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For Immediate Release August 6th, 2010  (UPDATED AUGUST 9th, 2010)

Student Loan Debt Surpasses Credit Cards Nationally

The Federal Reserve's latest G.19 report shows that the nation currently owes approximately $825 billion in credit card debt. Year-old OMB budget projection data, meanwhile, shows a cumulative public/private student loan debt burden of about $730 billion*.  Updated borrowing estimates for this year (more than $100 billion)  confirm that currently, national student loan indebtedness likely stands at about $830 billion.**

This point was expected to be reached years from now, but a modest curtailment in credit card borrowing, combined with a massive jump in student loan borrowing greatly accelerated the schedule.  Each of these categories comprise approximately  one-third of total consumer debt, which stands at $2.4 trillion.  

It is important to note that while these two types of debt weigh roughly equally upon the citizenry, media coverage of credit cards exceeds coverage of student loans by a factor of approximately 15-to-1 based on  unscientific news surveys conducted since 2007.

While credit card borrowers enjoy  the fundamental consumer protections afforded all other borrowers with all other types of debt, federal student loan borrowers enjoy almost none of these protections.  Not bankruptcy protections, not statutes of limitations, not truth in lending laws, not state usury laws...non-profit guarantors are even exempt from fair debt collection statutes.  In additions, the lending system enjoys collection powers that no no equal.  There is no appeals process for defaults.  About 20 cents of every dollar  repaid by borrowers whose loans were defaulted are taken by these guarantors (or the federal government) before anything is applied to principal, interest, etc.  Borrowers wages, Income tax returns, and even Social Security and disablility income are routinely garnished without a court order, and regardless of any legitimate claims they may have about the propriety of the default. Borrower's ability to work in their field can be taken away through state professional license suspension, and other related state and federal policies regarding defaulted borrowers...In a very real sense, defaulted borrowers are given the choice of either finding a way to repay a vastly inflated debt, or face the rest of their lives as indentured, marginalized, second class citizens.

And make no mistake:  Just as the American Public was misled into believing that student loan defaults were  low, and getting lower (when in fact, the default rate for student loans is at least 1 in 4), the oft-repeated propoganda about defaulted borrowers being a burden on the taxpayers is equally if not more incredulous. Please note:  where the recovery rate for defaulted credit cards, for example, is about 25 cents on the dollar, the recovery rate for defaulted student loans is a whopping 123%   The system is MAKING, not LOSING money on defaulted loans.!!  

Taken together, this revocation of consumer rights has produced an inherently predatory lending system that succeeds when the students fail, one that wields powers over the citizenry the likes of which have never been seen in this country, one that causes administrative and bureaucratic malaise,  poor federal oversight, and other systemic failures at the highest levels.  More importantly, this perversely incented system offers no real defense against inflation, and we have seen the results on that front over the past couple of decades.   Most importantly, this lending system is literally destroying lives, families, and communities....

It is our hope that this issue will be exposed to the same level of media scrutiny as is given to credit card debt, and even subprime home loan debt.  It is only under the light of serious investigative journalism that this problem will be identified correctly, and solved appropriately.  

We look forward to assisting in these efforts.  


     *Finaid.Org, August 9th, 2009
**Wall Street Journal, August 9th, 2009

Contact:  Alan Collinge

2123 Mt. View
University Place, WA
(253) 617-3407