Back to school, kids, if you can scrape up the tuition. By some estimates as many as 200,000 college students may not find anyone willing to lend them money for school this year.
Millions of others are going to have to jump through more hoops, pay higher interest rates and/or get their parents to co-sign their loans. This last expedient depends on the parents having a credit rating good enough to satisfy the money-lenders.
When students get loans this year, they will pay more for them. In at least some cases students are looking at rates of 23 percent. With those numbers a young person might be better off borrowing from the mafia.
Students shopping around trying to get themselves lower interest rates had best be careful. They can inadvertently get stung with higher rates as a result of trying to get lower ones.
The New York Times explains it this way:
In few other areas of consumer life are you at risk of being penalized for seeking out the best deal…. To quote a rate, lenders check an applicants credit history. And every time a shopper asks a lender for a rate quote, it can show up as another inquiry on a credit report. Lots of inquiries send the wrong signals to the formulas that create the popular FICO credit score. The lower the FICO score the higher the interest rate a student will have to pay for tuition money.
Cashing in on the kids is no small business. Last year it amounted to more than $17 billion. The interest on that is a lot of cabbage for private, government-subsidized loan companies, which explains why some college loan officers have taken bribes to steer students to favored lenders.
They have been lining up to screw unworldly 18-year-old freshmen and their parents who may not understand that there is a government student loan program at 6.8 percent interest–which is no bargain for someone about to start out in life, but better than getting the money from a guy with a baseball bat down on the docks. Since there is a cap on how much a student is allowed to borrow at the government rate, millions are also forced to sign up with the sharks.
No one can say how many students who take on these loans appreciate what a bad deal they have signed up for. Regardless of what bad luck may hit them in later life–unemployment, sickness, being run over by a beer truck–they must discharge that loan. There is no forgiveness. Unlike other debts, the law says not even bankruptcy will wipe out a student loan obligation.
It’s a neat system. The colleges and universities run up tuition without stint or limit in a society in which you either go to college or live on the verge of poverty. You must go to school and incur the costs.
No tuition restraints were included in the just-enacted higher education law. But there are more costs than tuition. Higher education is better than the airlines at tacking on fees and special charges. And the publishers of textbooks costing more than $100 are exempt from prosecution under the Racketeer Influenced and Corrupt Organizations Act.
Politicians and grossly overpaid college and university administrators compete with each other to speechify about our splendid young people, the hope of the future etc., even as they grab every chance to skin them alive. Young people have been helpless to save themselves from the depredations of the folks employed to protect and guide them.
Like the oil industry, the coal industry, the hospital industry and the drug industry, Washington is crawling with higher education industry lobbyists. They have the same interest in meeting student needs as the nursing home industry has in serving its patients.
Young people have no representation powerful enough and well enough bankrolled to go up against the higher ed lobby. Barack Obama is their best hope.
He and the Democrats are counting on the youth vote to put them over the top this November. Lets hope that, if the young people win it for Obama, the new President will ignore the rich, academic liberal types who swarm about him and repay his youthful followers by getting them something approaching an even break.
Nicholas von HoffmanNicholas von Hoffman, a veteran newspaper, radio and TV reporter and columnist, is the author, most recently, of Radical: A Portrait of Saul Alinsky, due out this month from Nation Books.