Paul L. Caron

Monday, September 3, 2018

The Incredible, Rage-Inducing Inside Story Of America’s Student Debt Machine

Mother Jones, The Incredible, Rage-Inducing Inside Story of America’s Student Debt Machine:

Why is the nation’s flagship loan forgiveness program failing the people it’s supposed to help? ...

BRANDON ISAACS: Gettysburg College (bachelor’s, 2005); University of Detroit Mercy (JD, 2009); $139,000owed at graduation; $58,000 paid back so far; $640 paid per month, on average; 7-8 months of delayed forgiveness because of FedLoan errors; $161,000 still owed today.

Isaacs lives in a Philadelphia suburb and works as a lawyer for a government agency, writing decisions for judges in response to requests for benefits. Before this, he worked for six years as a claims processor at the Labor Department. He graduated from the University of Detroit Mercy in 2009, when, on the slow upswing out of the recession, there were few private-sector options. He had federal loans, about $139,000 worth, consolidated into an income-based plan, and he knew he would want to take advantage of PSLF. ...

For Isaacs, the general lack of transparency has caused constant uncertainty. His payment count seems to fluctuate illogically with every employment recertification, and representatives have occasionally delivered wildly disparate information about his account. During one phone call, Isaacs says a representative underreported the number of payments he’d made by nearly 50. Isaacs panicked: That would mean FedLoan was delaying his forgiveness by more than four years, and if it could make a mistake like this, even over the phone, how could he trust anything the company told him?

Others describe even worse experiences of confusion and betrayal. ...

MICHELLE QUINTERO-MILLAN: University of Utah (bachelor’s, 2004); University of Denver (JD, 2012); $341,000owed at graduation; $35,000 paid back so far; $530 paid per month, on average; 30 months of delayed forgiveness because of FedLoan errors; $410,000 still owed today.

Not long after graduating from law school in Colorado, Michelle Quintero-Millan moved to South Texas, bought a car, and began working as a children’s staff attorney at the American Bar Association’s Pro Bono Asylum Representation Project (ProBAR). She would drive through the desert, visiting unaccompanied minors picked up by Border Patrol and held at federal migrant shelters, explaining what was going to happen to them and occasionally representing them in court.

Throughout her three years at ProBAR, Quintero-Millan had no reason to doubt her work there qualified for PSLF. “It’s pro bono work, representing individuals who are very vulnerable, in high need,” she told me. “It’s a pro bono salary. It’s a nonprofit organization.” Although the American Bar Association is in a different class of nonprofits than a regular 501(c)(3) and judged for PSLF on a case-by-case basis, many of Quintero-Millan’s colleagues had gotten letters from FedLoan that said their work qualified. After Quintero-Millan left ProBAR, she sent in records of all her post-law-school employment. Her later work as an immigration attorney at Catholic Charities USA and a refugee officer at US Citizenship and Immigration Services was quickly certified, but eventually she received a letter from FedLoan informing her that every month she’d worked at ProBAR had been disqualified: The Education Department had changed its mind about the organization, and borrowers were just out of luck. (FedLoan says her work at ProBAR never qualified.) Quintero-Millan couldn’t believe it. She’d just effectively lost three years of work—she loved the job, but she could have chosen any number of other immigration nonprofits that did virtually the same thing and did qualify. “It still to this day baffles me,” she said. “There’s no way that it doesn’t qualify. This is the type of work that was envisioned for this program.”

In December 2016, the American Bar Association sued the government, naming Quintero-Millan and another employee as plaintiffs, along with two staffers of other organizations that had been disqualified. In one of its letters to the plaintiffs, FedLoan offered an “apology for any inconvenience this may cause” and explained that in order to qualify as a public-interest legal service, the organization would need to be “funded in whole or in part by a government entity.”

Legal Education | Permalink


I am going on record now that the inevitable PSLF fallout will have as detrimental an impact on law schools as the 2008 banking collapse. I saw a statistic that somewhere around 40% of law school students are counting on PSLF for debt relief. Once that option is removed, you can expect to see a commensurate reduction in the number of young adults taking out six figure debt to attend law school.

And make no mistake, PSLF will collapse. Under the current regime, a law student can take out $275,000 in loans to cover net costs of attendance, and then go work as an DA/PD for $50k per year and pay back $150 per month for ten years and have the principal (by then over $350k) cleared. That is asinine. Net debt payments would be $18,000. That maybe covers cost of living for one year, which means in addition to all tuition, the Govt would be paying cost of living for two years to this law grad. This like the government gifted someone a house or a fully funded retirement account. Once lawmakers see what is actually happening, this program is over. Keep in mind, the debt forgiveness has only begun within the last year, and some miniscule number of debtors (like 100) have been granted forgiveness where total enrollment is PSLF is close to a million. Once the debts start coming due for forgiveness en mass this will make it to the top of legislators’ agendas real fast.

The only real question is whether current enrollees will be grandfathered in or not. Remember, the Govt has no obligation to actually carry through with its promise to give you a quarter million dollars. They can just decide, “nah.” And Fedloan is helping to take care of the problem by (as this article explains) throwing up every roadblock possible to prevent loans from becoming eligible for forgiveness.

