Wells Fargo bank spanked by the CFPB for maximizing student loan fees

The most interesting fact in this article originally from Reuters news service is that:

“Last year, the CFPB found that more than 8 million U.S. borrowers are in default on more than $110 billion in student loans. Breakdowns in student loan servicing may be driving the problem, the bureau said.

Simage-20160331-28459-fk6s7ntudent loans make up the second largest U.S. consumer debt market with roughly $1.3 trillion owed by borrowers who took out federal and private loans, the bureau said.”

Taken in the aggregate, it seems that student borrowers are terrible risks for banks. On the face of it, millions of mostly young people have no respect for their debts or the institution(s) that helped them get that very advantageous college education. A scenario is easy to imagine in which comfortable college graduates simply throw away the bill from their bank benefactor while they dutifully make their $4,000 condominium payment.

However, perhaps it is more a matter of their ability to pay. Can it be that promising young people marketing their shiny new degree find there are few job opportunities that pay enough to live on, let alone pay their debts? Anecdotally, I am the father of two young men; one a member of the college class of 2010; another of the class of 2013. Both are self-employed in businesses they created while in college or soon after graduation. They did not seek work from others’ businesses but created their own businesses to work in. The vast majority of their peers have not been so lucky. I have seen many who have accepted low-level administrative positions or even make ends meet delivering pizzas. Some can find no work at all and are “boomerang” kids who had to return to their parent’s home. Many conservatives may argue that: they should have chosen a more employable major course of study; there is work for any who want it;  or regardless of their financial situation, a debt is a debt and it should be paid, on time.

Those who cast aspersions on the liberal arts or fine arts graduate may not know much about what is required to earn a college degree. Much of the first two years of college involve the same courses for pre-med; engineering; hard sciences; teaching; business and public administration as majors in psychology, fine arts, languages, and philosophy. This portion of a college education alone imbues the student with a host of skills and knowledge that sets them apart from the vast majority of people who never attended college. They have the potential for much greater productivity in any business. To condemn them for chosing a poor career path is blaming the victim. They want to be more productive; were led to believe they would be if they continued in school; they even borrowed money to gain the advantage they were told they would have.

Did our children fail the system, or did the system fail them?

I would like to further explore the way in which state universities have lost their mission and have become quasi-private centers for business profitability. That will be for a future post.