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The Federal Government’s Predatory Student Loan Program

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Author: dianeravitch

Politico reports on the federal government’s very costly student loan program. Is it predatory lending? How does it increase access to make the cost so high? How can the Obama talk about expanding access and increasing college graduation rates while charging usurious rates? What you say matters less than what you do.

DO PARENT PLUS LOANS COME WITH A BIG MINUS? The fast-growing federal program known as Parent PLUS [ ] now has 3.2 million borrowers who have racked up $65 billion in debt helping their kids go to school. The loans have much in common with the regular student loans that have created a national debt crisis and a 2016 campaign issue, but PLUS has much higher interest rates and fees, and far fewer opportunities for loan forgiveness or reductions, writes Michael Grunwald for POLITICO’s The Agenda. The PLUS program, which includes similar loans to graduate students, is the most profitable of the 120 or so federal lending programs.

– According to the White House budget office, the expected recovery rate for defaulted Parent PLUS loans is a remarkable 106 percent, a testament to Uncle Sam’s unique power as a collection agency. Overall, the program is expected to return $1.23 on every dollar it lends this year, thanks to its relatively high interest rates and minimal opportunities for debt relief. When I spoke to White House education adviser Roberto Rodriguez about this conundrum, he emphasized that President Barack Obama has crusaded to make America the world’s leader in access to higher education. But he also said he’s concerned that too many struggling parents are getting in too deep. When I asked him if the Education Department was running a predatory lending program, he didn’t say no. “That’s the heart of the matter,” Rodriguez said. “You want to expand access and choice, but you also want to make sure families can afford these loans.”

– Parent PLUS was created in 1980 to provide small loans to help reasonably well-off families finance an undergraduate education. But it has evolved to providing almost any borrower with almost unlimited cash to attend any school with almost no regard to their ability to repay. “You feel so guilty that you haven’t done enough for your kid, and they make it so easy to get the loans,” said Elizabeth Hill, a 57-year-old property appraiser from the Boston suburbs with more than $30,000 in PLUS debt. “Then they’ve got you by the cojones. It’s like the Sopranos, except it’s the government.”

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