A tale of easy student Loans, for-profit schools & private equity
August 15, 2014 9:13 AM Subscribe
The most striking feature of the Direct PLUS Loan program is that it limits neither the amount that a school can charge for attendance nor the amount that can be borrowed in federal loans.
"This is, for a private-equity firm, a remarkably attractive arrangement: the investors get their money up front, in the form of the tuition paid for by student loans. Meanwhile, any subsequent default on those loans is somebody else’s problem—in this case, the federal government’s."
For context and background:
"A higher education is the single best investment you can make in your future and college has never been more expensive", Obama said
In the past nine years, the average student loan balance has exponentially grown from $10,649 to $20,326. Outstanding student debt totals $1.2tn in the US.
Total US educational debts are now second only to mortgage loans.
Most of the proposals being debated
in Washington wouldn’t reduce students’ debt loads; they’d just make loans cheaper or easier to repay. Republicans in the U.S. Senate last month filibustered a proposal by Senator Elizabeth Warren, a Democrat sometimes mentioned as a possible presidential nominee, to let about 25 million holders of student loans refinance their debt at a lower interest rate. A House Republican bill would make defaults on student loans less likely by automatically withholding a percentage of earnings from paychecks.