Archive | Fuck the Poor

New Jersey’s student loan program is ‘state-sanctioned loan-sharking’

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(Photo/Courtesy aboblist) by Annie Waldman ProPublica, July 3, 2016, 9 a.m.

Amid a haze of grief after her son’s murder last year, Marcia DeOliveira-Longinetti faced an endless list of tasks 2014 helping the police access Kevin’s phone and email, canceling his subscriptions, credit cards and bank accounts, and arranging his burial in New Jersey.

And then there were his college loans.

When DeOliveira-Longinetti called about his federal loans, an administrator offered condolences and assured her the remaining balance would be written off.

But she got a far different response from a New Jersey state agency that had also lent her son money.

“Please accept our condolences on your loss,” said a letter from the Higher Education Student Assistance Authority to DeOliveira-Longinetti, who had co-signed the loans. “After careful consideration of the information you provided, the Authority has determined that your request does not meet the threshold for loan forgiveness. Monthly bill statements will continue to be sent to you.”

DeOliveira-Longinetti was shocked and confused. After all, the agency features a photo of Governor Chris Christie on its website, and boasts in its brochures that its “singular focus has always been to benefit the students we serve.”

But her experience with the authority, which runs by far the largest state-based student loan program in the country, is hardly an isolated one, an investigation by ProPublica, in collaboration with the New York Times, found.

New Jersey’s loans, which currently total $1.9 billion, are unlike those of any other government lending program for students in the country. They come with extraordinarily stringent rules that can easily lead to financial ruin. Repayments cannot be adjusted based on income, and borrowers who are unemployed or facing other financial hardships are given few breaks.

New Jersey’s loans also carry higher interest rates than similar federal programs. Most significantly, the loans come with a cudgel that even the most predatory for-profit players cannot wield: the power of the state.

New Jersey can garnish wages, rescind state income tax refunds, revoke professional licenses, even take away lottery winnings 2014 all without having to get court approval.

“It’s state-sanctioned loan sharking,” said Daniel Frischberg, a bankruptcy lawyer. “The New Jersey program is set up so that you fail.”

The authority has become even more aggressive in recent years. Interviews with dozens of borrowers, who were among the tens of thousands who have turned to the program, show how the loans have unraveled lives.

The program’s regulations have destroyed families’ credit and forced them to forfeit their salaries. One college graduate declared bankruptcy at age 26 after struggling to repay his debt. The agency filed four simultaneous lawsuits against a 31-year-old paralegal after she fell behind on her payments.

Another borrower, Chris Gonzalez, couldn’t keep up with his loans after he got non-Hodgkin’s lymphoma and was laid off by Goldman Sachs. While the federal government allowed him to suspend his payments because of hardship, New Jersey sued him, seeking nearly $266,000 in payments, and seized a state tax refund he was owed.

One reason for the aggressive tactics is that the state depends on Wall Street investors to finance student loans through tax-exempt bonds and needs to satisfy those investors by keeping losses to a minimum.

Loan revenues also cover about half of the agency’s administrative budget.

In 2010, the agency filed fewer than 100 suits against borrowers and their families. Last year, it filed over 1,600 suits. (Some could result from federal loans handled by New Jersey, though such loans make up just 4 percent of the agency’s portfolio.)

The cases are handled by debt collectors, who can tack on another 30 percent in fees on top of the outstanding debt.

Marcia Karrow, the authority’s chief of staff, said, “the vast majority of these borrowers are happy with the program.” She added that New Jersey’s loans had “some of the lowest default rates” in the country. But when asked to produce the annual default rates, the agency sent ProPublica and the Times data only for students with strong credit scores, making it impossible to calculate the overall rate. (Read their responses to our questions.)

A spokesman for Gov. Chris Christie said the governor does not control the authority and declined to respond to questions about the loan program. But Christie appointed its executive director, Gabrielle Charette; he also has the power to appoint at least 12 of the agency’s 18 board members and can veto any action taken by the board.

Besides administering the loan program, the authority provides financial aid counseling, conducting hundreds of financial aid nights at New Jersey high schools, where it offers advice about paying for college, including pitching its own loans.

