If we truly want to stimulate the economy, we can start by reforming the student loan industry.
Student loans are the only form of consumer debt lacking standard consumer protections. In 1997, student loan companies such as Sallie Mae successfully lobbied Congress to amend the Higher Education Act and remove consumer protections, making defaulted student loans among the most lucrative and easy debts to collect.
The loan companies actually have a vested interest in debtors defaulting on their loans and have great leeway to collect on those loans.
Harvard Professor Elizabeth Warren was quoted in a Wall Street Journal article as saying that “student loan debt collectors have power that would make a mobster envious.”
The student loan companies can garnish or seize Social Security and disability payments, and even raid personal bank accounts without a court order. A number of people have actually been driven to suicide by their collection tactics.
The only people benefiting from this situation are the CEOs and corporate officers of companies like Sallie Mae. The outrageous profits they make would be better off circulating in local economies. Reform is badly needed.
– Brian Galloway