When Governing Elites View Students Not As Investments In The Country's Future Prosperity, But As... Easy Pickings

Trump caught fleecing students

Obama, the Republican Party and Democratic congressional leaders put their heads together to work out a "compromise" that would steal nearly a billion dollars from college students and their parents over the next decade. We covered the vote on that shameless rip-off in the Senate in late July and we looked at the House vote at the beginning of August. Every day is a shameful day to be a congressional Republican but those days were shameful days to be congressional Democrats as well. Senate Democrats joined the GOP to reject amendments that would lessen the burden on students and their families and, in the end, only 17 Democrats-- and one batshit crazy Republican with his own freaky agenda-- stood up and voted to give college students a fair break:

• Tammy Baldwin (D-WI)
• Richard Blumenthal (D-CT)
• Barbara Boxer (D-CA)
• Sherrod Brown (D-OH)
• Ben Cardin (D-MD)
• Kirsten Gillibrand (D-NY)
• Mazie Hirono (D-HI)
• Pat Leahy (D-VT)
• Mike Lee (R-UT)
• Ed Markey (D-MA)
• Bob Menendez (D-NJ)
• Chris Murphy (D-CT)
• Jack Reed (D-RI)
• Bernie Sanders (I-VT)
• Debbie Stabenow (D-MI)
• Tom Udall (D-NM)
• Elizabeth Warren (D-MA)
• Sheldon Whitehouse (D-RI)

It was sad to see several progressives spouting the Obama-Boehner corporate li that they had saved students from higher rates when they actually voted to raise rates on students down the road while letting current students slide on the increases. It was even more uncomfortable in the House where 171 Democrats joined 221 Republicans to stab students in the back. Only 25 Democrats voted the right way.

Yesterday's USAToday blew the cover off the liars' assertions that they were helping students instead of ripping them off. And they didn't bury the explosive conclusion deep in the story. The first paragraph ripped the scab off the wound: "A law touted by politicians as their way of keeping money in the pockets of the nation's college students will instead funnel more than $700 million in additional profit into the federal government's wallet over the next 10 years, a new analysis shows." Our governing elites at work... against their own constituents.

The law, regulating interest rates for federal student loans, was passed by Congress and signed by President Barack Obama this summer. It was hailed by politicians on both sides of the aisle as a win in the campaign to combat a rising tide of student loan indebtedness.

Though the law will accomplish that in the short term, it also guarantees profits for the government every year for the next decade and, starting in 2016, increases those already high profit levels, a mid-August report from the nonpartisan Congressional Budget Office shows.

"As soon as the interest rates begin to go back up, this deal ends up worse for students and their parents than if they did nothing," said Jessica Thompson, the senior policy analyst for the Institute for College Access and Success. "(The government) is absolutely making more money because of these changes."

In total, the CBO projects the government to clear $175 billion in profit over the next decade on student loans.

The CBO analysis comes as millions of students and their parents are signing loan documents heading into fall.

It also comes as Obama, once again, hits the road with a plan to lower college costs and decry the rising levels of debt students carry upon graduation.

A report issued in mid-August by the U.S. Department of Education shows that 57% of students received some sort of federal aid, and 41% of all undergrads had taken loans, up from 35% four years ago. The average debt for a college graduate in Michigan is slightly more than $26,000.

Nationally, there's more than $1 trillion owed in student debt-- more than what Americans owe on credit cards-- with more than $180 billion of it in some type of default, according to government data.

"If everyone else is making a killing off of us, I'm not the least bit surprised the government is angling to rake us all over the coals," said Nick Townsend, a senior at Ferris State University.

...For Stafford loans, both the subsidized and unsubsidized, the interest rate is the Treasury rate plus 2.05%, with a cap of 8.25%. Graduate student loan rates are the Treasury rate plus 3.6%, with a cap of 9.5%, and the parent loans are the Treasury rate, plus 4.6%, with a cap of 10.5%.

For loans taken out last school year, the rate for subsidized Stafford loans was 3.4%. This year, it's 3.86%. However, without some sort of congressional action, that rate would have been 6.8%.

Because this year's rate dropped under the new law, politicians were quick to praise themselves.

"It is an encouraging step forward in our effort to keep college affordable," Education Secretary Arne Duncan said in a statement in July.

Republican Rep. Tim Walberg, a member of the House Higher Education Committee, also cheered the move.

"This is a win for students, families and taxpayers," he said in a statement.

But the CBO analysis shows it's only a short-term win for students and families.

