Universities built palaces and financiers made fortunes in part through a lie: that student loans can't be discharged in bankruptcy. But a series of court cases is helping unravel the scam
I beat a private student loan holder in court for something like $30,000. The loan had originally been with one of the big providers, but they later sold it off to basically a collection agency. That agency eventually sued me, and since I didn't have any money anyway, I decided to fight it in court rather than just submit.
Then I did standard discovery to ask for proof that I owed the Plaintiff the money. As it turns out, there was basically no paper trail of the loan origination, just a photocopy of a ledger that couldn't possibly be authenticated by the new note holder. Still, the collection agency Plaintiff persisted, until I threatened to counter-sue them for malicious prosecution after I beat them on the debt collection action. I still had to show up in court on the day of the trial, only to find out the Plaintiff had dismissed the case at close of business the night before.
Other victims: People like me and my wife. It was clear to us 15 years ago that something nefarious was going on, but we paid sticker price and put 4 kids through college. Prices just kept rising. (Grants and reasonable loans were not an option). Thankfully, my 4th child chose a state university and spared us more brutality.
So we worked. And worked. And fed the beast.
So, how many years of retirement did we lose in the scam? I'd estimate at least 5.
But we're still fortunate. Our kids got a fresh start, debt free. I feel terrible for others. University leaders don't. They are all pigs.
I hope this blows up spectacularly in the face of the Educational Industrial Complex. The whole thing stinks - from the absurd tuition expense to the thought police that troll the campuses these days.
I did my schooling in Canada over two decades ago when it was still reasonable. I'd never participate in this scam today. This is one of the myriad reasons why I am glad to not have kids of my own and fear for the futures of those who are here. Its such an injustice.
There is a very good reason the Founders called for uniform bankruptcy laws ahead of the power to raise an army and declare war in the US Constitution. This student loan scam is precisely what they were worried about. Regardless of the outcome of the various cases now winding their way through the courts, the bigger truth is that one line of federal code, 11 USC 523(a)(8), must be repealed, and hopefully it will be soon.
Student loans should be treated in exactly the same manner as all other loans in bankruptcy proceedings.
The only problem with just returning bankruptcy at this late date is that it will likely compel tens of millions of people to file (around 80% of all borrowers were never going to be able to repay their loans even before the pandemic).
Not sure if we want to force 20+ million people into bankruptcy for the crime of going to college. Probably better to just cancel the damned loans at this point (this could be done largely without needing any money from Treasury, and without adding anything to the national debt). Take the lending system to the bath, drown it in the tub.
The federal government has also played a role in the obscene cost of college as it has subsidized the cost, which invariably caused tuition to rise. Tuition now funds things totally unrelated to the schools mission such as plush spas and other exotica to keep the kids happy and there for the long haul. Thus the cost of education has grown at about three times the rate of inflation.
Shes from Florida, which (at the time of her application to colleges) offered the most generous state scholarship in the country - 100% of tuition if you have a ~3.5GPA and ~28 ACT, neither particularly high. Or 75% tuition (100% to community college) if you have a ~3.0 and like 25 ACT. And the University of Florida is one of the top ranked public schools in the country.
Are college ridiculously overpriced? Definitely! Are student loans predatory and, especially for government backed loans too high of interest rate? For sure! Did the girl in this article have to go to college in NYC, when she could have gone somewhere in Florida for free?
Similiar to the story in the WSJ about the people in debt from the Columbia masters in film. "No shit, why did you choose to go there, for that degree?"
This is one of the subjects about which your reporting and writing have been absolutely fantastic, but in this case the really big hat tip goes to Victor Juhasz for that utterly hilarious illustration.
I literally felt sick to my stomach as I read this article. I'm so glad I was young back in the 1970s instead of today.
Colleges like every other institution in our country have turned into a money-grubbing, self-serving scam. When I attended an ivy league college fifty years ago, tuition, room and board and fees cost less than $4,000 a year. Now tuition costs twenty times as much -- a whopping $80,000 a year. Yes. I know the general cost of living has risen during the past half century. But it merely tripled. It didn't metastasize the way college tuition did.
And what exactly do you get in return for those inflated dollars ? Many on the faculty are poorly paid adjuncts, barely surviving on $3,000 per course. Much of the money is siphoned off for the bloated administrators including the woke mobsters who oversee the useless and dangerous programs that promote CRT, transgenderism, and other horrors.
Gotta love it. Unlimited lending with no underwriting standards, generally to people who are unemployed. What could go wrong? The NY Fed did a study a couple years back that showed that for every additional dollar of student loans made available, colleges raised tuition and costs over $.70.
Thank you for bringing this subject to light. Beneath the level on which you're reporting are far more dastardly deeds than those you are recounting, including government's willingness to throw students and their families under the school bus. The thicket began growing in the 1970s and will be worse tomorrow than it is today.
