This article appears in the June 2025 issue of The American Prospect magazine. Subscribe here.
In April, the Department of Education announced that it would resume collection on defaulted student loans for the first time in five years. Loan collections were paused during the pandemic in 2020 to offer some breathing room, but once confirmed as education secretary, Linda McMahon put a stop to that. “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” she vowed in a statement.
Roughly 5.3 million student borrowers who haven’t paid for more than 360 days were thrown into collections on May 5, and government data shows that another 5.59 million could hit default status within six months. And the federal government’s powers to force repayment far outstrip those of private businesses.
The Treasury Offset Program matches borrower information with government payments, and commandeers those funds to pay the loans. Tax refunds (including from low-income supports like the Earned Income Tax Credit) can be taken entirely, and so can a portion of monthly Social Security payments for retirees and people with disabilities. As a cherry on top, the Offset Program charges the borrower a $20 fee for the privilege of having their money taken. The Education Department also uses a different program, after giving 30 days’ notice, to garnish up to 15 percent of a borrower’s weekly wages.
Because federal collections statutes have not changed since 1996, only $750 per month is protected from Social Security seizures, meaning that the Offset Program can push borrowers into poverty. None of this requires a court order, and there is no statute of limitations on collections.
But it’s misleading to say that the government is grabbing wages and tax refunds and Social Security checks. A private company known as a loan servicer handles day-to-day operations on every federal student loan. But when borrowers slip into default, loans get transferred to the Default Resolution Group (DRG), managed by a different private company, a contractor called Maximus. This creates borrower confusion about who the point of contact even is.
McMahon’s Education Department has urged borrowers in default to contact the DRG to understand their options. But Maximus has been sued before for giving improper information to borrowers looking to escape default, and for snatching tax refunds of borrowers who should have been excluded from collections; the latter case reached an undisclosed settlement last year. In a third lawsuit, then-Education Secretary Betsy DeVos was found in contempt of court in 2019 for failing to stop Maximus collections against defrauded borrowers. Maximus reportedly failed to hire enough staff to properly tag borrowers who should have had their wages and government payments protected.
The watchdogs enlisted to look out for students have been effectively recalled by the Trump administration.
It would be incorrect to identify Maximus as a uniquely poor student loan servicer. Virtually all companies contracted by the government to manage student loans have been found to violate standards and practices. Navient, once the largest, was eventually barred from servicing entirely. And several state attorneys general are investigating MOHELA, another large servicer, over miscalculating billing payments and mishandling paperwork, following up on a lawsuit filed by the American Federation of Teachers last year.
The basic problem is that servicers lack any incentive to help borrowers deal with loans in distress. “One student loan servicer employee once told me that the goal was to get the borrower off the phone as fast as possible,” said Rohit Chopra, former director of the Consumer Financial Protection Bureau (CFPB) and prior to that the agency’s student loan ombudsman. The endless passing of borrowers between servicers and the financial imperative to rush borrowers into bad options turns the process into something Kafka would recognize.
The failures of contracted private companies boosts the fortunes of a separate set of private companies that are primed to prey on borrowers. For those in or nearing default, this could take the form of “debt relief” operators that pledge to improve a borrower’s situation, but which offer nothing that someone isn’t already entitled to under the law. As the $1.6 trillion federal student loan system erodes—which could accelerate if Republicans in Congress follow through on their intention to make loans more expensive and more punitive—would-be students seeking skills could be overrun by private lenders with even shoddier financing options, for-profit education programs dangling worthless degrees, or a combination of both.
Many of the worst abuses in higher education were contained by regulatory safeguards in the past several years. But those protections are under threat of being rolled back. And the watchdogs enlisted to look out for students have been effectively recalled by the Trump administration, precisely at the moment when collections are back and repayment pressures are rising.
“It’s sort of a perfect storm facing borrowers,” said Abby Shafroth, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. “As they restart this process, they will have no help.”
