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Household Debt Is a National Crisis. Predatory Lenders, Not Borrowers, Are To Blame.

| March 25, 2015

( Khalil Bendib, Otherwords)

( Khalil Bendib, Otherwords)

By LeeAnn Hall

Years after Toni Potter’s husband passed away from pancreatic cancer, debt collectors in her state of Washington were still relentlessly hounding her about his hospital bills.


Andrea Anderson, a young student in Oregon, has been saddled with $150,000 in college loans as she pursues her dream of becoming a social worker. She knows she’ll be paying the loans back for decades, threatening her other dreams of buying a home or starting a family.

Linda Mock of Idaho was trapped by a payday loan that quickly grew from the original $300 to more than $900 in interest alone. Trying to break free of the debt, she took out a title loan on her car and ended up losing her only transportation.

Family debt is no personal failing — it’s a national crisis. Even as unemployment declines, the debt crisis is holding back a full economic recovery and pushing more people into poverty.

LeeAnn Hall.

LeeAnn Hall.

That’s why President Barack Obama announced recently that he’s instructed the Department of Education and other federal agencies to do more to help borrowers afford their monthly loan payments.

It’s a step in the right direction.

But I’d urge him to go further and rein in the lenders, banks, and collection agencies that are profiting from Americans’ debt. It’s time to stop blaming borrowers and instead hold the financial interests that created the crisis accountable.

When hospitals give big price breaks to insurance companies but refuse to work with a widow struggling to make ends meet, something’s not right.

When a federal student loan provider charges young students nearly twice the interest it charges homeowners, something’s not right.

When payday lenders can get away with charging 300 percent interest on a short-term loan to a poor family just trying to fix their car so they can get to work, something’s not right.

The explosion of predatory lenders hurts families and siphons money out of local economies. There are more than two payday-lending storefronts for every Starbucks coffee shop in the United States.

other-wordsMeanwhile, more than 70 percent of students who graduate with a bachelor’s degree leave school deep in debt. The average student loan debt totals almost $30,000 today, up from $19,000 a decade ago.

For many Americans, there’s no way out.

Student loans can’t be discharged in bankruptcy. Some states will take your driver’s licenses and professional certifications if you fall behind in your student loan repayment.

And if you can’t afford your legal fees, you could go to jail — just for being poor.

It’s time to break the shame around debt and start putting the responsibility for solutions where it belongs: on those profiting off struggling families.

That means placing fair caps on interest rates, ending predatory practices that push people further into debt, and creating a path out of debt for people who are struggling.

Recently, folks from different communities across the country came together for a national online conference, “Up from Debt,” hosted by my organization, the Alliance for a Just Society. People from Seattle to New York shared powerful and moving stories — not to gain sympathy, but to erase the stigma that further burdens families trapped in debt.

The Obama administration should investigate all forms of predatory lending, including student loans, payday loans, medical loans, mortgages, and credit cards. On the White House website, you can sign a petition asking the president to create a pathway out of debt so families can reclaim their futures.

Our children, our neighbors, our parents, the sick, and the struggling aren’t cash cows for bankers and lenders to milk. It’s time to demand solutions that help families move up from debt.

LeeAnn Hall is the executive director of the Alliance for a Just Society, a national policy and organizing network that works on racial, health and economic justice issues.

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22 Responses for “Household Debt Is a National Crisis. Predatory Lenders, Not Borrowers, Are To Blame.”

  1. snapperhead says:

    How many are in debt because of $100/month cable bills, $100/month cell phone bills, $50/month hi speed internet or own $500 cell phones? There’s a price to pay for bad decisions and irresponsible budgeting. Can’t afford a $150,000 college loan? Then go to work and save until you can. No amount of government legislation/regulation is going to stop the “predators” from getting into some stupid peoples’ wallets. Priorities need to change more than more government policy.

    • tightlines says:

      snapperhead,

      You wrote, “Can’t afford a $150,000 college loan? Then go to work and save until you can.”

      Please, get real. This is not an economy in which someone working jobs that don’t require a degree is going to be able to, in any reasonable amount of time, put away enough money to cover four years of college tuition and associated expenses. Those jobs tend to pay so little that people working them barely make ends meet.

      And yes, students can work part time while attending state universities. But the money in that kind of low-paying work will likely be just enough to cover rent, if that. I’ve been there.

      That leaves students still needing loans to cover tuition, food and the slew of university fees and other expenses — hundreds of dollars a semester in required textbooks, equipment or software, for example — they’re hit with once enrolled.

