Student Loans, They Seem Like A Good Idea (at the time)
This is the time of year when every day seems to bring new graduation invitations for the class of 2006 in the mail. I began to wonder what it must be like to finally leave school with all that energy and excitement only to find out that you are now going to spend years paying off those student loans that seemed like such a good idea at the time.
The Centre for Economic and Policy Research reported recently that almost 65% of all students use loans to pay for their education. With many students racking up debts of $90,000 or more you start to wonder what it must be like to live under that type of pressure. How do they manage to pay off these loans and still have a life? There are many areas outside Southern California where you could buy a very nice home for that amount of money.
Do we really need to put the youth of today, our future, under this type of pressure all in the name of PROFIT. The laws governing Student Loans are some of the most powerful laws in the land. Our leaders have insured that it is a MOST profitable business for the lenders. These lenders have more power than all other lenders. Credit card companies and mortgage lenders cannot do what Congress has allowed the student loan providers to do.
Sallie Mae is the largest student loan provider in the country. They employ over 10,000 people across a number of states. Since they became a public company trading on the stock markets, their shares have gone through the roof. Let me outline why this is such a wonderful business for the likes of Sallie Mae. The loans they give out are all guaranteed by the government (sorry taxpayer), so whatever happens they get their money. This means, unlike a normal lender who has to calculate risk against reward before agreeing to give out a loan, for these providers there is NO risk, it's all reward.
It does not end there. Should a student default on a loan (almost 25% do), the provider then gets paid by the government (sorry taxpayer) and they are now allowed to send that debt to a collection agency. It's normal for the loan to double in size at this point. Sallie Mae owns a number of these collection agencies, the law allows that too. They now have the power to garnish your wages without having to go to court. They can also garnish your social security money, something no other lender can do. Sallie Mae is allowed under these laws to keep 25% of all the money recovered from the collection agency (that they own, nice business if you can get it). Where I come from this would be called Legalized Mugging or Jobs for the Boys.
Most of these students can forget about getting married or buying a home. There main concern is “where's next months payment coming from”. Maybe it's time we showed a little more compassion to these students, after all they are our future.
Have an opinion or a question you would like me to answer, then write me! Carl@freelocalpapers.com
About the Author
Carl Hampton is the author of the best selling book “From Credit Despair to Credit Millionaire”. His financial column “Your Money Matter” is now syndicated in a large number of newspapers with a readership of over 4 million readers per week.
He has more than 31 years in Real Estate, Banking and Insurance. He purchased his first investment property at the age of 18 for cash with money he had made from selling household products door to door. Before he had reached the age of 21 (1977) he had purchased more than 100 investment properties with a positive cash flow of more than $5,000 per month.
Carl has built and sold a number of very successful companies over the years including an Insurance Company that he built from the ground up by sending out salesman in the lower income areas. The salesmen who were all locals would collect the premiums weekly from their clients. For most of these families it was the only way they could afford home or life insurance. By the time he sold the company there were more than 3000 agents with an annual income of over 27 million dollars a year. He retired in 1996 at the age of 40 but after five years he returned full time to his first love Real Estate investments. In 2001 using the same successful formula he launched the Road to Riches program helping thousands of clients from all over the county reach their financial dreams.
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