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Student Loans: A Modern-day Form of Slavery?

posted by Debb Thorne

This past week, students in my Social Inequality course were asked to read and think about causes and consequences of various types of debt. Given the audience, it's no surprise that student loans kept coming to the fore. Well over three-quarters of the students indicated that they would graduate with loans--many of them well over $20,000 owed on a Bachelor's degree in the social sciences, majors that are vital for our society but not notorious for their high salaries. They described an increasingly common pickle--there was no way that they could have attended college without the loans, and they are frightened that they will not be able to repay them, but they knew that without the college degree, their futures were beyond bleak. To say they feel between a rock and a hard place would be an understatement.

I am very concerned about these kids' futures because I know what they face. In order for me and my husband to get through graduate school, we took out well over $40,000 in student loans. My retirement is going to be postponed because the money that should be going into my 401K is instead going to Sallie Mae. I don't regret my education, however, I am discouraged and disgusted by the amount of student loan debt with which so many of our young people must graduate college. The student assistance that used to come in the form of grants has been replaced with loans. I would argue that these student loans are the modern day version of indentured servitude. Sallie Mae (or whomever carries the loan) has become the company store. Do I have the answers? No. But I do have the question: Is this the kind of society that we want to be--A society that burdens so many of our young people with decades of debt in exchange for higher education? If the answer is yes, it doesn't paint a very pretty picture of America.


Two thoughts.

Student loan shackles are much heavier and harder to break than ordinary debt shackles, because student loan debt is generally not dischargeable in bankruptcy. But anyone on this blog knows that.

Aggregate student loan debt trends upward because students must borrow more to meet escalating tuition charges. Colleges and universities can raise tuition with impunity because of all the free money in the form of student loan proceeds available to pay that tuition. Tuition is going up much the way home prices went up these past five years. Inflation is an inflating of the money supply. When the money supply is inflated in a targeted way to encourage the purchase of a particuar consumption item, like homes or higher education, the prices of those items rise faster than prices in the overall economy. It is a self-reinforcing phenomenon.

I believe that we *are* headed for such a society. Where the pressures are to buy! buy! BUY! along with collapsing safety nets for the public.

The bankruptcy "reform" is intended to bail out the finance industry, and I expect that in another decade, we'll have bankruptcies essentially eliminated for non-businesses. And I expect debt will be inheritable before I die of old age.

I see the US heading the way of Mexico, with an extremely wealthy upper class, an extremely poor lower class and a miniscule middle class.

I want to highlight the differences between student loan debt and other commercial loans. Beyond the non-dischargability in bk, the interest rates can be ridiculous. When I applied for my $15,000 in student loans I was without a credit history. The interest rate changed by Sallie Mae is 11.5%. Sallie Mae has indicated that these loans “can not be consolidated, refinanced or reconsidered”. I recently tried to seek a change in my interest rate to correspond to current credit history and score. I have 6 years without a late payment or other black mark and a FICO score of 790. Why should I be subject to the same high rate that was evaluated when I had no credit history? Sallie Mae wouldn’t budge. I recently took out a personal loan from my local bank at 4.25% and used it to pay Sallie Mae. Of course, I lose the tax deduction for the student loan interest. But if a commercial bank is willing to loan me the same money at 4.25%, why does Sallie Mae insist on sticking to 11.5%?

I took out a student loan for a career change with Sallie Mae 4 years ago, being led to believe that it was a federally-subsidized loan. It was misstated by my school and I actually have a 'career training' loan which is not eligible for any consolidation programs. My interest is 16.25% interest with them and it is KILLING me. I've tried everything to reduce my monthly payments to an amount so I can manage my other expenses (rent, car payment and insurance) and they refuse to budge. I WANT to make my payments but it is a constant struggle. Why do they not realize that making it more difficult for borrowers to repay them is absurd?

I agree with all of you. I graduated in 1999 with 99K in loans (at the time thinking I'd never get a loan at such a great interest rate of 7.5%). I also consolidated my loans at that time, so I've been ineligible for reconsolidation rates. For over 4-5 years I paid at income sensitive rates and during this time my loan increased over $40,000. Now my payments are over 1,000 a month and I now owe $150,000. I'm now in deferment...even if I could pay the 1,000 a month fee I would never get out of debt (it merely would pretty much stay where it is). I work as a professor, I certainly don't make enough money to pay 1,000 a month. Further, last year I was diagnosed with Stage 4 cancer and I deferred again last year and this year....even sending in 500.00 a month when I can, why bother anymore when every month, the loan increases almost 1,000 a month. I've tried everything to reconsolidate at a lower rate or get lower payments. Ironically when I tried to reconsolidate at a lower rate I was told by student loan reps that the only way to do that would be to go back to school and take out another loan. Just based on principle I couldnt do that. I was just recently (before I deferred again) told that income sensitive payments would be almost $900 a month. Now, I'm painted in a corner, and a part of me thinks that my cancer is a symptom of the stress caused by these loans. Athletic teams can pay 51 Million dollars just to talk to someone to recruit them to a ball team, and there are those of us that work to educate our future and we get nothing but taken to the poor house. Where are our values in life?