      As to your comment about people going into debt because they have “$100/month cable bills, $100/month cell phone bills, $50/month hi speed internet or own $500 cell phones,” sure, some people make lousy choices.

      And many more live in financial desperation — and end up in debt — because they lost their job or because they or their spouse or child developed some kind of costly medical problem, not because of “bad decisions and irresponsible budgeting” or because they are “stupid people.”

      • snapperhead says:

        I lost my job like millions of others during the recession. No problem…I had saved enough to pay my bills for 4 months before securing another job.In the meantime I cut my expenses to a bare minimum.Like most Americans do nowadays, I could have spent that money on a newer car or boat,vacations etc and had nothing to fall back on when hard times hit. If you want a college education then don’t complain about the cost and future financial repercussions that come along with it. I’ve managed to do quite well in this economy without a college degree. The notion that a college degree is required for,or a guarantee of, success in this country is BS. I know plenty of people doing quite well without one. I’m sympathetic to people in debt from unforeseen medical expenses and that’s a whole other issue. But let’s not make excuses or expect big government be a solution to every jackhole that’s made bad decisions financially. If there’s no real repercussions to making bad decisions then people will just keep making them.

    • Karl Hungus says:

      Government policy and congressional special interests are the reason why that loan for school is $150,000. If you want cheaper education then you need to reform the system that delegates money to colleges and universities for the degrees that they offer.

      It’s kind of funny, a lot of people that think the way you do also think that univerities are bastions of liberal thought, set ot to destroy morality and goodness through their liberal teachings. In truth, higher education is a business, and upper administration worries more about student retention and money than is does about degree affordability and how well students are prepared for higher education. That’s why college and university presidents are chosen the way that they are – for their connections in talahassee. That’s also why athletes appear to enjoy a high degree of legal immunity, because sports brings in lots of money.

  2. Flagler Citizen says:

    I agree, household debt is one of the scourges of 21st century America. While the borrowers are not entirely innocent ($150,000 for a degree in Social Work? Really?), behavior on the part of many lenders have made the matter worse. I wish that every high school student in America was required to take a financial management class that included the importance of avoiding non-mortgage debt. If our students (and their parents) were better educated on how to plan for college, manage their money without using a credit card, etc, this issue would disappear. :)

  3. Sherry Epley says:

    This seems to be a complex issue. . . caused by a perfect storm of a number of factors:

    1. Now with more globalization of education, the children of wealthy citizens all over the world are driving up the price of admission to our private “for profit” universities. This is just another example of the widening divide between the planet wide 1% and everyone else.

    2. The tremendous political pressure from the conservatives to deregulate everything keeps the government from really controlling predatory lending practices. Legal loan sharking is everywhere!

    3. Our younger generations expect instant gratification and require the trappings of the celebrity lives they see on television and the internet every day. Gone are the days of the work ethic and living within one’s means.

  4. Outsider says:

    I’m sorry, but borrowing $150K for a degree in social work is ridiculous. You will be lucky to make $30K a year. It’s not everyone else’s fault in many instances, this being one of them. A lot of the blame belongs to the governemnt’s so-called “helping,” and the schools’ allowing kids to mortgage their futures for degrees with little promise of a good return on their “investments.” With the governemnt making so much financial aid available the schools are more than willing to tap into as much of it as they can, leaving students holding the bag. I left school with $1500 in debt. I might add that I had a business where I cut grass, cleaned out foreclosed homes, painted, washed windows and cleaned floors. I didn’t go to Harvard or Yale or Duke; I split my time between community college and the the local State University. Certain medical, law and professional degrees aside, ten years down the road a piece of paper will be a piece of paper. If you can afford Ivy League then go for it; for the rest of the world, use some common sense in mapping out your education.

    • Nancy N. says:

      You obviously haven’t paid much attention to the price of college in the last couple of decades. It has skyrocketed. Today, $1500 often won’t pay for books for a year (or even a semester, depending on the degree) of college let alone for tuition. I graduated in the early 1990’s with a modest amount of debt that was paid off in about 10 years. Today, you can’t go to a state school like I did for ONE year for what I paid for 5 years of school.

      You can’t pay for $30k-$40k per year of school by “cutting grass and washing windows.” You’ll be lucky to pay for your books and lab fees.

      This nation has a reached a crisis point regarding its college costs. They are spiraling out of control. Only the most rich families can afford to send their children to college without incurring huge amounts of debt. Something must be done!

  5. David S says:

    Living within ones means in todays society is almost impossible with the cost of everything going sky each day how can you keep up.?

