Time To Occupy Department Of Education ?

Originally Published on forbes.com on April 23rd,2012

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Alan Collinge is back with another guest post on thestudent loan crisis.  When I reviewed grievances cited by the Occupy movement student loan oppression seemed to be neck and neck with unaffordable health care for top grievance.  I haven’t checked lately, but I suspect it is still up there.

As the Obama Administration and Congress busy themselves cracking the whip on the Secret Service for their misadventures in South America, and on the GSA for wastefulLas Vegas conferences, I can’t help wondering if this is what they meant when they promised us “better government, not more government”. I certainly hope not.  While the various misdeeds alleged in these scandals certainly merit  investigation and  accountability, they pale in comparison to the gross, numerous and systemic derelictions of duty committed by the decision makers in charge of the student loan program at the Department of Education for years.

Consider:  For years and decades, the Department of Education knew that on average, federal student loans were being defaulted at a rate of about 1 in 4.  Yet, the Department never bothered to issue so much as a warning to the public.  In fact, examining year after year of press releases from the Department reveals quite the opposite.  Instead of sounding alarm bells about the default rate, the Department chose to release only pleasant sounding “cohort default rate” data which vastly undercounts the true, lifetime default rate.  This highly misleading metric was parroted by the universities, so that whenever the question came up as prospective students and their families considered which school to attend, they were left thinking that their schools had reasonable default rates- usually in the low, single digits- instead of the true, lifetime rate that would give anyone serious pause.   Yet, it continues to this very day.

Don’t believe me?  Call a recruiter at any college, large or small.  Ask them what their default rate is.  They will tell you it’s low- probably between 5 or 10 percent.  This is a lie. The true, lifetime default rate (i.e. the overall percentage of borrowers defaulting on their loans) is certainly far higher than the 25% that was discovered by the media a year or so ago  and could well be around 40% at this point.  Yet, the lies continue. Where is Congress on this?  Where is the President? This blatant disregard for the public interest is intolerable.

Consider also:  For years and decades, as a part of obligatory loan “entrance counseling” students were never informed that the most fundamental consumer protections that they had every reason to expect were present for student loans, were absent.  This includes standard bankruptcy protections, statutes of limitations, truth in lending laws, state usury laws, and many others.  Do you think this is information that citizens might have wanted to know prior to taking out their loans?  I would say so. Yet nowhere in entrance counseling materials is this vital information found, and the Department of Education looked the other way.  This happened at all schools. For years, and decades.  And yes, these egregious omissions continue to this very day.

I could trot out a laundry list at this point with many similarly troubling items in higher education, but to keep it simple, I will leave it at that, and ask again…Where is Congress on this?  Where is the President?   Oh, that’s right…they’re making themselves look useful by busting young secret servicemen for misdemeanors, and complaining about GSA junkets.  On higher education issues, we find them dickering about interest rates for a small subset of undergraduate student loans.

People aren’t camping out by the thousands and protesting in public spaces across this country because of interest rates on student loans, government conferences, or Secret Servicemen schtooping around in foreign lands.  They (we) are resorting to occupations across the land because of the big stuff, the very big stuff that Congress and the President seem all too happy to ignore, regardless of the damage it is doing to normal, decent citizens. This blatant disregard for the public interest is intolerable.  And if you thought the occupations of last winter were something, you ain’t seen nothing yet as long as this big, bad governance continues on both sides of the aisle, by corrupted servants, both elected, and unelected.

Alan Collinge is founder of StudentLoanJustice.Org , and author of The Student Loan Scam: The Most Oppressive Debt in U.S. History – and How We Can Fight Back

You can follow me on twitter @peterreillycpa.