More like indentured servitude. Since we somewhat willingly enter into it, hoping there is an end in site.

It starts with school, then a home loan, a car loan, etc... then you need a bigger hhouse, a bigger car, before you know it, you spend all your "free" time worrying about it, and your "work" time trying to earn enough to pay it off.

Question, I have a SLM Financial career training loan (it is a private career traing loan)
I filed chapter 13 bankruptcy in 2003 (before the law change of 2005). The bakruptcy is about to be discharged is this private career law dischargable?

I too have a "Career Training Loan" from SLM. Oddly enough, both my culinary school and SLM categorize it as an "educational" loan, even though there is no federal subsidization whatsoever! Very misleading and I think it is intentional. Anyway, I also filed Chapter 13 in 2004 and was told by SLM that my "educational" loan was not dischargable. Therefore I requested that my bankruptcy attorney not include it in the filing (I also have a co-signer on the loan and did not want them hurt by my bankruptcy). However, I received a letter out-of-the-blue in January 2006 from SLM telling me that they had been notified of my bankruptcy discharge in 2004 (not by me, so I don't know "who" notified them). As a result they were "obligated under law" to remove me from the loan and now it rests solely on my co-signer (not at ALL what I wanted!). They gave me the option of resuming the debt but my attorney advised me that I should just continue payments on my co-signer's behalf - which I have. My attorney believes that resuming the loan will not allow me to bounce back from my bankruptcy as quickly.

Also note: now that the loan is no longer in my name, for some reason it is no longer eligible for any of SLM's debt consolidation, forbearance or hardship requests. Another one of their many unwritten and unrevealed rules that they applied without any notice whatsoever.

I was reviewing info on how to handle my husband's loans that are over $200,000 and increasing by thousands each month. It is increasing so rapidly that at this point we have given up on repayment. They take the minimum that they can get and we pay no extra because we will never be able to repay. He has been graduated for 10 years and during that period he was never in a financial position to pay much. Now the debt with interest is so out of control we figure he will just have the minimun taken until he dies. It's really sad but there is absolutely no recourse for him. My best advise, never answer the phone.

To Anonymous From Feb 14,2007. I would really like to have the contact for you lawyer. We are having the opposite happen to us. SML is still trying to collect from us, and our lawyer says that it is questionable if the loans where discharged (they were listed in the bankruptcy as unsecured loans). He want us to pay again to sue SLM and reopen the bankruptcy to determine if the loans were discharged. Any help would be great.
[email protected]

To Linda from Feb 18, 2007: I am located in NJ so the law is probably different. Also, my loan was NOT included in my bankruptcy and I'll never know how SLM found out about it. I am still making payments on the loan, probably until I die, under my co-borrower's name because they solely attached it to him.

You should probably follow your attorney's advice as your situation is different. You DID include your loan under your bankruptcy and since these "career training" loans are private loans, I don't see why it would not be dischargable. I hope something can be done to stop this company from ruining so many lives some day!

I too am struggling under overwhelming student loan debt. The interest is accumulating much faster than I am able to pay. I feel like I am trying to drain the ocean with a teacup.

Is there some sort of debtors prison that I can go to in exchange for my freedom? I feel like I am in prison every day anyway. The stress caused by my debt is beginning to take it's toll on my health and my attitude toward life. My poor family even suffers because of the stress.

Student loan officers at schools of higher education don't help the situation - they paint a blissful financial picture of the future for people who get a college degree. At least the ones at the schools I attended did that. "Don't worry", they said. "You will be making so much money after graduation that you will easily be able to repay your debt". What a lie!

I have often wondered if students suffering under overwhelming debt could put together a class-action lawsuit against schools that promote the lie that higher education equals financial prosperity. The only thing higher education has done for me is get me into insurmountable debt that I cannot escape from.

It's sad, but sometimes I wish that I did have a permanent disability just to escape the burden of my education debt. Instead, I do as anonymous said and just refuse to answer the phone. I still live in constant fear that I will be in trouble for ignoring the debt-collectors. Oh well, it has to come to a head someday, because I just can't keep going on like this.

BTW, I started out with student loan debt totaling $115,000 after graduation and now it is close to $200,000. How's that for depressing?

