the student loan corporation

jessica desvarieux: welcome to the real newsnetwork. i'm jessica desvarieux in baltimore. senators left for their 4 july recess withoutsolving one of the biggest impeding debt debacles we've seen in a while. on july 1, rates offederally subsidized stafford student loans are set to double from 3.4 percent to 6.8percent. now joining us to discuss all this is stephenlendman. stephen is a writer, author, and radio host. his most recent book is how wallstreet fleeces america: privatized banking, government collusion, and class war. thank you for joining us, stephen. stephen lendman: thank you, jessica.

desvarieux: so, stephen, we're hearing thatas many as 7 million college students could be affected by this interest rate hike. canyou give us a sense of what sort of loans will be affected and will students who arerenewing loans be affected? lendman: jessica, i think an overall viewof the student loan situation might be best to start off with. the only way to describewhat's going on is a racket, an enormous racket that entraps millions of students. besidesstafford loans, we've got maybe close to 40 million students that are entrapped in debtbecause of the student loan racket. in both of my wall street books, i have chapters onthis. the chapters were written some time ago because my most recent book, banker occupation,came out in december of last year. but this

is an enormous scam on young people, on ageneration of youths. and it's coming not only at a time when millionsof kids will finish their education debt-entrapped. but what have they got to look forward to?we have an environment where good jobs aren't available. you're paying thousands of dollars,many thousands of dollars to get an education. you're coming out with no opportunities. the7 million or so involved in government guarantees, stafford loans, on monday they will see theirinterest rates rise from 3.4 percent to 6.8 percent. it's coming at a time when low ratesare virtually zero. if you are a banker, you pay virtually zero interest rates. if youare a student, you pay 6.8 percent. it involves debt entrapment. there is no way out fromunder these loans. if you can't repay them,

if you default--you cannot default. you willhave penalties. you will have other add-ons. you will literally be debt-entrapped untilthe day you die. the only way out from under them is either die or leave the country. desvarieux: so, stephen, let's talk specificallyabout policy. i want to get a sense of what president obama's plan is for reducing studentdebt. lendman: whatever market rates are, that'swhat obama wants. market rates are very low now. i'm old enough to remember the end ofthe 1970s and the 1980s. in 1979, average low rates were 11.2 percent. two years later,it peaked in june 1981 at 20 percent. well, you know the old expression: what goes aroundcomes around. rates are rising now. if you

link student rates with market rates, lowrates today will eventually be higher rates. they'll be much higher rates. they'll becomemuch more unaffordable than they are now. the republican plan really isn't much better,but it literally is better than what obama is proposing. desvarieux: what is the republican side proposing? lendman: republicans want rates linked withten-year treasuries. ten-year treasuries right now are about 2.5 percent. well, a few monthsago, they were 1.5 percent. maybe six months from now they'll be 3.5 percent or 4.5 percent.if they keep going up, they'll be trapped with those rates. i mean, it literally isyou cannot win with either plan. i'm sorry.

the republican plan does have an escape clause.obama's plan has no escape clause. the republican plan wants to cap rates for stafford loansat 8.5 percent, so no matter how high ten-year treasuries go, students entrapped in debtwill only pay a maximum of 8.5 percent. that's the way the plans stack up. the obama planis you literally can get entrapped in a bottomless pit where rates can go as high as marketswant to take them, and you literally--as bad as the entrapment is now, it can be much,much worse ahead. desvarieux: so it sounds like we're talkingabout one bad plan and one worse plan. what sort of policy recommendations would you makeif you were the person in charge and trying to reduce student debt?

lendman: if i was in charge, jessica, i neverwould have come up with a plan like this in the first place. if i was in charge now, beginningnow, beginning monday morning, with literally complete power, i would scrap the entire studentloan program. i would do it with an explanation that politicians never give. i would explain--studentsdon't need an explanation, but i would explain it for others who do need it. student loansare a scam. you literally hike it out from under them. you can't default. if you do,you get entrapped in permanent debt--it's permanent debt bondage now. you'll get trappedentrapped in worse student debt bondage. if you can't repay, you pay penalties, you payextra add-ons. the loan issuers love this plan, because theyliterally have students in a system that they

cannot get out from under. if you can't payduring your working lifetime, you will be debt-entrapped when you retire. they can garnishyour wages, they can garnish your social security, they can garnish other things that you have.again, you're literally entrapped. it's a terrible system. it's a system that'ssupported by republicans and democrats. it never should have been enacted in the firstplace. it's second only in size to home mortgage debt. if you can believe this, student [incompr.]rises on average about $3,000 per second. desvarieux: wow. per second. and this week, senator sherrod brown introduceda bill that would allow students to refinance. what do you make of these plans for studentsbeing able to refinance their debt? is it

actually something that would decrease theirdebt in the long run? lendman: oh, it's going to increase it. there'sno question about it. the only way students [incompr.] finance debt is at the same ratethat bankers finance theirs. if bankers pay anywhere from 0 to 0.25 percent, why shouldn'tstudents get the same rate? bankers are very, very wealthy. they pay bonuses in the billionsof dollars. they make huge salaries. students are basically impoverished. i remember wheni was a student i could barely make ends meet. students today are much worse off than i was.why can't students get the same benefit as bankers get? if i was sherrod brown, if iwas as a czar controlling this program, i'd give them the same deal as bankers. i certainlywould give them a deal any worse than bankers

get. instead, the plans, maybe a brown plan, maybeanother plan, maybe a number of plans coming out of the congress, out of the house, outof the senate, they're all scams. some are better than others. all of them are plansthat nobody, no legitimate politician should impose, especially on a student. but whenyou begin a working lifetime, again, you can barely make ends meet, you can barely getby. you're just starting out. you have no savings. they should get a terrific deal.they should get a deal to help them start out without getting further debt-entrapped.instead, the plans that are being proposed take a bad system and make it worse.

desvarieux: well, thank you for joining us,stephen. lendman: thanks. desvarieux: and thank you for joining us onthe real news network.