Your personal information is your responsibility...Right?

It's not a question of "if" but "when" the next data security breach happens.  Will it be your bank, your favorite store or an online purchase?

Here's the problem.  We tend to take the security of our personal information way too lightly.  At least that's what we're told when Target or Home Depot get hacked.  We're supposed to be diligent and wary of strangers.  Hide those pin numbers, don't use "monkey123" for your password and don't trust anybody.

That last one has some weight to it. 

But not for the reason you think.  The people you shouldn't be trusting are exactly the people responsible for breaking your trust.

It's the bank with the vulnerable database easily accessible from the Internet, the gas station that doesn't notice the card skimmers on their pumps, the home improvement store that doesn't bother to check the security of their Point of Sales systems.

It always seems there's some degree of "blame the victim."  Always that undertone that the "stupid consumer" is at least partially at fault.  So when bad things happen it's on you to fix their mess. 

Oh sure, they'll offer up "free credit monitoring" but that's about the extent of their "customer care."

Free credit monitoring is like being invited to a funeral.   

Something's dead, you can't do anything but watch and there's lots of crying.

The world we live in demands submission.  Want a job?  Be prepared to offer up more information than your mother knows about you.  Going to school? same story.

It's all in the name of "security."  We don't want to be working next to the next Osama Bin Laden now do we?

Fine, I feel very cozy in my little cubicle knowing that the guy next to me is unlikely to start living out his Soldier of Fortune fantasies in the break room anytime soon.

Except that it's all BS.  I repeat, it's all a huge, steaming pile of BS...

Personal information is a sacred trust. One that needs to be respected and not thrown around like a Facebook profile.  Yet your Facebook page is probably more secure than your credit report.  

Case in point and a personal pet peeve, Credit Reports used for anything but credit.

A credit report is reflective of your past ability to pay bills, that's it.  It is not reflective of your character, ethics or suitability for employment. 

But it seems you can't do anything without giving up the most personal of information to those who aren't the best custodians of it.

I'll cut to the chase, if I'm required to lay myself bare to get a job or buy a power drill then those entrusted with the information need to be responsible for it.  Offering up a year of credit monitoring is useless.  If my life is ruined because somebody didn't take that responsibility seriously then they need to do more than offer me a subscription to watch my own destruction. 

If my identity is stolen, my accounts spread all over the dark net and my job prospects ruined for a decade because somebody got lazy at your company then guess what...

I'm your ward.  You're now responsible for my well being.  You're going to make sure all my needs are taken care of.  I'll never have to worry about qualifying for a mortgage or paying the light bill because you're going to take care of it all.

All of it, no exceptions.  If I get married, you're going to pay for it.  If I want to take a Hawaiian vacation you'd better FedEx me the plane tickets.

That's the price of being careless.  If it's so critical to know everything about me just to sell me something, enroll in a college class or apply for a job then you should have as much risk as I do.

That's not ridiculous that's parity.  What's so ridiculous about demanding the same level of responsibility as is imposed on those providing the information?

"That's just the way the world is" is NOT a valid answer.  You can't be held to a standard that the standard bearers themselves don't adhere to.

One of two things needs to happen.  Either those that demand our personal information need to have as much at risk caring for it as we do or we just need to stop being required to provide it so freely. 

I'll say it again...I've NEVER seen ANYTHING on a credit report that had any bearing on somebody's ABILITY to do a job or reflected on their CHARACTER in any way. 

Yet it's a favorite rationalization for submitting to a financial colonscopy for everything and anything.  So long as it is, we need to demand equivalence or just refuse to participate. 

"Sorry" is not enough.

A tortured hour

It's 3:34 AM....

The house is dark but then the house is always dark to me even in the middle of the day.

It's hot, too hot.  The thermometer says it's 88 degrees outside but in here it's closer to 100.  Why? I can't afford to turn the AC on.  Such luxuries are for other people.

Madness! a Phoenix summer where the weatherman cheerily announces weeks of 110 degree plus days. No escape, no money for a reprieve from the heat.  No comforts...