ONE PROBLEM FACING BORROWERS is the sheer complexity of the process, and the incentives of the contractors involved. The Education Department terminated contracts with private student debt collection agencies in 2022, after years of evidence of unlawful behavior. But payment seizure and garnishment practices are now in the hands of Maximus, which effectively operates as debt collector and servicer, two tasks that often come into conflict.
For example, borrowers threatened by wage garnishment have the right to request a hearing to contest collection. But responses to that request go through Maximus, which is paid per loan in its portfolio, and therefore has a financial interest to keep people in default. The wage garnishment hearing process “has never worked,” said Thomas Gokey, co-founder of the Debt Collective, a student borrower advocacy group. “If you submitted a request for a hearing, it was getting flushed down a black hole.” A 2020 law review article by Deanne Loonin reinforces this claim, arguing that the hearings “offer no more than an illusion of due process.”
In 2019, the last time collections were turned on, 1.2 million borrowers made voluntary payments, according to a CFPB report. But that does nothing for their default status unless the payments are routed through loan rehabilitation, a process where borrowers can avoid default if they agree in writing to make nine payments over a ten-month period. The company in charge of explaining that is … Maximus.
“I don’t think anyone feels responsible for borrowers in default,” said one government source who works on student loans.
The rules themselves can harm borrowers. In loan rehabilitation, involuntary garnishment of wages or government benefits can continue during the first five voluntary payments. Borrowers can also consolidate defaulted loans into one payment, including income-driven repayment, which limits payments to a percentage of wage income, often lowers payments to $0 for the lowest-income borrowers, and forgives the balance after 20 to 25 years. But because loan consolidation cancels credit toward debt forgiveness and capitalizes interest into the unpaid balance, the amount owed gets higher, and if borrowers are steered by self-interested servicers into the wrong option, their monthly payment could go up.
Leisa Thompson/The Ann Arbor News via AP
Student borrowers under threat of wage garnishment could be attracted by phony debt relief scams.
Given the availability of affordable options like income-driven repayment, the number of borrowers in default should really be zero. But the Trump administration’s actions aren’t helping. In response to a court order blocking the Biden administration’s generous income-driven repayment plan in February, the Education Department pulled down applications for three other IDR plans and loan consolidation, while issuing a memo to stop processing nearly two million existing IDR applications. (The department announced it would restart processing those applications, but not before collections begin.)
The last round of student loan debt collection also demonstrates the dangers of expecting private companies to administer public processes fairly. When the COVID pandemic hit in March 2020, Congress turned debt collection off for defaulted student loans in the CARES Act, and the Education Department promised to follow through. But Elizabeth Barber, a 59-year-old home health aide earning $12.89 an hour, explained in a federal lawsuit that her paycheck continued to be garnished repeatedly. Her hours were cut during COVID, and the money being taken was critical to her survival, as her checking account was empty and she was past due on water and electric bills.
“I don’t understand why the government keeps taking my money away after it passed a law that says they will stop,” Barber said at the time.
In the first six months after passage of the CARES Act, the Education Department’s inspector general reported, more than $582 million was illegally garnished from over 390,000 defaulted borrowers. And though the Biden administration was more sympathetic to the plight of student debtors, it took them a while to wrap their arms around a devilishly convoluted system on autopilot. Some garnishments continued to August 2021, 17 months after the CARES Act became law, according to internal documents uncovered by the Student Borrower Protection Center. Some loans being garnished were already paid in full.
Atrocious recordkeeping was to blame. Maximus, which manages wage garnishment, conceded to the Education Department that most employer addresses where it was sending stop-garnishment letters were invalid. At one point, the servicer started googling employer phone numbers and cold-calling, and later resigned itself to “hav[ing] done what we can” to stop garnishments in an email to the department in February 2021. Some collections continued for six months after that.
Yet when the Education Department needed to find a loan servicer in 2021 to take over Navient’s portfolio of 5.5 million loans, it allowed a transfer to Aidvantage, a division of Maximus, making Maximus America’s largest student loan servicer. Almost immediately, Aidvantage was accused by borrowers of not contacting them in a timely fashion and issuing incorrect demands for payments.
