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Overlooking the fact that college tuition is overpriced (and growing more expensive every year), we've set future generations up for failure with a world that encourages high levels of personal debt, enables corporate abuse of public trust and well being, and promises false hope with education that has been rendered useless thanks to outsourcing and offshoring of manufacturing and high-tech.

As many of you know, the Student Loan industry is booming, and not in a way that benefits students and borrowers.  One lender in particular, Sally Mae was recently featured on 60 Minutes (video Part I - Part II) in a segment exposing their predatory (and highly profitable) lending practices.  

No student borrower wishes to shuck responsibility for his or her loans, however lenders have been given a green light by congress to do whatever they like with regard to dispersion and collection of loans.   Colleges & lenders spend comparatively little time explaining in advance the seriousness of borrowing large sums of money at higher interest rates, and how the interest can grow to equal or exceed the amount of the original loan within a relatively short amount of time.  Students are typically young and make irrational decisions.  We forbid anyone from drinking beer before the age of 21, yet we will gladly ensnare them with long term, high-cost loans which will greatly impact many of their lives - after it's too late.   Student Loan lenders such as Sally Mae view young borrowers as easy prey, and something needs to be done about it.  

Student Loan Justice recently submitted a call for experienced Attorneys to join a consortium of legal experts to examine the abuse perpetrated by Sally Mae and other predatory lenders:

We are organizing a group of attorneys who will be willing to work with Student Justice and pursue cases against Sallie Mae and other predatory student lenders. We need attorneys with expertise in RICO, Fraud, Truth in Lending, Bankruptcy, Civil Discovery, Student Loan Law and General Litigation and other relevant areas. We will build a consortium of lawyers who can work together. We need a critical mass of at least 25 experienced attorneys and 5-10 inexperienced lawyers. The consortium will be coordinated by Dr. Bruce W. Ebert in California. We will work closely with Student Justice to decide what litigation to pursue. Any questions may be directed to attorney Dr. Ebert at bpsylaw@aol.com, 916 781-7875.

Please, for the sake of what little good is left in America, if you can assist or know someone who can please contact justice@studentloanjustice.org with your information.

Related links
http://ticas.org/... TICAS Student Loan Watch

http://studentloanjustice.org Student Loan Justice (I am not affiliated with SLJ but support them wholeheartedly)

http://temporaryattorney.blogspot.com/...

http://www.generationdebt.org/ Generation Debt

http://studentloanslave.org/ Student Loan Slave

http://www.counterpunch.org/...  Sally Mae and the Student Loan Swindle

Originally posted to pkbarbiedoll on Wed Aug 02, 2006 at 07:31 AM PDT.

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Comment Preferences

  •  Just out of curiosity... (7+ / 0-)

    ...do you know of any student loan companies in particular that go out of their way to be fair to students? That would be some great information to have, and to promote.

    Thwarting the forces of idiocy since 1978. -6.38, -6.00

    by wiscmass on Wed Aug 02, 2006 at 07:26:53 AM PDT

  •  For the children (11+ / 0-)

    We need to put an end to Student Loan Abuse - now!

    •  or as I referred to it a......... (5+ / 0-)

      couple of week ago. Its not a Student Loan Program - it has become a Student Indentured Servitude Program.

      •  An inciduous plan (7+ / 0-)
        • Intice irresponsible teenager & young adult with "free money" to buy Ipods, Laptops, Cars, ect.. oh and tuition.
        • Threaten irresponsible student with a future of paltry income, or no future at all, unless they have a 4 year degree in High Tech.
        • Fail to mention the seriousness of the loan agreement, or mention it in passing.. just sign here.. standard agreement, don't worry.  you are going to pay it back right?  "yes mr. lender" well okay then, here's some money!  now go shopping because President Bush says so!
        • Borrower graduates with degree in IT or other high-tech industry, but finds most of the good paying jobs have been outsourced to India and other countries.  Borrower accepts job at Starbucks for a few dollars over min wage and resolves not to think about the looming debt incurred by college loans.
        • Allow borrower to declare forbearance for up to 5 years while compounded interest continues to accure.
        • Borrower, still unable to find suitable work in the field he or she went to school for, head over heels in debt years later.  
        • Borrower defaults on student loan - taxpayers pay for loan, yet student still owes balance to lender.  Borrower files for bankruptcy but unable to claim defaulted loan.
        • Borrower's paltry wages are garnished by goverment on behalf of lender.  
        • Borrower unable to pay rent, is evicted, becomes homeless and contemplates suicide.  