DeOliveira-Longinetti, who emigrated from Brazil and had long worked as a nanny while raising her son as a single mother, always knew that paying for college would be a challenge. Even after marrying her husband when Kevin was in middle school, she knew that their combined income would not be enough to cover the costs. But a friend told her about New Jersey’s program. That, along with a combination of scholarships, grants, and other loans, allowed Kevin to enroll at the University of Vermont.

Since her son’s murder, DeOliveira-Longinetti has made 18 payments to New Jersey. At $180 per month, she has about 92 to go.

“We’re not going to be poor because of this,” she said. “But every time I have to pay this thing, I think in my head, this is so unfair.”

For decades, states served as middlemen for federal student loans. Most of the loans were made by banks and were handled and backed by regional and state-based agencies as well as by the federal government. The arrangement was unwieldy, expensive and marked by scandal.

After Pennsylvania’s student loan agency lost a public records lawsuit in 2007, documents revealed that the agency had spent nearly $1 million on things like fly-fishing, facials and falconry lessons.

That same year, New Jersey’s agency was caught in what amounted to a kickback scheme. The state attorney general found that the agency had improperly pushed one company’s loans in exchange for annual payments of $2.2 million. A subsequent investigation by the state’s inspector general found that the agency was in “disarray.”

In 2010, Congress and the Obama administration decided to effectively eliminate the role of state agencies by having only the federal government lend directly to students.

Some states, like California, decided to downsize and transferred their federal loan portfolios. Others, such as Pennsylvania, won contracts from the federal government to service debt from the federal loan program.

But New Jersey chose a different path. In the years leading up to the end of the federal program, New Jersey sharply expanded its loan program, slowly replacing the federal loans it once handled with state loans. From 2005 to 2010, loans from the agency nearly tripled, to $343 million per year. Since then, the agency has reduced its loans by half, but its outstanding portfolio has remained roughly the same, about $2 billion.

Karrow said the growth of New Jersey’s program was simply a result of both the growing number of students and the rising cost of tuition. But in fact, college enrollment and tuition have not grown as rapidly as the program’s size.

Lawsuits on the Rise for the New Jersey Higher Education Student Assistance Authority

2008

2009

2010

2011

2012

2013

2014

2015

Source: New Jersey Courts Automated Case Management System (ACMS) and Archive Case Management Information System (AMIS)

While other states have similar programs, New Jersey’s stands apart, both for its size and onerous terms.

Massachusetts, running the next-largest program with $1.3 billion in outstanding loans, automatically cancels debt if a borrower dies or becomes disabled, something many other states also do. The program of the third-largest state lender, Texas, is half the size of New Jersey’s. And Texas offers a flat interest rate, a modest 4.5 percent, while New Jersey’s rates can reach nearly 8 percent. Some other state loan programs also have more flexible repayment options 2014 Rhode Island, for example, offers income-based repayment.

New Jersey, meanwhile, encourages students to buy life insurance in case they die to help co-signers repay. As an agency pamphlet cautions, “Are you prepared for the unthinkable?”

The agency, Karrow said, treats each instance of a deceased borrower case by case and tries to be compassionate, but, she added, “we must also meet our fiduciary duty to our bondholders.”

When consumer lawyers protested the program’s onerous conditions at a 2014 agency meeting, the agency, according to minutes from the meeting, said that giving borrowers a break would make the bonds sold to finance loans “less attractive to the ratings agencies and investors.

Indeed, in a recent bond assessment, the credit rating agency Moody’s cited the authority’s “administrative wage garnishing, which it uses aggressively” for “significantly higher collections” compared with other programs.

A New Jersey rule adopted in 1998 allows the agency to give borrowers in default a second chance by allowing them to become current on their account through on-time payments. But the agency has never granted a reprieve and instead cuts off contact with borrowers, leaving them at the mercy of collection firms.

Karrow said federal regulations prohibited the agency from offering such relief, but student loan experts disputed that assertion.

“There is nothing in the federal law or regulations that prohibits them from offering private loan rehabilitation,” said Mark Kantrowitz, a financial-aid expert.

