Truth in lending
By Matt Taibbi is shrill:
In a way, America itself is violating the Truth in Lending Act. It’s cheering millions of high school graduates toward college every year, feeding them into the debt grinder under the banner of increased opportunity, when full disclosure would require admitting that there isn’t a hell of a lot waiting for them on the other side, where the middle class has nearly vanished and full employment is going the way of the dodo.
We’re doing the worst thing people can do: lying to our young. Nobody, not even this president, who was swept to victory in large part by the raw enthusiasm of college kids, has the stones to tell the truth: that a lot of them will end up being pawns in a predatory con game designed to extract the equivalent of home-mortgage commitment from 17-year-olds dreaming of impossible careers as nautical archaeologists or orchestra conductors. One former law student I contacted for this story had a nervous breakdown while struggling to pay off six-figure debt. It wasn’t until he tapped into one of the few growth industries open to young Americans that his outlook brightened. “I got my life back on track by working for a marijuana delivery service in Manhattan,” he says. “I’ve had to compromise who I am . . . because I started down a path that I couldn’t turn away from. Student loans aren’t hope. They’re despair.”
The most interesting revelation in this important and disturbing piece is that, by its own estimates, the government ends up collecting close to or even more than the original principal balance on student loans that default. This is because, unlike almost any other form of debt, student loans can almost never be discharged in bankruptcy, and, when it comes to collecting on its debts:
“Student-loan debt collectors have power that would make a mobster envious” is how Sen. Elizabeth Warren put it. Collectors can garnish everything from wages to tax returns to Social Security payments to, yes, disability checks. Debtors can also be barred from the military, lose professional licenses and suffer other consequences no private lender could possibly throw at a borrower.
The upshot of all this is that the government can essentially lend without fear, because its strong-arm collection powers dictate that one way or another, the money will come back. Even a very high default rate may not dissuade the government from continuing to make mountains of credit available to naive young people.
H/t Anna in PDX.