
Debt Collectors Cashing In on Student Loan Roundup - jseliger
http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html?hpw&pagewanted=all
======
DanielBMarkham
_“It’s the closest thing to debtor prison that there is on this earth,” he
said._

One of the sadder parts of a credit crisis like we're having is that
privileged players, mostly the government and some Credit Card companies, are
angling for more "aggressive" collection abilities.

Let's be honest, if you get yourself 50-100K in debt with a student loan and
you're not making that much, you are in prison. You'll never receive a tax
refund, you won't be able to own property, you can't have brokerage accounts
even with a 2-3K in them for a rainy day, and so on.

There's an equal or greater number of folks who are just as screwed with
various taxes. The government is now talking about preventing people with back
taxes from travelling overseas. Look for folks to start talking about stuff
like this for the students as well.

This is very dark stuff. Even considering all of our freedoms that are getting
trampled by the TSA and other agencies, this idea that we are allowing people
to be indebted for life without any recourse simply because they have some
sort of "special" debt is a terrible new thing for the U.S. I actually think
it's worse than the horrific civil liberties problem we have. People will get
used to having no anonymity and being tracked like a wild animal on a nature
show (sadly), but they'll never get used to being an indentured servant.

When the United States was formed we made a conscious decision that you didn't
punish people for life for poor money choices they made. We didn't have
debtor's prisons. What the the hell are we doing to ourselves?

~~~
yequalsx
I hadn't heard about a travel ban on those who owe back taxes. The articles I
read after looking this up aren't as bad as it appears. The idea was to ban
people who owe more than $50,000 in back taxes from traveling overseas. But
that's how it works, right? One small step at a time. Pick a number that most
people can shrug off because they don't owe this much and then tighten the
screws.

My answer to your last question is slowly marching toward feudalism. It's
distressing to see how things have gotten worse over the last 30 years. I
remember in the 90s that protest leaders were arrested preemptively before an
international meeting in Washington D. C. No one had committed a crime but the
powers that be could not suffer the complaints of the people. In the last
decade protest leaders were preemptively on faux terrorism charges.

When being slowly boiled it is hard to recognize when the point of no return
had occurred.

~~~
DanielBMarkham
Yep, as you point out these violations of principle always seem to happen with
things that are emotionally outraging to folks and always at some extreme
numbers.

Once the new principle has been established, however, then the system can
slowly clamp down until more and more people are involved -- all without any
political input at all. So that's how we end up in a security state and there
really isn't anybody accountable for how we got here. Lots of little changes
around the edges.

We've ended up in a spot where, if you ask a constitutional scholar, they can
explain to you how it all works and makes sense. But if you ask the average
guy on the street, he'll tell you the system is spinning out of control.
There's a serious structural problem when the system has become so byzantine
that it requires 6 years of study to understand it all. And most of those guys
don't believe that it is fair or correct. We seem to have been overwhelmed by
edge cases.

------
FollowSteph3
A common theme I saw across the examples, AND A CAR PAYMENT. If you're in
debt, then the last thing you should be acquiring is another depreciating
asset that costs money. Not only do you have car payments and insurance, but
you also have maintenance, and everything else that goes along with a car.

Also, how many of these same people have tv's with cable? Cell phones with
data plans? Go out for diners, drinks with friends, and so on?

When I graduated I spent 3-4 years paying down my debt as quickly as possible.
I believe I got my first car, and it was for under $1000, when I was in my
late 20's. I just couldn't afford one.

I also noticed at least one example of someone also buying a home with a
$100,000+ debt. That to me is just a bad financial decision. Anything happens
and your in trouble.

Also I did notice a lot of the examples showed degrees where getting a job
would be tougher, or that it wouldn't pay that well compared to the cost of
the debt. I hate to say this, but not all degrees are created equal, and in
today's world you need to evaluate the cost to benefit. Unfortunately for some
degrees, you can only really acquire them if you have disposable income
because there's no way you can make a profit.

In any case, the most common theme I noticed was that they couldn't afford the
debt with their other expenses. But the author rarely discussed what they
were. For me a car is a luxury. Tv is a luxury. Anything beyond the most basic
$20/mth cell is a luxury. Going out for drinks and suppers is a luxury. Just
saying... ;)

~~~
eric_bullington
Are you saying a car is a luxury for everyone? If so, you must have never
lived outside a large city. At least in many suburbs across the US, and in
rural areas, having a car is most definitely _not_ a luxury if you have a job
outside the home, or if you have kids that have to go to school. I've lived in
metropolitan areas in which I didn't have to have a car. I loved it. I hate
the maintenance and care that a car requires. But a car is absolutely
necessary if you live in the country or in many suburbs, where the nearest
public transportation is many, many miles away.