The combination of a lack of flexibility, an unwillingness to discharge loans and the state’s power to seize wages has resulted in even “more intractable problems for our clients than predatory mortgages, deceptive car loans or illegal internet payday lending,” said David McMillin, a lawyer with Legal Services of New Jersey, a nonprofit organization that provides free legal assistance to low-income state residents. “Many borrowers and co-signers find themselves facing a lifetime of debt problems.”

Given the lack of options, some New Jersey borrowers have resorted to declaring bankruptcy, even though, as is true of all student loans, their debt is rarely canceled. Declaring bankruptcy also makes it virtually impossible to secure a mortgage, lease a car or even use credit cards for years. But for New Jersey borrowers, such an extreme step at least offers a way to gain manageable monthly payment terms.

As a co-signer, Tracey Timony struggled to help pay off her daughter’s $140,000 in loans. Though the Higher Education Student Assistance Authority can seize wages or tax returns without court approval, it must secure a judgment to dip into borrowers’ bank accounts or place liens on their property. Instead of garnishing Timony’s wages, New Jersey sued her after her daughter defaulted.

“The agency is looking to put as much pressure on the borrower and be as aggressive as possible, and the way that you do that is you go after everybody that is liable,” said Jennifer Weil, a New Jersey student debt lawyer. “In case the garnishment doesn’t work, a judgment will help put pressure on the parents.”

Timony declared bankruptcy and got monthly debt payments that will rise no higher than about $1,000 a month, far less than what the agency had demanded.

“I never thought that sending my daughter to college would ruin our lives,” Timony said.

Few have felt the weight of the agency’s powers more than Gonzalez, the college graduate who was sued after receiving a diagnosis of cancer and losing his job.

He had borrowed the maximum he could in federal loans 2014 a total of about $30,000 for five years 2014 and paid for most of his tuition with loans from New Jersey.

“I felt so comfortable because it was the State of New Jersey,” he said. “It’s the state, my government, trying to help me out and achieve my American dream. It turns out they were the worst ones.”

Over five years, he took out over $180,000 in state loans. Unlike most other states, New Jersey does not impose a strict cap on loans to discourage overborrowing. One family, according to a recent state audit of the agency, took out over $800,000 in loans, more than five times the value of their home.

Gonzalez’s loans had a relatively high interest rate 2014 on average about 7.5 percent. At the time it seemed like a good investment. He graduated with an engineering degree from Embry-Riddle Aeronautical University in Florida and landed a job on Wall Street working as a programmer for Goldman Sachs.

But a few months after he started, unusual rashes began to appear on his legs and underarms. He was diagnosed with non-Hodgkin’s lymphoma and started radiation therapy.

After three years of cancer treatments, Gonzalez was also laid off.

He needed to take care of his student loans. The federal government and his private lenders all deferred his debt for at least six months.

Gonzalez expected New Jersey to do the same, but the agency refused, requiring him to pay at least $500 a month. With unemployment checks as his only income and burdened by continuing health expenses, it was too much for him.

He made no payments while the agency reviewed his case. In June 2014, Gonzalez moved to Florida to lower his cost of living. His health slowly improved and he started his own company, developing technology for small businesses. In his first year, he made just $26,000, but he started to pay back his federal and private bank loans.

On May 8, 2015, after months of hearing nothing, he received an email from New Jersey: His deferral request had been denied and his loan was being sent to a collection agency.

“Unfortunately, because of how the loan originated, the Authority is not in a position to offer forbearance or relief,” Robert Laird, a program officer at the loan agency, said in the email.

Terrified by what a default would mean for his credit rating, Gonzalez told the agency that he would stop paying for health insurance and use the money 2014 $200 per month 2014 to repay the loans.

The agency rejected the offer. “In the event that your doctor declares you total and permanently disabled, please keep me posted,” Laird told Gonzalez in an email.

One day in April, a stranger rang Gonzalez’s doorbell.

“Chris Gonzalez?” he asked. Gonzalez nodded. “You’ve been served with a lawsuit from the New Jersey Higher Education Student Assistance Authority.”

