US Marshals Are Arresting People For Not Paying Student Loans

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In an insidious and relatively new twist in the student loan crisis, the US Marshal Service is arresting people for not paying their student loans. And sometimes, showing up with guns drawn in an overwhelming show of federal government intimidation run amok.

US Marshals arresting people for not paying their federal student loans

Paul Aker says he was arrested at his home last week for a $1500 federal student loan he received in 1987.

He says seven deputy US Marshals showed up at his home with guns and took him to federal court where he had to sign a payment plan for the 29-year-old school loan.

Federal student loans are the only form of consumer debt that cannot be dispatched through bankruptcy, and collection of defaulted loans falls to the government. While to most, it might seem like a no-brainer to have to “pay the piper” when a loan comes due, there’s more to the story.

Is the Federal Government a Predatory Lender?

Most financial aid professionals recommend federal student loans because these loans are cheaper, more available and have better repayment terms. But, federal student loans also share many characteristics in common with predatory loans. So, let’s consider the question: Is the federal government a predatory lender?

A predatory lender makes loans with unfair or abusive terms and conditions, where the lender coerces, induces or deceives the borrower into accepting the loan. A predatory lender may also take advantage of a borrower’s lack of understanding and lack of sophistication with regard to complicated financial transactions.

The U.S. Department of Education makes loans without regard to the borrower’s future ability to repay the debt. Federal Perkins and Stafford loans, for example, do not consider the student’s credit history. Aggregate loan limits are not based on the student’s likely income after graduation.

The U.S. government’s predatory-lending program

America earns $3 billion a year charging strapped college parents above-market interest. “It’s like ‘The Sopranos,’ except it’s the government.”

As if that wasn’t bad enough, student loans and the rising cost of college tuition is a scam worthy of prosecution under the Racketeer Influenced and Corrupt Organizations Act (RICO Act). Except that, in this case, the federal government is responsible and profiting from it.

Beginning in 1976, the federal government passed laws to exempt student loans from being discharged via bankruptcy within the first five years since the loan was origination. Then in 1998, the time limit was removed, making it impossible to discharge this form of consumer debt via bankruptcy.

Remember those dates, 1978 and 1998, two milestones in the creation of this financial fraud on American citizens. Now, look at this chart that shows the relative change in consumer prices since 1978.

Tuition

Realizing that easy money was available to students, the cost of tuition began to rise at a rate well above any other consumer expense, in lock-step with the laws protecting student loans from bankruptcy filings in the first five years. Then, a second spike after the 1998 revision to the law, removing the time frame, denying bankruptcy completely.

College tuition has risen at a rate of twice that of medical costs, and nearly 3.5 times everything else. Predatory federal loans enabled the insane rise in tuition. And now, if you can’t pay, serious people with guns will be at your door.

This is your government sticking it to you. If anyone else did this, they’d be in jail.

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