Greetings. I wanted to let you know that your website caused me an almost "sleepless" night over the discovery of this Bill and the possibility it being passed. I am a lawyer who graduated from lawschool with over 120k in debt. I was horrified to discover I could not take advanatage of new consolidation rates this year since I had already reconsolidated once at 9%, with a small reduction for auto pay. I pay about 1000k a month and feel trapped by this payment. I even left being a prosecutor in part because these loans were creeping up on me and interest was capitalizing. After 10 years of being an attorney, I just started paying the full amount. Bottom line is when I first consolidated, there was no warning this rate was permanent. I thought, like a car, house, if rates fall, I will just refinance. WRONG. After taking a while to figure out why I could not, and recently learning that there are about 800,000 others like me - I stumbled on this website. To get the new rates would be a life changing situation for me, so many young lawyers and other professionals stuck in this trap. Since learning of HR 2711, I have already contacted my local, state and american bar association asking them to do articles about this Bill since I now fear it will languish or die because most of those affected will not even know it is out there. I myself just accidently discovered it. It has huge ramifications for so many... improving quality of life, less money worries, perhaps allowing some to stay in public service! This needs to hit the news in some large fashion. Any other plans to contact professional associations? Even if one attorney in each state hit their state and local bar, begging for articles to be published it would help. Any similar promotion in other areas? Is anyone else as worried as me? Also, once I saw over 3000 bills are proposed every year, I also wonder about feasibility of it ever passing since most do not. Does anyone have an info on the potential success on it? I see some support on your website. What else will it take? I also contacted my House member who was not listed as supporting it and explained the bill and wanted to know if he supports it and if not, why. This is huge chance for so many of us. Looking forward to a reply.
I feel your pain! I am in a similar predicament myself as a lawyer just a few years out of school. I am paying $1000 a month total on my loans, $800 of which is for my consolidation loan at 8.25%. I, too, had no idea consolidation loans couldn't be refinanced, and that's a reason we started this site. I am planning on contacting my local bar associations here in Chicago as well, and I think contacting professional associations and alumni associations is a great way to get the word out. Of course forwarding our website and our petition out to our friends and family will help, too, as will contacting local media.
Gerry is keeping up with Congressman Wu's office on H.R. 2711. As of right now, it's still in committee. As far as what it will take to get it passed, I think contacting our representatives is a good step, and letting candidates know that this is a top concern for many voters.
Looks like we lawyers are being pretty hard hit by our inability to refinance our loans. My principal balance is thousands more than when I initially graduated from school about 6 yrs ago due to the capitalization of interest that I previously had no chance of affording.
I have written letters to any one I can think of and will continue to do so in the future.
I am bombarded with offers to "reconsolidate" my loans from other lenders. When I advise that I have already consolidated they still offer to refinance my direct loan at the same interest rate. some of them have various incentives to do so like a 1% rebate after six months of continuous payments and another has a 1% interest rate reduction after 3 yrs of payments.
I haven't done any of these since the incentives aren't anything to get excited over at this point. also i was concerned about my ability to re consolidate should this legislation pass.
I was wondering if anyone has any thoughts about this and if you have seen any deals better than the ones mentioned.
Stacy, thank you for your post. Your story is shared by not 800K but rather millions of young professional Americans.
What we offer here is a forum to raise, discuss and mobilize behind just your issue. We're all in the same boat. We all need -- and deserve -- relief. My heart breaks again and again w/ every story I hear of a young person who bought into the debt for education story, just to find that while they increased their earning potential, they shackled themselves to a debt load that prevents their greater earnings from making a meaningful difference in their lives. If you're like the rest of us, not only are you paying $1000/month now, but you will until you retire. That's not the American Dream.
If you haven't signed our petition, please do so now. If you have signed it, please spread the word.
We all have our individual networks. Just today, thousands of young Democrats became aware of our work thru a network I'm fortunate to have. But its hardly the only one. I ask you, share our story with all yours, and ask your friends to do so, too. And, as you can, be involved here, continue posting, and I am sure we'll get results.
I'm thrilled you called your elected officials. As I'm sure you have friends from college and law school in similar straights, hopefully in various states; reach out to them, too, and insist that they join this fight.
HR 2711 is just one step that could be life changing to you and many others. If it's the least we accomplish, we will have accomplished a lot ... but we want to elevate this issue so that we can also accomplish more.
I have been on the phone w/ various reporters of varying degrees of sympathy. Call those in PA who cover the higher ed beat ... we're looking for a first good story that can catalyze other opportunity at major newspapers. If one story happens, it will be picked up on the AP wire, and others will follow. Yes, we're striving for major coverage. But it won't happen till someone local gets the message and takes the first step.
We need more partners in this fight, and I welcome you to ours. We will win. It will take time. It will be frustrating. But at some point, we get relief to you and the millions of Americans who, like you and me, took on a mound of debt in pursuit of the American Dream, and who found upon getting our education that we were screwed.
BTW: We're non-partisan, and there's a lot of appeal to Republicans on this issue. I happen to be a Democrat, and so I have a network of Democrats. But GenDebt is not a D body, but rather a non-partisan body for what is right by young Americans suffering under the bane of extraordinary debt, regardless of party affiliation. If you're an R, so much the better ... we need friends on both sides of the aisle. If you have R friends, invite them to our forum.
You can't reconsolidate to lower levels presently. Sorry to share w/ you what you already know. That's why GenDebt is here.
As Stacy and the rest of us are doing, call your local elected officials AND your local press. People think it's hard to reach the press. It's not. They're people like you and me, and they want a local interest story. Call the your paper, ask for the editorial staff that handles higher ed, and you'll more than likely speak w/ the person who writes on this issue. Tell them about yourself, tell them how you can't afford to improve your life despite your higher education, tell them you're not alone. And let them know about us.
We're gonna get this done ... but it's gonna take a lot of work by a lot of people. We all can benefit from this work, and we can benefit many others too. And we have "right" on our side.
Unfortunately, publicizing your plight, though it is the same as ours, has negative impact on the potential passage of relief - and I think you know why. There are few Americans who will take the time to "feel the pain" of anyone with a JD in front of their name. And while $1000/mo is a frightening sum, the fact that you can pay it at all is reason enough for the opposition to use you as poster children for branding positive legislation as "Greedy Lawyer Relief".
From a PR standpoint, what we need is a large and visible statistical discrepancy between the total, verifiable numbers of post-graduate, sub-average-earning wage slaves (i.e. those for whom the payments on a "measly" $35K @ 8.25% bill amounts to more than 20% of their monthly take-home pay) and those folks, like you, who have actually been able to use your degree(s) to make an "above-average" provessional-level income.
To put it in another perspective by using another political fight:
While the 2nd Ammendment debate impacts anyone who would like to reasonably and safely use firearms, it is awfully hard to garner sympathy for the Rednecks at Machinegun Conventions when they protest for/against legislation.
It doesn't really help to have Lawyers complain about the unfairness of things. No matter how unfair it really is.