Things haven't been so good.  The refrigerator's almost  always empty and what little is there provides meager nourishment for body or soul.  Everything around me seems somehow broken.  Things that should have long since been discarded forced past their prime, patched together and pressed back to service until they can finally give no more.

Broken...

For five years it's been a tough row to hoe.  It's never been easy but this time it's harder.  I know, it's been that way for many but I'm most familiar with my own tribulations.  

Excuse the pain if you've heard it before...

It's the kind of thing that makes you hate television, especially the commercials.  Constant nagging about things nobody really cares about all with the promise of taking your woes away...for a price.

A price I can no longer afford which makes me hate them even more.  It's like being mocked, the proverbial carrot inevitably followed by the stick.  I don't hate them for selling their wares; I hate them for the assumption that I don't know any better.

Buy this car and save money on gas, Enroll in that diploma mill and have a brighter future.  Neither is true and I've got close to 100K of debt to prove it with nothing to show but the collection letters.  The worst part, they sell a lifestyle with expensive trappings but little meaning.

When did becoming a member of the middle class become a lifelong aspiration?  When did simple civilized survival become a goal?

It's 3:44 AM...

Something's rattling on the car, I know what it is, I know every sound it can make but all I can do is hope that it remains little more than an audible annoyance...

Comfort is a luxury.  There is no peace in my surroundings or my soul. 

Middle aged, underestimated, dismissed, hopeless but still defiant!

Pull myself up by the bootstraps!  But I have no boots...

Never cared for that analogy anyway.  It's a fallacy perpetrated by those who never knew the predicament.

Opportunity is made not found but opportunity doesn't happen in a vacuum but lately it seems I do.

Whose fault?  Mine I suppose.  But then far more worthy than I have a similar tale.  We can't all be wrong.

What can I do?  For myself, I'll try anything that doesn't risk the little that remains.  Is it enough?

Time will tell, but do I have the time? 

It's 4:00AM

Do something, do anything.  Unbridled ambition thwarted by petty finances.  Do I believe in myself? Am I all that I thought I once was?

Not a high bar, humility or more appropriately the edge of self-loathing has always been a companion.  Ego and hubris have no place.  But neither did confidence.  I rarely win so I refuse the gamble.

This isn't the life I planned or should I say any of the lives I've planned.  I've started over so many times but always end up in the same place. 

Here...

Keep trying, keep striving all the time fearful of losing the little bit I have left even if I hate the prison it creates.

Do I have time to try again?

It's 4:16AM

Damn! it's hot in here.  The winters are better but I still can't afford the heat.  I sit in the remains of my chair, it too is broken, drenched in my own filthy perspiration the only comfort being the memory of it that will come when I can see my breath waking on some January morning.

Not defeated, not giving up but lost.

How do I move forward?  What's the key? 

4:23 AM

Recruiters, agencies, headhunters.  Hardly better than TV commercials.  Promises not kept, selling a bill of goods only for their own ends.  The product doesn't match the consumer, no sale.

Still I try, find the needle, ignore the haystack...

My own pursuits?  On virtue success, on paper, failure. 

I never wanted to do anything that didn't matter to someone.  It seems that's a dying...virtue.

It's 4:24 AM

Everything still seems broken.  I look around me and see so much that could be done.  I want to fix it, I want to fix me...

I'm not in a vacuum. Others suffer for my affliction.  I want to fix that too.

Keep trying, keep looking, deny the doubt...

Fix it...

It's 4:34AM

Fixing the lie of "for profit" schools (revised and angrier!)

After my last article about the lie of for profit schools a friend of mine wrote to me saying that while he agreed with most of my take on the Devry's of the world he couldn't completely agree with it. 

Of course this sparked a larger discussion when I saw him a few days later.  Briefly, his position was that while for profit schools may be more apt to focus on their bank account than the curriculum it didn't necessarily elevate public universities to Mother Theresa status.

He related a few key points in his argument. 

