For decades, one of the driving impulses of American liberalism has been to expand people’s access to good things — to open up the doors of higher education, banking, health insurance, and the like to regular folk who have been priced out or otherwise excluded from stuff that helps privileged people get ahead. But increasing access is only one half of an important equation! You also have to be careful to ensure that by, say, expanding people’s access to a set of risky financial products (or an overtreatment-happy health care system, or a gold-digging higher ed sector), you aren’t in fact just expanding a predatory industry’s access to a bunch of fresh meat.*
This week, my old shop, the Washington Monthly, has published a searing investigation of how we have neglected the latter half of this equation in the realm of higher education. More precisely: how we have dramatically expanded access to college loans, and even taken the good step of reforming the student loan origination process, only to leave the nightmarish back end of the college loan business in the hands of a privately-run, often predatory, and “fearsomely complex student debt management and collection system.”
Over the years, politicians, even liberal ones, have paid too little attention to what happens on the back end of the student loan system to those who can’t afford to make their payments. Instead, Democrats have focused on trying to broaden access to higher education by making student loans more available and less costly on the front end. In 2010, the Obama administration achieved a major victory in this access agenda when he signed legislation ending the wasteful practice of subsidizing banks to make student loans. Since the summer of 2010, all federal student loans are now made directly by the government, saving the Treasury $68 billion over eleven years (half of which is going to expanded Pell Grants for needy students). But this monumental reform of the front end of the student loan system leaves the back end untouched, meaning that more and more Americans— people like Gregory McNeil—are left at the mercy of predatory debt-collecting contractors. Having kicked the banks out of the student loan business, it’s high time to get rid of the repo men, too.
Student loans, unlike other debts, can’t be voided through bankruptcy. In other words, this is a system doesn’t distinguish at all between deadbeats and people who simply can’t pay back their college debts. And this particularly vicious trap is built around, of all things, guaranteeing the repayment of federal loans! In short: read the piece!
* That’s why the new Consumer Financial Protection Bureau is designed to teeter between two missions: to protect consumers from abusive or deceptive financial practices, while also preserving broad access to financial services. Tricky!