Defaulting on loans trending on campus

  • Article by: JIM SPENCER , Star Tribune
  • Updated: October 22, 2012 - 12:22 PM

1 in 7 at 2-year schools are behind on their federal loans.

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luzhishenOct. 22, 1212:24 AM

"Both Capella and another for-profit school, Rasmussen College, have more students in default than all of the private schools combined." The CEOs got huge salaries and bonuses and we get the bill - sound familiar? The Free Market works its miracles once again!

triomnOct. 22, 12 1:10 AM

Proprietary schools are ripping off students as well as the taxpayers who pick up the bill for defaulted student loans. I say it's not a free market business if the customers are all getting federal money to attend school. Our federal money. I understand that about 5 companies bought up most of the proprietary schools and have said that they don't care about students who drop out because so many more register with each ad run on late night tv

endothermOct. 22, 12 1:46 AM

The government should not back loans for for-profit schools. Their business model is defective and they deliver a substandard product. The only way for-profit schools can stay in business is by constantly advertising and luring in new students to replace the ones who inevitably fail. There is very limited student support and the standards for new students is low. They accept anyone and basically stop paying attention to them as soon as they get their loan money. Teachers and staff are poorly paid and morale is low. Meanwhile, the people at the top make a profit.

nessmessOct. 22, 12 5:46 AM

It's not free market when loans are handed out (by government) like Halloween candy. If the free market were allowed to operate (w/o over-regulation from Gov't), then most students who never intended to repay loans would not be given loans in first place. This is just a repeat of the home loan fiasco ("everyone deserves a free education" aka "everyone deserves a home"" mantra' In europe, education is free, however "ONLY" the top 10-15% of students get to go to college... the rest are left to work in manual labor jobs the rest of their lives.

gwbuddyOct. 22, 12 5:48 AM

When I went to college 30+ years ago, I was INELIGIBLE for any type of Federal Student Loan. I was forced to attend a Cheap, Public, 4-year MNSCU college. When it came time to pay my tuition bill, I "Cursed" President Ronald Reagan for his cuts to the Federal Student Aid program. Fast forward to today. I now "Praise" Ronald Reagan, his cuts, and the fact that I graduated from college DEBT FREE. Today's college students often seem to have "No Choice" but to take out those "Financially Suffocating" Federal Student Loans to pay the ever-increasing cost of their college education. I'm just not sure about WHY the cost of a college education has increased so much -- anywhere from 5X to 10X -- in just the 30+ years. Ouch!!!

swmnguyOct. 22, 12 6:31 AM

For at least the past 15 years, the only "growth" in our economy has been in asset bubbles. Not real growth.

You have to remember, in our system debt can be bought and sold and speculated on for profit, so debt is an asset to the finance industry. Our system of abstract money and buying and selling money and debt at interest requires infinite growth possibilities in resources, markets, and money supply. We've hit the natural limits on the first two. So now we see tricks based on gaming the system on infinite money and debt.

Increasingly the public, government, power and balance sheet has been merged with private, corporate, power and wealth. So to see where the next bubble will be, look to see where corporate power has directed government to provide risk-free guarantees to corporate interests.

We've had an 11-year warfare state providing huge bonanzas to private corporations, and as Iraq and Afghanistan wind down, we see increased pressure to wage war in Iran and Syria, and ill-conceived adventures in Libya. The public-funded bubble in privatized military spending will continue, in equipment and mercenaries.

The housing bubble was entirely enabled by corporate-written laws exempting bond derivatives from any oversight, and by Federal agencies guaranteeing any and all mortgages based on lenders' say-so, and what do you know? The lenders lied about the quality of the mortgages. We're now spending $45 billion a month in public money to buy the most worthless of mortgages, at face value, from the banks. All profit to the banks, all losses go on the public ledger.

Student loans are guaranteed by the Federal government, and cannot be discharged through borrower bankruptcy. Guaranteed money. So of course interest rates tripled and quadrupled, and colleges and lenders encourage anyone with a pulse to take out loans. When the loans default, the government pays the lenders, and the borrower owes the government for life.

Now we see privatizers moving in on K-12 funding, through a variety of methods. We'll see all kinds of scheming to move unpayable health care debts onto the public tab.

When consumers' incomes are stagnant for 30 years, there's no real growth in a consumer economy. So all that's left is crony capitalism, using government to convert tax money into corporate revenue streams. This will go on until it collapses, as the elites aren't going to willingly go without for the good of the country.

irishmom58Oct. 22, 12 6:35 AM

where is the data on how many of these students were able to find a job post graduation? It is a dismal world for college grads since 2008. I would like to see the correlation to lack of employment and inability to begin repaying student loans

EleanoreOct. 22, 12 7:22 AM

The CEOs got huge salaries and bonuses and we get the bill - sound familiar? The Free Market works its miracles once again! - When taxpayers are forced at bayonet point to subsidize those bonuses through student aid, there is no genuine free market operating in the equation.

tailgaterOct. 22, 12 7:22 AM

Everyone is concerned about the government backing loans for "for-profit" schools. The real issue here is the government backing loans at all. Why should my tax dollars go towards your kid attending college? If your kid can't afford it, tough luck. Maybe he/she should work hard for a few years and save up enough money to go. Who knows, maybe that hard-work will pay off when they actually have to study.

itsmyboatOct. 22, 12 7:23 AM

The follow-up story should be the relationship between the schools and the lenders whereby all too often the schools steer students to certain lenders who charge extremely high interest rates and then the schools get a kickback on the earnings on the loan. The for-profit private schools are especially suspect, relying mainly on the income from student loan tuition, guaranteed to them by the government with such loans having to be paid back by unsuspecting students who walk out with virtually worthless credentials and a mountain of debt. The student pays, their co-signer pays, the taxpayer pays, and the schools get rich. Explain how schools such as Capella and McNalley-Smith and Rasmussen working with banks such as Wells Fargo and Bank of America aren't engaged in criminal enterprise.


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