On behalf of myself, not this site, while I understand where you're coming from, I respectfully disagree with your analysis. I was making that 35k you mention for the first couple years after law school, because I wanted to do public service work. I had to defer my payments at that time because it WAS too large a percentage of my income. At any rate, I think one of the points Stacy and I were trying to make was that many lawyers (and doctors, and teachers, etc.) want to do more public service oriented work, and feel we can't because of our loan burden.
Now, on behalf of the site, the bottom line is this: we're all in the same boat on this interest rate problem. We want to put all of our faces on the issue. This is about what's right.
Note question #10. "When Congress decides to increase federal higher education aid, where should it direct its attention -- toward financial aid for needy, incoming college students or for continued subsidies to college graduates in the workforce, such as those borrowers who are repaying their student loans?"
Think they have us in mind? Lawyers? Bankers? Financially needy? You gotta be kidding!
That said, I for one am not after sympathy. But what we're fighting for has nothing to do w/ sympathy. We're not asking for forgiveness. We're fighting for equal opportunity to refinance our loans to make it easier to pay an obligation we're required -- and fortunate -- to pay. We're asking to do this consistent with other kinds of loans -- with virtually every other kind of loan.
Where I do think that sympathy can apply is in HOW we're in the same boat: we are all about the same age and are mostly newly professional. We are at the beginning of our earning potential. We have done things right: we went to school, we pay our bills, some of us even have jobs. :)
So we graduated. And then we had a rude awakening: not only do we have to repay -- which is all good. BUT we hear over and over again how low rates now are; hell, we even get mail from Sallie Mae and the Dept of Ed reminding us how low rates are! And then we each do what you know you've done: we call the 800 # and try to reduce our rate, just to find that we can't.
But the bottom line is that Congress created the anomoly that brings us together, that is the prohibition to true refinancing. It affects people across the board, regardless of geography, background, religion, etc ... Except that we share relative age in common, and being shackled with this much debt so early in life speaks to the stories we've shared here.
So, yeah, Bryan, you're right: were we to be Lawyers' Generation Debt rather than Gen Debt, I'm sure we'd pull at no heart strings. Yet we ARE lawyers, doctors, bankers, teachers, social workers, accountants who want exactly one thing: the chance to reduce our student loan interest rate to prevailing rates. That's not a sob story to me. That's justice.
Stacy: I am talking about PR, not "reality". Lawyers are getting just as royally screwed as the rest of us and deserve the same relief. OTOH, you misread my post. I WISH I was making 35K. That's "just" how much I OWE. I MAKE less than 21k - four years of job hunting and a Y2K degree from a "prestigious" university notwithstanding. My SL payments are 21.8% of my take-home (but only 17.3% of my Gross, so I get no relief there either).
Gerry: I agree. And since I too am after justice for everyone here, I feel it is important for the participants to understand the Political/PR realities we face.
Since my (tremendously valuable - NOT) degree says I studied/understand crisis-communications & PR, experience tells me that we need our Lawyer Contingent to act as our "counsel support" more than be on the public forefront. (Same goes for Doctors). Public perception is everything in this fight, and as long as our most vocal/visible advocates are, well, Advocates (and Physicians) we're going to have a hard sell.
I really do understand where you are coming from regarding the PR issue. I know how many people hate lawyers, think we're rich, etc. (when the reality is that my payments are roughly 23% of my take home pay per month at this point). Hopefully we'll disprove some of that perception throughout the course of this fight to get the law changed.
But again, the bottom line is that all grads who borrowed money to pay for school and then consolidated their loans deserve to be able to take advantage of lower interest rates. That's our point, no matter what profession in which those grads work.
As we've ramped our visit #s since rebranding, what we need more than anything is to spread the word, to provide value, and to access local media and legislators.
Let our biggest problem be that we have an overconcentration of lawyers participating with us (I, for one, am not one) :)
Heh. Neither am I a lawyer, though people often posit that I am (or should be). My current mode is itenerant philosopher/administrative assistant/office manager. It's pretty lame to be 36 and making less than I did when I was 25 and undegreed.
Diana: I'm not trying to be confrontive, but consider, if you are paying $1000/mo (give or take) - and it is 23% of your net, that means you have a monthly (pre-SL) net of over $4000, or over $50,000/yr - well above the "national average annual GROSS income".
That it the PR problem.
I won't GROSS 50k in TWO years, much less NET it in one. Hell, I won't even come close to GROSSING your post-student-loan net. THAT is where the PR problem lies. Frankly, if I were making what I was "worth" (according to my age & education & the BS the University "career" center puts out) and bringing in your kind of money, even paying "only" your $1000/mo, my $35k in loans would be GONE in 3 years - even with me being the sole-provider and having a disabled, hospital-prone spouse. (Actually, it would be more like 19 months, since I wouldn't know what to do with $3000 ready cash each month...)
You can't tell me that, even in Chicago (I live in MC IN, so I know...) you are struggling to live on $3000 a month - unless you over-bought on housing (Loop Condo maybe?) and automobile and are the sole-provider for a family.
I live decently (though it, admittedly, isn't a hell of a lot of fun) on a net of less than $1450/mo. That includes a Condo mortgage and my car. The rest of america sees your post-sallie-mae $3000 and sees your, and thereby our, plight as whining.
In the meantime, getting into a "quien es mas macho" debate on who suffers more under the weight of our debt does none of us any good.
In the words of someone famous, I forget who it was ... "I feel your pain." AND I know you feel mine. It is enough that we are aggrieved. We all feel the heavy burden. Even those among us who are lawyers. :)
We each have our own circumstances, our own individual debt levels, our own stories. Let's steer away here from putting one another down. That's divisive, and doesn't serve us well.
May I suggest putting some of that energy into sending out our URL to more friends, or making calls to local media, or getting more people onto the petition?
I look forward to the creation of the alleged PR problem that could ensue.
I concur with Gerry. Let's please try and leave stereotypes out of this (though for the record, I rent a small one bedroom and have no car). We're all borrowers who want the law changed to benefit everyone, and that is what we as the creators of this site are trying to publicize. Now how about some more ideas on how to get the word out on H.R. 2711 and the issues surrounding it?
Ah, but it does exist already. You have mentioned it. I have read indications to that effect from some of the debates. When I talk about this issue with people the FIRST thing they bring up is "whiny lawyers". I have to spend most of my time disabusing people of the notion that Doctors & Lawyers will be the biggest benicifiaries of proposedlegislation. To the public, it's the "big numbers" that matter, and the PostDoc professions have the biggest numbers (in real dollars) even though the majority of people with locked-in high-interest loans have sub $50K, undergrad balances.
Unfortunately, some people don't understand that it's all about perspective - and the perspective that counts in this fight is the one that sees "young professionals" (within 5 years of graduation) netting 50-100% more per month than they do complaining about the unfairness of their debt. (Yes it is Unfair - this is a tactical explanation, not a diatribe.)
Legislation is won or lost on its percieved populist merits. I know. I worked on two political campaigns that both lost because the candidates were unwilling or unable to appear as populist as did their RINO opponent - even though both candidates WERE more populist than the incumbent.