•      Nobody's forced to attend a post-secondary school.
•      Non-profit doesn't necessarily mean eligible for sainthood.
•   Schools aren't completely responsible for the success or failure of a student. 

Let's take a look at these...

Yes, education after high school is completely voluntary  but I'd argue completely necessary.  That is unless you think cashiering at your local fast food joint is a career path.  Considering I could barely count change when I graduated from high school, a little extra classroom time was beneficial.

When we're talking about non-profits it's a given that anything touched by humanity is by default corrupted by its ambitions.  Even the Bible couldn't escape that truth and neither does a non-profit school.

He pointed to how non-profits may not offer stocks traded on the NYSE but it never stopped them from wasting millions on something other than their stated reason for being. Admittedly, it's hard to frame the building of a new football stadium at "(Insert State here) University" as a catalyst for advancing education.

Still, at least the money went back into advancing something other than a quarterly dividend to some shareholder.  I'd also remind you that there are plenty of non-profits that don't have their own football stadium. 

His last point goes without saying, we are to at least some degree in control of our own destiny.  If in the pursuit of it we're mislead into making a poor decision, however, somebody needs to be held accountable.  It's the reason we have the Federal Trade Commission.  If you mislead the public about your product expect to pay the consequences.  That's the set of rules you have to accept if you're in the "business" of selling education like Oscar Mayer sells hot dogs. 

Yes, public universities also suffer the sin of selling unnecessary classes too but they're a damned sight cheaper and at least the credits transfer.  Oh yeah, and they're not setting up the curriculum based on a revenue projection.

That's really the crux of the argument.  As I said in the last article, if you're going to just sell education as a product then your focus isn't on advancing knowledge.  Rather it's advancing your bottom line.

So here's the part where my friend agreed with me.

I hold the belief that any educational institution that operates as a profit entity shouldn't have access to public funds.  Yes, I'm suggesting that taxpayer backed student loans and grants shouldn't be given to institutions whose reason for being is the make money. 

I see no reason to provide public funding to someone's private venture with virtually no oversight and dubious value to society.  It's not unlike the uproar over the AIG bailout or the furor over saving domestic automakers.  The difference here is that there's even less oversight of public monies in for-profit schools than there was for the billions we gave to banks and insurance companies. 

If your school is in it for the money then put it where your mouth is.  The Devry's and ITT's of the world  shouldn't be getting the bulk of their revenues from government backed student loans and grants.  If they want to offer financing they should be providing it themselves and not passing it on to taxpayers.

That means your education may still cost $50k for a Bachelor's degree but if it doesn't live up to the hype and you go broke because of it at least there's always bankruptcy. 

It's not that I'm against private schools or even alternative education, on the contrary.  I myself was attracted to ITT Tech and then the University of Phoenix exactly because I didn't want to waste time on classes that had nothing to do with my chosen course of study. 

That's been a failing of public universities in the past and it caused a drop in enrollment which ultimately benefitted alternatives like the for-profit schools.  A problem, by the way,  that's only recently been addressed by many universities adopting a similar program structure to the for-profit schools.

So if the Not for profit schools have been able to adjust their programs to match the profit schools and still be 2 to 4 times cheaper for the same degree then where's the justification for the extra cost? 

As much as I may have enjoyed my time at ITT Tech nobody holds that degree in the same regard as say a year of study at M.I.T.  So how can you justify charging almost the same money for a year of education at an IVY league school ?

The simple answer goes back to that old marketing adage, Sell benefits not features.  Advertising a benefit is essentially selling an intangible product that's almost impossible to challenge.  Where features like power windows, cruise control or Air conditioning are tangible.  Looking Cool, being admired and improving your station in life are not. 

They're the warm fuzzies that you can't quite put your finger on and if you can't define what it is that's motivating you then you can't challenge their value either.   Convincing me that I'm going to be just as valuable to the world as an M.I.T. graduate based on a bare bones"heat and serve" boilerplate curriculum is just a lie.