~~~
kaonashi
There are cars that don't require monthly payments. They don't look as nice,
but they still get you from point A to point B.

~~~
omni
You're making an assumption that a person has a base level of net worth with
which they can buy a car outright. Someone who is "in debt" by definition has
a negative net worth, so even a very cheap car ($500 or so?) would be
difficult to pay for with cash. Additionally, cars that cheap usually end up
costing way more when you account for hidden maintenance costs, etc., so a
decent car is probably going to run you $1500 at least.

------
reader5000
It's really a perfect storm of destruction, driven by greed and exploitation.

1\. If you are a young person and aspire to "middle class" employment, in 90%
of cases you need a 4-year degree. The reason this is true is simply because
potential employers will prefer an applicant vetted by a college admissions
council versus a not-vetted candidate. It's a basic signalling arms race.

2\. Many professions such as law and medicine legally require purchase of the
appropriate degree. There is no option for apprenticing or self-study and
sitting the licensing exams without the degree. If you want the profession,
you are required by state law to buy in. And the degree-supplying institutions
have no qualms about "finessing" employment/income statistics (if they even
pretend to collect them) and the like to give the impression entrance in such
professions is like winning the lottery.

So you have two sources of basically inelastic demand for these little sheets
of paper from young people anxious to find a seat in society. If you are a
supplier of such sheets of paper, how do you exploit this situation for
maximum profit? After all, 18 year olds don't have the cash in their pockets
to be defrauded of. The solution, of course, is the federal government.

Make a deal with the federal government that in exchange for risk-free blank
checks from the federal taxpayer, you, the degree-supplier, will graciously
grant these poor 18 year old saps with seals of approval from your fine
academic institution. Once you have have this deal arranged, blow tuition
through the roof, say 500%+ in the past 10 years, with precisely 0 correlation
to actual costs or say competition in some sort of "free market" where firms
are actually exposed to "risk" etc. Congratulations sir, you are now wealthy.
You won America!

Oh, it's not fair to indenture teenagers with mortgage-equivalent debts at
usurious interest rates for a service most first world nations provide for
free or limited expense? Doesn't matter: 'merica.

Oh, it's not constitutional to disallow discharge of these exploitation debts
in bankruptcy? Doesn't matter: 'merica.

I think basically the question is: why aren't we fucking over young people
more? I think if they want a college/professional degree we should make them
sign contracts like "In exchange for this most valuable degree, any money I
ever earn over $30,000 annually for the rest of my life goes straight to Uncle
Sam, and/or the appropriate collections agency".

~~~
wallflower
> 1\. If you are a young person and aspire to "middle class" employment, in
> 90% of cases you need a 4-year degree. The reason this is true is simply...

A while back, someone on HN replied to a comment about college degrees being
almost de rigueur with a link to a lawsuit I never heard of.

<http://en.wikipedia.org/wiki/Griggs_v._Duke_Power_Company>

As it turns out, this is the real reason why 4-year degrees have the power
that they do in the world of white-collar employment.

And that is the beauty of HN, you can learn the facts when sometimes most
people just do conjecture

~~~
rmc
It would be 'interesting' if someone could prove in court that degrees were
racially biased. Then companies wouldn't be able to ask about them.

------
avolcano
God, this is depressing.

Young people putting themselves into crippling debt because college has been
sold as the only way to get good, "real" employment in this country. And you
know what? It's probably true in most of industries and for the vast majority
of people. We've been taught that without college, you'll be stuck in a fast
food job forever. Everyone has to go - high schools have replaced all of their
"technical" classes with "college prep" classes; everything rides on that SAT
score, kids having complete breakdowns over not getting the scholarship they
wanted...

All for colleges that gobble up money for degrees that seem to never
correspond to actual intelligence or skill in a field like they're intended
to.

Ugh.

------
forgottenpaswrd
Those are the problems of giving free money, they will give money to people
that can't pay it back and will inflationate the cost of services for all,
because demand has been artificially expanded.

The law of unintended consequences. You make something to "help" and you
destroy society in the process.

I can't understand that someone who is $55.000 in debt has a SUV, like the
woman in the article. I prefer to live poor but free, in fact I had to in the
past.

In Spain something similar happened with real state. In the bubble I saw banks
giving 300.000 euros to a 18year old with a yet to pay Mercedes at the door.
Those people will pay refinancing their debt. This made houses prices to
skyrocket. Now this banks needs to be "saved".