Someone in their 30s making over $50K but complaining that they can't live on $3000+ a month does NOT strike a populist chord. Thus my suggestion that the PostDoc professionals among us keep as low a profile as possible while providing as much data, legal feedback and caselaw research as possible.
That's all I was suggesting.
Other than that, I do expend quite a bit of energy and intellectual capital on his fight. I enjoin fights to win, not to lose to bas PR.
Diana, the stereotypes are precisely what we have to contend with. I was/am pointing out, with hard numbers, using the figures you supplied, how those stereotypes manifest themselves.
Politics is all about stereotypes. Gun owners are Redneck-Rambo-Wannabees, Environmentalists are tree-hugging Gaia-worshiping paint-throwing bunny-huggers, etc. Stereotypes work. The opposition of whatever cause knows this.
My suggestion (beyond getting out the word on this website and HR 2711) is one of simple pragmatisim. Our "spokesmen" need to be wage slaves, not those whose stereotype, fair or not, can be used against us.
I've been involved in politics too long (over 10 years) to not understand the value of pragmatisim. But, as you say, it's officially a dead horse. I just hope I've made my point.
I am a post-doc owing lots of money too. I have contacted the President-Elect for the APA (American Psychologist Association) who has agreed to look into the matter. As far as I know, the APA supports the removal of the sole lender prohibition but does not think supporting HR 2711 is helpful because it takes away money from future students. Well, I informed him of the following points of interests: 1. why must those who have consolidated bear the burden for future students while the current students only have to worry about their loans?, 2. if FHA loans, which seem to have some type of guarantee by the govt, can be refinanced, why not consolidation loans? and 3) sallie mae etc are publicly traded stocks and perhaps they are more concerned about their profits than students in general. I have contacted my representatives including John Edwards ( I am in NC)who has agreed to keep my issue in mind. Finally via my capital alert, I have contacted the media with no response, however, 19 people have read it, perhaps modified it and sent it to their legislators. You can post an alert by going to http://capwiz.com/congressorg/issuesaction/
I am so glad to have this website for support and ideas. I see HR 2711 now has 90 sponsors - way too go! Thanks Diana and Liz.
Mary
PS I am willing to go Washington DC for a rally if necessary.
I'm gonna just say, you made your point, let's move forward. You don't like having lawyers as part of the front line. OK. Well, guess what? We're doing the best we can, and if we decide to have lawyers as our spokespeople, then we will. You may dedicate your energies here or elsewhere, and that is your choice.
If that we have lawyers -- or Lawyers -- among us doesn't suit you, you're more than welcome to set up your own online resource for non-Lawyer and non-Doctor and non-Wall Street "wage slave" debtors. (Your words, not mine).
I'm frankly unsure how much thought to put into your tirade, as I personally find it bordering on the offensive, but I will continue to show you respect in the hope of gaining your energies in our collective effort. This is probably the last on what I think is a tired issue ... as I have said repeatedly before, let our worst problem be that we have a lawyer spokesperson or a PR problem.
Diana, Liz and I set up this site as a resource for the millions of Americans who are in our same boat. That boat includes you, it sounds like, even if you don't like that there are lawyers in the boat, too. We all feel like we are "wage slaves" as you put it.
Regarding your political experience, you might like to know that 2711 now has approximately 100 co-sponsors. Nope, not a majority -- but a hell of an effort thus far. So yes, we do have a shot.
And we're gaining access. I'd love to know how you're working to gain access for this cause, within and outside this specific effort. We ARE in the same boat and SHOULD be working on the same side. And should be respectful of one another.
Oh -- and by the way -- speaking of political experience I WAS a public official and I WON my races. And MY instincts say we need to be inclusive.
Now, a word in your defense: no one here has posted a PR strategy that might look like the following, a commercial w/ a series of lawyers and doctors and bankers crying in their Mercedes that they can't make ends meet, that they can't take there 5 vacations a year and that they can't afford to send their kids to Andover for their student loan rates. Indeed, Bryan, we agree that sending such a message would be counter-productive. And it should be.
But I also believe that we here represent a constituency that FEELS debt-burdened beyond recovery. And, once again, the issue here has NOTHING to do w/ income but rather to do w/ RATES and PARITY.
I refuse to argue how much is "enough" to live on, and whether $10K, $25K or $50K or $500K incomes create our underlying message. I hope you come to earn a ton of money someday -- and someday soon -- as I wish for all of our readers.
Our underlying message, in case you missed it, is that the measure that we're working toward be FAIR and CONSISTENT with EVERY OTHER LOAN PRODUCT IN THE COUNTRY. In turn, that WOULD allow refinancing.
I am not about refinancing for accountants and not for teachers, or teachers and not for lawyers, or lawyers and not for doctors. I am for a simple solution that applies to all.
Brian, I look forward to seeing your positive energy. I do not want to continue what seems to me a negative debate prematurely posed. I hope you will focus more on what we CAN DO and ARE DOING (as you say you are) and NEED TO DO -- together -- than attack anyone, as I believe you did Diana today, and be an agent for progress rather than counter-productive rants.
Thank you for the breath of fresh air I needed this evening! :)
I do not know your level of experience in working w/ media, so I apologize if what I write here is stuff you already know.
First, I recommend trying to access local print media. You may not succeed in getting thru the 1st time, but having the person's NAME and perhaps even being familiar w/ a recent piece or two he or she has written resonnates a lot w/ reporters. Makes for good conversation, too, which is always a good thing.
Second, don't expect a call back. They ain't gonna call, unless the stars are REALLY in alignment and they're already looking at this issue.
Third, the best thing that can happen in a conversation w/ a reporter is that he or she agrees to look at additional information and perhaps write a story. BUT, the 2nd best thing is that you can get reliable access to that reporter moving forward. Perhaps now's not the time for him or her. Perhaps next week is. Or, perhaps he or she needs to write a piece, hasn't an idea, and picks us up.
In a past life, I worked a lot with the press. And, I learned some important lessons, like reporters are people, too (some even have large debt burdens!). Whatever can be done to facilitate coverage -- i.e. make it easy for the reporter -- adds to the likelihood of coverage. They, after all, must fill space.
I've even written pieces for reporters that have been printed verbatim, under the reporters' own names.
Fifth, and finally, if you access a reporter and they say they're not interested in our story, ask him/her if there's someone else at the paper that might be. I respect nothing more than a reporter who tells me he/she isn't gonna write a piece on what I'm pitching. Had that happen this week on our issue ... and the reporter gave me another name at the same paper. So, I'll try again.
Thanks for your hard work, Mary! And thrilled that you found us!!!
One more thought, as you continue pursuing the APA.
Yes, there is a misconception that reducing rates would reduce access to loans among future students. While vaguely true, the logic behind the logic does seem to add up ... except that, in practice, that's not how it works.
What happens differs for loans managed in portfolio by the Dept of Ed and by private lenders such as Sallie Mae.