  6. Sherry Epley says:

    Suggestions for living on what you earn:

    1. Learn to cook and eat at home
    2. Use cash only, do not acquire credit card debt
    3. Take public transportation if possible
    4. Work during the day and go to community college at night
    5. Take birth control pills and do not have children you cannot easily afford
    6. Economize- try Netflix/Hulu instead of cable
    7. Create a budget and stick to it
    8. Clip coupons and buy store brands
    9. Have a friend cut your hair, and you cut theirs
    10. Drive an older car

    There are a million ways to live on what you earn. . . the alternative is disaster!
    I’m sure the others who comment here can easily add to this list.

    • Outsider says:

      All great ideas. I could easily have a brand new Mercedes in my driveway, but instead I drive an eleven year old car that I’ve maintained pretty well. My wife’s car is twelve years old. I have friends that make half of what I do and they drive brand new cars, with brand new car payments. I have none. Now, your suggestion number 9 is one that I cannot follow, but if you do I would like to see a selfie!

    • Livesinpalmcoast says:

      Sherry,
      I completly understand where you are coming from with your tips. However no matter how one tries to live within their means, emergencies come up unexpected. Some lead to debt and it’s hard to climb out of. I have never liked using credit cards but they are a necessary evil, one must build credit to get a mortgage and a car loan. Driving an older car does make sense but sometimes the repair on an older car is not worth it. If one drives a distance an older car could make the commute unsafe. One must be realistic and get what they NEED and not buy what they don’t.

    • Nancy N. says:

      You make it sound so easy Sherry. But life in the real world is more complicated than that.

      But what happens when you require emergency surgery with a 20% copay that runs into thousands of dollars? What happens when you become uninsured altogether due to circumstances beyond your control and require hundreds of dollars a month in medication (not to mention doctors and tests to monitor that medication)? What happens when that “older car” suddenly requires $1000 in repairs to be driveable? How are most Americans, living paycheck to paycheck, supposed to live on what they earn, then? Should they just not eat for a couple of months? Forgo electricity? Because for a lot of people in those situations, that is what it comes down to.

      I’m particularly offended by the suggestion that people not have children they can’t easily afford. That right there is right off the Fox News racist talking points against benefit programs, which is frankly beneath you. I’m seriously disappointed. You cannot honestly expect someone, the day they decide to get pregnant, to have psychic knowledge of what the next 18 years are going to bring? A family that is financially secure one day may find itself devastated financially several years (even only months) later by a job loss or a serious illness. THINGS CHANGE. That’s life. We don’t know what is going to happen. Sometimes fate brings us good things. Sometimes, its bad things. To blame people during the bad times for things they did during the good times is the height of hubris. What if you are next?

      That also raises a sort of slippery slope situation that suggests that only people who are rich are worthy to procreate. THAT is an extremely dangerous road to travel down.

      • snapperhead says:

        An even slipperier slope to go down is to expect government and society to pay for ones mistakes. My friend lives pay check to pay check because come hell or high water she finds a way to spend money every week on stuff she doesn’t really need…hair salons, manicures and pedicures, eating/drinking out, trips to wherever. She should be saving that extra cash for when an “emergency” arises or to help out should she lose her job…let’s not make it sound like everyone in dire straights financially is there because of causes beyond one’s control.

        • tightlines says:

          Snapperhead, the fact that you know one person who makes lousy financial decisions means only that you know one person who makes lousy financial decisions.

          It does not mean you can fairly assume that’s the case for everyone who has financial problems and ends up in debt.

          You wrote earlier that you saved enough money to handle a period of unemployment during the recession. Great. Many people aren’t able to do that.

          If someone’s laid off when they’re young and just starting out, or if their job search outlasts their savings, or if their money is devoured by an expensive medical problem, or if they’re in a field that doesn’t pay enough for them to pack much money away, they’ll have a harder time staying out of debt if they lose their job.

          And before you blame people for choosing a low-paying field, think: Do you really want a society without social workers, paramedics, journalists, therapists, professors or teachers? All of those professions pay very little during the first few years, at least, of employment. And then there are people who simply don’t have the aptitude for jobs that pay well. Should everyone who labors their entire working life bagging groceries or cleaning toilets or working a fast-food fryer — because that’s all they’re able to do — simply go hungry if they get sick, or if their car breaks down and needs hundreds or thousands of dollars in repairs?

          These discussions seem to show two general attitudes toward people with financial problems. Some people hear about those less fortunate, pat themselves on the back for doing well, and think, “Screw ‘em. Their problems must be their fault.” (Or, as you put it earlier, “If there’s no real repercussions to making bad decisions then people will just keep making them.”)