In a statement, Maximus spokesperson Eileen Rivera called the company “a conflict-free partner to government” and directed all specific questions to the Education Department. Questions for the Education Department were not returned.
“It raises questions about how the department is communicating with borrowers in default, or handling requests for review,” said Shafroth. “Will borrowers have opportunity to challenge the debt and get into repayment?”
If not, bottom-feeders from the outside are circling.
THERE’S A SMALL BIT OF TEXT at the Office of Federal Student Aid’s (FSA) website about getting out of default, several screens down the page, that advises, “If you are contacted by a company asking you to pay ‘enrollment,’ ‘subscription,’ or ‘maintenance’ fees to help you get out of default, you should walk away. Your loan holder will help you with your defaulted loan for free.”
Those 39 words buried on a government website are unlikely to provide enough protection. “This is going to be a massive opportunity for debt relief scammers,” said Sam Levine, who ran the Bureau of Consumer Protection at the Federal Trade Commission (FTC) during the Biden administration. “They are going to say, ‘This is last chance to get Biden debt relief, call us now.’ They’re going to impersonate the Department of Education. They always take news events as hooks.”
Several separate schemes uncovered by the CFPB in recent years demonstrate how they work. Debt relief companies obtain leads, including from credit reporting agencies, to identify distressed student borrowers. They then use direct mail, telemarketing calls, or online advertising to reach those borrowers, offering to help them navigate the admittedly byzantine student loan process for an up-front fee. Performance SLC, for example, charged between $1,000 and $1,400 to file applications for loan consolidation, income-driven repayment, and other options. Another scheme, GST Factoring, charged up to 40 percent of a borrower’s outstanding debt, plus a monthly processing fee.
Some companies actually perform document preparation for borrowers, which is a better outcome than others who appear to do nothing at all other than take fees. But it shouldn’t cost anything to file student loan repayment applications with the government. “Debt relief companies collect the same information from borrowers that the borrower would be inputting from their own computer on studentaid.gov,” Shafroth said. In some cases, companies ask for borrowers’ credentials to log in to the government portal for them, which makes it difficult for borrowers to wrest back control of the loan once they realize they’ve been scammed.
“The hot new idea is the old 2007 idea, let private lenders back into the space.”
In one of the worst examples, Prosperity Benefit Services mailed “Time Sensitive” notices promising “complete loan forgiveness,” with a telephone number to call. When borrowers made the calls, representatives would claim they were affiliated with the Department of Education, and that they could offer “guaranteed” forgiveness in as little as a few months. All borrowers had to do was hand over personal information and bank account authorization for the up-front monthly payments. According to a lawsuit from the FTC, Prosperity frequently did no work to secure any payment modifications. Because the scheme took place during the COVID-era student loan payment pause, some borrowers only found out years later that they still had loan obligations. Over $20 million was siphoned from consumers before the government learned of it.
The FTC mostly enforces debt relief scams under the Telemarketing Sales Rule, which prohibits up-front fees and misrepresentations about savings. But the agency put in place an Impersonation Rule to stop companies pretending to be from the government or other businesses. Its first use was in the Prosperity case, and last June, a federal court immediately halted the scheme and froze the company’s assets. A later settlement permanently shut down the enterprise.
Under President Biden, the FTC and CFPB did a lot of work to root out student debt relief scams. The FTC employed additional tools, like the new Impersonation Rule and a provision of the Gramm-Leach-Bliley Act prohibiting anyone from falsely obtaining a consumer’s financial information. Agencies also began to name individual defendants in their lawsuits. But with the Trump administration’s zeal for deregulation, these tools could disappear, and scam artists could work their way back to victims. “You do wonder, will there be a cottage industry of people wanting to profit off people’s pain?” Chopra asked.