With the Dept of Ed, monies received (student loan interest and principal payments) go into the general budget and not necessarily toward any new loans. As a result, I like to call the surplus interest the gov't (not the Dept of Ed) receives (that is, the interest over the gov't cost of capital) a "tax" ... Student loan payments are simply a free source of revenue that the gov't can rely upon -- to the tune of about $500M a year in excess of the cost of funds -- to use in any way it sees fit, just like each and every one of our federal tax dollars. And it does. And the money doesn't directly go back into more student loans. Tax dollars do, but not necessarily these "tax" dollars.
In exchange for these higher interest rates, the gov't on loans held by the Dept of Ed acts in effect like a bank. And the gov't absorbs all rate and default risk. Of course, also unlike other kinds of loans, student loans may not be discharged upon bankrupcy. In defense, however, they do enjoy preferable terms, such as deferrment upon returning to school and other stuff.
Sallie Mae and other private lenders do not hold most loans in portfolio. Rather, they operate like the mortgage market does, and consolidate the mortgages into new instruments, and in turn they sell the interest and principal payment streams to investors -- primarily pension funds and other institutions. It is this secondary market that provides liquidity and access for current and future students, NOT the interest we pay.
Sallie Mae, and most banks operating in this area, serve as "pass-thru" organizations. Quite literally, the moment a loan is made and rec'd by Sallie Mae, it is repackaged and sold to other investors, who give Sallie Mae back most of the money up front; Sallie Mae, in turn, makes more loans. And the cycle continues.
By holding loans "in portfolio," the Dept of Ed sends the following message: we are making an investment, an investment just like what pension funds make in Sallie Mae securities. That is, we think we can make more by holding these loans than other means. And it makes sense: many people are repaying at rates of 9 and 10%. You go find a high credit, high quality, never dischargable investment that pays 9% in this market!
The commonly shared logic APA shared w/ you is ... well ... logical, but simply not true, yet very, very common (... well, not true except in a really, really, really esoteric sense: that if the gov't has more $, it can make more loans, and I suppose it can, but the dollar trail doesn't work that way). But with those moneys, it can also build more roads, allow more graft, fight more wars, etc. In short, the funds don't necessarily -- and don't usually -- go back into new loans.
A better parallel is with state and interstate lotteries. The rationale for allowing them initially was to fund education. With time, however, many state lotteries shifted their use of the moneys gained from education to other needs. State gov'ts discovered that this was a reliable, renewable source of funds, and diverted the revenues elsewhere. Such is true w/ most student loan proceeds.
So yes, it makes perfect sense that loan interest payments would LOGICALLY be put back into a kitty for future loans. But nope. What do you expect? Sense?
I hope this helps you w/ APA. Please tell us what happens! And let us know how we can support you!
On to what postiive things are happening, I have been able to have the Pa. bar assoc. agree to publish an article about the issue and their Young Lawyers division is reviewing it to consider actually backing it publicly. I have a call in to the American Bar Association to to see if they would do the same. My local paper has agreed to do an article in exchange for me giving an exclusive interview on a crmininal case I have coming up and my local bar magazine is doing an article also. I have mass emailed our Young professionals group to tell them about it and it contains many different professionals. I have asked them to please contact their professional organizations espec on the national levels. The bottom line is, with so much pending legislation out there, this bill has been sitting quietly by needing to be discovered. I just found out about it and eveyrone I tell did not know it was out there and goes nuts! So first goal - others need to know of it. As for the previous postings, I hope the whole debate is done regarding pr etc. I think we are all smart enough to know to not do commercials with lawyers crying in their mercedes that they cant join the right country club because they are broke. Only a moron would not recognize the perils of such an stupid approach. That said, hammering defeatist reasons why this cannot work is as much a waste of time as producing the mercedes commercials. If I had a nickel for every time someone told me it cannot be done, and I saw it get done, I wouldnt be complaining about my loan payment. Same with cases I was told, you cant win, and then I did. Obstacles are expected. I was once told there would never be any support in my state for vevamping the DNA system because "politically" no one cares about the rights of defendants. Well no kidding. So we packaged the plight from the angle of victims who realized their attackers DNA wasnt being processed in the central database before they were released in some cases due to overburdened crime labs, and the great cost of incarcerating actually innocent people until the test came back to exonerate etc, and the overtime being paid to other states labs to help us catch up .. All issues were viable, but we put out there the most logical ones to get the job done and generate mass support. I am now the head of the governors committee for DNA reform with currently $500,000 to allocate just for the end of 2003, to the surprise of many naysayers. So the points are well taken but seriously...they were already known. The questions is what are we going to do about it. The real issues are the monopoly created by these loans which are actually locked for their life. These are loans which were not disclosed as being subject to the single lender rule nor was the meaning of that rule explained when we took them. Which leaves one to believe, like regular economy, they must stay competitive with rates or you can refinance. It is the failure to disclose such a relevant feature of the loan which makes me want to argue it is an adhesion contract negotiated oppressively, them knowing the secret and us not. If this were a residential mortgage and they left out such a term, you could go sue them and it would most likely be found to be unenforcable. But this is the government, impossible to sue, and even if you can, it takes FOREVER. Because of that, realitstically, our real best bet is not to try and sue them or sallie mae or any other clever idea that may have merit, but to push this legislation and I think that point about the terms of the loan is persuasive to some, even if a lawyer or doctor is making it. I want to see something happen soon rather than years later. and for what it is worth in response to the "whiny lawyers" angle, politicians are lawyers last time I checked. we need to be able to dispel myths that this takes money from new students etc. But first, we need to spread the word and start leaning on politicians. You cannot predict what anyone of them thinks about it until you ask. Then deal with it. Some we will never change, some will be for it, and some will be open to having their misconceptions changed. So lets shut up and do it.
Comments
Greetings. I wanted to let you know that your website caused me an almost "sleepless" night over the discovery of this Bill and the possibility it being passed. I am a lawyer who graduated from lawschool with over 120k in debt. I was horrified to discover I could not take advanatage of new consolidation rates this year since I had already reconsolidated once at 9%, with a small reduction for auto pay. I pay about 1000k a month and feel trapped by this payment. I even left being a prosecutor in part because these loans were creeping up on me and interest was capitalizing. After 10 years of being an attorney, I just started paying the full amount. Bottom line is when I first consolidated, there was no warning this rate was permanent. I thought, like a car, house, if rates fall, I will just refinance. WRONG. After taking a while to figure out why I could not, and recently learning that there are about 800,000 others like me - I stumbled on this website. To get the new rates would be a life changing situation for me, so many young lawyers and other professionals stuck in this trap. Since learning of HR 2711, I have already contacted my local, state and american bar association asking them to do articles about this Bill since I now fear it will languish or die because most of those affected will not even know it is out there. I myself just accidently discovered it. It has huge ramifications for so many... improving quality of life, less money worries, perhaps allowing some to stay in public service! This needs to hit the news in some large fashion. Any other plans to contact professional associations? Even if one attorney in each state hit their state and local bar, begging for articles to be published it would help. Any similar promotion in other areas? Is anyone else as worried as me? Also, once I saw over 3000 bills are proposed every year, I also wonder about feasibility of it ever passing since most do not. Does anyone have an info on the potential success on it? I see some support on your website. What else will it take? I also contacted my House member who was not listed as supporting it and explained the bill and wanted to know if he supports it and if not, why. This is huge chance for so many of us. Looking forward to a reply.
