The Federal Reserve has authorized banks to create brand new electronic accounting entry money out of thin air every time they make a new loan. Banks can create enormous amounts of this debt-money and pour it into any market. The banks fueled the real estate bubble with easy mortgage money. They've been doing the same thing with the education market. But it's far worse, because there is no house to act as collateral for the loans. Instead the industry has convinced Congress to make student loans non-dischargable in bankruptcy court, turning student borrowers into modern day indentured servants. Tuition will keep expanding like a sponge, soaking up all this easy bank-created debt-money.
"The higher education bubble is a speculative boom and bust phenomenon in the field of higher education. According to the theory, while college tuition payments are rising, the rate of return of a college degree is decreasing. . . . College students who fail to find employment at the level needed to pay back their loans in a reasonable amount of time have been compared to the debtors under sub-prime mortgages whose homes are worth less than what is owed to the bank."
"In 1987, U.S. Secretary of Education William Bennett first suggested that the availability of loans may in fact be fueling an increase in tuition prices and an education bubble. This "Bennett hypothesis" claims that readily available loans allow schools to increase tuition prices without regard to demand elasticity."
Congress Must Enact Changes to the Student Loan Industry
Please call the offices of the following members of Congress and request that basic consumer protection laws be restored to the student loan industry.
Senator Merkley 503-326-3386
Senator Wyden 503-326-7525
Representative Blumenauer 503-231-2300
Representative Schrader 503-557-1324
● Restore basic consumer protection laws to the student loan industry including:
- Restore dischargeability of both federal and private student loans in bankruptcy proceedings.
- Restore statutes of limitations to student loan collections.
- Restore truth-in-lending laws to student loans.
- Restore fair debt collection practices to student loans.
- Restore refinancing rights to student loans.
- Restore protection of state usury laws to student loans.
● End garnishment without a court order of wage, social security, and disability income of defaulted student loan borrowers.
● End suspension of state professional licenses of defaulted student loan borrowers.
● End termination from public employment of defaulted student loan borrowers.
● Regulate and reduce arbitrary penalties and collection fees attached to student loan debt.
● A comprehensive plan to forgive student loan debt.
● A higher education system based on grants and scholarships for everyone.