          And others think, “Wow, that must be rough. What can we do to make things better?” I’d hate to become so judgmental, cynical and self-righteous as to fall into the former category.

          • snapperhead says:

            Tightlines, knowing nothing about me I’d say you fall into the former category already I volunteer regularly for Habitat for Humanity, Humane Society and Feed Flagler efforts..I don’t think what can WE do, I think what can I do. I have compassion for people, but what i won’t do is accept as gospel the notion that so many people that are in debt are there thru no fault of their own.Nor do I accept that most of the people doing menial labor jobs aren’t capable of doing more with their lives,some just lack drive and motivation.Life isn’t fair, if someone told you it’s supposed to be they did you an injustice. In case you haven’t noticed WE as a society are in debt $18 trillion dollars, much of which goes to the “less” fortunate already. Driving the country into bankruptcy or default isn’t going to benefit anyone.

  7. Sherry Epley says:

    Dear Nancy,

    My suggestion of family planning is not the least bit implying that only the wealthy should have children, not at all. You are reading much too much into my suggestion. But, creating a family should be taken very seriously for several reasons. . . an important one being financial. It is a minimum of a 20 year commitment, and multiplies all the emergency situations mentioned by yourself and others.

    I had a huge eye opener when my sister became pregnant with her 4th child, when she couldn’t afford the first 3. When I asked about why she wasn’t using birth control, her reply was that diapers were cheaper. I was stunned that she did not think beyond changing a diaper. Her life and the lives of her children have essentially been disasters of her creation. And, yes, of course, our entire family has done our best to try to support, help and guide her and her children. We should each strive to do our best, in each moment to live consciously and do our best to make healthy decisions for ourselves, our families, our communities, our state, our nation, our planet and our universe.

    One thing should should have been high on my list is saving for a rainy day. Life throws us all unexpected curve balls. A good goal could be to live a bit below your means whenever possible, so that when those emergencies come you are more prepared.

    Yes, I cut my own hair and my husbands too. My mother was raised on her parents’ farm during the depression. She taught me that a “penny saved is a penny earned.” She made most of my clothes by creating patterns out of newspaper she pinned on me while I stood on the kitchen table. I owned 6 outfits, 5 for school and 1 for church. I had 1 pair of shoes, which I took off the minute I came home. My aunt took me to my first restaurant when I was 15. . . I did not go to another until after I was married at 18. . . and then rarely until I was in my 40’s. I started my first full time job when I was 18 and I put myself through college classes , burning the midnight oil.

    Believe me when I say, I did over 35 years of 50 hour weeks. Yes, I have created ways to travel extensively even beyond those trips required by my career. . . but, nothing has been handed to me, and I still clip coupons, and save, and shop sales. I really have no expectation of anything in this life beyond that which I create myself.. My cup runneth over. . . not with money, but with a wonderful husband, family and friends!

  8. Lancer says:

    Not another “but, Fox News” posts, Nancy. Try addressing actual issues instead of labeling. Funny when someone spews this garbage that they never acknowledge the many other news orgs that are left in nature: abc, cbs, nbc, msnbc, cnn, etc., etc. I know the left doesn’t understand finance or how a calculator works, but to not understand a TV remote control???? Wow.

    It’s about individual decision making. Generally speaking, Americans are the most financially ignorant I have ever seen. They have no understanding that financial decisions today have financial consequences tomorrow and have been told by leftists, for generations, that “nothing is their fault, it is always someone else to blame”. Leftists have been masters at giving them someone to blame. Case in point” “Its predatory lenders, not consumers!” Complete and utter bullshoi! If you are using a credit card, you are borrowing from someone else to buy and that comes with a monthly percentage rate. It’s on the contract you sign with them when you apply for the credit card. Don’t like the agreement, don’t sign!!!

    Next comes the “but, we are desperate”. That is from making bad financial decisions from the beginning. For instance, a home you plan on buying should not be more than 3 times your annual income. But, people have champagne tastes on a beer budget and watch home improvement shows that don’t sell reality. Being self disciplined is a guarantee to financial success, period.