Stacy Parks Miller
814-234-1500
Miller, Kistler & Campbell
720 South Atherton Street
State College Pa 16801
Posted by: Stacy Parks Miller | March 2, 2004 12:46 PM
Stacy -
I feel your pain! I am in a similar predicament myself as a lawyer just a few years out of school. I am paying $1000 a month total on my loans, $800 of which is for my consolidation loan at 8.25%. I, too, had no idea consolidation loans couldn't be refinanced, and that's a reason we started this site. I am planning on contacting my local bar associations here in Chicago as well, and I think contacting professional associations and alumni associations is a great way to get the word out. Of course forwarding our website and our petition out to our friends and family will help, too, as will contacting local media.
Gerry is keeping up with Congressman Wu's office on H.R. 2711. As of right now, it's still in committee. As far as what it will take to get it passed, I think contacting our representatives is a good step, and letting candidates know that this is a top concern for many voters.
Posted by: Diana | March 2, 2004 01:36 PM
Looks like we lawyers are being pretty hard hit by our inability to refinance our loans. My principal balance is thousands more than when I initially graduated from school about 6 yrs ago due to the capitalization of interest that I previously had no chance of affording.
I have written letters to any one I can think of and will continue to do so in the future.
I am bombarded with offers to "reconsolidate" my loans from other lenders. When I advise that I have already consolidated they still offer to refinance my direct loan at the same interest rate. some of them have various incentives to do so like a 1% rebate after six months of continuous payments and another has a 1% interest rate reduction after 3 yrs of payments.
I haven't done any of these since the incentives aren't anything to get excited over at this point. also i was concerned about my ability to re consolidate should this legislation pass.
I was wondering if anyone has any thoughts about this and if you have seen any deals better than the ones mentioned.
Posted by: Mark | March 2, 2004 02:19 PM
Hey there ... Gerry here.
Stacy, thank you for your post. Your story is shared by not 800K but rather millions of young professional Americans.
What we offer here is a forum to raise, discuss and mobilize behind just your issue. We're all in the same boat. We all need -- and deserve -- relief. My heart breaks again and again w/ every story I hear of a young person who bought into the debt for education story, just to find that while they increased their earning potential, they shackled themselves to a debt load that prevents their greater earnings from making a meaningful difference in their lives. If you're like the rest of us, not only are you paying $1000/month now, but you will until you retire. That's not the American Dream.
If you haven't signed our petition, please do so now. If you have signed it, please spread the word.
We all have our individual networks. Just today, thousands of young Democrats became aware of our work thru a network I'm fortunate to have. But its hardly the only one. I ask you, share our story with all yours, and ask your friends to do so, too. And, as you can, be involved here, continue posting, and I am sure we'll get results.
I'm thrilled you called your elected officials. As I'm sure you have friends from college and law school in similar straights, hopefully in various states; reach out to them, too, and insist that they join this fight.
HR 2711 is just one step that could be life changing to you and many others. If it's the least we accomplish, we will have accomplished a lot ... but we want to elevate this issue so that we can also accomplish more.
I have been on the phone w/ various reporters of varying degrees of sympathy. Call those in PA who cover the higher ed beat ... we're looking for a first good story that can catalyze other opportunity at major newspapers. If one story happens, it will be picked up on the AP wire, and others will follow. Yes, we're striving for major coverage. But it won't happen till someone local gets the message and takes the first step.
We need more partners in this fight, and I welcome you to ours. We will win. It will take time. It will be frustrating. But at some point, we get relief to you and the millions of Americans who, like you and me, took on a mound of debt in pursuit of the American Dream, and who found upon getting our education that we were screwed.
Gerry
Posted by: Gerry | March 2, 2004 02:32 PM
BTW: We're non-partisan, and there's a lot of appeal to Republicans on this issue. I happen to be a Democrat, and so I have a network of Democrats. But GenDebt is not a D body, but rather a non-partisan body for what is right by young Americans suffering under the bane of extraordinary debt, regardless of party affiliation. If you're an R, so much the better ... we need friends on both sides of the aisle. If you have R friends, invite them to our forum.
Welcome aboard.
Gerry
Posted by: Gerry | March 2, 2004 02:36 PM
Mark-
Your situation, also, is precisely why we exist.
You can't reconsolidate to lower levels presently. Sorry to share w/ you what you already know. That's why GenDebt is here.
As Stacy and the rest of us are doing, call your local elected officials AND your local press. People think it's hard to reach the press. It's not. They're people like you and me, and they want a local interest story. Call the your paper, ask for the editorial staff that handles higher ed, and you'll more than likely speak w/ the person who writes on this issue. Tell them about yourself, tell them how you can't afford to improve your life despite your higher education, tell them you're not alone. And let them know about us.
We're gonna get this done ... but it's gonna take a lot of work by a lot of people. We all can benefit from this work, and we can benefit many others too. And we have "right" on our side.
All my best,
Gerry
Posted by: Gerry | March 2, 2004 02:40 PM
Stacy & al. Legal types:
Unfortunately, publicizing your plight, though it is the same as ours, has negative impact on the potential passage of relief - and I think you know why. There are few Americans who will take the time to "feel the pain" of anyone with a JD in front of their name. And while $1000/mo is a frightening sum, the fact that you can pay it at all is reason enough for the opposition to use you as poster children for branding positive legislation as "Greedy Lawyer Relief".
From a PR standpoint, what we need is a large and visible statistical discrepancy between the total, verifiable numbers of post-graduate, sub-average-earning wage slaves (i.e. those for whom the payments on a "measly" $35K @ 8.25% bill amounts to more than 20% of their monthly take-home pay) and those folks, like you, who have actually been able to use your degree(s) to make an "above-average" provessional-level income.
To put it in another perspective by using another political fight:
While the 2nd Ammendment debate impacts anyone who would like to reasonably and safely use firearms, it is awfully hard to garner sympathy for the Rednecks at Machinegun Conventions when they protest for/against legislation.
It doesn't really help to have Lawyers complain about the unfairness of things. No matter how unfair it really is.
Posted by: Bryan | March 3, 2004 08:40 AM
Bryan -
On behalf of myself, not this site, while I understand where you're coming from, I respectfully disagree with your analysis. I was making that 35k you mention for the first couple years after law school, because I wanted to do public service work. I had to defer my payments at that time because it WAS too large a percentage of my income. At any rate, I think one of the points Stacy and I were trying to make was that many lawyers (and doctors, and teachers, etc.) want to do more public service oriented work, and feel we can't because of our loan burden.