While the CBO projects profits for the government each of the next 10 years, it shows that starting in 2016, the profit level will increase. The CBO's projections look at how much money the federal government will have to subsidize the program. A negative subsidy exists when there's more money coming in than going out, CBO officials and financial aid policy experts agree.

The CBO projections show an average subsidy rate of just over negative 20% for each of the next 10 years. That means the government will have 20% more coming in than going out. That's an increase of 2 percentage points over what would have been coming in had Congress not passed this law.

The government will particularly increase its profits on parent loans, with an average increase of 9 percentage points each year between 2013 and 2023.

...Sen. Carl Levin, D-Michigan, said he voted for the plan because it promised relief to students, at least in the short term.

"We stopped the increase in interest rates," he said Wednesday. "We kept that cap where it was for the next few years, and then it's gradually going to go up to a certain point. Do I think we ought to make money (on student loans)? The answer is no. That wasn't the alternative that was presented to us."

Sen. Debbie Stabenow, D-Mich., had pushed a plan to freeze the rates at 3.4% for subsidized Stafford loans and allow more work to be done on loans and the federal government's role.

"At a minimum, the federal government shouldn't be making a profit," she said. "I, personally, think it's appropriate for us (the government) to subsidize the cost. We need to make sure the federal government is not making money off the back of students."

..."The price of tuition at big public schools is outrageous, and the price of books keeps climbing into the stratosphere," said Will Huff, a graduate student at Arkansas Tech University. "I think the USA should find a way to lower the price of education, and by no means should the government profit off of the students."

The debt can be crippling to young graduates, keeping them from renting apartments, buying cars and beginning their professional lives, many said. Having a portion of that debt being tied to federal government profits is frustrating, they said.

Also this weekend, Donald Trump was exposed for the crook he is, and always has been, in his own scheme to rip off students. New York state Attorney General Eric Schneiderman initiated a $40 million law suit against Trump on Saturday for engaging in illegal business practices over his phony-baloney "Trump University" that "promised to make students rich but instead steered them into expensive and mostly useless seminars, and even failed to deliver promised apprenticeships." The Attorney General accuses Trump of engaging in persistent fraud, illegal and deceptive conduct and violating federal consumer protection law. The $40 million he seeks is mostly to pay restitution to consumers. Schneiderman: "Trump University engaged in deception at every stage of consumers' advancement through costly programs and caused real financial harm. Trump University, with Donald Trump's knowledge and participation, relied on Trump's name recognition and celebrity status to take advantage of consumers who believed in the Trump brand."

State Education Department officials had told Trump to change the name of his enterprise years ago, saying it lacked a license and didn't meet the legal definitions of a university. In 2011 it was renamed the Trump Entrepreneur Institute, but it has been dogged since by complaints from consumers and a few isolated civil lawsuits claiming it didn't fulfill its advertised claims.

Schneiderman's lawsuit covers complaints dating to 2005 through 2011. Students paid between $1,495 and $35,000 to learn from the Manhattan mogul who wrote the best seller, Art of the Deal a decade ago followed by How to Get Rich and Think Like a Billionaire.

Scheiderman said the three-day seminars didn't, as promised, teach consumers everything they needed to know about real estate. The Trump University manual tells instructors not to let consumers "think three days will be enough to make them successful," Schneiderman said.

At the seminars, consumers were told about "Trump Elite" mentorships that cost $10,000 to $35,000. Students were promised individual instruction until they made their first deal. Schneiderman said participants were urged to extend the limit on their credit cards for real estate deals, but then used the credit to pay for the Trump Elite programs. The attorney general said the program also failed to promptly cancel memberships as promised.

Trump claims the law suit is politically motivated because he only gave Schneiderman $12,500 for his campaign and Schneiderman wanted more. Trump's false promises sucked over 5,000 students from around the country to spend thousands of dollars to enroll in his unlicensed and unaccredited "educational institution." According to the NY Times, Trump ran false ads "that Mr. Trump had handpicked instructors to teach students 'a systematic method for investing in real estate.' But according to the lawsuit, Mr. Trump had not chosen even a single instructor at the school and had not created the curriculums for any of its courses."

The inquiry into Trump University came to light in May 2011 after dozens of people had complained to the authorities in New York, Texas, Florida and Illinois about the institution, which attracted prospective students with the promise of a free 90-minute seminar about real estate investing that, according to the lawsuit, “served as a sales pitch for a three-day seminar costing $1,495.” This three-day seminar was itself “an upsell,” the lawsuit said, for increasingly costly “Trump Elite” packages that included so-called personal mentorship programs at $35,000 a course.

