. This includes identification of illegal actions** that have led to waste, fraud, and abuse under federal RICO statutes.
Second, the network should be broken up. Remedies exist in RICO legislation, 18 U.S. Code § 1964. Civil remedies.
(a) The district courts of the United States shall have jurisdiction to prevent and restrain violations of section 1962 of this chapter by issuing appropriate orders, including, but not limited to: ordering any person to divest himself of any interest, direct or indirect, in any enterprise; imposing reasonable restrictions on the future activities or investments of any person, including, but not limited to, prohibiting any person from engaging in the same type of endeavor as the enterprise engaged in, the activities of which affect interstate or foreign commerce; or ordering dissolution or reorganization of any enterprise, making due provision for the rights of innocent persons.
(b) The Attorney General may institute proceedings under this section. Pending final determination thereof, the court may at any time enter such restraining orders or prohibitions, or take such other actions, including the acceptance of satisfactory performance bonds, as it shall deem proper.
(c) Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee....
Third, Congress should open an oversight investigation on all of the above. Airing it out in sunshine is the best disinfectant and is essential to resolving the student loan crisis. As a political scientist, I'm more than a little surprised that the student loan crisis has not already been tackled more vigorously by Congress, which surely must know that at its heart it is also a major civil rights issue, as the victims of the crisis are disproportionately women and people of color. The Center for Responsible Lending has made this clear in a new report issued this month. May it help generate action.
Finally, those in the for-profit college and student loan industries who are sincerely interested in education and embarrassed by what apologists call "bad apples" should clean up their professions. They need to step forward and show that the whole barrel has not been spoiled. Good apples are increasingly hard to find.
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* Even bankruptcy is not an option; uniquely in consumer-credit finance, student loans are generally not dischargeable in bankruptcy.
** Violation of recusal, perjury, conflict of interest, obstruction of audits, obstruction of state law enforcement, loan fraud, wire fraud, racketeering.
