What follows is my submission to the Consumer Financial Protection Bureau (CFPB) regarding the current state of private student loans in America.
As an student of debt history I am very familiar with many periods in the past where people or groups of people have been subject to financial servitude as a result of some agreement they made. A good example would be early coal mining towns where workers were limited to purchase goods and housing from the company and then were forced to work to pay off those obligations at marginal income.
Today there is still a legalized mechanism that locks entire generations of consumers into financial slavery and it’s through private student loans.
Student loans are perceived as a tool to allow people to receive education and higher learning in an effort to further themselves. many think about it as good debt.
Schools that accept disbursements from private student loans get the benefit of selling students into seats and earning income from the disbursements of the private student loans, regardless if the student eventually receives a degree.
There is also insufficient counseling of students if their career field is even capable of supporting the resulting financial obligations generated by the school.
Because private student loans have minimal solutions for dealing with the resulting debt, unlike government backed student loans, the end result for a growing segment of the population is nearly lifelong debt that may never be paid off in the debtors entire remaining working life.
Today we see more and more people coming to us for free help and advice at GetOutOfDebt.org that have been repaying on their private student loans for decades and have higher balances than when they first graduated. There is almost no escape for people with unmanageable private student loan debt. No reasonable intervention options exist to allow people to adjust the balance they owe or obtain an affordable payment.
If you find yourself owing more than life allows you to repay through no fault of your own, you can’t discharge the debt in bankruptcy, a large collection penalty can be added to the balance due, fees and penalties continue to be added, interest accrues, and a wage garnishment can be placed against you without the lender going to court.
In 2012 in the United States, private student loans place well intentioned people seeking a better life through education into a potential life of financial slavery.
There needs to be real options for people who owe private student loans that allow someone to reduce the balance they owe on an income contingent plan or give people a realistic way to deal with their unmanageable private student loan debt other than the two ways we hear about more and more; suicide and leave the country, forever.
Even the United States Constitution provided that citizens would have the right to seek protection under bankruptcy, but when it comes to the massive balances that can be generated by private student loans there is no legally supported way of dealing with that debt. It seems contrary to the wishes and rights this country was founded on.
The absence of realistic affordable repayment options is an issue the CFPB should tackle on behalf of shackled citizens.