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Very Disturbing UPDATE: Student Loan Bubble and Seeking Arrangements

Posted by Larry Doyle on August 4, 2011 7:11 AM |

I have a soft spot for those within our society whom I believe are preyed upon and ultimately victimized by the perils and pitfalls of modern day finance.

I fully appreciate that people need to be held responsible for their personal behaviors and decisions, but we need to acknowledge that the tangled financial web that our nation has woven has placed many members of our society in untenable positions.

The story I address today is perhaps one of the saddest I have encountered since launching Sense on Cents in early 2009.  Sophisticated investors get little sympathy here and elsewhere when they lose money from taking excessive risks. What about the unsophisticated within our society, though?

Our elderly, our poor, our youth, our students? Are we doing enough to protect these “unsophisticated”? I think not.

Specifically in regard to college and university students, I have highlighted twice the enormous and excessive debts run up by so many as they pursued their degrees. I wrote over the last few months:

1. Are Student Loans a Bubble? Is Higher Education a Scam?; April 26, 2011

2. Are Student Loans a Bubble? Is Higher Education a Scam? Part II; June 22, 2011

I wrote in my initial piece on this topic,

Have we learned our lessons from the sub-prime housing nightmare? Could we possibly be going down the same path in another segment of our economy? Yesterday a reader inquired if I had addressed the potential impending fiasco in student loans.

This morning I discussed the cost of higher education with my better half. Will our economy be able to generate both the jobs and income levels for students to manage their increasing levels of indebtedness?

I am a huge proponent of the need for quality education in our nation. That said, as this expose reveals there are MANY serious problems, conflicts of interest, and assorted other issues in higher education today. A racket, you might ask?

Yes, in a manner of speaking, there are certainly elements of a racket within higher education today. Let’s navigate.

Well, for those involved in the higher education field, the student loan industry, and for every citizen of our nation, let me further highlight the levels to which some students in our nation feel compelled to go in order to pay their student loans.

As the Huffington Post recently exposed, Seeking Arrangement: College Students Using ‘Sugar Daddies’ To Pay Off Student Loan Debt,

On a Sunday morning in late May, Taylor left her Harlem apartment and boarded a train for Greenwich, Conn. She planned on spending the day with a man she had met online, but not in person. Taylor, a 22-year-old student at Hunter College, had confided in her roommate about the trip and they agreed to swap text messages during the day to make sure she was safe. Once in Greenwich, a man who appeared significantly older than his advertised age of 42 greeted Taylor at the train station and then drove her to the largest house she had ever seen.

He changed into his swimming trunks, she put on a skimpy bathing suit, and then, by the side of his pool, she rubbed sunscreen into the folds of his sagging back — bracing herself to endure an afternoon of sex with someone she suspected was actually about 30 years her senior.

Taylor doubted that her client could relate to someone who had grown up black and poor in the South Bronx. While he summered on Martha’s Vineyard, she’d likely pass another July and August working retail in Times Square.

A love match it wasn’t.

But then again, this was no ordinary date. A month prior, faced with about $15,000 in unpaid tuition and overdue bills, Taylor and her roommate typed “tuition,” “debt,” and “money for school” into Google.

A website called popped up. Intrigued by the promise of what the site billed as a “college tuition sugar daddy,” Taylor created a “sugar baby” profile and eventually connected with the man from Greenwich. (“Taylor” is the pseudonym she uses with men she meets online. Neither she nor any of the other women interviewed for this article permitted their real names be used.)

In her profile on the site, Taylor describes herself as “a full-time college student studying psychology and looking to meet someone to help pay the bills.”

Some within our society may view this activity as a natural outgrowth of our current economic condition. That would be unfortunate.

I am not here to get involved in personal judgments of the students involved. I am here to bring attention to this reality and hope it will cause those within the fields of higher education and student lending to question, “what the hell are we doing?”

If young women prostituting themselves is not a SCREAMING INDICATION and MAJOR RED FLAG that our nation has sunk to an entirely new depth in terms of our financial turmoil, I do not know what is.

As for the SCUMBAGS who prey upon these women, I recommend you find a local community college, make a donation to their financial aid fund in the same amount you’d spend on these activities, and then go for a long run.

I hope people will want to spread this story and bring some transparency to the unseemly side and impact of the student loan bubble.

Questions, comments, constructive criticisms always encouraged and appreciated.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

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