Posted by: JM | Sep 4, 2018 10:17:06 AM


Hardly veto-proof majorities. 1 seat majority in the Senate and like 233-200 in the House. Bush didn't have to sign it into law if he didn't want to. And a lot of these kids wouldn't have gone into this sort of debt were the program not in existence, so they are more than justifiably angry at being barred from accessing it through loan servicer derpitude or aggressively narrow-tailored definitions of a public sector employer.

Posted by: Unemployed Northeastern | Sep 4, 2018 8:23:42 AM

"PSLF was a program passed into law by the well-known Marxist George W. Bush in 2007"

Low information? Does that include being so ignorant that you don't know Congress passes laws? And which party Controlled Congress in 2007? That would be Democrats.

Posted by: SDN | Sep 3, 2018 3:38:55 PM

Someone will have to revise the lyrics to 16 Tons.

Posted by: Jonathan T Kurtz | Sep 3, 2018 3:23:23 PM

The mistake here was in assuming/expecting someone else to cover the tab for your choices. Who gets $300K in debt to get a law degree and then works at a low-paying job? Don't feel the least bit sorry for these people and their stupid choices... am surprised that they still haven't learned anything.

Posted by: obijohnkenobe | Sep 3, 2018 2:47:17 PM

Lot of low-information commenters on the site this weekend. Yeesh. PSLF was a program passed into law by the well-known Marxist George W. Bush in 2007 so that non-plutocratic college students could work in the public sector without being utterly crushed by the cost of their graduate degrees. I'm sure you lot would be happier if your DA, PD, water district manager, social workers for abused children, etc. et al were just GED holders but it would not make for better governance.

Posted by: Unemployed Northeastern | Sep 3, 2018 12:45:39 PM

Perhaps parents should get serious about disciplining their offspring and getting them ready for learning in kindergarten, rather than worrying about their fragile personalities--develop critical thinking, assessment, and math--so they don't become whiny losers instead of responsible adults. Do these people think that money grows on trees for their picking, and they can eat without working? Really? No wonder the IQ has been dropping on average for the last 100 years. No one works at anything, remembers anything, carries their own load or anyone else's, and their parents and grandparents are dying off with nothing to leave to them, even if they knew how to maintain and grow it anymore. The world is heading for a melt down in short order.

Posted by: Cat-n-hat | Sep 3, 2018 11:49:46 AM

I understand airlines are looking desperately for mechanics and paying $70,000. So a lawyer with $410,000 in student loans is "working with migrant children?" And hoping for taxpayers to pay her loans?

Posted by: Mike K | Sep 3, 2018 10:43:30 AM

It is hard to feel sorry for someone who ran up huge loans and chose to work as a Social Security decision writer and for a charity, and depended on the government to take care of them. The sad thing is these people will complain until they are blue in the voice, while still voting for policies that increase the size of the same government they wrongly depended on.

Posted by: Brian | Sep 3, 2018 10:39:05 AM

Graduated w/ MDiv in 1988, 8 loans totalling $21k at 9%. Consolidated to be able to pay just one payment -- and didn't understand (or wasn't told) that this was my one and only refi chance. Defaulted when the clergy thing didn't work out, ended up owing $31k. Still owe $7k in spite of $350/mo payments for most of the months since 1995. I know what $21k has done to my life, can't imagine people thinking that 2-3-10x that is okay. BTW, the collections on those loans was the worst ever -- my employer thought I had a bookie. John Malone, wherever you are, I hope you rot in hades.

Posted by: geek49203 | Sep 3, 2018 10:23:02 AM

There's enough guilt to go around in this matter, including students who use loans as an excuse not to work and not having jobs as an excuse to party.

I am well beyond college and can live easily on my retirement and writer's income. And yet this Saturday I'll be doing crowd control at Auburn's football games. It pays well above the minimum wage, and yet the security firm is having trouble hiring students.

Someone needs to send these students a wake-up call. Most Americans didn't go to college. They're not going to pick up the tab for those who did.

Posted by: Michael W. Perry | Sep 3, 2018 10:09:57 AM

So, some people found a way to dip into a federal tax money stream to their own benefit, while damaging those it was intended to 'help'? Well, who could have guessed that would happen?

Posted by: Jorge McKie | Sep 3, 2018 10:03:22 AM

While I would take anything printed by Mother Jones with a handful of salt, colleges are charging outrageous amounts for their programs. It is one reason why I dropped out myself, not wanting to be a debt slave in order to feed marxist professors while they destroy my country.

Posted by: Melissa | Sep 3, 2018 9:32:53 AM

Don't worry everyone, Betsy DeVos is on the case! She will solve this by... ceasing data sharing between the Department of Education and the Consumer Financial Protection Bureau while also removing student loan servicers from accountability under state consumer protection laws.

Posted by: Unemployed Northeastern | Sep 3, 2018 8:22:29 AM

Excellent post. I absolutely love this website. Thank You!

Posted by: Income Tax Return Harlingen TX | Sep 3, 2018 4:17:48 AM