    Nothing exudes the financial ignorance of the American people more than the belief in the lies DC has been selling for decades and decades. For example, in 1964 LBJ started his “Great Society Program”. In 1967 the poverty rate was 14%. The poverty rate for 2014 was 14% and this is after we’ve spent over $22 TRILLION. The US population is around 350 million…what’s that spending per person? Oops, I’ve now asked leftists to do mathematics…which is a no no! Leftist head can’t accept this so they yell,”You’re a hatemonger! You want to end these programs!” Therefore, retreating from any semblance of reasonable debate. For them, its continue the same lame, tired, ineffective, debt laden programs.There has got to be a better way, but not for the left because dependency has given them a voting base. “We don’t allow the US government to operate within budget, why should we??”, right leftists?

    Once the left cares enough about people to actually see there are serious financial and fiscal problems that need to be addressed, there maybe a small bit of common ground. Until then…they chase failure like a dog chases their own tail and cannot be trusted, relied upon or reasonably approached.

  9. Sherry Epley says:

    To characterize (AKA label) about 50% of the citizens of the USA, who happen to be progressive, open minded and liberal, as financially and mathematically incompetent is outrageously ludicrous! To do it in a rant against another for ” labeling” people is completely hypocritical!

    How about some factual perspective. . . this from The Berkeley Daily Planet:

    Which party’s Presidents have been better for the economy? Republicans: Eisenhower, Nixon, Ford, Reagan, Bushes I and II or Democrats: Truman, Kennedy, Johnson, Carter, Clinton, and Obama

    The highest growth in the gross domestic product?
    The highest growth in jobs?
    The biggest increase in personal disposable income after taxes?
    The highest growth in industrial production?
    The highest growth in hourly wages?
    The lowest Misery Index (inflation plus unemployment)?
    The lowest inflation?
    The largest reduction in the deficit?

    The answers are 1.Harry Truman, 2.Bill Clinton, 3.Lyndon Johnson, 4.John F. Kennedy, 5.Johnson, 6.Truman, 7.Truman, 8.Clinton. In the Economic Sweepstakes, Democratic presidents trounce Republicans eight times out of eight!

    • Lancer says:

      Presidents have very little to do with economic movement. Government policies can stimulate growth, but money is in the hands of the individuals. Good policies that understand that the economy and success is driven by every day people, not government, work best.

      What is ignored by the left is this:
      People will adjust to bad policies, continue to make money and pay as little taxes as possible.
      However, good fiscal policies will lead to more investment and risk taking by individuals and that leads to technological advancements, wage increases and wealth creation.

      Case in point…all leftists like to brag about Bill Clinton. They also completely ignore that he LOST CONGRESS and a little thing called “The Contract with America”. They also ignore the advent of the dot com era and that the government had little involvement in regulating and handcuffing that industry, as of yet! Why is that, Sherry?

      Also, missing from the list is the leftist deity FDR and his “New Deal”. It should have been called “The Raw Deal” because his polices in reaction to the “Great Depression” were horrible! http://newsroom.ucla.edu/releases/FDR-s-Policies-Prolonged-Depression-5409

      Lastly, the left loves to ignore The Presidency’s of Harding and Coolidge…and it’s no wonder. Their reaction and policies towards tackling WWI debt, a dismal economy and high unemployment prove that reducing government spending, scope and taxes work better.

      https://www.youtube.com/watch?v=FS1_Ng2W4ns

      This video breaks down what Harding and, then, Coolidge walked into. It then shows how Hoover and FDR reacted to slowing economies in exact opposite ways…for the worse.

      We have the greatest economy the world has ever known. It led to the greatest technological advancements the world has ever seen. It has created the greatest wealth ever realized.

      …and we have amassed $18 trillion in government debt that promotes entitlement, not opportunity.

  10. Sherry Epley says:

    Karl Hungus, thank you. . . you make an excellent point I had not thought of regarding sports teams and how university Presidents are selected. Yes, now that so many of our universities are focused on “profit over educating our populace”. . . we are experiencing the downside of capitalism in education as well.

    Think of it on the grander scale:

    1. Schools at every level moving to “profit centers”. . . AKA Private and Charter Schools
    2. Massive resistance to the ACA (Obamacare)
    3. Mental care hospitals closed down=jails are full of the mentally ill
    4. Union Busting
    5. Pressure to slash funding for all social programs like the Department of Children and Families
    6. Less regulation over environmental polluters/ the financial industry/ gun safety/ highway safety, etc.
    and on and on. . .

    These are all symptoms of the same thing: AMERICAN GREED! PROFIT OVER PEOPLE!

  11. Anonymous says:

    Sherry & snapperhead have it going on. :) Live within your means, be a life long learner, live a healthy, sometimes boring lifestyle and stop subscrbing to those rags about the rich and famous, barely written at a 4th grade reading level! The money you save can get you a cut AND style!

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