Yesterday in Anabel Taylor Hall, Alan Collinge, founder of Student Loan Justice, spoke about massive problems he has seen arise from student loans. Though approximately 50 percent of Cornell students receive financial aid, according to Collinge, only two out of 10 know where their loan is coming from.
With colleges around the country raising tuition rates in response to budget cuts, many students are forced to compensate for these changes by taking out loans to finance their education. However, Collinge said that many students are unaware of the hidden penalties and fees that come attached to these loans, which could potentially cause financial ruin.
Collinge said that student loans are the worst kind of loans because they are not covered by the Consumer Credit Protection Act, leaving students vulnerable to the predatory tactics employed by loan companies.
In this light, he said, “students are like turkeys at Thanksgiving waiting to be served up to the loan companies.”
According to Collinge, many students operate under the illusion that most loan companies are a direct subsidy of the government and do not stand to gain profit. He said this misconception began in 1994, when Congress enabled student loan companies to spin off from the government and become for-profit organizations; as a result, companies started strictly looking to make money and disregarding the situation of the student.
More frightening, said Collinge, is that the collection agencies go after people who are willing to pay their principle with interest.
He pointed out that “most students are willing to pay back their loans at a reasonable amount, which includes the principle with interest. “It is only when companies start charging exorbitant penalty fees that people run into trouble.”
One aspect of Student Loan Justice is to compile stories of people whose lives, according to their assessment, have been ruined due to the overwhelming debt they have accrued and the strategies collection agencies use to retrieve their money.
“It is not uncommon to read stories about people committing suicide because they cannot deal with the burden of their debt. It becomes insurmountable,” Collinge said.
He said that many people are forced to flee the country due to the belligerent tactics employed by collection agencies.
He recalled the story of a young woman attending John Hopkins University who had taken on so much debt during her battle with breast cancer that she ended up committing suicide despite recovering from illness.
“Financial debt is an embarrassing nightmare, but then there just gets to be a point where enough is enough. People want to fight back … people want to pay. It is a massive psychological strain,” he said.
Heather Dunbar, who organized Collinge’s speech, said she knew the effects of overwhelming debt. Recently, the 40th anniversary of her unpaid loan just passed.
“The biggest consequence of that debt is that is really takes money out of the community,” Dunbar said.
Collinge, who himself at one point amassed debt up to $100,000 after attending The University of Southern California and California Institutite of Technology, said that the behavior of most lenders is monopolistic.
Because of the current structure of student loans, a person can only consolidate their debt once, so they are forced to stick one lender . He said that universities also enable lenders to trap students, since many institutions take on preferred lenders that bind students to one company without their knowledge.
Collinge is in the process of lobbying for political action that creates a fairer process of debt payment.
“Students are in dire need of counseling when it comes to debt. They need to know the infrastructure behind these loans,” he stated.
Collinge said he hopes to see results with the Student Borrower Bill of Rights but admits the document will probably go nowhere despite backing by Hillary Clinton. In spite of these setbacks, he said the goal is to have more people speak out and incorporate the ideas presented in the bill into a larger document sponsored by the Higher Education Act.
“Student loan is a national problem that ruins millions of lives. The word needs to spread about this. There is true strength in numbers when people seek out others in the same circumstances,” he said.