Now, on behalf of the site, the bottom line is this: we're all in the same boat on this interest rate problem. We want to put all of our faces on the issue. This is about what's right.
Posted by: Diana | March 3, 2004 10:21 AM
Bryan, Diana, Stacy and others,
I actually think that Bryan has a point.
There is no question in my mind that lawyers will not get sympathy for their debt obligation as lawyers with large debt (just check out the Committee on 21st Century Effectiveness' survey for a marvelously leading question: http://edworkforce.house.gov/issues/108th/education/highereducation/collegecostcentral.htm)
Note question #10. "When Congress decides to increase federal higher education aid, where should it direct its attention -- toward financial aid for needy, incoming college students or for continued subsidies to college graduates in the workforce, such as those borrowers who are repaying their student loans?"
Think they have us in mind? Lawyers? Bankers? Financially needy? You gotta be kidding!
That said, I for one am not after sympathy. But what we're fighting for has nothing to do w/ sympathy. We're not asking for forgiveness. We're fighting for equal opportunity to refinance our loans to make it easier to pay an obligation we're required -- and fortunate -- to pay. We're asking to do this consistent with other kinds of loans -- with virtually every other kind of loan.
Where I do think that sympathy can apply is in HOW we're in the same boat: we are all about the same age and are mostly newly professional. We are at the beginning of our earning potential. We have done things right: we went to school, we pay our bills, some of us even have jobs. :)
So we graduated. And then we had a rude awakening: not only do we have to repay -- which is all good. BUT we hear over and over again how low rates now are; hell, we even get mail from Sallie Mae and the Dept of Ed reminding us how low rates are! And then we each do what you know you've done: we call the 800 # and try to reduce our rate, just to find that we can't.
But the bottom line is that Congress created the anomoly that brings us together, that is the prohibition to true refinancing. It affects people across the board, regardless of geography, background, religion, etc ... Except that we share relative age in common, and being shackled with this much debt so early in life speaks to the stories we've shared here.
So, yeah, Bryan, you're right: were we to be Lawyers' Generation Debt rather than Gen Debt, I'm sure we'd pull at no heart strings. Yet we ARE lawyers, doctors, bankers, teachers, social workers, accountants who want exactly one thing: the chance to reduce our student loan interest rate to prevailing rates. That's not a sob story to me. That's justice.
That's just my 2 cents.
Gerry
Posted by: Gerry | March 3, 2004 11:24 AM
Stacy: I am talking about PR, not "reality". Lawyers are getting just as royally screwed as the rest of us and deserve the same relief. OTOH, you misread my post. I WISH I was making 35K. That's "just" how much I OWE. I MAKE less than 21k - four years of job hunting and a Y2K degree from a "prestigious" university notwithstanding. My SL payments are 21.8% of my take-home (but only 17.3% of my Gross, so I get no relief there either).
Gerry: I agree. And since I too am after justice for everyone here, I feel it is important for the participants to understand the Political/PR realities we face.
Since my (tremendously valuable - NOT) degree says I studied/understand crisis-communications & PR, experience tells me that we need our Lawyer Contingent to act as our "counsel support" more than be on the public forefront. (Same goes for Doctors). Public perception is everything in this fight, and as long as our most vocal/visible advocates are, well, Advocates (and Physicians) we're going to have a hard sell.
Posted by: Bryan | March 3, 2004 12:08 PM
OOPs, My comment to stacy should have been directed toward Diana...
My Bad. Sorry.
Posted by: Bryan | March 3, 2004 12:11 PM
Bryan -
I really do understand where you are coming from regarding the PR issue. I know how many people hate lawyers, think we're rich, etc. (when the reality is that my payments are roughly 23% of my take home pay per month at this point). Hopefully we'll disprove some of that perception throughout the course of this fight to get the law changed.
But again, the bottom line is that all grads who borrowed money to pay for school and then consolidated their loans deserve to be able to take advantage of lower interest rates. That's our point, no matter what profession in which those grads work.
Posted by: Diana | March 3, 2004 12:33 PM
Brian,
I'm all for putting our sexiest foot forward.
As we've ramped our visit #s since rebranding, what we need more than anything is to spread the word, to provide value, and to access local media and legislators.
Let our biggest problem be that we have an overconcentration of lawyers participating with us (I, for one, am not one) :)
Gerry
Posted by: Gerry | March 3, 2004 12:34 PM
Gerry:
Heh. Neither am I a lawyer, though people often posit that I am (or should be). My current mode is itenerant philosopher/administrative assistant/office manager. It's pretty lame to be 36 and making less than I did when I was 25 and undegreed.
Diana: I'm not trying to be confrontive, but consider, if you are paying $1000/mo (give or take) - and it is 23% of your net, that means you have a monthly (pre-SL) net of over $4000, or over $50,000/yr - well above the "national average annual GROSS income".
That it the PR problem.
I won't GROSS 50k in TWO years, much less NET it in one. Hell, I won't even come close to GROSSING your post-student-loan net. THAT is where the PR problem lies. Frankly, if I were making what I was "worth" (according to my age & education & the BS the University "career" center puts out) and bringing in your kind of money, even paying "only" your $1000/mo, my $35k in loans would be GONE in 3 years - even with me being the sole-provider and having a disabled, hospital-prone spouse. (Actually, it would be more like 19 months, since I wouldn't know what to do with $3000 ready cash each month...)
You can't tell me that, even in Chicago (I live in MC IN, so I know...) you are struggling to live on $3000 a month - unless you over-bought on housing (Loop Condo maybe?) and automobile and are the sole-provider for a family.
I live decently (though it, admittedly, isn't a hell of a lot of fun) on a net of less than $1450/mo. That includes a Condo mortgage and my car. The rest of america sees your post-sallie-mae $3000 and sees your, and thereby our, plight as whining.
THAT is the PR problem.
Posted by: Bryan | March 3, 2004 01:22 PM
As I said, I look forward to having a PR problem.
In the meantime, getting into a "quien es mas macho" debate on who suffers more under the weight of our debt does none of us any good.
In the words of someone famous, I forget who it was ... "I feel your pain." AND I know you feel mine. It is enough that we are aggrieved. We all feel the heavy burden. Even those among us who are lawyers. :)
We each have our own circumstances, our own individual debt levels, our own stories. Let's steer away here from putting one another down. That's divisive, and doesn't serve us well.
May I suggest putting some of that energy into sending out our URL to more friends, or making calls to local media, or getting more people onto the petition?
I look forward to the creation of the alleged PR problem that could ensue.
Posted by: Gerry | March 3, 2004 02:02 PM
I concur with Gerry. Let's please try and leave stereotypes out of this (though for the record, I rent a small one bedroom and have no car). We're all borrowers who want the law changed to benefit everyone, and that is what we as the creators of this site are trying to publicize. Now how about some more ideas on how to get the word out on H.R. 2711 and the issues surrounding it?