        Am I missing anything?

  •  Thank you for this diary (7+ / 0-)

    Colleges & lenders spend comparatively little time explaining in advance the seriousness of borrowing large sums of money at higher interest rates, and how the interest can grow to equal or exceed the amount of the original loan within a relatively short amount of time.  Students are typically young and make irrational decisions.  

    Or make 'rational' decisions which are only 'rational' because everyone around them is telling them 'this is the way to do it'.  Their parents don't know any better.  The school doesn't care.

    Here's a financial aid package which is 90/10 loans and grants..... and most of the loans are private hahahahaha!!!! sucker!!!!

    The scam of 'work study' being counted as part of the package should also be examined.  How many work study jobs do have anything to do with the field they're studying for (I do remember how jobs which were in such fields were usually rare and highly competitive for placement) and have pay which is comparable to what the student could have gotten on the outside for the same hours?

    •  They like to add prestigious names as well (3+ / 0-)

      to the grants so the the parents and student get overwhelmed by the honor and don't care that the school is only giving them a grant for $100.  Just think about how that will look on their resume!!!!
      I can tell you that if they don't care if you were a rhodes scholar, they aren't going to care that you got the andy humperdink grant.

    •  I still find it hard to believe (2+ / 0-)
      Recommended by:
      tryptamine, just passing through

      how easy it is to get a student loan.  And corporations are all over campus selling their wares.. overpriced books, computers, dorm furniture, ect.. eager to take the recently borrowed money like candy from a baby.  

      I would like to see student loans become much harder to get - just like any other loan.  We could then afford to pay for needy students' education with the money taxpayers would save from defaulted loans.  

      Of course I'd also like to see tuition drop in price.

      And I'd like to ensure borrowers have access to good paying jobs to begin to pay back some of their debt.  

      •  I don't agree (4+ / 0-)
        Recommended by:
        ChicagoDem, aimeeinkc, sessal, Albatross

        I think we need to take them back in the system of the 70's or early 80's.  Where the loan was at a guaranteed government subsidized low rate.  It benefits society to have an educated workforce, economically and socially, so it only makes sense for the state to help pay the bill.

        •  As someone who got blindsided by two 'grants' (2+ / 0-)
          Recommended by:
          tryptamine, pkbarbiedoll

          which were really private loans... I think I understand pkbarbiedolls point.

          a loan isn't an investment in the future when such a loan is given out to anyone regardless of ability to pay, now or in future and no serious effort is made in educating the borrower regarding said loans.

          It has to be treated as an investment from the beginning; not as 'free money' and not as 'oh don't worry about it/you won't have to worry about it until 6 months after you graduate just sign here and here and here'.

          If I had known what I was getting myself into, I would have put off school for several years so that I could make money while at home, known better what I wanted to do since I was in the 'real world', and done it all at my own pace. It would have been a much more serious investment.  I, for one,  wasn't ready for college, and I certainly wasn't ready for the bills that came with college.

          And I certainly wouldn't have chosen to attend a double digit private university just because they offered an aid package that only appeared to cover the charges because only have to worry about the price tag after graduation, right?