Indisputable is that the cost of post-high school education has soared at many times the general rate of inflation. Since 1995, the CPI has risen 114%; college and university costs have fattened by more than 498%. Going back to 1969, my senior year, public institutions have increased in cost by 3,009% versus 559% rise in CPI. The reason it grew so much faster than other costs is simple supply and demand.
In the long-term struggle between proponents of equal opportunity and proponents of equal outcomes, the "outcomes" side has scored a knockout punch. We acknowledged in the 1960s that education was the great leveler, and saw that people with college degrees earned more than those without. The situation was misunderstood by government, which concluded that if everyone had a college degree then everyone would earn higher wages. Wrong conclusion.
The complex economy of the U.S. needs few people with college degrees and always has. If only one out of 50 employees needed a college degree to perform his work, awarding college degrees to the other 49 wouldn't change the education needed to perform their jobs. The rapid technical advances of the last 150 years have done away with most job, meaning that where once 50 people worked to execute a function in 1870, today only one or two are required. This is nowhere more evident than in agriculture: In 1870, 75% of the US Labor Force was engaged in farming and ranching. Today, with vastly improved crop yields, sturdier and more capable machinery, and greater reliance on technology, less than two percent of the US Labor Force is required the feed the nation and much of the rest of the world. Perhaps two people on each family farm needed to know how to read, write and perform basic arithmetic functions in 1870. Today's industrial farmers and ranchers need college degrees, but there are very few of them. Fewer as a percentage of the workforce than needed basic literacy in the past.
Having failed to understand the role of education in the labor force government set about to get everybody a college degree, and poured more money into higher education. With more money available to pay for the same product, prices went up. As prices rose, government poured more money into the pot. We still need most most of the engineers graduating college, but that's a relatively low number. What we don't need in the economy is more intersectional aromatherapists. We may need them culturally, but if it is necessary to cross a stream I want an engineer on the team, and we'll advertise among the baristas in Starbucks to get a PhD aromatherapist when actually needed.
Meanwhile, we have a shortage of plumbers, electricians, carpenters, surveyors and others who can keep the lights on. Social shaming of people who skip college is both decadent and wrong.
I beat a private student loan holder in court for something like $30,000. The loan had originally been with one of the big providers, but they later sold it off to basically a collection agency. That agency eventually sued me, and since I didn't have any money anyway, I decided to fight it in court rather than just submit.
Then I did standard discovery to ask for proof that I owed the Plaintiff the money. As it turns out, there was basically no paper trail of the loan origination, just a photocopy of a ledger that couldn't possibly be authenticated by the new note holder. Still, the collection agency Plaintiff persisted, until I threatened to counter-sue them for malicious prosecution after I beat them on the debt collection action. I still had to show up in court on the day of the trial, only to find out the Plaintiff had dismissed the case at close of business the night before.
So yeah, you can beat them.
" Gray, essentially, was being sued by a tranche of student loan debt, a little like being sued by the coach section of an airline flight."
I've worked in finance my entire life and I can verify that that line is pure unmitigated genius.
What a crime.
Other victims: People like me and my wife. It was clear to us 15 years ago that something nefarious was going on, but we paid sticker price and put 4 kids through college. Prices just kept rising. (Grants and reasonable loans were not an option). Thankfully, my 4th child chose a state university and spared us more brutality.
So we worked. And worked. And fed the beast.
So, how many years of retirement did we lose in the scam? I'd estimate at least 5.
But we're still fortunate. Our kids got a fresh start, debt free. I feel terrible for others. University leaders don't. They are all pigs.
Pure Matt Taibbi gold right here. Awesome stuff.
I hope this blows up spectacularly in the face of the Educational Industrial Complex. The whole thing stinks - from the absurd tuition expense to the thought police that troll the campuses these days.
I did my schooling in Canada over two decades ago when it was still reasonable. I'd never participate in this scam today. This is one of the myriad reasons why I am glad to not have kids of my own and fear for the futures of those who are here. Its such an injustice.
Perhaps the educational institutions should be financing the loans. What kind of degree programs would vanish in that case?
Great article, thank you for bringing attention to yet another “venerable American institution” that has been corrupted beyond belief.
There is a very good reason the Founders called for uniform bankruptcy laws ahead of the power to raise an army and declare war in the US Constitution. This student loan scam is precisely what they were worried about. Regardless of the outcome of the various cases now winding their way through the courts, the bigger truth is that one line of federal code, 11 USC 523(a)(8), must be repealed, and hopefully it will be soon.
Student loans should be treated in exactly the same manner as all other loans in bankruptcy proceedings.
The only problem with just returning bankruptcy at this late date is that it will likely compel tens of millions of people to file (around 80% of all borrowers were never going to be able to repay their loans even before the pandemic).
Not sure if we want to force 20+ million people into bankruptcy for the crime of going to college. Probably better to just cancel the damned loans at this point (this could be done largely without needing any money from Treasury, and without adding anything to the national debt). Take the lending system to the bath, drown it in the tub.
