Eating Her Young: America Reinvents the Law of the Jungle in Her Own Image

“I am 30 years old. I went to college to get a better job. But now I regret going. I originally owed $70,000, have been paying for nine years and now owe $157,000. I can barely afford to go to the dentist or doctor. If there’s an emergency, I have to rely on credit cards or retired parents. I am living at poverty level and would have been better off not going to college. I’m never going to be able to buy a house or save money. I don’t know if I’ll ever be able to enjoy life again.” (Kristina M.)

Vera T. is 62 with major health problems. After bankruptcy she has no home, no car, no job. What she still has are student loans, over $7,000 worth after she tried and failed to better herself by attending community college. She was denied bankruptcy relief for her loans because she fails the ‘hardship’ test. She’s still trying to get a job — “I know I’m getting older, but I want to do as much as I can for as long as I can.’

Politics and desperate Americans. Strange bedfellows or a witches’ brew? You decide. This is the tale of a big, bad (some might say merciless) empire and millions of its victims. Not in some foreign land — although there are plenty of them in at least seven countries and all over Africa —but right here in the U.S.A.

In 1974, when President Gerald Ford pardoned Richard Nixon, he promised that “our long national nightmare is over.” He was half-right. Nixon was gone but what was in store for America’s young was by any measure far worse. What happened next is a tale of greed, avarice, double dealing and duplicity. Here’s how it unfolded. A scant two years after Nixon’s pardon, student loans, which had been dischargeable in bankruptcy just like credit card debt, car loans, even gambling debts, took a big hit in Congress. Responding to the pressure of the finance sector to protect their student loan profit center (there is currently a $200 billion market for student loan asset-backed securities) and the supposedly high default rate of federally guaranteed loans, Congress passed legislation requiring student borrowers to make five years of repayment on loans issued by the government or non-profit colleges and universities before becoming eligible for bankruptcy protection. The high default rates lawmakers expressed such concern about? In 1974, 4,559 students applied to bankruptcy court for relief. Hardly a tsunami. Don’t be fooled by the escape hatch written into the bill. Another mirage. Since the average cost (tuition, fees, room and board) of attending a public college was $1,940 and a private college $3,980 in 1976, the law virtually assured that most borrowers would be compelled to pay off much if not all of their indebtedness before bankruptcy became an option. Not content with only 80% of the student loan pie (share of all student loans federally guaranteed), the greedy bankers put the arm on their watercarriers (congressmen and women) and in 1984, with another Republican president Reagan, subjected private loans to the same five-year repayment juggernaut. Out with the old in with the old, as Reagan faded from the scene (and cognition), George H.W. Bush appeared with the same “soak the poor” Republican ethos and in 1990, the student loan mandatory repayment period for both federal and private loans increased from five to seven years.

The hopes and dreams of millions of “ordinary” Americans took a skyward bounce in 1992 with the inauguration of “feel your pain” President Bill Clinton. Like most 20th and 21st century democratic presidents he failed miserably to live up to his billing (or campaign promises). Aside from signing a criminal “justice” law that spiked the prison population, a draconian welfare “reform” law that savaged poor Americans, financial “deform” laws that paved the way for the 2007 depression, he was the president that in 1998 bill signed a law that excluded all federal student loans from bankruptcy protection (the only exception a vaguely worded “undue hardship” exception— hard to prove, and in the face of judicial skepticism, unlikely to prevail). In addition, the government was given two new powers: to garnish (seize) a portion of a borrower’s pay check to repay defaulted student loans as well as the authority to reduce a borrower’s Social Security benefits for unpaid student loans.

Here’s what’s in store for defaulting seniors. They can lose all but $750 of their monthly benefit. Pretty close to the death penalty for over half of Americans (56%) who have less than $10,000 in retirement saving and 1/3 of those who have no savings whatsoever. Considering that the official poverty line for a single adult is $990 per month, it’s time for many of us to pick out the most desirable sidewalk for our sleeping bag.

The final chapter in this sorry tale of an exceptional (self-described) nation transforming 44 million (and counting) of our most ambitious young people into indentured servants for life occurred in 2005. In a bill described as “perverse and obscene” private loans joined federal loans in non-dischargeable debt land.