          •  I have some problems with your comment (0+ / 0-)

            I can understand your frustration about what happened to you.  However I have a problem with the idea of we should only be giving loans out based on the ability to repay.  By general definition a person takes out a loan, because they don't have the money to pay for what they need.  The republicans have really done a job on the educaction system in this country.   When I first went to school in the mid 80's, after Reagan had already gutted a large part of the system, I had a loan at a guaranteed rate for the life of the loan.  I had $2000 in federal grants and close to $2000 in state grants.  These were real grants as well, not these scam loans that they offer these days.

            When I went back to school in the early 90's.  The republicans were trumpeting increasing the Federal grants to $1200.  That was $800 less than I had gotten about 7 years previous, and I hadn't gotten anywhere near the max my first time around.  They also had expanded the pool of people that could get grants, so that the children of upper middle class people were eligible.  In effect driving the real max you could get down several hundred dollars.   The GOP had also raped the states tuition funding system, so that state aid was down to a couple of hundred and tuition had more than doubled at a state university.

            I can understand your frustration.   But the last thing we should be doing, is restricting loans to the right sort of people.  Which isn't exactly what you were saying, but if you think about it, it's damn close.

            •  The right sort of person (2+ / 0-)
              Recommended by:
              tryptamine, pkbarbiedoll

              is the person who knows what they're entering into, and can make a realistic effort to repay those loans.

              I had no business signing off on loans because 'it was for my future' (how lofty) and i wouldn't have to worry about them until the future.  None.  Especially when I was only going to school because 'you're supposed to be in school'.  I had no idea what I wanted to do.  $12,000 a year not including room and board is an awful high price to pay to play the 'what do I want to be when I grow up' game.  I realize many people have paid much higher and are paying back much higher.

              I wanted to choke when I realized I could have 'paid' for 6 years of public education for the price of that one year of loaned out the ass private school education.  It was a waste of money and time, for me.  I would never recommend college -- and I sure as hell would not recommend taking out loans -- to someone who isn't sure where they want to be.  I would not recommend college to someone who comes from a background which isn't suited for going to college immediately.

              This is someone's future, and 'diversity' games should perhaps take a backseat to filling in a background and statistics with pleasing numbers.  

              Defaulting on student loans is a mess you can't pull out of except with help.  No one should ever advocate putting students in a hole they are not prepared to dig.

              I'd recommend National Guard before all that.  University -- and the loans that come with it -- are not the place to try to 'find' yourself, and you're not paying for such self-discovery yourself/someone else isn't paying for it for you.  

              University is an awesome place to be if you have a plan.  Those who have a plan also are more likely to be realistic about loans.

              Financial education should be a required course in high school for every student who says they want to go into higher education.  It should also be a required course for every student who enters higher education for the first time.

              •  I agree with you 100% on the course (1+ / 0-)
                Recommended by:
                pkbarbiedoll

                and you know.  Amazingly enough my local high school used to have a course like that, which was required for students that were planning on going to college.  
                I read a diary here last night from a former high school teacher that had lost their job due to GOP budget cuts.  They had a class that pretty much covered the ins and outs of loans and interest, and what that meant to a consumer.  You gotta love NCLB.  

                I personally don't recommend student loans either anymore.  But I wouldn't recommend the National Guard.  From everything I've seen and read, they don't have the money to give out and basically the chances seem to be higher of you getting your name on a memorial than on a diploma.  

      •  But that's the thing... what's the alternative? (2+ / 0-)
        Recommended by:
        tryptamine, pkbarbiedoll

        I fucking HATE how expensive student loans are.  I hate the scams the loan companies use.  I hate the way the government zigs and zags, forcing panicked students to rush into the arms of waiting consolidation companies.

        But really, unless the government starts funding hella scholarships (with a record debt, unlikely), or forces tuition rates down (lot of political capital needed, and it's not like either party gives two shits about students), how else are you going to pay for college?  I know I can't raise $30K a year dedicated to tuition on my own.  If not student loans, where do you get the cash?