Time for the Student Loan Jubilee.
Change.Org/CancelStudentLoans
Hell yes, Taibbi. This was gutting and beautifully written. My favorite thing you've done on Substack. Kudos.
Who controls educational institutions? It's not conservatives.
The federal government has also played a role in the obscene cost of college as it has subsidized the cost, which invariably caused tuition to rise. Tuition now funds things totally unrelated to the schools mission such as plush spas and other exotica to keep the kids happy and there for the long haul. Thus the cost of education has grown at about three times the rate of inflation.
Shes from Florida, which (at the time of her application to colleges) offered the most generous state scholarship in the country - 100% of tuition if you have a ~3.5GPA and ~28 ACT, neither particularly high. Or 75% tuition (100% to community college) if you have a ~3.0 and like 25 ACT. And the University of Florida is one of the top ranked public schools in the country.
Are college ridiculously overpriced? Definitely! Are student loans predatory and, especially for government backed loans too high of interest rate? For sure! Did the girl in this article have to go to college in NYC, when she could have gone somewhere in Florida for free?
Similiar to the story in the WSJ about the people in debt from the Columbia masters in film. "No shit, why did you choose to go there, for that degree?"
This is one of the subjects about which your reporting and writing have been absolutely fantastic, but in this case the really big hat tip goes to Victor Juhasz for that utterly hilarious illustration.
I literally felt sick to my stomach as I read this article. I'm so glad I was young back in the 1970s instead of today.
Colleges like every other institution in our country have turned into a money-grubbing, self-serving scam. When I attended an ivy league college fifty years ago, tuition, room and board and fees cost less than $4,000 a year. Now tuition costs twenty times as much -- a whopping $80,000 a year. Yes. I know the general cost of living has risen during the past half century. But it merely tripled. It didn't metastasize the way college tuition did.
And what exactly do you get in return for those inflated dollars ? Many on the faculty are poorly paid adjuncts, barely surviving on $3,000 per course. Much of the money is siphoned off for the bloated administrators including the woke mobsters who oversee the useless and dangerous programs that promote CRT, transgenderism, and other horrors.
Gotta love it. Unlimited lending with no underwriting standards, generally to people who are unemployed. What could go wrong? The NY Fed did a study a couple years back that showed that for every additional dollar of student loans made available, colleges raised tuition and costs over $.70.
Thank you for bringing this subject to light. Beneath the level on which you're reporting are far more dastardly deeds than those you are recounting, including government's willingness to throw students and their families under the school bus. The thicket began growing in the 1970s and will be worse tomorrow than it is today.
Indisputable is that the cost of post-high school education has soared at many times the general rate of inflation. Since 1995, the CPI has risen 114%; college and university costs have fattened by more than 498%. Going back to 1969, my senior year, public institutions have increased in cost by 3,009% versus 559% rise in CPI. The reason it grew so much faster than other costs is simple supply and demand.
In the long-term struggle between proponents of equal opportunity and proponents of equal outcomes, the "outcomes" side has scored a knockout punch. We acknowledged in the 1960s that education was the great leveler, and saw that people with college degrees earned more than those without. The situation was misunderstood by government, which concluded that if everyone had a college degree then everyone would earn higher wages. Wrong conclusion.
The complex economy of the U.S. needs few people with college degrees and always has. If only one out of 50 employees needed a college degree to perform his work, awarding college degrees to the other 49 wouldn't change the education needed to perform their jobs. The rapid technical advances of the last 150 years have done away with most job, meaning that where once 50 people worked to execute a function in 1870, today only one or two are required. This is nowhere more evident than in agriculture: In 1870, 75% of the US Labor Force was engaged in farming and ranching. Today, with vastly improved crop yields, sturdier and more capable machinery, and greater reliance on technology, less than two percent of the US Labor Force is required the feed the nation and much of the rest of the world. Perhaps two people on each family farm needed to know how to read, write and perform basic arithmetic functions in 1870. Today's industrial farmers and ranchers need college degrees, but there are very few of them. Fewer as a percentage of the workforce than needed basic literacy in the past.
Having failed to understand the role of education in the labor force government set about to get everybody a college degree, and poured more money into higher education. With more money available to pay for the same product, prices went up. As prices rose, government poured more money into the pot. We still need most most of the engineers graduating college, but that's a relatively low number. What we don't need in the economy is more intersectional aromatherapists. We may need them culturally, but if it is necessary to cross a stream I want an engineer on the team, and we'll advertise among the baristas in Starbucks to get a PhD aromatherapist when actually needed.
Meanwhile, we have a shortage of plumbers, electricians, carpenters, surveyors and others who can keep the lights on. Social shaming of people who skip college is both decadent and wrong.
This is a GREAT piece, and in line with why I subscribe to TK News. You nailed it.