That, my friends, is exactly what for-profit schools are selling.  Not the quality of their programs but the promise of improving your condition for a premium price.  Whether or not it's justified is entirely subjective but I'd rather not be putting taxpayers on the line for it. 

If you're a for-profit school and your programs fail to deliver you still have the taxpayer's money no matter how successful the students are.  You've effectively conned the government into supporting your corporate bottom line. 

Perhaps it's the biggest con game of all when you can get public money to support private enterprise that by its very nature is set up to only enrich itself.  

I mean at least Boeing has to deliver helicopters that don't crash in the desert for the billions they get from the Department of Defense.  Where's the accountability for the University of Phoenix and Devry's of the world who take billions in public education money? 

Does it make any sense that government financing has turned these schools into multibillion dollar corporations whose only reason for existence is to keep the public money pump primed and flowing?  They can't deny it, their "business" model is set up to support a revenue stream no matter how much it degrades the product.  It really is that simple.  If you're a corporation, you're in it for the money anything else is just marketing.

This actually speaks to the flawed logic of people who believe that government should be run like a business.  It just doesn't work simply because where business exists for the enrichment of itself, government exists for the public good (or at least it used to).

Government that exists for the betterment of itself usually has a dictator at the helm and that's not good for anybody. 

The logic fits for education as well.  Hopefully my point is a bit clearer now.

  

The lie of "for profit" schools

I've had more time than I'd like to watch TV lately which also affords me more time to analyze its content. 

For Example, Have you seen the latest Devry university commercial?

It has all the right elements to properly position the "product."  Stirring music played at a subtle volume, young adults happily traversing an idyllic campus setting and a resolute spokesman delivering a somber message. 

"By 2025 there will be 20 million new jobs and not enough graduates to fill them.."  or something like that, forgive me if I paraphrase.  I'm sure of this much, the statistic comes from the United States Department of Labor in a March 2012 publication.

What they fail to mention is who or where these jobs are going to be located.  In spite of the rhetoric, business is still outsourcing most of its technical work overseas or abusing work visas to suppress wages.

Remember, this is Devry which fancies itself as a "University" now.  Perhaps you aren't old enough to remember when they were just a vocational school producing entry level techs to staff the assembly lines of Motorola, Honeywell and the like. 

A great foot in the door but nobody was ever going to give you a seat at the CEO's conference room table over it.  They were no better than schools like ITT Technical Institute or the Ron Bailey School of Broadcasting.  

They claim to be more than that now but they can't hide from their humble beginnings.   

In fact the term "diploma mill" was coined because of these types of schools.  That was because their programs were usually not accredited by the same governing body as traditional universities.  The admission requirements were more relaxed as well so long as you had at least a GED and the ability to pay.

That allowed them flexibility in their curriculums not to mention the ability to commoditize their programs of study but made almost none of the credits transferrable to a regular university program.  Needless to say, nobody ever asked about your SAT scores.   

In the end you had the equivalent of very expensive vocational training and a piece of paper few took seriously.

Were they diploma mills?  That was entirely dependent on the school.  Sadly, you often had little more than a slick advertising campaign to judge them by.  Most fell by the wayside when the promise fell short of the reality and the law suits starting rolling in.

Your education at any of these institutions would likely be financed by government  grants and student loans.  The exact composition of which was of no matter because the loan payments would be excessive no matter what the amount owed.  Especially true when you could expect to spend the first few years of your career pulling down about  as much money as an assistant manager at Mickey D's.

There's no debating the value of a quality education whether it comes from a University or a vocational school. The broadening of your knowledge base will always pay a dividend even if it isn't in the form of a bigger paycheck.  It's about having options and the more you have the better off you'll be.

If it sounds like I'm contradicting myself I'm not.  I'm a strong proponent of education in all its forms.  What I'm not in favor of is the whole concept of a "for profit" school.

Which is why I have a problem with schools like Devry and the University of Phoenix making promises they can't keep. 

Going to a "for-profit" school changes the education dynamic.  Instead of being about imparting knowledge, it's about selling a product and its value diminishes with every shareholder meeting. 