Posted by: Diana | March 3, 2004 02:35 PM
Ah, but it does exist already. You have mentioned it. I have read indications to that effect from some of the debates. When I talk about this issue with people the FIRST thing they bring up is "whiny lawyers". I have to spend most of my time disabusing people of the notion that Doctors & Lawyers will be the biggest benicifiaries of proposedlegislation. To the public, it's the "big numbers" that matter, and the PostDoc professions have the biggest numbers (in real dollars) even though the majority of people with locked-in high-interest loans have sub $50K, undergrad balances.
Unfortunately, some people don't understand that it's all about perspective - and the perspective that counts in this fight is the one that sees "young professionals" (within 5 years of graduation) netting 50-100% more per month than they do complaining about the unfairness of their debt. (Yes it is Unfair - this is a tactical explanation, not a diatribe.)
Legislation is won or lost on its percieved populist merits. I know. I worked on two political campaigns that both lost because the candidates were unwilling or unable to appear as populist as did their RINO opponent - even though both candidates WERE more populist than the incumbent.
Someone in their 30s making over $50K but complaining that they can't live on $3000+ a month does NOT strike a populist chord. Thus my suggestion that the PostDoc professionals among us keep as low a profile as possible while providing as much data, legal feedback and caselaw research as possible.
That's all I was suggesting.
Other than that, I do expend quite a bit of energy and intellectual capital on his fight. I enjoin fights to win, not to lose to bas PR.
Posted by: Bryan | March 3, 2004 03:41 PM
Diana, the stereotypes are precisely what we have to contend with. I was/am pointing out, with hard numbers, using the figures you supplied, how those stereotypes manifest themselves.
Politics is all about stereotypes. Gun owners are Redneck-Rambo-Wannabees, Environmentalists are tree-hugging Gaia-worshiping paint-throwing bunny-huggers, etc. Stereotypes work. The opposition of whatever cause knows this.
My suggestion (beyond getting out the word on this website and HR 2711) is one of simple pragmatisim. Our "spokesmen" need to be wage slaves, not those whose stereotype, fair or not, can be used against us.
I've been involved in politics too long (over 10 years) to not understand the value of pragmatisim. But, as you say, it's officially a dead horse. I just hope I've made my point.
Posted by: Bryan | March 3, 2004 04:03 PM
I am a post-doc owing lots of money too. I have contacted the President-Elect for the APA (American Psychologist Association) who has agreed to look into the matter. As far as I know, the APA supports the removal of the sole lender prohibition but does not think supporting HR 2711 is helpful because it takes away money from future students. Well, I informed him of the following points of interests: 1. why must those who have consolidated bear the burden for future students while the current students only have to worry about their loans?, 2. if FHA loans, which seem to have some type of guarantee by the govt, can be refinanced, why not consolidation loans? and 3) sallie mae etc are publicly traded stocks and perhaps they are more concerned about their profits than students in general. I have contacted my representatives including John Edwards ( I am in NC)who has agreed to keep my issue in mind. Finally via my capital alert, I have contacted the media with no response, however, 19 people have read it, perhaps modified it and sent it to their legislators. You can post an alert by going to http://capwiz.com/congressorg/issuesaction/
I am so glad to have this website for support and ideas. I see HR 2711 now has 90 sponsors - way too go! Thanks Diana and Liz.
Mary
PS I am willing to go Washington DC for a rally if necessary.
Posted by: Mary | March 3, 2004 07:24 PM
OK Brian,
I'm gonna just say, you made your point, let's move forward. You don't like having lawyers as part of the front line. OK. Well, guess what? We're doing the best we can, and if we decide to have lawyers as our spokespeople, then we will. You may dedicate your energies here or elsewhere, and that is your choice.
If that we have lawyers -- or Lawyers -- among us doesn't suit you, you're more than welcome to set up your own online resource for non-Lawyer and non-Doctor and non-Wall Street "wage slave" debtors. (Your words, not mine).
I'm frankly unsure how much thought to put into your tirade, as I personally find it bordering on the offensive, but I will continue to show you respect in the hope of gaining your energies in our collective effort. This is probably the last on what I think is a tired issue ... as I have said repeatedly before, let our worst problem be that we have a lawyer spokesperson or a PR problem.
Diana, Liz and I set up this site as a resource for the millions of Americans who are in our same boat. That boat includes you, it sounds like, even if you don't like that there are lawyers in the boat, too. We all feel like we are "wage slaves" as you put it.
Regarding your political experience, you might like to know that 2711 now has approximately 100 co-sponsors. Nope, not a majority -- but a hell of an effort thus far. So yes, we do have a shot.
And we're gaining access. I'd love to know how you're working to gain access for this cause, within and outside this specific effort. We ARE in the same boat and SHOULD be working on the same side. And should be respectful of one another.
Oh -- and by the way -- speaking of political experience I WAS a public official and I WON my races. And MY instincts say we need to be inclusive.
Now, a word in your defense: no one here has posted a PR strategy that might look like the following, a commercial w/ a series of lawyers and doctors and bankers crying in their Mercedes that they can't make ends meet, that they can't take there 5 vacations a year and that they can't afford to send their kids to Andover for their student loan rates. Indeed, Bryan, we agree that sending such a message would be counter-productive. And it should be.
But I also believe that we here represent a constituency that FEELS debt-burdened beyond recovery. And, once again, the issue here has NOTHING to do w/ income but rather to do w/ RATES and PARITY.
I refuse to argue how much is "enough" to live on, and whether $10K, $25K or $50K or $500K incomes create our underlying message. I hope you come to earn a ton of money someday -- and someday soon -- as I wish for all of our readers.
Our underlying message, in case you missed it, is that the measure that we're working toward be FAIR and CONSISTENT with EVERY OTHER LOAN PRODUCT IN THE COUNTRY. In turn, that WOULD allow refinancing.
I am not about refinancing for accountants and not for teachers, or teachers and not for lawyers, or lawyers and not for doctors. I am for a simple solution that applies to all.
Brian, I look forward to seeing your positive energy. I do not want to continue what seems to me a negative debate prematurely posed. I hope you will focus more on what we CAN DO and ARE DOING (as you say you are) and NEED TO DO -- together -- than attack anyone, as I believe you did Diana today, and be an agent for progress rather than counter-productive rants.
Posted by: Gerry | March 3, 2004 08:07 PM
Mary-
Thank you for the breath of fresh air I needed this evening! :)
I do not know your level of experience in working w/ media, so I apologize if what I write here is stuff you already know.
First, I recommend trying to access local print media. You may not succeed in getting thru the 1st time, but having the person's NAME and perhaps even being familiar w/ a recent piece or two he or she has written resonnates a lot w/ reporters. Makes for good conversation, too, which is always a good thing.
Second, don't expect a call back. They ain't gonna call, unless the stars are REALLY in alignment and they're already looking at this issue.
Third, the best thing that can happen in a conversation w/ a reporter is that he or she agrees to look at additional information and perhaps write a story. BUT, the 2nd best thing is that you can get reliable access to that reporter moving forward. Perhaps now's not the time for him or her. Perhaps next week is. Or, perhaps he or she needs to write a piece, hasn't an idea, and picks us up.
