Predatory Student Loans in Christie’s New Jersey

POSTED BY MARTIN KICH

In an article sponsored jointly by ProPublica and the New York Times, Annie Waldman has reported the following:

“New Jersey’s loans, which currently total $1.9 billion, are unlike those of any other government lending program for students in the country. They come with extraordinarily stringent rules that can easily lead to financial ruin. Repayments cannot be adjusted based on income, and borrowers who are unemployed or facing other financial hardships are given few breaks.

“New Jersey’s loans also carry higher interest rates than similar federal programs. Most significantly, the loans come with a cudgel that even the most predatory for-profit players cannot wield: the power of the state.

“New Jersey can garnish wages, rescind state income tax refunds, revoke professional licenses, even take away lottery winnings—all without having to get court approval. ‘It’s state-sanctioned loan sharking,’ said Daniel Frischberg, a bankruptcy lawyer. ‘The New Jersey program is set up so that you fail.’

“The authority has become even more aggressive in recent years. Interviews with dozens of borrowers, who were among the tens of thousands who have turned to the program, show how the loans have unraveled lives. . . .

“One reason for the aggressive tactics is that the state depends on Wall Street investors to finance student loans through tax-exempt bonds and needs to satisfy those investors by keeping losses to a minimum.

“Loan revenues also cover about half of the agency’s administrative budget. In 2010, the agency filed fewer than 100 suits against borrowers and their families. Last year, it filed over 1,600 suits.  . . .

“The cases are handled by debt collectors, who can tack on another 30 percent in fees on top of the outstanding debt.

“Marcia Karrow, the authority’s chief of staff, said, ‘the vast majority of these borrowers are happy with the program.’ She added that New Jersey’s loans had ‘some of the lowest default rates’ in the country. But when asked to produce the annual default rates, the agency sent ProPublica and the Times data only for students with strong credit scores, making it impossible to calculate the overall rate. “

 

I cannot help but wonder if these “satisfied borrowers” are comparable to the “satisfied” students who enrolled in Trump University. This must be what Trump means when he talks about the “silent majority.”

Admittedly, those are cheap shots, but Christie has been obsequiously pursuing the v-p slot on the ticket with Trump; so he has very willingly reduced himself to a target for cheap shots.

More broadly, these kinds of abuses of students trying to get a college degree have become all too prevalent. The Far Right has long touted privatization as an efficient and cost-effective alternative to public agencies. It typically has proven to be neither, but when it has lived up to that claim, it has very often done so by being exploitive of the very people whom it is ostensibly intended to serve better.

Indeed, the Far Right has long focused on the federal spending on the “takers,” but no one has ever tallied up all of the federal and state dollars going directly and indirectly to corporations, both U.S.- and foreign-based. Most budgets are not decreasing; even in Louisiana and Kansas, the budgets have not been decreasing as fast as the state revenue. So the money is going somewhere, and if the allocations for public employees have become much smaller as a percentage of the budgets, that means that that tax revenue and in many cases probably more is going into some corporate account.

Think about this: every time the Defense budget is cut, everyone starts talking about the need to reduce personnel or benefits to servicemen and –women or to veterans. But almost no one ever asks how much of the Defense budget is actually allocated to personnel costs. But it is easy to look up: about one quarter of the base budget goes to personnel costs, civilian and military, and if one includes set asides for veterans’ pensions and benefits, the percentage rises to one-third of the budget. There is a very comparable reality in higher education, where administrators often emphasize the fiscal constraints or crises caused by personnel costs—without conveying the additional information that the salaries and benefits of those actually doing the teaching typically constitute about one-third of those personnel costs and one-fifth to one-quarter of the total institutional budget.

Of course, the base budget for Defense has not included allocations for the wars in Afghanistan and Iraq–very little if any of which would have gone to personnel costs, which were already covered in the base budget, except that in both theaters there were at least as many “civilian contractors,” or corporate-provided mercenaries, as there were soldiers, sailors, and airmen. I have no idea how military operations, including drone strikes, in places such as Somalia, Yemen, and Central Africa, are being budgeted, but I would be very surprised if those costs are coming out of the base budget for Defense. And the base budget for Defense also does not include the allocations for Homeland Security, which of course has included a great deal of military intelligence gathering and other clandestine operations overseas, as well as such things as the militarization of our police forces with “military surplus” equipment.

One wonders what President Eisenhower would have to say about today’s “military-industrial complex,” which surely makes what was occurring in the 1950s look like a fairly simple and fairly transparent arrangement.

If our political discourse is ever going to move beyond contending talking points, we need much more clarity about how our national and state priorities are being defined budgetarily. And perhaps more of us might then agree that the definition of the “takers” ought to be reconsidered and revised.

 

Annie Waldman’s complete article is available at: https://www.propublica.org/article/new-jerseys-student-loan-program-is-state-sanctioned-loan-sharking?utm.

 

 

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