Students Protest Debt as Student Loan Debt Collectors Make a Billion
36 students arrested at headquarters of
student loan provider Sallie Mae
Dozens of students were arrested this afternoon at the Sallie Mae headquarters demanding forgiveness of student loans. The protest comes after recent reports show $1 trillion in student debt burdening borrowers.
The high amount of debt is good news for debt collectors, however. A Bloomberg report shows that debt collectors made nearly $1 billion in commissions from aggressivley pursued student loan collection efforts.
“Student-loan debt collectors have power that would make a mobster envious,” said Harvard Law Professor Elizabeth Warren.
About three dozen student activists were arrested Monday during a protest outside the Washington headquarters of student loan provider Sallie Mae, according to participants.
The demonstration was part of an annual legislative conference by the U.S. Students Association, which ended Monday with a “Lobby Day.” That event usually consists of a march to Capitol Hill and meetings with congressional representatives, but because of the outcry over student loans and the challenges of student debt, the protest at Sallie Mae was added to the schedule.
Debt collection is intensifying for student debtors as the U.S. Department of Education ramps up its collection efforts
The Education Department has contracted a copious amount of debt-collection companies in response to the $67 billion of student loans in default, according to Bloomberg.
The government contracted debt collection agencies and helped the Education Department recover $11.3 billion last year. Government contracts and Education Department data show that debt collectors made about $1 billion in commissions for the recovered $11.3 billion. [...]
“Student-loan debt collectors have power that would make a mobster envious,” Harvard Law Professor Elizabeth Warren, who helped establish the Consumer Financial Protection Bureau and is now running for a U.S. Senate seat from Massachusetts, told Bloomberg.
Unless Congress takes action, college students and graduates might have to pay thousands of extra dollars in loan repayment.
As a college student without a steady income, this is highly concerning. President Obama put it bluntly in a recent speech at the University of Michigan: “That would not be good for you.”
It’s true—it wouldn’t.
Congress initially cut student loan interest rates in 2007, when they voted to chop the subsidized Stafford loan rate in half—from 6.8 percent to the current 3.4 percent. But these provisions were only put into place for five years and will expire on July 1, causing the loan rates to double to the original rate of 6.8 percent.
While the interest rate has been lower for the past five years, total student loan debt carried by Americans has skyrocketed to new heights, surpassing credit card debt for the first time in American history and, by some estimates, already topping $1 trillion. According to the Department of Education, six years is now an acceptable amount of time to finish an undergraduate degree, meaning a potential two more years of loans for some student borrowers.
With the kind of increase in student debt we’ve seen recently, today’s graduates are taking drastic measures to repay their loans. A simple Google search of “student loan debt” reveals tales and statistics that seem like folklore. One graduate was allegedly willing to sell a kidney to pay off his student loan debt so he could start his professional life with a clean slate. Others have turned to services like Seeking Arrangement to find well-off people willing to help pay their loans in exchange for companionship.
Yet some members of Congress don’t seem too concerned about students, but rather with how the interest rates are affecting the federal government. At a recent Senate Health, Education, Labor and Pensions Committee hearing on Innovations in College Affordability, Sen. Mike Enzi (R, Wyo.) said that if Congress doesn’t increase the loan rate it will cost the government $2.4 billion dollars.