~~~
eckyptang
Living poor but free summarises my ideals. Ironically, this attitude was
brought on by having to pay back student loan in the UK. You don't get debt
collection here, but they take 9% of your income until you've paid it off.

------
gallerytungsten
One of the key factors driving the student debt bubble is "for profit"
colleges. Many of these schools are scams to begin with, and prey on students
who are desperate for a degree, but probably not qualified to attend college
in the first place.

They max out the debt load of their students, and really don't care if they
graduate or get a job. Congress recently tried to crack down on these
education scammers, but the for profit school lobby blocked any reform.

The sad thing is, degrees from these schools are worse than worthless. When I
see University of Phoenix on a resume, it's pretty much guaranteed to wind up
in the trash. It makes it quite obvious that the holder of this "degree" is
too dumb to get into a real academic program.

~~~
rjbond3rd
> When I see University of Phoenix on a resume... the holder of this "degree"
> is too dumb to get into a real academic program.

Perhaps, or just as likely, she/he had a family situation which prevented a
traditional full-time academic path. Let's not equate personal or economic
circumstances with intelligence.

~~~
tdfx
In most areas, you can work through up to your junior year of college by
attending evening community college classes and transfer to a state school to
finish. There's never a good reason to attending one of these for-profit
schools, except that you bought into their marketing hype and didn't do your
own research.

------
mtoddh
Articles like this make me think that there is going to be a big cultural
shift in America with regards to how people see debt. I'm guessing that when
these young people get older and have kids of their own, that generation may
have a far less cavalier attitude about taking on debt (for housing, college,
etc) than generations before.

~~~
spaghetti
It's happening already. For example I'm totally opposed to taking on any
substantial debt. The only debt I accept in my life is temporary 30-day credit
card debt which is of course payed off in full every month.

I find the massive debt associated with "owning" a home to be ridiculous. It's
like you're renting the home from the bank for 30 years. In exchange for
paying rent every month you get to maintain the home and pay for repairs,
potentially deal with idiotic HOAs, pay property tax which in some cases is
equivalent to renting an apartment for a year and endure the burden of
cleaning the giant thing.

I realize there are circumstances where the above downsides of "owning" a home
are acceptable. For example when one has a family and/or the home is purchased
very early in the housing price bubble cycle. However I'm already planning
alternatives for my family.

~~~
rayiner
There is a difference between mortgage debt and credit card debt or student
loans. You can't just "cash out" your student loan debt by selling the asset.
You can usually do it with a house. Moreover, unlike a car, TV, etc, a house
is typically an appreciating asset not a depreciating one.

In a way, mortgaging a house is like renting the home from the bank, but there
is a key difference: you own any appreciation in the value of the home, not
your landlord. Your mortgage payment is the same every year (and in real terms
goes down over time because more of each payment becomes principal and because
of inflation). Your apartment, meanwhile, gets more expensive every year. My
rent in downtown Chicago has gone up 11% in three years.

Moreover, the mortgage interest and property tax deductions are among the only
tax deductions available to higher-earning singles and couples. Your $2000
rent payment is not deductible, but $1500 of a new $2000 mortgage payment is
deductible. Also, the portion of your rent payment that goes to paying
property taxes is not deductible, but your property taxes are deductible.
Depending on your tax bracket, this can be a lot of money.

Finally, buying a house is one of the only leveraged investments available to
most people. Say you buy a $500k house with $100k down, at a low mortgage rate
of 4.5% per year (mortgage rates are as low as 3.5% today). Say you're in a
high tax bracket (= 33%). If your house appreciates 10% after two years, then
after paying your interest your total return is 29% on your original $100k
investment.

Now all of the math depends on the specifics of your situation. E.g. in
Chicago property is pretty cheap relative to rent, so buying makes sense for
more people than in places where rents are cheap relative to buying. The tax
deductions are also much more valuable for people in higher tax brackets,
particularly people who get hit with the AMT.