Tough Situations call for tough solutions....Move to Canada...No one deserves to live without hope

I also have a Career Training loan with SLM for my daughter's attendance at Sylvan. I am looking into bankruptcy to try to get out from under the debt that I have accumulated being a single parent. I just want to make sure that I am reading everyone's postings correctly. Is the career training loan considered a "private loan"? I would think that the interest rate issue would be enough to prove that it is not an education loan because I was always under the impression that the interest on student loans was regulated and capped.

I am the co-signer on my son's career training loan from Sallie Mae. I am filing for bankruptcy in WIS and my lawyer lists the loan as a student loan even though I told him it is a "career training" loan. Any suggestions?

The Trustee may end up reclassifying your SLM Career Training Loan into the correct unsecured category. I recommend reading it and making sure your attorney has a copy of the agreement. The website for SLM also states: "The Career Training Loan is a private, credit-based loan and is not
federally sponsored or guaranteed."

I am looking to do a documentary exposing this scam. Anyone interested in being interviewed or helping out, please feel free to contact me at [email protected]

I thought I was the only one being "put to financial death" with a Sallie Mae "Career Training Loan"! My payments are over $400 a month. I only borrowed $22,000 in 2004 and now I owe almost $28,000! They faithfully call my home at least six times a day, seven days a week, starting at 8am until 9pm. I hate it most that I had to have my parents be co-signers...because they have financial struggles of their own & now I added this to their burdens.

If someone knows of a class action suit against loans like this, count me in!!!!!!!!!!!!

I agree, Im currently filing for bankruptcy with my wife because of a career training loan recieved through computertraining.com, my loan started a year ago at 24,500 and is now up to 30,109 with interest, in one year, Im wondering if thiscan be written off, the lawyer added to the discharge papers but says the judge will most likely dismiss and we will be stuck with our over 400 a month repayment....if anyone knows of any class-action suits against sallie mae, count me in too.

I am trying to determine if I should consult with an attorney over a student loan payment with Sallie Mae. I have been making payments to them for over a year now but they continue report to the credit report agencies that the account is closed and that I have made no payments at all although I have bank records proving that I have been making payments and that the checks to them have been cashed. I spoke with a Sallie Mae representative a week ago and initially he said that they didn't have any records of my payments to them and that if I didn't make the full payment it would show up as no payment through the credit bureaus. Is this right? I got laid off my full time job in 2001 and lost all of my belongings and became homeless for about 6 months in 2002 so I do not have my original signed agreement with Sallie Mae. The Sallie Mae representative told me that if I didn't make the full payment it would show as no payment made at all. What's up with that? I have tried my darnedest to show good faith in paying these people. The training center I enrolled in (Silicon Valley Institute) went belly up also so I am unable to use the original contract with them for contining education. I am not sure what to do at this point. If the loan has been closed who is receiving and cashing these checks? I need some answers. Please help!

I too have a loan through Sallie Mae for computertraining.com.. please if anyone knows of a company that is willing to consolidate this loan please contact me. And or if this class action suit transpires.

I also have a loan for 26,000 for computertraining.com through SLM and was iniitially led to believe my payment every month would be 200 dollars but now know there were two loans for 12,500 and i owe a total of 400 dollars 200 for each loan for the next 15 years. I do not know what to do the job i was placed with through the program pays 30,000 a year before taxes and the 400 dollars a month is more than 25% of my take home pay i do not know what to do and now with a girlfriend of 4 years who thought are life was only going to get better after i completed this training is left on this loan with me as the co-signer look forward to debt how can we possibly afford to buy a home get married or start a life with this iver our heads somebody just e-mail and talk to me i really do not know what to do.

My husband was laid off his job recently. We were already struggling to pay our monthly Sallie Mae career training loan and had already fallen behind. Once he was laid off there was no way we could pay $250.00 a month. We called Sallie Mae and ask for a forbearance and they said No because our payments have to be current first.

We will probably have to file Chapter 7 now since my husband has been laid off. Sallie Mae told us we could not include it in the bankruptcy. Has anyone successfully include a Sallie Mae career training loan in a bankruptcy and had the loan discharged?

I too have the god awful loan for computertraining.com. Who got a job out of school making upwards of $50k/year? I was told that CT.com was being sued. Does anyone have any more information about possible litigation?

I read an article in Business Journal that indicated the State of New York is inquiring into Sallie Mae's "Tuition Action" loans. Perhaps it's the beginning of a much needed class action suit. I would contact your Congress person and complain LOUDLY. We sold our house to pay off a SLM loan to avoid the massive accumulation of interest and still paid an additional 47% of the loan amount in interest.

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