<p>“I do know people who haven’t make payments on student loans for at least a decade. You can keep going back to school and after school ends get hardship deferrals if you can show low income or unemployment, medical problems, etc. You can conceivably keep that kind of deferral going on for some time. So he could conceivably not have been an official scofflaw during 1995-2000.” </p>
<p>Actually there’s another appalling factor to that situation. It’s been a practice for certain of the corporate lenders to report deferments as defaults under remediation because they get federal bingo money for doing so. Not exactly surprising therefore that Bowman has contended SMC booted up the fees to unreasonable amounts. It’s not uncommon for these loans under default to be increased 20%+ due to the fee enhancements. So even if one is trying in good faith to remedy such a situation its often impossible. It’s ironic and quite disturbing that the manner via which educational debt is structured is giving our middle classes a feel for what the poor have been exposed to for years with such as payday loans, rent to owns, and illegal loansharking. </p>
<p>Plus the man lost a leg in an accident, and so may not have been in any financial condition to mitigate other problems. The medical bills alone on something like that would be disasterous. </p>
<p>But Bowman’s situation aside we do have to recall that SMC has aggressively gone after even those who are completely disabled or even dead. There have been several high profile cases of accidental deaths, or disease, or suicides wherein even after the persons death SMC representatives quite happily went after the survivors. So even death is not a way out when dealing with these people. </p>
<p>Expecting reasonable conduct from companies like SMC, is like expecting sane conduct from Mad King George. And for much the same reasons of incestuous political origins and unchecked and unreasonable power. </p>
<p>And Bowman might be a scofflaw, but he’s a rank amateur. Remember the little 270 million dollar over billing of the USDOE by NNC? None of that was ever repaid because of the application of a questionable loophole. And the little attempt to back engineer a .5 increase on SLP subsidies which had already been paid, going back for almost a decade,engineered by SMC and their associates? And the most recent attempt to collect 15% out of Duncan’s and the USDOE’s new direct lending proposal, for ‘servicing’. </p>
<p>Perhaps its inevitable moral decay is a response to our current student lending system. When systemically we’ve got situations that even Boss Tweed never even dreamed of, there’s not much point for the small players to try to behave morally. It’s the situation Orlov wrote about in his comparision of the failure of the USSR and the potential failure of the US-in systemically corrupt systems those who try to hold to some idealized morality, get eaten.</p>
<pre><code>"Atana, at some point don’t you feel the borrower has a responsibility to actually read the documents he’s signing? Or do we give him a pass since he might have been illiterate (in which case I say bravo on denying him a license to practice law) or not competent to enter into a legal contract (ditto).
</code></pre>
<p>Before we pile it on Sallie Mae and the institutions, let’s have a shout-out for people NOT borrowing money that they don’t intend to pay back. Or people who don’t care that IF you borrow and don’t make any payments, your debt will be transferred to a collection agency and that fees will accrue in addition to the interest, principal, and fees already rolled into the loan." </p>
<p>Blossom I have no disagreement that people should try to pay their debts. However there is also a moral reciprocity not to arrange the debts in a manner which are usurious. Or that the attempt to collect these debts exceeds the moral restraints appropriate for such an action. Others much higher profile than myself and my colleagues have commented much more eloquently about this problem, especially at Harvard Business school. Dr. Warren’s essays and interviews about the issue are the definitive statement.<br>
Plus there is a clear reason that the Christian Bible and the Koran make clear proscriptions against usury. Usurious lending is often the gateway to systemic moral decay.</p>
<p>The problem is that attempting to use moral judgments in a matter of this type cannot work if that judgment is applied unilaterally. I would not approve of Bowman’s actions, but from the point of systemic harm the often usurious conduct of some of these lenders is more problematic because more people are affected. Both are morally problematic, but the effect is greater in one case than in the other.</p>