While bringing cases provides a deterrent effect, Levine says that it’s so easy to set up one of these operations that law enforcers are constantly running a losing race. Defunct companies also sell their leads to upstart firms, who rerun and replicate the scams. Levine thinks enforcers need to go one step further. “They should look where there are patterns of payments and processors who are serving the debt relief operators,” he said. The FTC did this in 2021, banning Automatic Funds Transfer Services (AFTS) from processing payments after uncovering its participation in a student debt relief scheme.
Levine doubted that the Trump administration would go there, given Republican resistance to a similar initiative in the Obama years that tried to stop banks from processing payments for payday lenders and other high-risk businesses. But FTC spokesperson Nicole Drayton told the Prospect that going after companies like AFTS that “substantially assist or facilitate unlawful telemarketing activity such as a student loan debt relief scam … is often important to stopping the fraud and returning its proceeds to consumers.” She added that the FTC would continue to police debt relief scams, including by using the Impersonation Rule and naming individual defendants, as it did in a recent case in March.
Meanwhile, the legitimate system for getting student loan assistance is so difficult to navigate that borrowers may be attracted to other options. “The best strategy to stop scammy debt relief is to have good student loan servicing,” Levine said.
MILLIONS OF STUDENT BORROWERS can’t keep up with their loan payments now, but House Republicans’ solution is to price out the borrowers of the future. On April 29, the House Education and Workforce Committee marked up its contribution to the giant budget reconciliation bill, aimed mostly at reducing $330 billion in college financial aid over a decade, and funneling that money into tax cuts for the rich.
The Republican bill eliminates all but two repayment programs. A standard plan with a fixed interest rate would last between 10 and 25 years, depending on the amount borrowed. Single debtors carrying the average amount of student debt as of the end of 2024 ($38,374) and the current 6.3 percent interest rate would owe $432 a month, and would pay close to $3,000 per year more than under the cheapest Biden-era plan, according to an analysis by the Student Borrower Protection Center. The alternative, an income-driven repayment plan, would last 30 years before the balance is extinguished, and offer little assistance to most borrowers unless they don’t earn much.
More important, the Republican bill imposes a lifetime cap on available loan amounts: $50,000 for undergraduates, $100,000 for graduate students, and $150,000 for students in professional programs like medicine or law. These figures are almost certainly inadequate to cover a full course of study, and other financial aid would be harder to access as well. Pell grants would only be available to “full-time” students with 30 hours of coursework per academic year. Part-time students who must work to sustain themselves would be locked out of those grants.
Democrats on the committee outlined the stark choices facing aspiring college enrollees if the bill were to pass. “Students would be forced to turn to predatory lenders looking to profit off the desire to get an education,” said Rep. Jahana Hayes (D-CT). Corporate lobbyists seem to agree, though they put it differently. “It’s a victory, and it certainly opens up market opportunity,” Robert Moran, who represents private student lenders, told Politico.
Since changes embedded in the Affordable Care Act of 2010 established direct federal lending, private student loans make up only about 7 percent of the market. But the corrosion of direct lending offers private actors a ray of hope. SoFi, the leading private refinancing company for student loans, saw originations increase 71 percent year over year in the fourth quarter of 2024, and stay at roughly that level in Q1 2025.
“I think the old Sallie Mae is the new Sallie Mae,” said Julie Margetta Morgan, president of the Century Foundation and a former CFPB and Department of Education official. She’s referring to the largest private student lender in the U.S. prior to 2010, which benefited from a government guarantee that backstopped losses on its portfolio. After direct lending, Sallie Mae immediately fired 30 percent of its staff. The company got into servicing—under the name Navient, which was kicked out of the servicing market. “They wanted to retain elements of the business that could be the ticket to success,” Margetta Morgan said. “The hot new idea is the old 2007 idea, let private lenders back into the space.”