        Read James Loewen's "Sundown Towns"!

        by ChicagoDem on Wed Aug 02, 2006 at 08:45:32 AM PDT

        [ Parent ]

  •  Interesting Stuff (2+ / 0-)
    Recommended by:
    tryptamine, spuds

    I graduated with $60,000 in student loans.
    Ouch.
    But my dad (a financial advisor) said it was the best kind of loan to have & that the payment would seem harsh at first but easier later on.  And that has turned out to be true.

    I believe that abuse goes on - just like in any big industry.  

    I switched to "Nelnet" last summer.  Got a 4 percent interest rate that went down to 3.75 with automated payments and down to 3.50 after three years of timely payments.  It was the best deal around!

    Good luck!!

    I'm walking 60 miles to eradicate breast cancer. Will you support me.

    by aimeeinkc on Wed Aug 02, 2006 at 07:43:10 AM PDT

  •  My son got a small student load when he was 18 (7+ / 0-)

    It was for some small school that went out of business shortly after giving him a 'Diploma'.

    He went to the school administration when he heard about them closing down to complain, because one of the main selling points for him was life time job placement assistance for graduates.

    The person who handled the finance for the school told him that all the loans that came in over the last 12 months had been returned, and that he would never be billed.  Unfortunately he believed him.

    For 10 years he never recieved any letters from the lender, untill one day his boss told him that somebody was trying to get a garnishment.  When he called to find out what was happening it turned into a nightmare.

    Apparently the lender has no resposibility to notify you in any way that you owe them, much less that you are heading into default.  The interest rate jumps up to usary levels, and it gets compounded daily.

    His $1200.00 loan for a small time school has turned into $20,000 he has no hope of paying back.  They wont work with him in anyway, the only responce he gets is start paying or else.

    It was'nt dischargable in bankruptcy even before bush destroyed that.

    He's in some program now that lets him pay $95 a month, chich he can barely afford, but after 12 months of that the loan gets moved to a different lender who sets their own payment minimums.  The lady he is currently talking to says that typically people coming out of a default have minimum payments of 1% per month, he has no idea what he's going to do then.  

    Sorry for the long post, this is a sore subject with me.

    •  The way out (1+ / 0-)
      Recommended by:
      tryptamine

      I hope he hasn't paid anything yet.  He needs to request a hearing with the dept of education.  If he has all of his records, he can likely get a greatly reduced amount that he has to repay or no amount that he needs to repay.   I know this for a fact.   I had a screw up on my loan as they started to computerize all the records.  It took me around 15 years before I was able to get a hearing to show them that I had a letter showing that I had paid the loan off.  The dept of education is the only place to get these things taken care of, and they are so understaffed the only time to get them to look into it is basically right before you are taken to court.

      •  He has started paying (1+ / 0-)
        Recommended by:
        tryptamine

        Because it was either that or face the garnishment.

        The collection people where talking 25% garnishment, and while I know its technically not legal to fire somebody for having a garnishment there are many reason an employer can find to have some turnover.  

        He is 6 payments into the plan, which his phone contact laughed and called the 'Depter re-education plan', but nobody I have talked to from the lenders, or the DOE seems to care.  I thought about seeing some of my elected officials, but I doubt that Frist is going to care either.

  •  Bravo! (2+ / 0-)
    Recommended by:
    ChicagoDem, tryptamine

    While BushCo and others mouth the words that education is important to our nation's future, their actions belie their own utterances.  Personally, I do believe that education is one of the components of securing the future of the nation.  Notice, I said one, for there are many others that must work in concert.

    The issue of student loans, and in fact the issues of making higher education affordable, have direct impact on the economy, the state of education in general terms, and the direction in which our nation is headed.

    I am probably extreme on this issue, but to my way of thinking, any student qualified for a higher (university/college/technical shool) education should have it available -- without loans!

    Much more to it, or course, but a better-educated nation equals a more competitive nation.  (The offshoring of jobs is another matter, but it is also related.)

    The very greatest boost to the nation came, perhaps, with the GI Bill that grew out of WWII.  It was a committment to the veterans, and at the same time, a committment to the nation.  And just look of what grew from that!