How did we get into this hell hole? Did it happen as we were busy doing good works in other countries? Or maybe we all fell asleep at the same time and when we woke up, behold a society of winners (very few) and losers (most of us). Actually divine agency was not required. What was required was a handful of self-dealing politicians with personal advancement uppermost on their bucket lists and a horde of financial “quick buck” interests and their lobbyists who saw the potential student debt market as the proverbial golden goose and climbed on the bandwagon of politicians willing to “vote the right way.”

The Republican contribution to this outrage probably comes as no surprise. What could be considered mind-boggling is the craven behavior of our “friends,” the democrats (truly with friends like these, who needs enemies). Two stellar examples of their unfathomable treachery can be laid at the feet of the most recent democratic president and vice president —Nobel Prize luminary Obama and good old Joe (Biden).

Let’s start with the seamy saga of Joe Biden who has long described himself as the savior of the middle class — a designation that arises from his daily commute on the lowly Amtrack train. Like the defense of the farmer caught “in flagrante delicto” — Who are you going to believe? Me or your lying eyes” — the Delaware lawmaker despite a never-ending charm offensive has supported without reservation the financial industry’s 40-year campaign to make indentured servitude a profit center. Exhibit A —the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act that our hero as head of the Judiciary Committee worked tirelessly to pass. That little gem put bankruptcy protection out of the reach of the vast majority of federal and private borrowers. How did Joe benefit from his Herculean labors? With the help of $2 million dollars (aka donations) in blood money from a bunch of rich, craven financial interests, most of them located in his state, Joe has managed to hold onto a senate seat for 42 years (and counting) plus munificent pension benefits, if he ever retires. That’s not all, leave it to good old Joe to take care of family business while pursuing his own enrichment. Guess whose son was working for the largest bank in Delaware, MBNA, Biden’s major cash cow and an avid supporter of the 1998 and 2005 bankruptcy bills. Hint: his last name is Biden.

As betrayals go, it must be admitted that the ultimate one was perpetrated by Mr. Hope and Change himself whose administration in 2015 intervened in the case of a 65-year-old man, Robert Murphy, seeking bankruptcy protection for over $220,000 in federal loans he took out for his children. At retirement age, unemployed, his house foreclosed he sought dismissal of his loans on the only allowable ground “undue hardship.” Obama’s legal eagles, intervened, arguing that Mr. Murphy had plenty of chances to go back to work or failing that, to win the lottery. If you don’t believe the feds would promote gambling as an alternate income source, here’s how they put it: “An individual’s circumstances may change over time…the debtor may benefit from an inheritance or other windfall.”  In the happy endings department, Mr. Murphy prevailed and his debt was erased when a federal appeals court ordered the bankruptcy judge to settle the case. As it turned out a clever ploy, in the absence of an actual opinion, the case did not establish a precedent for other borrowers.

Obama wasn’t always so truculent about student loans. Running for a second term in 2012, he made the following “promise” which like most of his campaign declarations quickly hit the circular file after victory. “We’ve got to make college more affordable…we’ve got to make sure you’re not saddled with debt…we can’t make higher education a luxury…Every American family should be able to afford it.”  Way to go, Mr. President! In 2014, with no rich donors breathing down his neck, he came up with this catchy ditty— “Lower tax bills for millionaires or lower student loans bills for the middle class. This should be a no-brainer.”  But it wasn’t. Ask Mr. Murphy.  (“You can’t hide your lyin’ eyes. And your smile is a thin disguise”)

How to explain it? The richest nation in the world waging economic war on its young people. As atrocious as the government’s position is on the issue of life-altering debt, a more important and unanswerable question is waiting in the wings. Why should 70% of college attendees have to take out a student loan and spend the equivalent of three lifetimes paying it back? No wonder in a 2016 survey by Citizens Bank, more than half of millennial (18-34 years old) graduates regret taking out student loans and over a third (36%) would not have gone to college if it meant coming out as debt slaves.

For how much longer will we remain voiceless as our young are dominated, indebted and impoverished for the sin of trying to become productive members of society, hold good jobs and live independently (in 2017 almost one-third of young adults lived with their parents, most for financial reasons). The tyranny of the financial sector, the abject subservience of the political class…What comes next is up to us.

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