Indeed, in a February note on its website, Sallie Mae rebranded itself as an “education solutions company” that offers planning resources and “responsible private student loans to cover any gaps in financing.” The note warns that federal student loans allow families to “overborrow” and lead to “unsustainable levels of debt.” The implication is clear: make the federal system stingier so families will be forced into the arms of lenders like Sallie Mae. There’s even been talk about selling off the entire student loan portfolio to the private market.
One hurdle is that students, particularly ones who can’t afford their loans currently, will not be seen as a solid credit risk. Interest rates will be much higher than what’s available in the federal system. Teaser rates and other enticements could attract borrowers, but without the government backstop, it’s hard to see how legitimate private lenders can find success.
Illegitimate ones, however, might have a shot, especially in the regulatory free-fire zone the Trump administration is establishing. “I definitely think it’s true that you’ll see people turning to payday loans, or the equivalent of a payday loan but it’s on an app,” said Thomas Gokey of the Debt Collective.
Chopra believes that paying for student lending could drift into other credit markets. Credit cards could see rising balances, or there could be increases in home equity loans, eroding the transparency we currently have into the student loan market. “When you squeeze someone who can’t pay, they might meet that obligation by getting on a treadmill of debt,” Chopra said.
Sketchy lenders aren’t the only entities that could see new life under the Republican student loan overhaul. The bill repeals two critical regulations aimed at ensuring colleges and universities are high-quality. The gainful employment rule requires that program graduates can get employed in their field of study and earn enough to pay off the debt. The 90/10 rule forces educational institutions to derive at least 10 percent of their revenue from something other than federal financial aid, requiring schools to find legitimate tuition sources and not just feed off student loans.
These rules attack the for-profit college sector, which dates back to the 19th century but which really ramped up after the Higher Education Act of 1965 authorized federal assistance for college students. During the Obama years, rampant abuses at for-profit colleges piled up, including high-pressure sales tactics that misled students about job placement, substandard coursework, piles of forced debt, and diplomas with no value for career advancement. Amid state and federal enforcement and tightening regulatory standards, dozens of campuses went out of business.
That was a win for students and taxpayers, Chopra explained. “If we care about stopping waste, fraud, and abuse, we cannot allow for-profit schools chowing down on public funds to not deliver something of value to students.” But removing the gainful employment and the 90/10 rules while also diminishing the federal student loan system could bring for-profits roaring back. Worse, while during the previous for-profit college bubble, students who were defrauded by their schools were able to eventually have their loans canceled, another provision of the Republican bill would block such loan forgiveness. Victims of crime would have to essentially pay for the crimes committed against them.
Of course, for-profits of the past relied entirely on federal loans, and if that system breaks, the economics may not make sense anymore. But at the nexus of shady private lenders and shady education programs are companies that do both. And even before Congress succeeds in wiping away regulatory obstacles, these innovators are inching their way back onto the field.
CHRIS BELCHER WAS AN EX-MARINE selling windows who wanted to break into software sales. Ads kept popping up in his Facebook feed promising exactly that, and he bit. Prehired touted a six-week training course that would guarantee a tech sales job with $60,000 in earnings.
The coursework was online, self-directed, and somewhat rudimentary; Belcher told me the first class involved setting up email signatures in Microsoft Outlook. Recruits could go at their own pace. “Basically it was like, you take care of what we’re telling you to do, and we’ll help you get a job,” he said. But the way Prehired structured payment was noteworthy: A contract entitled the company to 12.5 percent of their graduates’ eventual income, until they paid off $30,000.
The concept is known as an income share agreement (ISA), a privatized version of income-driven repayment with vague and sometimes harmful terms. Purdue University experimented with them, but among the earliest adopters were Silicon Valley venture capital firms. “You had people who thought they would hack higher education by offering these companies that were both student lender and education provider,” said Mike Pierce, a former CFPB official and executive director of the Student Borrower Protection Center, which has warned of the dangers of ISAs.
