Can Your College Sue You? Hint: Yes, It Can.

I am sure we all know that student loan debt is a national issue and a problem burdening millions of Americans, including myself. As the cost and necessity of higher education rises there is increasing pressure to suck it up, take out loans and hustle to pay them back. U.S. borrowers have accumulated around $1 billion in loans and schools like Yale and The University of Pennsylvania have been forced to take extreme measures.

They’re suing students. The issue is that when a student takes out a Perkins loan they are not borrowing from a bank or the government, the university is the one shelling out the loan. In an ideal world, students who borrow from the school are supposed to repay the money back and that money gets loaned out to other students. If those loans don’t get repaid then incoming students who need that money can’t go to school.

According to Bloomberg:

“Yale, Penn and George Washington University have all sued former students over nonpayment, court records show. While no one tracks the number of lawsuits, students defaulted on $964 million in Perkins loans in the year ended June 2011, 20 percent more than five years earlier, government data show.”

It seems as though there is no solution, besides forgiving the loans. People need to go to college but college is freaking expensive and most people cannot afford to go. There are too little opportunities in the job market right now, even if you get a job, you certainly won’t be making enough money to make those monthly payments.

Obama is hoping to expand Perkins loans from $1 billion to $8 billion, in which case The Department of Education would be shelling out the loans instead of the universities.

“Repaying Perkins loans may be a lower priority for borrowers with multiple debts, said Nancy Coolidge, associate director of student financial support for the University of California system. They may be more likely to pay back private student loans first because they can carry much higher interest rates, she said. Perkins loans are given to the most at-risk students, and “they may have the least ability to pay it back,” Coolidge said.”

Another problem is that because Perkins loans are private there aren’t any alternative repayment plans similar to the ones available with government issued loans. There aren’t any income-based repayment plans which allow you to decrease your payments based on the amount of money you’re making.

It’s tough. But this comment really pisses me off:

“You could take a job at Subway or wherever to pay the bills and that’s something you need to do if you have agreed in taking a loan to pay it back,” Neal McCluskey,  an associate director at the Cato Institute in Washington, said. “It seems like basic responsibility to me.”

 Do you know what the cost of living in New York City is? Do you know that minimum wage is $7.25? Do you know that the millions of Americans who are in debt and who are unemployed would literally take on any job? This notion is so removed from reality that it makes me upset. Anyone who believes “laziness” is the issue needs a serious reality check because even jobs at fast food joints and in menial labor are SCARCE. Even if you had them, you couldn’t make $300 payments because that’s literally how much you’d be making biweekly with minimum wage in most places.

So what do you do? Do you deny students who probably won’t be able to pay the money back because they come from poor or working class backgrounds (students like myself) and exclude them from higher education, which will ultimately prevent them from being socially mobile? Or do you let them in, give them their degrees and then, in a way, punish them for it?

I don’t think we’re close to finding an answer. What do you think?

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