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December 10, 2007 [ More archived home pages here ]

On Student Loan Terms


The above image is, The University of Illinois Illini Union

Today's song is Against All Odds by Phil Collins, released in 1984.

Back in June, I wrote a few short comments about debacles in the Student Loan Business. Now today, another article appeared to expose the underlying problems in that business.

Student loans are a very good idea. The way they are implemented is not so good. Basically, if an adult can walk into a higher education school, they can apply and likely receive a student loan. The school takes care of the paperwork. A bank loans the money and either the person applying for the loan is obligated for repayment or the public is on the hook for it, because the loans are backed by public money if there is a default.

In the case of a default, neither the school nor the bank is at risk. That's part of the problem. They make their money either way and assume none of the risk.

Twice in my life I attended court sessions in Cook County as an observer that dealt with student loan default cases. In both times I watched about 50 people each time appear before a judge and basically say they couldn't afford their loan payments. For all who appeared except in one case, the judge always left the mark on that person's record as defaulting on the loan. Then the public guaranteed account was debit the funds to pay for the loan. The judge had no power to assign a cost to the bank for making the loan, nor to the school for accepting a student that likely would not finish the courses nor could afford to pay for them. As I said earlier, the school and bank got off free for their erroneous (greedy?) contributions to the problem.

Think about it. How many court sessions are there every month in the nation that deal with student loan defaults. It must be quite a lot.

I think every American deserves a chance to better themselves. Receiving a higher education is one such way to better yourself. I think the school should help such people when they appear to be failing the class or not attending regularly. The school is in the position to know how to assess risk of students being able to complete the classes they sign up for.

The bank needs to be at-risk in the transaction too. Maybe it would be a more fair system if the schools and banks had a credit rating for their default student loan experience. Maybe they need to take a hit on default loans and not receive a free pass. If they are not at risk, they make bad financial decisions at times because they know the public is the one who ends up paying on the defaulted loans.

I watched many of those former students who lost the court cases leave the room dejected and upset because they felt the system promised them a dream and instead delivered a financial nightmare to them. That is not what the student loan program was designed to do. I'm glad that some legislative corrective action and more attention is being brought to bear on the processors of student loans.

Students should be learning beneficial lessons, not the hard-knocks of life lessons via the current student loan business practices that take advantage of some of the applicants.

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Saturday night, Sherry and I attended the Twin Oaks Toastmasters joyful holiday party at Tanis and Alan Brown's wonderful home in San Marcos, CA.

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My friend, Rick, just returned from a trip to New Zealand.

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Broken hearts can be fatal. And in some cases, near-fatal. Here's my impression of the experience.

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The Commodore 64 is still loved.

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CompUSA is closing its doors.

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My favorite company is wealthy. They open beautiful stores and provide good services and products to their customers. One of my friends works at one of their stores here in San Diego. He says about 75% of the customers purchasing a new computer from that store are switchers.

Don


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