In a past life, I worked a lot with the press. And, I learned some important lessons, like reporters are people, too (some even have large debt burdens!). Whatever can be done to facilitate coverage -- i.e. make it easy for the reporter -- adds to the likelihood of coverage. They, after all, must fill space.
I've even written pieces for reporters that have been printed verbatim, under the reporters' own names.
Fifth, and finally, if you access a reporter and they say they're not interested in our story, ask him/her if there's someone else at the paper that might be. I respect nothing more than a reporter who tells me he/she isn't gonna write a piece on what I'm pitching. Had that happen this week on our issue ... and the reporter gave me another name at the same paper. So, I'll try again.
Thanks for your hard work, Mary! And thrilled that you found us!!!
Posted by: Gerry | March 3, 2004 08:22 PM
Mary-
One more thought, as you continue pursuing the APA.
Yes, there is a misconception that reducing rates would reduce access to loans among future students. While vaguely true, the logic behind the logic does seem to add up ... except that, in practice, that's not how it works.
What happens differs for loans managed in portfolio by the Dept of Ed and by private lenders such as Sallie Mae.
With the Dept of Ed, monies received (student loan interest and principal payments) go into the general budget and not necessarily toward any new loans. As a result, I like to call the surplus interest the gov't (not the Dept of Ed) receives (that is, the interest over the gov't cost of capital) a "tax" ... Student loan payments are simply a free source of revenue that the gov't can rely upon -- to the tune of about $500M a year in excess of the cost of funds -- to use in any way it sees fit, just like each and every one of our federal tax dollars. And it does. And the money doesn't directly go back into more student loans. Tax dollars do, but not necessarily these "tax" dollars.
In exchange for these higher interest rates, the gov't on loans held by the Dept of Ed acts in effect like a bank. And the gov't absorbs all rate and default risk. Of course, also unlike other kinds of loans, student loans may not be discharged upon bankrupcy. In defense, however, they do enjoy preferable terms, such as deferrment upon returning to school and other stuff.
Sallie Mae and other private lenders do not hold most loans in portfolio. Rather, they operate like the mortgage market does, and consolidate the mortgages into new instruments, and in turn they sell the interest and principal payment streams to investors -- primarily pension funds and other institutions. It is this secondary market that provides liquidity and access for current and future students, NOT the interest we pay.
Sallie Mae, and most banks operating in this area, serve as "pass-thru" organizations. Quite literally, the moment a loan is made and rec'd by Sallie Mae, it is repackaged and sold to other investors, who give Sallie Mae back most of the money up front; Sallie Mae, in turn, makes more loans. And the cycle continues.
By holding loans "in portfolio," the Dept of Ed sends the following message: we are making an investment, an investment just like what pension funds make in Sallie Mae securities. That is, we think we can make more by holding these loans than other means. And it makes sense: many people are repaying at rates of 9 and 10%. You go find a high credit, high quality, never dischargable investment that pays 9% in this market!
The commonly shared logic APA shared w/ you is ... well ... logical, but simply not true, yet very, very common (... well, not true except in a really, really, really esoteric sense: that if the gov't has more $, it can make more loans, and I suppose it can, but the dollar trail doesn't work that way). But with those moneys, it can also build more roads, allow more graft, fight more wars, etc. In short, the funds don't necessarily -- and don't usually -- go back into new loans.
A better parallel is with state and interstate lotteries. The rationale for allowing them initially was to fund education. With time, however, many state lotteries shifted their use of the moneys gained from education to other needs. State gov'ts discovered that this was a reliable, renewable source of funds, and diverted the revenues elsewhere. Such is true w/ most student loan proceeds.
So yes, it makes perfect sense that loan interest payments would LOGICALLY be put back into a kitty for future loans. But nope. What do you expect? Sense?
I hope this helps you w/ APA. Please tell us what happens! And let us know how we can support you!
All my best,
Gerry
Posted by: Gerry | March 3, 2004 08:39 PM
On to what postiive things are happening, I have been able to have the Pa. bar assoc. agree to publish an article about the issue and their Young Lawyers division is reviewing it to consider actually backing it publicly. I have a call in to the American Bar Association to to see if they would do the same. My local paper has agreed to do an article in exchange for me giving an exclusive interview on a crmininal case I have coming up and my local bar magazine is doing an article also. I have mass emailed our Young professionals group to tell them about it and it contains many different professionals. I have asked them to please contact their professional organizations espec on the national levels. The bottom line is, with so much pending legislation out there, this bill has been sitting quietly by needing to be discovered. I just found out about it and eveyrone I tell did not know it was out there and goes nuts! So first goal - others need to know of it. As for the previous postings, I hope the whole debate is done regarding pr etc. I think we are all smart enough to know to not do commercials with lawyers crying in their mercedes that they cant join the right country club because they are broke. Only a moron would not recognize the perils of such an stupid approach. That said, hammering defeatist reasons why this cannot work is as much a waste of time as producing the mercedes commercials. If I had a nickel for every time someone told me it cannot be done, and I saw it get done, I wouldnt be complaining about my loan payment. Same with cases I was told, you cant win, and then I did. Obstacles are expected. I was once told there would never be any support in my state for vevamping the DNA system because "politically" no one cares about the rights of defendants. Well no kidding. So we packaged the plight from the angle of victims who realized their attackers DNA wasnt being processed in the central database before they were released in some cases due to overburdened crime labs, and the great cost of incarcerating actually innocent people until the test came back to exonerate etc, and the overtime being paid to other states labs to help us catch up .. All issues were viable, but we put out there the most logical ones to get the job done and generate mass support. I am now the head of the governors committee for DNA reform with currently $500,000 to allocate just for the end of 2003, to the surprise of many naysayers. So the points are well taken but seriously...they were already known. The questions is what are we going to do about it. The real issues are the monopoly created by these loans which are actually locked for their life. These are loans which were not disclosed as being subject to the single lender rule nor was the meaning of that rule explained when we took them. Which leaves one to believe, like regular economy, they must stay competitive with rates or you can refinance. It is the failure to disclose such a relevant feature of the loan which makes me want to argue it is an adhesion contract negotiated oppressively, them knowing the secret and us not. If this were a residential mortgage and they left out such a term, you could go sue them and it would most likely be found to be unenforcable. But this is the government, impossible to sue, and even if you can, it takes FOREVER. Because of that, realitstically, our real best bet is not to try and sue them or sallie mae or any other clever idea that may have merit, but to push this legislation and I think that point about the terms of the loan is persuasive to some, even if a lawyer or doctor is making it. I want to see something happen soon rather than years later. and for what it is worth in response to the "whiny lawyers" angle, politicians are lawyers last time I checked. we need to be able to dispel myths that this takes money from new students etc. But first, we need to spread the word and start leaning on politicians. You cannot predict what anyone of them thinks about it until you ask. Then deal with it. Some we will never change, some will be for it, and some will be open to having their misconceptions changed. So lets shut up and do it.
Posted by: Stacy Parks Miller | March 4, 2004 02:40 PM