The Student Loan Mess

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THE STUDENT LOAN MESS….The student loan market is a mess, and it’s mainly a mess because the federal student loan program is woefully inadequate. Natalie Hickey learned the hard way:

Hickey got caught in an increasingly common trap in the nation’s $85-billion student loan market. She borrowed heavily, presuming that all her debt was part of the federal student loan program.

But most of the money she borrowed was actually in private loans, the fastest-growing segment of the student loan market….Whereas federally guaranteed loans have fixed interest rates, currently either 6% or 6.8%, private loans are more like credit card debt. Interest rates aren’t fixed and often run 15% or more, not counting fees.

….Hickey ended up with $20,000 in low-interest federally guaranteed loans issued by Sallie Mae, and $120,000 in higher-interest private loans issued by Sallie Mae. Hickey said no one explained the difference to her.

There’s really no excuse for this. At the very least disclosure practices need to be tightened up, but what really needs to happen is a substantial increase in the current limit for federal student loans. It’s not even close to the amount needed to get through school these days.

What’s more, there’s really no reason that the feds should be guaranteeing private loans instead of just originating the loans themselves anyway. Bank origination may have been the only practical option 40 years ago, but that ceased to be the case long ago, and the private student loan market has since become a cesspool of graft, corruption, and abusive practices. Today, federal origination is cheaper and more efficient for both taxpayers and students, and there’s really no reason why the Direct Loan Program shouldn’t be expanded to the point of putting the private market out of business.

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THE TRUTH IS...

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And the truth is, going into the final 4 days of the year we still needed to raise $TK to hit our $350,000 goal and start 2021 on track. It's nerve-wracking, wondering if the big spike we normally see at the end of December is going to be another thing that doesn't go as planned in 2020, or worse, if, now that Donald Trump is set to leave the White House (for longer than a taxpayer-funded golf trip to a property he owns), folks might be pulling back from fighting for the truth and a democracy and think the hard work is done.

It's not, and if you can right now, please consider a year-end donation to support our team's fearless nonprofit journalism so we can close that big fundraising gap and finish the year strong, ready for all that's ahead in 2021. Whether you can give $5 or $500, it all matters in keeping us charging hard, and we'd be grateful.

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