Student Loan Debt and the Big Higher Education Scam

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, and they don't wind up saddled with student loan debt after they graduate.

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.

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: Astronomical Student Loan Debt

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

Student Loan DebtPersonally, I don't get what costs $10,000 a year (which is 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 to add insult to injury, they're being victimized by this parasitic source:

Secondary scammers.

My Second Beef: "Debt Help" Companies

My other 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 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 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?

More from Shah Gilani: Last week momentary panic ensued over a bank in Portugal, contagion fears spilled out across the globe, and markets tanked. The bank's regulators and the central bank of Portugal are telling us it was nothing, it's all been contained. But here's why we can't afford to buy in to their false reassurances...

About the Author

Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.

The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.

Shah founded a second hedge fund in 1999, which he ran until 2003.

Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.

Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.

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