The suit demanded over $260,000 2014 about $188,000 for the original loans, nearly $34,000 in interest, and $44,000 to cover the fees of a collection agency’s lawyer.

Even if his business improves, Gonzalez has no idea how he will afford his ballooning payments.

“I don’t have money,” he said. “I am spending it all on my debt.”

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.


But they couldn’t test the water in Flint

By on June 22, 2016 in Class War, Dirty Rotten Scoundrels, Fuck the Poor, Scary Crazy Wingnuts

Gov. Snyder on 2016 investment mission to Europe

Don’t let your friends vote for Republican governors and legislators:

Not a single welfare recipient or applicant has tested positive for banned drugs in a Michigan pilot program, part of the growing practice of screening beneficiaries of government assistance for drug abuse.

The program, which ends on 30 September, may face renewed scrutiny in the wake of Wisconsin congresswoman Gwen Moore’s proposed legislation to force taxpayers with more than $150,000 of itemized deductions to submit to the IRS a clear drug test. Under the legislation, applicants who refuse the test would be required to take the significantly lower standard deduction when filing their taxes.

Moore’s office said drug-testing welfare recipients and applicants is “blatantly unacceptable” and pushes a stereotype that impoverished individuals are more susceptible to substance abuse than other, wealthier individuals who are beneficiaries of government programs.

Uh oh

By on June 22, 2016 in Class War, Dirty Rotten Scoundrels, Fuck the Poor

The grand bargain

By on June 3, 2016 in Class War, Fuck the Poor, Politics As Usual

Barack Obama Warns Air Force Graduates Not To Succumb To Isolationism

Told ya:

President Obama’s decision to join Bernie Sanders, Hillary Clinton, and Elizabeth Warren in calling for expansion of Social Security is a big win for the left wing of the Democratic Party. Liberal Democrats and their allies in the labor union movement put this idea on the table several years ago to try to kill off enthusiasm from centrist Democrats for reducing Social Security benefits. Their strategy worked.

But in addition to a tactical win for the left, Obama’s turnabout on Social Security is the result of a cycle of tactical ineptitude on the part of the American conservative movement.

Five years ago, conservatives had the opportunity to get a Democratic president to sign legislation that would have substantially cut entitlement spending. In exchange, they were asked to agree that high-income Americans should pay higher taxes. They refused, thinking in part that preventing Obama from scoring a bipartisan achievement would make him easier to beat in 2012.

Obama was reelected anyway. Taxes on high-income households went up anyway. And now the politics of entitlement spending have shifted drastically to the left. The Republican Party’s 2016 nominee says he opposes cuts in Social Security benefits, and mainstream Democrats have flipped away from Obama’s openness to cuts to the position that benefits should be enhanced.

A nation of scammers

By on June 3, 2016 in #OccupyWallStreet, Class War, Dirty Rotten Scoundrels, Fuck the Poor

Fact-checking claims about Donald Trump's four bankruptcies.And a Trump University many more #nevertrump2016 @syed32701

Charles Pierce:

If there is a single, overriding lesson in the unfolding Trump University scandal, it is this: If you are the defendant in a civil trial in which you are accused of a massive and grotesque act of fraud, it’s probably best if you don’t get up in public and imply (loudly) that the presiding judge is a Mexican criminal. This can result in the judge’s simply saying, “Fck it,” and dumping a metric ton of evidence regarding said fraud into the public domain. This then will require you to hold a press conference in which you are forced to call a reporter “sleaze” and generally act out because—and I am borrowing here from the Twitter account of the great Quinn Cummings—you are really a giant toddler.

If there is a single, overriding question in the unfolding Trump University scandal, however, it is this: Why in god’s name is anyone surprised?

Of course, the fact that He, Trump was behind this scam is prima facie evidence of some thoroughgoing shenanigans, but that’s not what I mean. He, Trump is an apex bunco artist, but he also is a high-profile American corporate businessman of the late 20th century.