Along with allegedly deceptive marketing tactics and more aggressive debt collection buried in the contractual fine print, ISA providers were insistent that they weren’t offering loans, and therefore didn’t have to provide several borrower protections. When the Education Department issued guidance in 2022 that ISAs actually were loans, following on similar guidance from the CFPB, many of the programs dried up, including at Purdue.
Economic hardship offers a target-rich environment for financial schemes.
Prehired was founded in 2017. Recruits were told that they wouldn’t start paying part of their incomes until they finished the course and earned the $60,000 salary promised in the pitch within 12 months. Belcher never finished the course, but he became a recruiter for the company, targeting the program to the military, which was his background. Belcher brought a few companies to Prehired that were seeking sales recruits, but none would ever convert. Meanwhile, students found him on LinkedIn and reached out, complaining that Prehired wasn’t helping them land a job. Belcher was being paid on commission, and also wasn’t making any money.
Belcher quit after a few months and went back to the window industry. “I got a callback from Prehired and they said, ‘Hey you got a job.’ I said, ‘I didn’t finish the course and the window industry isn’t the same as software sales.’ But they wanted their money.” Evidence later showed that Prehired debt collectors tried to coerce students into converting their ISAs into settlement agreements that would be “beneficial” for them. But the settlements would make the payments contractually obligatory with little recourse.
The phone calls continued until early 2022, when Belcher and more than 280 other Prehired students became defendants in simultaneous debt collection lawsuits filed in Delaware, where the company was incorporated but nowhere near many of the defendants. Prehired claimed the loans were in default and sought a $25,000 judgment against each borrower, giving them 15 days to respond. When Delaware’s consumer protection unit questioned the lawsuits, Prehired voluntarily dropped the cases, but then refiled them through a private arbitration platform, despite no student ever signing an arbitration agreement.
By this point, Prehired alumni were organizing through posts on LinkedIn. Some appealed to then-Washington state Attorney General Bob Ferguson, who filed a lawsuit in June 2022 to shut down Prehired; three months later, the company filed for bankruptcy. The CFPB and 11 states sued Prehired, eventually leading to a settlement whereby the bankruptcy court ordered Prehired to shut down, return $4.2 million to students, and cancel another $27 million in ISAs.
This all seemed like old news until late last year, when Prehired somehow resurrected under the name FastTrack. Virtually everything about the FastTrack sales pitch is identical to Prehired; in its testimonial section, it includes comments from students who explicitly reference Prehired. Initially, the website included blogs authored by Prehired founder Joshua Jordan, though if you look at the site now, the blogs are attributed to Tre Scinta. It is not clear whether FastTrack has any students or if they’ve just set up the website, which claims that “hundreds” have been helped.
Pierce’s Student Borrower Protection Center informed state AGs who settled with Prehired that the company appeared to have popped up with a new name, which they claimed could be a violation of the settlement. But after everything was documented in The Verge, Bill Stiber, who identifies himself as co-founder of FastTrack and a successful Prehired graduate, insisted that the company is a wholly separate entity that merely licensed Prehired’s intellectual property from the bankruptcy estate. Stiber added that Jordan was not involved with the company.
Stiber and Jordan didn’t respond to questions from the Prospect.
DURING CHOPRA’S TENURE, the CFPB was not only active in shuttering Prehired, but taking action against other ISA schemes arising from Silicon Valley accused of deceiving students, like BloomTech. But when advocates saw Prehired transformed into FastTrack, they did not take their concerns to the CFPB, which by that point had been shut down itself for two months. In fact, state attorneys general who settled the Prehired case in 2023 recently asked Vought why consumer refunds for students have still not been processed, and why he hasn’t answered emails about the matter.
Enforcement of financial scams has withered under acting CFPB director and Project 2025 architect Russ Vought, and student loans are no exception. The agency’s student loan ombudsman, Julia Barnard, was initially fired in a mass purge before being reinstated by a federal judge. Barnard was not part of the second attempted mass purge in April, also blocked by the same judge, but her entire staff was. Among the dozen-plus enforcement actions left over from Chopra’s tenure that Vought has dropped is a proposed $2.25 million settlement with the National Collegiate Student Loan Trusts, a servicer of private student loans accused of improper debt collection. And in an April memo announcing enforcement priorities, acting CFPB chief legal officer Mark Paoletta stated that the bureau would “deprioritize” student loans.
