Americas Student Loan Racket: Stiffer Debt Bondage ComingStephen Lendman For growing numbers of American youths, higher education is increasingly out of reach. High tuition and fees make it unaffordable. So does a disturbing government/corporate partnership. Millions of students need financial aid. Theyre exploited for profit. Providers are enriched. Higher education involves debt entrapment. Students graduate tens of thousands of dollars in debt. Some post-graduates face burdens up to $100,000. If unpaid after 30 years, its multiples higher. If default or declare bankruptcy, its unforgiven. Bondage is permanent until repaid. Loan providers thrive from defaults. Wages can be garnished. So can unemployment benefits, disability payments, tax refunds, as well as Social Security and other retirement benefits. A conspiratorial alliance of lenders, guarantors, servicers, and collection companies derive income from debt service and inflated collection fees. College marketing officers, state and federal legislators, and administration officials are complicit with them. Principle, accrued interest, late payment and collection agency penalties create enormous burdens to repay. Private lenders are exempt from federal fair debt collection requirements. Federal loans have minimal safety net protection. Lenders operate virtually risk-free. The system is rigged against borrowers. Loans are easy to get. Theyre tough to service. Theyre not forgiven. Burdensome debt escalates higher. A vicious circle entraps graduates and dropouts. For many its permanent. Once entrapped, escape is impossible. Unless repaid, future lives and careers are impaired. Todays economic crisis exacerbates conditions. Job opportunities are scarce. High-pay/good benefit ones are fast disappearing. What began decades earlier, Obama accelerated. Hes beholden to monied interests. He spurns populist ones. Hes done so throughout his tenure. Hes waging class war. Hes in lockstep with Republicans and most Democrats. Hes gutting Americas social contract en route to eliminating it altogether. For millions of higher education aspirants, affordability puts it increasingly out of reach. Others attaining it face onerous debt repayment burdens. From 1971 1989, Robert Stafford was Republican Senator from Vermont. He was considered moderate compared to bipartisan extremists now running things. In 1988, Congress renamed the Federal Guaranteed Loan program in his name. It did so for his work on higher education. Eligible students in accredited US institutions may apply for Stafford Loan help. Theyre federally guaranteed. Lower interest rates are offered. As explained above, repayment is mandatory. Debt bondage on all student loans remains until repaid. If default or declare bankruptcy, its unforgiven. Its the only loan obligation mandated this way. PLUS Loans are offered to parents. Theyre committed to repay. Theyre for students enrolled at least half time. They must be in eligible undergraduate or post-graduate institutions. Currently, fixed 7.9% interest rates are charged. Theyre from initial disbursement until final loan repayment. On July 1, Stafford rates will double. PLUS Loan rates will increase. Theyll do so unless Congress intervenes. Republicans, most Democrats and Obama agree in principle. In 2012, bipartisan agreement was reached. It was for one year only. Subsidized Stafford Loan rates remained 3.4%. At issue now is what follows. The fate of million of students hangs in the balance. Both parties claim they want rates kept from doubling. Rhetoric differs from policy. Republicans control the House. On May 23, they passed HR 1911: Smarter Solutions for Students Act. Smarter for whom wasnt explained. Not for students for sure. Passage reflects greater debt bondage. Obama and most Democrats rhetorically distanced themselves from Republicans. Doing so differs from what they support. Both parties largely agree. Republicans want interest rates tied to 10-year Treasury note yields + 2.5% and 4.5% for Stafford Loans and PLUS loans respectively. Theyd be capped at 8.5% and 10.5%. In December 2008, the Fed cut its overnight federal funds rate to a range of zero 0.25%. Banks can borrow short-term for virtually nothing. They can keep doing so by borrowing to repay whats owed. At the same time, the Fed pays interest on required reserve balances. It does so for amounts held at Reserve Banks. The Fed is privately owned and controlled. Major Wall Street banks do so. Reserve Banks issue stock shares to members. Its conditional of being part of the system. They cant be sold, traded or pledged for loans. Why bother in todays near-zero rate environment? Banks alone benefit. Dividends are guaranteed. By law, theyre 6% annually. Its sure money. It accrues to bottom line profits. Borrowing for virtually nothing helps maintain them. Republicans wants student loan rates up to 10.5%. Democrats arent much better. Obamas plan may be worse. It offers short-term relief only. Hes comfortable with much higher long-term costs. Republicans want rates capped. Obama excludes doing so. He wants market forces setting them. He wants them based on when loans were issued. Eventually rates will rise. From past experience, they could be well into double digits at some point. With no cap, the skys the limit. In 1979, the fed funds rate averaged 11.2%. In June 1981, it peaked at 20%. Savers were well compensated. Today theyre cheated. Borrowers were severely penalized. They still are via credit cards, other consumer rates, and student loans. Bipartisan complicity wants them more made more onerous. Debt entrapment already is policy. Its long-term or permanent. Obligations cant be erased. Raising interest rates exacerbates todays burden. Regardless of inflation changes, tuition and fees rise annually. Future costs become less affordable. Greater burdens are created. For many students, higher educations out of reach entirely. Worse still is how few good jobs await graduates. Desired careers become unattainable. Low-pay employment makes debt service and loan repayments harder. For many, permanent debt bondage is certain. Theres no escape. Around 38 million borrowers face loan repayment burdens. About 10% default within two years. Many more do thereafter. Doing so means added penalties. Last March, student debt topped $1 trillion. Currently its over $1.1 trillion. It increases by about $3,000 per second. Only home mortgage debt exceeds it. Some economists call it a dangerous bubble. Bursting would impact economic conditions significantly. The student loan crisis grows increasingly worse. Relief is badly needed. Nothing ahead appears promising. Americas ownership society is heartless. Popular interests dont matter. Whats ahead looks grim. Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.His new book is titled How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening. http://www.progressiveradionetwork.com/the-progressive-news-hour/ linkwithin_text=Related Articles: 