Oh? You didn't realize that Devry was publicly traded corporation?  Their ticker symbol is DV on the NYSE.  They closed at a bit over $31 a share at this writing.  Down a bit since its $60 average a few years ago.  So what does a company do when it's revenue numbers are down?

Sell more product of course!

When your product is education and you're charging a premium price for it your angle better be good.  

The usual sales pitch is the chance for a better job.  Of course they never emphasize that word "chance" unless you can read that tiny type flying by at 60 milliseconds on your TV.

It's all about the "benefits" of their product.

It's no different than a commercial for hot dogs.  I mean does anyone really think about just what part of the beef is in "100% pure beef" hot dogs? 

Of course not, instead they portray family and friends gathered around the perfect suburban backyard relishing in the perfect summer day with perfectly plump weenies sizzling on the grill.

Trouble is, we're talking about people's futures not weenies.

If your motivation is profit you do whatever you can to protect it.  Capitalism has no conscience.

It shows up in the form of overpriced books, obsolete equipment, instructors with questionable qualifications (which is why most are referred to as "facilitators") and an inadequate curriculum.  Don't even get me started on the "Financial Aid" department...

 The result is a graduating student with tens of thousands in debt and an education that doesn't match what their chosen career demands. 

So if we're going to treat education like hot dogs then there should be some recourse when the product doesn't deliver.  After all, if you get sick from a bad batch of hot dogs the least you can expect is a refund.  Try to get a 50K refund for a useless Bachelor's degree, yeah, good luck with that.

Meanwhile, millions of people have been sold a bill of goods with nothing to show for it but a piece of paper and decades of payments  that rival most people's monthly mortgage.  The final injustice, those loans are backed by the U.S. government which means you can't get rid of them even if you go broke.

There's only one fix for all of this...

Get rid of the "for profit" schools unless they guarantee placement equal to their advertising.  If they refuse then they either need to shut down or be forced to change their ways. 

If they complain, remind them that compared to their "product" hot dogs have a better guarantee and that's just bad business.

Economies of scale and the scourge of the middleman

You know me, I've got too much time on my hands these days so I chose to spend it keeping up with the tech pundits.  So I was watching Triangulation on TWIT this week (3-15-2012) and their guest was the co-founder of Kiva.org Matthew Flannery.

Kiva is a micro lending service that allows anyone to lend money to those in need around the world via a network of Microfinance Institutions (MFI's).  The first thing you have to understand is that it's not a bank and you don't get any interest on the money you lend.  In fact Kiva is the antithesis of a bank in that it exists not for its own profit motives but rather to offer access to needed  funding to those who'd be denied otherwise.  It's more like a personal loan that also scratches your humanitarian itch.

Make no mistake, these are loans not handouts.  In a move that should satisfy even the most staunch fiscal conservative, this is the ultimate expression of pulling one's self up by their bootstraps.  Most loans are for small businesses in need of a minimal amount of capital. Kiva facilitates the process by connecting would-be lenders to MFI's.  They take no  profit in the process and are funded by donations, grants, corporate sponsors and foundations.

Leo and Tom did a far better job  of shining a light on Kiva in their interview of Matthew Flannery on Triangulation than I can do here so I suggest you watch the episode if you want to know more. 

Kiva is the rare example of a middleman that contributes something tangible.  So it struck me how very wrong the so-called first world is in their handling of economies.

What it brought to mind was how much waste is caused by middlemen in the developed world.  For example, I have loans like everyone else.  A car loan, student loan, revolving credit card balances and the like.  Each one of those has an interest rate and somebody standing in the middle whose only purpose is to shuffle paper, for a fee.

I get the interest part of the equation, someone lets you use their money so it's only natural that they deserve some consideration for making it available to you. 

Here's the problem.

If you were to trace how many hands were on every dollar you ever borrowed or spent you'd soon understand why prices always seem to be going in the wrong direction of your bank balance.