    Anyway, cheers:)  

    Life is not a 'dress rehearsal'!

    by wgard on Wed Aug 02, 2006 at 07:51:47 AM PDT

    •  More high-skilled workers (3+ / 0-)
      Recommended by:
      tryptamine, wgard, pkbarbiedoll

      = more opportunities for innovation = new sectors of economic growth = jobs where India and China don't have tons of skilled workers yet.

      The dirty little secret of outsourcing is that, while these countries have gigantic labor pools, their educational infrastructure isn't exactly churning out the right kind of skilled labor yet.  Even the famous Indian Institutes of Technology only educate a very small percentage of Indians, and a large group of those students still go overseas (eg: keep jobs in the West).

      Read James Loewen's "Sundown Towns"!

      by ChicagoDem on Wed Aug 02, 2006 at 08:50:01 AM PDT

      [ Parent ]

  •  Apparently (3+ / 0-)
    Recommended by:
    tryptamine, esquimaux, Albatross
    the student loan industry is much worse than straight up nicking students, it nicks the taxpayer as well.

    Here is my understanding of how it works. After a bank has issued a student loan, the bank sells the loan to the formerly governmental but now private agency Sally Mae.  Student loans can not be discharged in bankruptcy court nor waived if you become disabled. If you fail to pay, then Sally Mae collects from the taxpayer funded insurance. Then Sally Mae hands the debt over to collection agencies for collection - and as there is no statuate of limitations on the debt, forever will you be responsible and harrassed for the debt. Disability checks can be garnished.

    The killer arrangement in this set is that Sally Mae OWNS these collection agencies. So Sally Mae collects from the taxpayers in general on any bad debt (nice work, no risk) PLUS it is 100% assured to collect on any bad debt from the loan holder, with fees and penalties for non prompt payment amortized into to the 'loan'. It is better than double dipping at the pork trough.

    The above link to counter punch has a better explanation than I do.

    "The healthy man does not torture others - generally it is the tortured who turn into torturers. " Jung

    by sailmaker on Wed Aug 02, 2006 at 07:53:19 AM PDT

    •  Double dipping (3+ / 0-)
      Recommended by:
      tryptamine, aimeeinkc, Albatross

      If you fail to pay, then Sally Mae collects from the taxpayer funded insurance.

      Exactly - which is what makes this whole thing even more dispicable than it already is.  

      The student loan snakes are just as vile as the oil tycoons, if not more so.  Their trickery is selling our young men and women down the river, preventing them from ever taking part in the American Dream, and that is deplorable.  

  •  Much like T-1000, Sallae Mae cannot be stopped. (1+ / 0-)
    Recommended by:
    tryptamine

    Not only are they incompentent (Having already "lost" my automatic billing information once, and calling me to remind me to refinance after I already did so, with them...) but they are staffed completely by robots.

    I'm not kidding.  As far as I can tell, no humans work there.  Just try calling them.  Be warned, their patience with inferior, carbon-based intellects is short.

  •  Well (3+ / 0-)
    Recommended by:
    ChicagoDem, tryptamine, pkbarbiedoll

    I have posted about Student Loan Justice and the industry here several times. Thank you for posting the information.

    The worst part is that Sallie Mae and other lenders are making tons of profits off of taxpayer money. For example, as the 60 minutes piece explained, Salle Mae was orginally chartered by Congress to operate as a quasi-public company because traditional banks were originally reluctant to provide student loans. To encourage traditional banks to provide financing, Congress also guaranteed each student loan with taxpayer money.

    In the 1990s, through legislation passed by the Congress, Sallie Mae becames private. At the same time the bankruptcy laws changed favorably for the student loan companies. In the late 1990s changes in the bankruptcy law made it very difficult and all but impossible to discharge student loans. Once private Salle Mae acquired numerous collection agency firms, turning them into corporate subsidiaries.