As an aside, it's inaccurate to say that all housing is characterized by a
"bubble cycle." Housing prices in major metro areas increase in the long run
because the amount of developable space in these areas remains fixed while
population grows. This is unlike most commodities. The price or gold may
fluctuate based on the discovery of deposits, but nobody is going to discover
more land on Manhattan. This is not a rigid law of nature, of course...
housing prices in Detroit collapsed when the city entered a death spiral of
shrinkage, but something like that happens once a century. Even in this
current housing bubble, most people in established metro areas are still up
from where they were in 2000. The people who are underwater on their mortgages
are mostly people who bought right before the bubble popped, people who
refinanced, or people who bought in unestablished areas.

------
smoyer
For the last four years I've spent most of my disposable income making sure my
kids ended college without debt ... Not only is it a better way to start their
working life, but it also demonstrates an important life lesson. Sometimes
it's worth sacrificing for something important.

Unfortunately, I'm no longer convinced that a college degree is worth the cost
and my hope that they'll recoup the money spent during their working years is
diminishing.

~~~
jmduke
As a current college student, I'm kind of curious about this. Did your
children work part-time? What sort of factors led your decision?

~~~
smoyer
My son is now a senior and he's had a part-time job since high school. He is
responsible for paying for his books, transportation and food. I pay for his
tuition and fees which amounts to around $20K per year.

My daughter is a national merit scholar and received a scholarship that
covered tuition, her room and paid her a stipend. Since she's also farther
from home, I pay for her car, airfare and to feed her plus some miscellaneous
expenses. I think I'll spend between $7500 and $10K per year for her
education.

Both kids went to a private high school, so we (to some degree) got used to
paying tuition before they headed off to college. We've been fortunate to be
able to afford their educations, but we've certainly sacrificed to do it (I
drive a 20 year-old car).

I worry about the kids who graduate (or don't) from college with large amounts
of debt. Not only have we burdened them with a payment plan, but we've taught
them that you should just borrow money for anything that comes along. If there
are two things I'd like my kids to see patterned by their mom and I it's to
save for what you want to buy (instead of financing it) and that it's okay to
_not_ have everything (at least right now).

The mistakes my wife and I made when she graduated from college and we became
DINKs (Dual-Income, No kids) was that we didn't realize how much disposable
income we really had (we should have saved a lot more) and we thought we could
afford everything our parents had accumulated through-out their life-times.

This is probably a longer answer than you want to hear, but our decision to
help them was born out of our experience. My parents paid for my college but
my wife's did not (I actually paid for her last year of her undergrad and we
took out a student loan for her master's degree). We've warned our kids about
the risks of easy credit and showed them how to save for things they want/need
... it wouldn't seem right to also throw them into student loans if there was
any way to avoid it.

As a final note I should also state that I think their work-ethics are
stronger because of their up-bringing. They're going to make pretty good
employees if someone gives them a chance.

A few questions for you:

a) Where are you going to school? b) What are you majoring in? c) Are you
passionate about the jobs you'll be qualified for? d) What percentage of your
future income will be required to service your debt?

I have to admit I'm a bit intrigued by students who frequent HN _and_ have
their curiousities intact. Ciao.

~~~
jmduke
Interesting! If you don't mind me asking, what kind of paths are they pursuing
(ie lib arts v. pre-law/pre-med v. engineering)?

As for me:

I'm attending the College of William and Mary in Virginia (small public
school, primarily liberal arts) and double majoring in CS and Business
(ironically, I came to the College as a prospective English major -- I only
switched less than two years ago, and haven't looked back.)

I had the opportunity this summer to intern for Big Tech and it was literally
the best three months of my life, so I'm confident that programming is the way
to go for me. At the same time, I feel as though I've had a tremendous
advantage by being 'the computer guy' in most of my b-school classes, and I
definitely don't share the stereotypical disdain of managers/business folk.

In terms of debt, I'm going to be graduating with only barely four-figures,
thankfully in part to a) Pell Grants (state-granted need scholarships), b)
merit scholarships, and c) working 20 hrs/week since freshman year. Another
commenter mentioned that it's pointless to work during college because it
barely puts a dent in tuition, but I've found:

\- Working minimum wage at the rec center might not give you that much money,
but I was able -- as a 16-year-old college freshman -- to make at least $20/hr
(much more at this point) through tutoring and basic (talking Wordpress and
CSS here) web design. $20/hr * 20 hrs/wk * ~15 weeks/semester =
$6000/semester. \- Despite the amount of 'get an internship! get a nice
resume!' advice thrown at college kids, very few of them actually follow
through. I've interviewed with more industries than most other undergrads, and
found that universally having two-three solid experiences (ie. not
lifeguarding) is a huge differentiator.