Nobody just makes something and sells it for a small profit over their cost, there's always more to it than that.

 We always hear about "overhead"..  Overhead might as well be another name for middlemen.  Yes there's always a cost to make something but as business has evolved we've added layers of needless complexity creating a fertile environment for "facilitators". Everything you buy, use or see has an army of people between you and the producer.  All with waiting open palms contributing nothing to the process other than passing it from one hand to the next. 

Buy a new car and somewhere in the price you're going to pay the dealer's overhead.  He's got to pay for the land, inventory, utilities and property taxes just to offer that car to you.  Speaking of inventory he has to pay the car manufacturer for his inventory which introduces its own overhead.  The manufacturer has similar overhead for facilities as well as the overhead built into the price they pay their parts suppliers who in turn had their own overhead to produce the parts. 

The chain can go on forever with a middleman at every level standing between buyer and seller .  That cost ultimately  gets passed on to you in the form of a price that has little to do with the actual resources it took to produce the product.

Some might say that's just how the world works these days.  I say it's exactly why the world is in such dire financial straits.  There are far too many people whose living depends on doing little more than facilitating the movement of paper from one office to another. 

That's why there's so many layoffs in financial institutions.  When nobody's buying there's not enough paper to shuffle and the middlemen  start circling the wagons and reducing headcount.  Their fortunes are dependent on "servicing" accounts which in layman's terms means ensuring they get their fees for passing money from one entity to another.  They only thing they're actually concerned about servicing is their own profit margins.

Whole economies are based on professions whose whole reason for existence is to "facilitate" a transaction.  Their names are common, Banks, Title companies, Loan Servicers, brokers, sales engineers and the like.  None of them produce anything tangible, they exist only as profiteers convinced of their own relevance.   Yet when they fail they jeopardize the financial stability of entire nations.

We hear a lot these days about poor working conditions in the third world.  That's because huge corporations seek to protect their profits by exploiting their workforces instead of cutting out the middlemen.  That includes the ones on their payroll by the way.

Of course PR departments and advertising firms swing into high gear whenever the public gets wind of an obvious injustice.  Realize that PR and advertising are just middlemen of a different color.  They too produce nothing of tangible value.  They are, in effect, the middlemen between customer and corporation and ultimately end up in the "overhead" reflected in the final price.

Which brings me back to Kiva.org.  In developing nations a few hundred dollars can have the same effect as a few million in other parts of the world.  That's because the resources provided match the need and nothing more.  The process is kept simple and the middleman isn't driven by a profit motive in Kiva's case.  Economies grow by making transactions between the buyer and the seller simple.   The more complex a transaction becomes the more waste gets introduced into the process .  Middlemen for the most part don't follow Kiva's example and exist only to complicate simple processes to their own advantage. 

Until economies recognize the threat of the profiteering middleman they will never be stable.  As such a vicious cycle continues to erode an already weak currency platform that's backed by little more than faith in the very institutions that created the problem.  Not enough money in the treasury? Just print more and dilute its value even further instead of dealing with the real problem.

The question that's never asked is what role do the middlemen play in all this?  They're right in front of you but only visible in their deeds.  When the news cycle is full of reports on deepening national debt,  failing banks and financial market corruption you see their handiwork.    

Economies are driven by markets.  Markets provide products to consumers.  Money is not a product even if the Wall Street currency traders  and economic strategists think it is.  It's simply a facilitator, a mechanism for exchange between parties.   If we apply the same criteria to it as we do a profiteering middleman, the reason for all this economic strife becomes obvious.   We've assigned a value to the worthless.

Financing Education, another mortgage crisis in the making?

Originally published on Technorati as Financing Education, Another Mortgage Crisis in the Making

Every once in awhile you see an article come up about Federal Student Loan programs and this week I saw two.

Reuters published an article a few days ago suggesting some fuzzy math by FinAid.org's Mark Kantrowitz concerning the nation's total student loan debt. It suggested that Kantrowitz may have overstated the number and was actually more like 610 to 800 Billion dollars. Not quite the 1 trillion dollar number being bandied about but historically large nonetheless.

