Saturday, February 14, 2009

Reform Student Loans

Posted by David Lucas

If we truly want to stimulate the economy, we can start by reforming the student loan industry.

Student loans are the only form of consumer debt lacking standard consumer protections. In 1997, student loan companies such as Sallie Mae successfully lobbied Congress to amend the Higher Education Act and remove consumer protections, making defaulted student loans among the most lucrative and easy debts to collect.

The loan companies actually have a vested interest in debtors defaulting on their loans and have great leeway to collect on those loans.

Harvard Professor Elizabeth Warren was quoted in a Wall Street Journal article as saying that "student loan debt collector have power that would make a mobster envious."

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