I went back to school in 2005 while I was home with my two oldest children. I took out just enough to pay for my schooling through a private Wisconsin university that offered an online degree program. When I graduated, I had $28,000 in loans. Flash forward 8 years of paying over $500 a month ($6000 a year) and I still had over $26,000 in loans. If my mother-in-law had not died and left my husband an inheritance, we’d still be paying on the loans. Which is why we’ve always taught the children that they should pick one of the two local universities or the technical college, stay at home, and get their degrees the less costly way. Sadly, our oldest has not heeded our pleas and is planning to go to a public university across the state. We’ve saved some money for her schooling, but not enough to cover her five year program. I worry about the debt load she is going to take on.
Which is why, when NetGalley and Simon and Schuster offered me The Debt Trap: How Student Loans Became a National Catastrophe (Amazon) to read in exchange for an honest review, I gladly accepted. The book will be released to the general public August 3, 2021.
“In 1982, a new executive at Sallie Mae took home the company’s financial documents to review. “You’ve got to be shitting me,” he later told the company’s CEO. “This place is a gold mine.”
Over the next four decades, the student loan industry that Sallie Mae and Congress created blew up into a crisis that would submerge a generation of Americans into $1.5 trillion in student debt. In The Debt Trap, Wall Street Journal reporter Josh Mitchell tells the untold story of the scandals, scams, predatory actors, and government malpractice that have created the behemoth that one of its original architects called a “monster.””
It really all began after World War II, when the G.I. Bill provided each veteran with unemployment checks, $500 a year for college tuition, and loan guarantees to buy homes. While many women served in the military, the powers that be labeled their units civilian, so there were no G.I. benefits for them.
Then in 1957, Sputnik launched and Americans were scared out of their minds of Soviet dominance. Lyndon Johnson looked back fondly on the loan he was given to go to college; it helped make him who he was. He believed if the United States could make college affordable, Americans could beat the “Commies”. It was then, as a member of Congress, that the first federal student loan program started.
Of course, the easy access to loans meant that colleges could raise their tuition at rates that exceeded inflation. So what did Congress do? They increased loan limits and interest rates and let more people borrow money. Private banks that were loaning the money to students made huge profits on the interest paid by former students.
At the same time, Congress made it harder and harder for borrowers to discharge their loans. In 1976, they made it difficult to get out of debts through bankruptcy, but still possible. In 1997, the legislation they passed makes it nearly impossible to get out of paying federal student loans. In 2005, Sallie Mae backed a bill that blocked student borrowers from declaring bankruptcy with their private student loans. Shockingly, during the 2008 meltdown of the economy, Sallie Mae was the first bailout of the financial crisis.
The Debt Trap is an interesting history of how we got where we are today, and offers anecdotal stories at the beginning and the end of the book. There’s no easy answer to the financial aid crisis in our country, which now tops $1.5 TRILLION. Universities keep raising tuition and housing rates beyond the rate of inflation, and lenders are raising the interest rates and loan amounts for borrowers. Something has to give, or as a country, we’re going to be collectively in a world of hurt.
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