On the political side Ron Paul (Republican candidate for president) in an interview on Sunday's (10/23/2011) Meet the Press on NBC said, "he'd kill the loan program eventually if he were president". His comments were framed in the context of higher education costs being inflated by government intervention.

While it's refreshing that the magnitude of the problem is coming to light, I've yet to see any real action to change it. Last year as part of President Obama's health care reform act, new student loans were going to be directly administered by the federal government. The goal was to eliminate the loan servicers who are in effect the middlemen of the student loan industry. Their function was to handle the administrative aspects of the Federal student loan programs adding fees and costs to the borrowers total indebtedness as well as to the Federal government.

While a welcome change, the legislation did virtually nothing for current loans. Student loan servicers haven't gone anywhere and as student debt grows it's a sure bet that a portion of that increase can be attributed directly to fees and gaming of the system by both schools and loan servicers.

The issue is that this isn't a fair game; in fact it's got worse odds than a Vegas slot machine. As I look at the overall condition of the economy it's not a stretch to believe that default on student loans is going to be the next financial bubble to collapse taking the government backed student loan program with it as well as the banks participating in it.

The Federal student loan programs were meant to give an opportunity to those who'd otherwise not have it. At its core it was meant to back education loans made by private banks with federal money virtually eliminating any risk of non-payment to the bank.

Let's make this point crystal clear. The bank that loaned you the money is at absolutely no risk of default from giving you a student loan. That's why you almost never had to produce a credit report or collateralize the loan. The Federal government in essence vouched for you.

Of course as it is with most government programs without adequate oversight things eventually went wrong. Private Schools and profiteering middlemen (loan servicers) have been able to game the system with increasing tuition rates and complex loan terms. Banks frequently bundle and sell student loans using the loan servicer as a kind of broker. In my own experience, my student loans have been serviced by two servicers and owned by at least 4 different banks since their origination.
Sound familiar? It should. It's not unlike the packaging and reselling of mortgages or the operation of the derivatives market.

The school's role in this has been to; increase tuition, raise the number of required "filler" classes unrelated to the degree program and in the most egregious cases direct their financial aid departments to promote programs more favorable to their relationship with preferred lenders.

It's easy to say "Caveat Emptor" but then how many of us really understand the terms of our loan agreements or their connection to the financial markets that have corrupted the process.

Once you're in the system you do have certain benefits from having a government backed student loan such as the ability to defer payments due to unemployment or disability. The down side is that you suffer the penalty of "capitalized interest" each time you need to defer a loan payment. Your entire balance is recalculated to encompass the unpaid interest into the principal. Over the life of a loan that can mean as much as an extra 10% to the original principal. Add in the standard 3% to 8% standard interest on the loan and you can quickly find yourself digging an ever deeper financial hole.

With more of us barely getting by, exercising options such as loan consolidation, payment deferment or both becomes more likely. Consolidation can lower payments but your term extends indefinitely. This makes it harder to pay down the principal since the amortization schedule becomes a moving target.

 Most consolidation and income sensitive repayment programs try to front load the loan so that only interest is being paid for most of the loan's life with principal payments only applied much further down the line.

This sounds familiar as well, it's not unlike like the interest only mortgages being written before 2008.

There's no end to the traps a borrower can fall into and I won't even get into the dire consequences of default on a student loan. While recent changes help new borrowers, something needs to be done for those already encumbered by a corrupt system.

I'd suggest that after 10 years of repayment history that no more interest can be charged and all payments go directly to the principle balance of the loan. I'd also outlaw capitalized interest as it's a hidden extra cost which is unjustifiable due to the simple fact that the lender still receives interest payments and has no risk. I understand fees to offset risk and that's fair. A government backed loan offers no risk which raises such fees and practices to the level of extortion.

Regardless of who's talking point it is, nothing real has been done for those truly affected. Until it is nothing being said has worth outside of today's 30 second sound bite