Loans: Where is the money going?

Alan Collinge has been called a “financial hero” by Forbes, and featured on 60 Minutes, Time magazine, and countless other TV and radio programs, so Bellevue College Economics Professor Chase Stiehl and the Political Economics Club were very excited to bring Collinge on campus to talk about the problem that has become his area of expertise – student loans.

“I don’t like to tell you guys that you’re all screwed,” said Collinge, “…but students that are in college today are in a very tough position.”  Lacking virtually all of the normal consumer protections that apply to every other type of loan, student loans have become a tool for predatory lending practices that have corrupted not just the banks, but the institutions supposed to oversee banks all the way up to the Federal Government.

The Department of Education makes a 122% return on defaulted loans on average, which means that there’s an incentive for banks, guarantors, and the DOE to hope for students to fail instead of succeeding.  “This is a defining characteristic of a predatory lending system.”

In traditional loans for things like credit cards, homes, vehicles, agriculture, and businesses, there are laws that protect the borrower from potentially abusive practices.

Such laws include bankruptcy protections, statutes of limitation, truth in lending laws and many others, but none of these protections apply to students due to some legislation passed back in the late 1970’s and early 1980’s to counteract the perceived danger of students going straight from college to bankruptcy court, essentially getting out of student loans “Scott free.”

As a result, lending institutions can get more money from students who fail to repay their debts than students who maintain regular payments and keep their loans in good standing, since there is no “out” for students as there are for every other type of loan the Federal Government participates in.

“The Department of Education must be destroyed and rebuilt,” since the agency has been captured by the lending industry and now sees educating America’s youth as a source of income instead of a cost.

He said that consumer protections must be reinstated, and that the “bad guys” – the predatory bankers, lenders and for-profit schools and the lobbyists who support them – must be gotten rid of.  “President Obama has been completely useless on this,” he added.

In a striking conclusion, Collinge advocated direct actions on the part of students for change, saying students had more political power than they realize.  “In my opinion, if you can get enough people together to storm the president’s office, and you know, commandeer it for a night or two, and demand something smart  such as the return of bankruptcy protection… it will go national – and hell, I’ll be right there with you.”

The presentation can be seen in the Library Media Center, and the slide-show can be viewed at  For more information, contact Alan Collinge at