Is the impending federalization of Stafford and PLUS loans consumer-driven?
No. It’s driven by governmental interests. Policy architects like Bob Shireman want to implement a system with fewer moving parts. Unfortunately, the changes and benefits will be largely internal to the government. From the consumer’s perspective it will look very much the same, and it’s likely to exhibit the same predatory characteristics. What consumer protections, in particular, do Stafford and PLUS loans lack? The bankruptcy provisions of those loans protect the government, not borrowers. So do a surprising number of additional provisions regarding the draconian way the government and its agents collect the loans. Statutes of limitations do not apply. The provisions of the Fair Debt Collection Practices statute can be–and are–ignored. Truth in lending requirements are usually ignored. State usury laws are superceded. Those practices, when employed by the federal government, actually are corrosive and produce profound systemwide effects. What corrosive effects? Here’s one example.
