U.S. College Students Owe $1 Trillion to Bankers

Student Loan Sharks

By Frank Whalen -

Student debt, which now totals nearly $1 trillion, rarely gets the attention that its magnitude warrants. Who’s at fault for this looming crisis in America’s education sector? According to a new documentary by two respected filmmakers, the blame lies squarely with Congress.

In Default: The Student Loan Documentary, filmmakers Serge Bakalian and Aurora Meneghello thoroughly tackle the issue.

According to the film, astoundingly, student loans do not have normal consumer safeguards such as bankruptcy protection, refinancing options and a statute of limitations. They also do not adhere to usury laws, fair debt and collections practices, or truth in lending requirements.

When asked who was responsible for such a tragic state of affairs during an Oct. 6 interview with this writer, both filmmakers answered in a word: “Congress.” It comes directly as a result of legislation passed by Congress, which favors even the most predatory lender over young Americans seeking higher education.

The group Student Loan Justice notes that “in 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed, and included in it a change which removed bankruptcy protections from private student loans.”

Ms. Meneghello cited Rep. John Boehner (R-Ohio), current Speaker of the House, as an example of an elected official who is in the pocket of the lending industry.

In a commentary from January 2006, news website Real Clear Politics stated, “The king of the student-loan business is Sallie Mae. It should surprise no one that Sallie Mae is Boehner’s most generous benefactor.” The story adds, “Boehner raised $172,000 from student-loan companies during 2003 and 2004.”

According to published reports, student loans in the U.S. now total nearly $880 billion, and that is increasing by more than $2,800 per second. If you default on a student loan, you stand to lose everything.

Bakalian expanded on this sentiment, saying, “Wages can be garnisheed, as well as Social Security and disability.”

Take the case of Vincent Grande. This 25-year-old Floridian was just weeks away from graduating college when he was killed. His parents were in for even more shock when they learned that not only had they just lost their only son, but they were responsible for $81,000 in student loans. The parents were told: “You co-signed. Too bad.”

Ms. Meneghello heard many similar tales while making Default. She told this reporter, “We talked to borrowers all over the U.S. and heard stories of couples contemplating divorce, homes on the verge of being taken away, and even some people who felt they couldn’t marry or start a family because they would be placing this financial burden on loved ones.”

She hopes this film will inspire some changes in the way things are done.

“I’d like to see bankruptcy protections reinstated for student loans,” she said. “This would give lenders an incentive to negotiate with borrowers. Currently, they know they can go after borrowers, so they feel no need to try to work out a deal with them.”

Ms. Meneghello said that unlike the adversarial approach to negotiating most loans, borrowers often told her their mistake was that they “trusted my financial aid office.” She added: “Students are told that loans for college are good for them because it is an investment in their future. The problem is that people don’t often share their own personal experiences because they invested in themselves and in their dreams and now feel like failures.”

With the importance that society places on college degrees. yet the lack of available jobs, this reporter asked the filmmakers if they felt the truths exposed in Default are another reason to not go to college.

After a brief pause, Bakalian responded: “People who want to better themselves and their situations are being saddled with $100,000 of debt. I’d hate to suggest that, but yes.”

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