The Student Loan Scam

I saw this story on “What Student Loans Are Really Spent On” at ZeroHedge:

Robert Thomas Price Jr. borrowed about $105,000 for his tuition at Harrisburg Area Community College from 2005 and 2007, federal authorities say. It doesn’t cost anywhere near that much to study at HACC, though.
So Price, 45, of Newport, is facing federal student loan fraud and mail fraud charges.

A U.S. Middle District Court indictment alleges that Price spent much of the loan money on crack cocaine, cars, motorcycles, jewelry, tattoos and video games.

U.S. Attorney Peter J. Smith said today that Price secured about $92,000 in private student loans and around $13,000 in federal PELL grants and Stafford loans. Price was aided in the alleged scam by his ex-wife, a former HACC employee who is not charged or named in the case, Smith said.

Granted, this is anecdotal– one hapless fraud a pattern does not make.

But the fact that it even happened highlights a couple things of import in my mind:

1. This guy was in his late 30s when he committed this fraud; I bet the average person would be surprised to know what the demographic profile is of the average student loanee, my guess is it is not a starry-eyed, hard-working, bright-but-unresourced 18yo kid just looking to make it in this cold, harsh world
2. If it happened once, it’s possible it’s happened more than once; how much of the $1T+ in outstanding student loan debt is being spent in frivolous or fraudulent ways? Reminds me of David Einhorn’s book on a SBA loan-backed fraud he shorted and exposed. Fraudsters flock to government handout programs like flies to dung because the government has less of an incentive to catch and punish them given it doesn’t cost them anything but bad press if it takes place, there are always more taxpayers to steal from if fraudsters take a piece of the pie
3. Student loans are leverage, and they are leverage used to engage in consumption; these kids with student debt don’t suddenly become ascetic monks while they scrupulously work toward their degree and eventually paying off their debt… they continue to live and spend like the college kids they are, just with someone else’s money

To the last point, I chuckled at this response from a friend to whom I sent the ZeroHedge article:

Oh yeah, big time. One of my really good friends that I’ve known since senior year HS, who has never really been a big spender or a big earner, is now a third (or fourth?) year medical student, and he is really living the life of the young adult…through loans. He has a loft in downtown [city withheld], has a HUGE flat-screen tv, bought a new car a couple years ago, and adopted a dog (granted, [name withheld] the dog is super sweet). I seriously doubt he 1) had all that money laying around before, and 2) would spend his own money like that. I’m 99.9% sure it’s all loans because he’s never spent money like this, even when he had a serious gf in college whom he loved and wanted to marry.

I think this article really connects with the last one you sent about vomitus whores. Student loans are essentially enabling all that behavior. Here’s some money, go to “school,” attend some BS classes and write some BS essays, then go drink with this free money. Or perhaps you can go buy a new fancy, shiny thing to show off so that girls will want to sleep with you. *sarcastic thumbs up

I certainly think there is some causation-via-correlation here, though how much exactly is uncertain. Young people are pretty stupid, levered or not. I mean, look at how they vote! What dopes! It’s like they get off on being debt slaves or something.

Anyway, that link in the quote is worth checking out. It’s a riotously funny post from today by Kid Dynamite on the shocking idiocy of the modern American collegiate zeitgeist. Brings new meaning to the term “idiot savant.”