Too bad Schneiderman can't sue Rick Perry, whose own rip-off of Texas students, makes Trump look like a neophyte. Nor is Rick Perry the only slimy conservative politician currying favor with corporate America by making it easy for them to rip off students. Buck McKeon (R-CA), John Kline (R-MN) and Virginia Foxx (R-VA) have, at least in part, financed their sleazy political careers on the backs on students they allowed for-profit institutions, like Trump University, to rip off.

McKeon took a great deal of money from the banksters ($1,015,098 from the financial/insurance/real estate sector in return for his lockstep approval of all the deregulation bills that allowed the sector to loot and plunder the American people since he was first elected in 1992). Even with one of the worst foreclosure rates in hard-hit California (14,898 foreclosures in CA-25), McKeon still voted against allowing bankruptcy judges to change the terms of mortgages. In fact, he's been a 100% obstructionist and has voted against everything President Obama has tried to accomplish to ameliorate the effects of the economic collapse that McKeon and his cronies in Congress brought on with their wrong-headed policies, policies meant to serve the needs of their wealthy, powerful campaign donors.

But McKeon's particular piece of the pie was in setting the Republican policies on the House Education Committee he chaired-- the primary source of the bribes that have financed his disgraceful career in politics. How much damage has he done? Almost immeasurable-- and he's still trying to do more. When President Obama proposed $85 billion in student loans go directly to students, cutting out the finance industry middlemen (McKeon's campaign donors), McKeon went ballistic. Like all the hypocritical wingnuts who scream and moan about government spending too much, if government tries saving money by cutting out corrupt contractors and middlemen, he really gets serious. He's taken in over $500,000 from the crooks in this useless and dysfunctional bureaucracy and he has no intention of sitting back and watching Obama destroy it-- regardless of how much money it saves the taxpayers ($47.5 billion over the next ten years) and no matter how much more money we get going directly into education.

Now McKeon has moved on to the far more lucrative Armed Services Committee-- he is now the #1 most heavily bribed Member of Congress (even more than any senator) by armaments manufacturers and war contractors-- and has left the GOP's predatory strategy towards students to his cronies John Kline (R-MN), chair of the Education and Workforce Committee, and Virginia Foxx (R-NC), chair of that committee's subcommittee on Higher Education. Let's take that crazy little fireball from North Carolina since she's been running her mouth all week about how she has no tolerance or, to be precise, "very little tolerance" for people who graduate from college with huge student loans. Open Secrets offers some excellent context that paints Foxx as a money-grubbing suck-up for the private loan industry which has been funneling thousands of dollars into her miserable political career. Foxx, they assert, "has become a magnet for campaign contributions from for-profit universities."

Last year a Senate investigation found that nearly one-quarter of students at for-profit schools end up defaulting on student loans, and half of defaults on all student loans are by students at for-profit schools. At the time there was a lot of noise about possibly rewriting rules for how these for-profit schools can operate because so many of their students rely on federal grants or student loans-- until a big lobbying push by the industry seemed to quiet things down.

In her first year on the subcommittee, Foxx picked up at least $48,668 from PACs or individuals affiliated with for-profit colleges. We counted 22 companies or trade associations in the for-profit college industry on the list of her top contributors, including: Bridgepoint Education, the Association of Private Sector Colleges and Universities, the Apollo Group (which owns the University of Phoenix) and student loan lender NelNet Inc.

Check out our politician profile for Foxx and especially the list of top contributors to see which groups with ties to the student loan business have contributed to her campaign war chest.

In the radio interview Foxx explained that she worked her own way through college and never borrowed a dime to get through to graduation. She went on to criticize people who think success should be handed to them.

Foxx has certainly seen her own financial success-- we rank her as the 54th wealthiest member of Congress.

In the last cycle, Bridgepoint Education has bribed many of the Republicans on the committee (as well as the sleazier Democrats who don't understand-- or care-- that only criminals take bribes):

John Kline (R-MN)- $9,500
Thomas Petri (R-WI)- $1,000
Buck McKeon (R-CA)- $3,500
Virginia Foxx (R-NC)- $9,000
Glenn Thompson (R-PA)- $2,000
Kristi Noem (R-SD)- $7,000
Joe Heck (R-NV)- $2,000
Robert Andrews (D-NJ)- $8,500
Bobby Scott (D-VA)- $4,000
Carolyn McCarthy (D-NY)- $6,000
Susan Davis (D-CA)- $1,000
Tim Bishop (D-NY)- $4,000
Dave Loebsack (D-IA)- $10,000