How This Great American Dream Is Turning Scam

Special Report from Monday Morning

by Shah Gilani, Money Morning

Here’s a question for you: Has higher education become another great American scam?

I’m not talking about the rich getting scammed. They get what they pay for. They can afford to be scammed – they know what’s up.

A lot of rich people send their kids to expensive private colleges hoping they’ll get a good education that will lead them into their chosen careers. If they haven’t chosen a career, rich parents are more than happy to give their kids the “experience” of college, with all its social aspects, country club accommodations, and alumni status.

But then there are kids who want a higher education because they believe a college education is their ticket to gainful employment and well-compensated careers. They pay for it themselves, or their hardworking parents cosign on loans or take out personal loans on behalf of their kids’ college dreams.

For them, higher education is increasingly looking like a scam….

These Aid Programs Only Add to the Debt Burden

Some critics complain that this is students’ own fault, that they’re pursuing the wrong majors. Or they say that colleges themselves are lacking, that they’re not teaching what kids need to know in our ever-changing economy.

However, my problem isn’t with education or kids’ choices. Today I’m telling you where my beefs are – and why they’re costing today’s kids and their parents billions…

My first beef is with the come-ons that lure kids and their parents who can’t afford college into indentured servitude.

Personally, I don’t get what costs $10,000 a year (which is dirt cheap these days) or $25,000 a year. And I especially don’t get what costs $50,000 and higher a year.

Maybe if kids were guaranteed jobs that allowed them to pay off their loans, those crazy costs might be justifiable.

But there’s no guarantee on jobs, and so those costs aren’t justified.

Half of all kids who recently graduated colleges and universities are unemployed.

Outstanding U.S. student loan debt now exceeds $1.2 trillion.

Students are saddled with an average of more than $21,000 in debts. This takes into account both those who got out relatively early without a degree and graduates who can owe $100,000 and more – well into their 50s.

And now they’re being victimized by secondary scammers.

My second beef is with these “debt help” outfits that promise borrowers help and end up ripping off those least able to afford such scams.

The Consumer Financial Protection Bureau recently reported, among many other disturbing facts about student loans, that more than 7 million Americans have defaulted on over $100 billion of student loan obligations. The CFPB is now seeing “tens of thousands more (defaults) every month.”

Desperate students and parents who want to clean up their outstanding debts are increasingly turning to debt-help companies that are advertising day and night, just like mortgage-forgiveness outfits did during and after the mortgage crisis.

Way too many of them are scams.

Illinois Attorney General Lisa Madigan is doing something about it. Too bad she’s the only AG I see going after these scammers. She’s filing suit today against two outfits that ply their rotten tactics in her state.

One outfit, First American Tax Defense, advertised an Obama Forgiveness Program, supposedly just passed by Congress. Of course, there is no “Obama Forgiveness Program.” There’s only the president’s request for $3.7 billion to house illegal immigrant kids and help educate them… but I digress.

Another outfit, Broadsword Student Advantage, takes up-front money for its “help program” and charges an ongoing $49.99 a month and does virtually nothing.

The Federal Trade Commission received 204,644 complaints about student loan debt forgiveness and debt-help scams in 2013. It’s an epidemic.

So, I have to ask: Doesn’t this remind you of something?

Doesn’t our system of higher education increasingly look like nothing but indebtedness and more pain? And doesn’t it increasingly look like another great American scam?

Editor’s Note: The public narrative has always boxed in debate on topics considered sacred cows “above” questioning. Higher education, despite its track record of rampant, mismanaged costs and weak institutional oversight, is certainly one. Shah regularly tackles topics that are all the more dangerous for their implied insulation from public scrutiny.