JPMorgan snared in student loan scandal

[Wednesdays]

Source: CNN Money.com

(Video caption): "Millions of American students have been scammed by the student loan industry. CNN's Christine Romans reports."

The Wall Street giant, a major student lender and part of the group buying Sallie Mae, is accused of conflict of interest in hiring of college student aid workers.
May 8 2007: 9:29 PM EDT

WASHINGTON (Reuters) -- Congressional investigators probing student loan problems said Tuesday that JPMorgan Chase & Co. paid five college student aid officers to do work for the bank while they were on college payrolls.

In 2005 the bank also arranged a $70,000 dinner cruise in New York City harbor for more than 200 student aid officers, the investigators said, adding to conflict-of-interest allegations in a widening student loan scandal.


Read more: http://money.cnn.com/2007/05/08/news/companies/jpmorgan_studentloans.reut/index.htm?section=money_latest

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1. I've thought for years that student loans are a scam that screws the middle class

I was on serious financial aid in college, and a lot of it was grants and tuition breaks, so I didn't have bad loans, and I paid them off right away.

But I met a lot of people after college who took out huge loans and were in heavy debt. They had to make hard decisions staying in crappy jobs rather than take a chance doing something bigger and better because of their debt load. A lot of their income went into paying off that debt, and if they spent more than they earned, it meant profits for their credit card company. Why didn't they declare bankruptcy? Because you can't get rid of student loans in bankruptcy. I.e., they're a low risk investment for people buying packaged student loan debt on Wall St. They're a bigger risk for the people getting the money than they are for people giving the money. Isn't that absurd?

Incidentally, a real litmus test for me in the '04 primaries was whether a candidate proposed more kinds of loans for college students or proposed ways to reduce the debt burden. It showed me who was looking out for wall street and who was looking out for the ability of the American middle class to recreate itself.