~~~
smoyer
My son studying "Media Effects" and will also get a minor in IST. My daughter
is pre-med with an emphasis on medical research (as opposed to eventually
having a practice).

It sounds like you're in pretty good shape financially as well as being in a
field you love. I suspect you'll gradually learn to share the "distain" of
management and business folk (I've been both) because you'll have plenty of
"Dilbert moments". The good news is that there are plenty of good managers and
business folk too, but they don't create funny comments. Just reserve your
distain for people that earn it, keep that distain to yourself and you'll do
fine.

------
siculars
I'm the biggest America lover out there but I hate to say the answer may
simply be to leave the US. Simply start over somewhere else. There are plenty
of nice places that would love to have you.

~~~
ak217
Perhaps the answer is not to take the debt on in the first place.

~~~
TheAmazingIdiot
Where's the informed consent in regards to any type of student loans?

It would be simple to have bullet points that say things like:

    
    
      1. You cannot get rid of student debt by bankrupcy.
      2. The Govt can garnish wages, social security, and other monies if you dont make regular payments.
      3. etc....
    

But yet, we are sold a bill of goods called "Public University" that has
routinely jacked up rates much higher than inflation. Where's the public
funding making costs cheap? Or, why are private, for-profit colleges protected
from bankruptcy as well?

My mom (in her late 50's), tells me when she was going to university, she
would only have to work during summer a job or 2 to pay for schooling for fall
and spring. If she picked up a job on campus, she'd have spending money for
luxuries and such. That's what public funding did for her. Not so much for
this day and age.

~~~
rjbond3rd
> Where's the informed consent...?

Actually, it exists nowadays. Students (in the US) receiving loans are
required to complete a loan counseling session, which covers the pros, cons
and responsibilities of student debt.

However, this is a relatively recent development that probably wasn't around
for the people in the article.

~~~
king_jester
In my case, my loan "counseling session" was an online form I had to complete
to unlock access to certain features of my online college account software.
You do not get a sit down with someone to tell you about what you are getting
into before you start. Even if you can get a person to talk to, we are seeing
that lots of hand waiving and outright dishonesty is being used to propagate
loan profits.

------
camworld
I understand the problem, and I feel for these people who have the crushing
student loan debt. I left college with a lot of student loan but debt, too. I
struggled but managed to pay it off in less than 5 years. This required
sacrifice, hard work and lot of luck getting jobs.

I made some bad decisions in my 20s and early 30s and ended up with $40K in
credit card debt. I met my wife, got married and had a kid - and in the course
of four years paid off all that debt, saved $50K, bought a house and continue
to save.

It was hard, and required a lot of hard work, coupon clipping and clearance
sales.

Paying off your debts _can_ be done.

~~~
ansgri
Couldn't imagine getting married having any substantial debt at all, sounds
quite irresponsible.

------
nchuhoai
Giving out loans to people who shouldn't get them because they can't repay
them? Sounds familiar

------
steve8918
My college tuition was $1800/year, and it was completely covered by the
scholarships that I received. I just checked, and the funny thing is that
those same scholarships are still at around $2000/yr, but tuition is around
$15k/yr.

If I ever have kids, when they decide to go the college, we will do a simple
cost-benefit analysis to see if it's actually worth it. I would never imagine
that my kids would not go to college, but based on how quickly costs are
rising, and how crazy student debt has become, instead of being laden in debt
until they are 45, it might be better to simply take the $250k (the costs 20
years from now) and try to create a business instead.

------
LogicX
Check if your income makes you eligible for Income-Based repayment:
[http://studentaid.ed.gov/repay-
loans/understand/plans/income...](http://studentaid.ed.gov/repay-
loans/understand/plans/income-based)

------
Wingman4l7
I keep thinking about this quote:

"That’s how you’re paying for school? Student loan scams?"

"Student loans are already a scam. Impossible interest rates, exponential
debt, easy access. It’s a bubble; I’m in it 'till it pops."

— Weeds, S07E07

------
16s
An important fact that many young people may not realize is that federal
student loans cannot be removed by declaring bankruptcy. Most other loan debt
can, but not these loans. These loans will be with you and are your
responsibility to repay for the rest of your life or until they are re-paid in
full.

------
kenster07
This a lesser-known way in which the education system is broken. When
education is based on the quality of your education compared to other young
job seekers, educational inflation will certainly not benefit the average
student who can pay to play the game.

