Friday, April 13, 2012

Why is there a student debt market? Cancel all student debt.

Despite all the talk of a begrudging recovery, millions of people are still jobless, homeless, health care less and suffer other forms of depravation due to the failure of the 1%’s precious market system. For the top 1%, even a severe crisis like the present one doesn’t harm them too much, they simply shift capital around.  The housing bubble may have burst followed by an ongoing process of deleveraging but there is another bubble that is in dangerous territory and that’s student debt which has now reached the $1 trillion mark.

Why is there such a thing as a student loan market?  What sort of society allows individuals to profit from lending money that they never earned in the first place to members of society who should receive a social service like education?  These social parasites enslave people in debt, earning billions in interest payments just like they do on mortgages while another section of the capitalist class make money harassing and terrorizing people in to repaying that debt during times of capitalist crisis.

$67 billion in student debt is in default and young people are being crushed by the weight of it.  This is just another entrepreneurial opportunity though for other bottom feeders.  There are 23 private debt collection companies contracted to the US Dept. of Education that go after this debt, threatening and basically terrorizing the borrower. These private firms earned $1 billion in commissions last year according to Bloomberg Business Week. 

It turns out that these bounty hunters have been threatening distressed borrowers in order to extract stiffer payments from them even though there are federal programs that allow low earners a certain amount of leniency.  There is, after all, an economic crisis with some 30 million without work. One man, a disabled guy with liver disease and an income of $20,000 a year was told by on of these firms that he’d have his wages garnered if he didn’t pay what they wanted, “You’re dealing with the federal government” they told him.  But because of his low income he was eligible for low payments; this was kept from him.  They’re terrorists these people.

The reason for the aggressive approach is money.  These private contractors, paid by the taxpayer (to the tune of $1 billion last year) can receive as much as 16% of the entire loan amount in commissions if they get the borrower to pay between .75% and 1.25% of the total loan amount monthly. If they get lower than that only get a $150 debt collector fee. Naturally, the bonus commission is what they want, that’s capitalism isn’t it?

I was reading that the interest on loans known as Stafford loans may be doubling.  In response, some 130,000 students have written to Congress asking that they stop that. What doubling the interest on Stafford loans will mean is described in a piece on the Huff Post:
“….now comes news that the interest rate on new subsidized student loans from the federal government, called Stafford loans, are set to double to 6.8% on July 1 if Congress does not prevent the federal program keeping those interest rates low from expiring. If interest rates on new subsidized student loans double, the average student loan borrower on the standard 10-year plan will need to pay $2,800 more over the life of the loan, according to the U.S. Public Interest Research Group, cited by Time. Students who borrow the maximum $23,000 will have to pay $5,000 more under the 10-year plan -- and $11,000 more under the 20-year plan.”

A study a few months ago found that almost 50% of Americans were unable to come up with $2,000 in 30 days if an unexpected emergency arose; this is a staggering finding and reflects the extreme crisis in US society  . Half our country is living one paycheck away from financial disaster and people are buying food with credit cards. The mass media which is owned by the 1% and perhaps the most censored and controlled mass media of all the advanced capitalist countries does not reveal the depth of the crisis in real terms and as this situation exists, they are continuing to cut more and more sowing the seeds for further crises.

Meanwhile, the JP Morgan Chase CEO made $23 million last year,“843 times the median household income and pays his Chase customers 0.01 percent on their savings.”, as 2.7 million foreclosures were filed in the US.

One thing is certain and that is the student loan market is one giant bubble.  We demand the cancellation of all student debt.  Our task must be to wrest the management of the economy from the clique, the few thousand people that control and direct it. Society needs new managers.

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