Did You Lose Your House? Trump Hoped You Would

By on May 25, 2016 in #OccupyWallStreet, Austerity Porn, Class War, Corporate Statism, Fuck the Poor, Politics As Usual

Crush Trump March NYC

Were you one of the millions who lost your home, job or both in 2008 when the housing market crashed? It shouldn’t surprise you to discover that Donald Trump was one of the guys sitting on the sidelines waiting to profit from your misery. This happened while he was peddling his bogus Trump University courses to… Continue Reading →

WI senators was ‘giddy’ over voter ID law

By on May 18, 2016 in Class War, Dirty Rotten Scoundrels, Fuck the Poor, It’s OK If You’re A Republican, Scary Crazy Wingnuts

Wisconsin State Capitol

This makes me sick:

Madison — A trial over Wisconsin’s voting laws kicked off Monday with a former aide to a Republican state senator testifying that GOP senators were “giddy” over the prospect the state’s 2011 voter ID law could keep some people from voting.

Todd Allbaugh, who worked at the time for then-Sen. Dale Schultz (R-Richland Center), said some senators expressed a lack of enthusiasm to take up the voter ID legislation early that year during a private meeting of Republicans. Sen. Mary Lazich (R-New Berlin) then made the case for the bill, he testified.

“She got up out of her chair and hit her fist or her finger on the table and said, ‘Hey, we’ve got to think about what this would mean for the neighborhoods around Milwaukee and the college campuses,'” Allbaugh said.

Schultz said they ought to consider what they would be doing to people’s ability to vote, according to Allbaugh. That elicited a response from Glenn Grothman, who at the time was a state senator and now is a member of Congress.

“Grothman said, ‘What I’m concerned about here is winning, and that’s what really matters here. … We better get this done quickly while we have the opportunity,'” Allbaugh said.

“I’ve characterized it as giddy and that’s part of what bothered me so much,” Allbaugh testified.

Allbaugh named two other senators — Leah Vukmir and Randy Hopper — as being gleeful over passing the bill.

“They were politically frothing at the mouth,” he said of Vukmir and Hopper, who lost a recall election a few months after the voter ID law passed.
Continue Reading →

The stark disparities behind school money

By on May 17, 2016 in #OccupyWallStreet, Class War, Fuck the Poor, Politics As Usual

Via Pro Publica:

Why do many school districts fail to meet the needs of their students? One commonly cited response is our country’s disparate school funding system: because most districts rely heavily on local property tax for funding, schools in poor districts are often left with fewer resources than schools in wealthier areas. Even though school funding issues play out on a local level, in recent decades, it’s risen to the forefront of national issues. This past year, for the tenth year in a row, a national Gallup poll found that Americans view lack of financial support as the largest problem facing America’s schools.

But can more money really fix America’s struggling, poor schools? That is exactly what NPR’s Cory Turner and a team of over 20 NPR member-station reporters wanted to find out. After six months of investigating, Turner and his team published a series of stories digging into school funding disparities from Chicago to Sumter County, Alabama. ProPublica education reporter Annie Waldman spoke with Turner to learn more about their investigation.

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So Sue Them: What We’ve Learned About the Debt Collection Lawsuit Machine

By on May 6, 2016 in Blind Justice, Class War, Corporate Statism, Dirty Rotten Scoundrels, Fuck the Poor

Debt Collectors Adopt Mob Tactics as Russians Struggle to Pay Bills by NEIL MacFARQUHAR

Millions of Americans live with the possibility that, at any moment, their wages or the cash in their bank accounts could be seized over an old debt. It’s an easily ignored part of America’s financial system, in part due to a common attitude that people who don’t pay their debts deserve what’s coming to them. A… Continue Reading →

New Mexico State Workers Denied Food Assistance To Families With Less Than $100 In Assets

By on May 3, 2016 in Austerity Porn, Class War, Fuck the Poor

Hatch Peppers at H-E-B

Don’t kid yourself. This is happening in every state now:

Five New Mexico state workers admitted last week that they denied food assistance to needy families after being pressured by superiors. According to KTRK, five workers at the state’s Human Services department told a federal court that they falsified records to claim that families applying for food assistance had more than $100 in assets When the… Continue Reading →

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