Students Are Being Squeezed By Debt Unfairly

Ryan J. Farrick — February 10, 2017

Students graduating college; photo courtesy of ISTOCKPHOTO

Education is an expensive investment. Beginning in the first quarter of 2010, student debt began to eclipse the amount Americans owed on credit cards nationwide. Recent moves on the part of the Trump Administration indicate that trouble could be brewing for people who couldn’t finance their degrees out of pocket. Companies which collect on behalf of the federal government could press the president to weaken the Consumer Financial Protection Bureau, which regulates the industry. Past and present students are being squeezed by debt unfairly, with the practices of some loan servicing companies only aggravating what is already a problem of tremendous proportions.

The editorial board of The New York Times wrote in a February opinion piece how businesses like Navient have run afoul of its clients. Navient has litigation pending against it by the attorneys general of Illinois and Washington state. The attorneys general allege the company has unfairly profited by pressuring borrowers into costly repayment plans. Although persons who take out federally-funded Stafford and Parent Plus loans can cap their monthly bill to a tenth of what they earn, loan servicers like Navient tend to steer customers into forbearance. When in forbearance, interest accrues on an account while a person takes time to gather their finances and proceed with payments in the future. The attorneys general claim that Navient didn’t publish deadlines or explain the pitfalls of forbearance versus income-based repayment plans.

Richard Cordray, the director of the Consumer Financial Protection Bureau, said in a statement that “for years, Navient failed consumers who counted on the company to give them a fair chance to pay back their student loans. At every stage of repayment, Navient chose to shortcut and deceive customers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable.”

Navient has control over more than 12 million student loan accounts – a quarter of all Americans who made use of education loans offered by the federal government. With national education indebtedness totaling to $1.2 trillion, the fall-out from defaults and sunken credit scores is tremendous. By failing to explain or even outline income-based payment plans, companies like Navient create consequences which can follow students from an entry-level corporate position well into retirement.

Credit card debt vs student debt; graph courtesy of Politifact

The Center for Retirement Research at Boston College featured an article which showcased how student debt can have significant impacts on retirement savings and security. The authors’ analyses concluded that the impact is large and worthy of inclusion in policy-making discussions. If every modern-day worker owed as much as recent graduates, an additional 4.6% of Americans would be unable to afford retirement. 4.6% might seem like an insignificant number, but it totals to millions of people when considering the sheer size of the available labor force.

Nobody should have to choose to forego an education because of inadequate funds. The benefits of being educated are higher than ever, as are the standards of employers. A notion gaining traction is that the bachelor’s degree has taken the place once occupied by high school diplomas as a baseline for being able to earn and live well.

Companies like Navient need to be regulated and kept in check by agencies like the Consumer Financial Protection Bureau. Allowing rogue representatives and unscrupulous loan servicers to control the independence and indebtedness of working adults is a miscarriage of justice.