    So now, when a borrower defaults, Sallie Mae and other banks earn tremendous profits. First, when a borrower defaults, Sallie Mae receives the principal and interest from the taxpayers. Then Sallie Mae will sell the non-performing loan to its collection agency subsidiaries. At that point the law permits student loan creditors to seize income tax refunds, garnish wages, seize parts of social security checks, raid disability checks, and have professional licenses revoked (this is a perverse incentive. If they want deliquent borrowers to pay back their debts, taking away professional licenses makes it harder for them to find work to pay back the debts), charge very high fees, capitalize those fees onto the balance (which result in higher balances). The Supreme Court even ruled earlier this year that the student loan companies could even garnish a part of a disabled man's small monthly SSI check. So they have free reign to terrorize deliquent borrowers.

    I agree that people who take out loans should repay them, but there should be some relief for those who are burdened with unanticipated medical bills or who lose everything through a natural disaster. Those folks should have some sort of relief. There should be some ability to "reorganize" debts at the very least. But this relief doesn't exist right now.

    While it is technically possible to discharge student loans, the Brunner Test makes it very difficult. The Brunner Test has been adopted by bankruptcy courts to determine whether a loan can be discharged. It has three prongs. To get a loan discharged you have to meet all three criteria:

    1. That the borrower has made good faith efforts to repay the loan;
    1. That the borrower cannot maintain monthly expenses and be solvent if required to repay the loan;
    1. That the borrower's financial circumstances and earning potential are not likely to change.

    These requirements are basically very impossible to meet. For example the loan companies can state in regard to #2 that "the borrower could go without cable tv, a car, internet access, and cell phone use" and then be "solvent". In regard to #3, the loan companies could argue that there "is potential for the borrower to get higher paying jobs". So proving each of these three criteria is very hard.

    Courts have provided, however, partial discharges. Still, though, that is the exception rather than the rule.

    The issue to me is that if the student loan industry wants the right to terrorize deliquent borrowers, then the taxpayer guarantee should be eliminted. For if these loans are basically exempt from bankruptcy relief, they shouldn't also profit from taxpayer funds. It's as if they are being paid twice.

  •  College Loans (1+ / 0-)
    Recommended by:
    tryptamine

    My son just graduated from high school. I estimate that a whole forest of trees was cut down to provide the blizzard of paper we have received--recruitment brochures from multiple colleges I've never heard of, all branches of the military--many times each, weekly credit card offers from the same 15 companies, and endless offers of student "aid."

    Even in the official student aid package received from the college he will be attending based on the FAFSA family income report, the larger part of what they offer is in the form of PLUS loans to parents. This ensures that not only students but parents who, if responsible, should be preparing for retirement (not the "retirement resort" kind, the please-God-don't-let me-have-to-eat-cat-food kind) will be saddled with horrendous debt into their elder years. In addition, they make it very difficult to tell if loans are subsidized or unsubsidized. With unsubsidized loans interest accrues from day one. Given that it takes a minimum of four years to graduate, that interest really adds up.

    We had a terrible time paying off my husband's college loan because they kept telling us we owed lots more money but could or would not ever provide documentation of ANY kind--I'm convinced they lost it. We finally had to get an attorney who resolved it but you'd better believe I've kept the paperwork.

    Another trick is to have the student sign one "master promissary note" before their freshman year.  Although we haven't found out what will happen afterwards, I don't think he will have to sign much in later years--that first note obligates him to everything he would borrow afterwards. Wow,it's almost like not borrowing anything at all!

    We are fanatic about trying to get him through with no student debt. We have accepted one subsidized loan but have the money saved to pay it off at time of graduation which will also serve as emergency money should he need it.

    Plus, we have told him he is forbidden to  marry anyone who has student loans :)!

    South Dakota: Where you can drive at 14 and carry your incestuous rapist's baby to term at 12. Then he gets visitation rights.

    by bluebrain on Wed Aug 02, 2006 at 09:57:49 AM PDT

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