President Trump said in March that, in conjunction with closing the entire Education Department, he would move the student loan portfolio to the Small Business Administration, an agency with a tattered history of managing federal credit programs. It’s unclear whether that has moved forward, and it would likely require congressional action. But the Education Department has fired the entire staff at the Office of Federal Student Aid charged with oversight of student loan servicers.
There’s a clear through line between sending cops off the beat and inviting would-be thieves to come out of the shadows. “I think there’s clearly a Trump effect on these kinds of operations,” said Pierce. “You have Linda McMahon making the case for short-term workforce training as a substitute for higher education. That’s an open sign for scammers.”
A viral TikTok video shows a student borrower explaining how her loan balance doubled while making all her payments.
Economic hardship offers a target-rich environment for financial schemes. Credit reporting on student loan delinquencies, which resumed during the Trump administration, was responsible for an overall drop in U.S. credit scores for only the second time in a decade. Over 26 million borrowers are not current on their student loans, and credit hits make home mortgages, auto loans, and even renting more expensive. Consumer debt overall has hit an all-time high, and more than 40 percent of Americans under 30 say they are “barely getting by” financially, according to the Harvard Youth Poll. And that’s before tariffs and supply shocks could tip the economy into recession.
When I wrote about for-profit colleges a decade ago, I talked to a corporate finance manager at one of the biggest networks, Corinthian Colleges, who told me that during the economic carnage of the Great Recession, her bosses were thrilled. Economic precarity leads to people seeking new skills, and desperation breeds susceptibility to pitchmen promising an escape hatch into the middle class.
Restarting student debt collections, limiting financial aid, and tossing out anyone who would monitor whether the alternatives borrowers seek out are legitimate seems like what a financial predator would do to lay the groundwork for a crime wave if they were in charge of the government. And it’s worth pointing out that Donald Trump paid a $25 million settlement before winning the presidency in 2016 over his own for-profit real estate training enterprise, called Trump University.
But even before the Trump tsunami, borrowers weren’t exactly having an easy time. The agencies manning the student loan program are underfunded, and their contractors are borderline indifferent. The rules are complicated and not well articulated. At least the predators have good marketing and slick communications.
The situation is a classic case of privatization ending up worse for everyone involved, because of the profit motive’s inevitable conflicts with the public interest. The IRS is the biggest payment collector in the world, and could easily do the job of handling monthly student loan checks. In 2014, the Obama administration even tested eliminating servicer middlemen and taking student loan operations in-house. But fully undoing privatization would take manpower and money, and Washington’s allergy to any of that means the broken system keeps rolling along.
When you recognize the deep anger borrowers have about their student loans and the unfairness of the system, you begin to understand why they’ve given up on government fixes and could be attracted to snake oil. In a viral TikTok video, a social worker with the handle @themath_aintmathin explains how she’s been in an income-driven repayment program since 2011, in which time her loan balance nearly doubled due to interest accrual, from $46,000 to almost $90,000. “You want to know why people are pissed off about their student loans? It’s not because we can’t get anyone else to pay them for us. It is because you have set it up where we can never pay them off ourselves … Anyone who still doesn’t see that this is rigged against us can get fucked!”
Why would anyone caught up in what they see as a rigged game expect the government to help them? Isn’t it logical for them to pay for assistance they could get for free, if it means someone will actually answer the phone? Doesn’t it make sense for them to run screaming from a perceived public-sector fraud, even if the result could be an actual private-sector one? The consequence of hollowing out government is a loss of trust, a core desire of anti-government ideologues. Rather than seeing what’s happening to the student loan system as a confluence of disconnected horrors, it may just be a plan working to perfection.
