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Archive for September 29th, 2016

student-loans-2

Nowadays, 43 million Americans owe student loans averaging $35,000. That’s because he or she who has the gold makes the rules in the US federal government.

Twenty years ago, the US Congress privatized the student loan program, which was supposed to give more Americans access to higher education.

In its place, lawmakers created another profit center for Wall Street and a system of college finance that has fed the nation’s cycle of inequality. Step by step, Congress has enacted one law after another to make student debt the worst kind of debt for Americans – and the best kind for banks and debt collectors.

Today, just about everyone involved in the student loan industry makes money off students – the banks, private investors, even the federal government.

For example, student loans made Albert Lord rich. Lord was the CEO who built Sallie Mae into a financial colossus through fees, interest and commissions on billions of dollars of federally guaranteed student loans. For delivering handsome profits to investors, Lord received pay and stock worth hundreds of millions of dollars. He also owns his own private golf course, thanks to everybody else’s student loan payments.

Student Loans

Then we can’t forget the bondholders. That’s right. Like mortgage backed bonds, there are hundreds of billions of dollars of student loan backed bonds. Who owns them? Not the folks who owe student loans. Wall Street investment banks, hedge funds and other assorted super-rich investors own them. When student loan borrowers make payments on their student loans, part of that monthly payment goes to the investors, who, coincidentally, have an incentive to keep pushing government to enact more laws and regulations to ensure that more students take out more debt, and cannot go bankrupt on their current debt.

In other words, the legal structure of student loans was changed back in the 1990’s to ensure that rich investors could suck millions of college students dry. Student loans have become simply another plot to redistribute income from working Americans to the rich.

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