For Immediate Release March 31, 2014 EDITED APRIL 3, 2014
Student loans are the only type of loan in this country to be stripped of standard bankruptcy protections. After 9 years of diligent research, and sustained observation, StudentLoanJustice.Org has come to understand with confidence, and shown clearly that the removal of this critical and fundamental consumer protection has turned the student loan system against the public, and the systemic effects of this have been devastating to the public good. While no one wants to file for bankruptcy, this consumer protection is a critical and essential element for any stable, healthy, rationally priced lending system. By removing bankruptcy protections from student loans, Congress enabled a lending environment to take hold where defaulted loans are financially more lucrative than loans which remain in good stead- this is a defining characteristic of a predatory lending system, and cannot be sustained.
The Center for American Progress, A prominent Washington, DC. based think tank, appears to understand, and agree with this view in their most recent policy paper regarding bankruptcy protections for student loans, published last fall. Certainly, any non-expert reading this paper is left with that impression.
But while CFAP makes it sound like they are for bankruptcy protections for both federal and private student loans, and in fact make a pretty convincing argument for this in the paper, they use a so-called “Qualified Loan” filter which provides an exception for loans that have “reasonable” interest rates, repayment/deferment options, and that are from schools that pass a “gainful employment” test.
All experts in this field know and agree by these criteria, nearly all federal loans currently held by the public now (and ALL federal loans made in the future), and likely, even, most private loans would be considered “qualified loans”, and thus would remain exempted from standard bankruptcy protections!
Legislatively, the citizen’s have seen the return of bankruptcy protections be passed over repeatedly in favor of various repayment programs, “gainful employment” rules, and other legislation intended to fix the student loan problem over the years. More than a decade of evidence, at this point, shows clearly that these fixes have been useless, and in fact have made the problem far, far worse.
The CAP’s most recent initiative, dubbed “Higher Ed, Not Debt” appears to be yet another attempt to pre-empt this. While the initiative has not yet put forth any legislation to examine, it has all the hallmarks of yet another feckless effort, at best. At worst, it looks suspiciously like a taxpayer-funded bailout designed to provide private student lenders a vehicle to offload their non-performing private loans!
What is more disturbing, however, are the CAP staff who who are responsible for the Center’s higher education policy, David Bergeron, and Joe Valenti. Prior to joining CAP, Bergeron spent 30 YEARS at the Department of Education. His most recent position was as the Deputy Assistant Secretary of Education, and Director of the Office of Post-Secondary Education, which MANAGES THE STUDENT LOAN PROGRAM. The Chronicle of Higher Education actually describes Bergeron as “THE INSTITUTIONAL MEMORY” of the Department of Education.
The other author, Joe Valenti, came to the Center from the TREASURY DEPARTMENT, where he was a “ALEXANDER HAMILTON FELLOW”. Alexander Hamilton is credited with architecting the nation’s banking/financial system, and wrote a majority of the Federalist Papers. These documents are, among other things, used to justify a strong, centralized government (as opposed to a weak government model). Interesting guy was Hamilton…but he was no progressive.
What is perhaps most disturbing, however, are funders of the Center for American Progress. Below is just a partial sampling:
Bank of America
DeVry Education Group
The Blackstone Group
There is nothing “progressive” about the paper in question or its authors. Further, there is nothing progressive about the Center’s “Higher Ed, not Debt” initiative, or its corporate funders. There is certainly nothing progressive about taking money from the above corporations.
For the sake of the citizens, the Democratic Party, and the relevance of this nation’s democracy generally. We urge the CAP to correct these indefensible violations of the public trust, or lose its legitimacy. We further urge the citizenry to stop giving this organization support until this is completed.
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