Mailbag: Private Loan Borrowers in Distress

...For bringing attention to this issue. Bankruptcy protections should never have been stripped from student loans. Period. The fact that there are decent citizens being forced off the grid, fleeing the country and even much worse as a result of their student loan debt is unfathomable in the richest country in the world. And this goes not only for private loans, but publicly guaranteed loans as well. Thousands of additional stories from people who are having their wages, tax returns, social security and disability income taken to cover a bare fraction of the penalties and fees on their loans demonstrate this in crystal clarity at www.studentloanjustice.org. The bankruptcy laws have been strengthened to guard against fraud and abuse. Why should student loans stand alone as the ONLY type of loan in U.S. HISTORY to be stripped of this important protection? We have seen the predatory practices that have resulted from this: Sallie Mae's "fee income" has increased by a whopping 227% between 2000-2005. Albert Lord actually brags to shareholders in their 2003 annual report that their record profits were attributable to collections on defaulted loans. There is actually a student loan company in Indiana that has installed a 4000 gallon shark tank in their corporate headquarters. This cannot be what Congress had in mind when it created the Higher Education Act. It is a shame that the sitting Congress has done nothing to remedy this situation. Bills from Senators Durbin, Clinton, and Congressman Davis that would have returned protections such as bankruptcy to student loans have died as a result of intense lobbying by the student loan industry, and opposition from both Republicans and Democrats.

Why is it that nobody blames the schools? They gladly accept all the money and should be the ones who require students to prove at least a 101 level understanding of the loans they steer them towards. Isn't it funny how they will claim to teach you everything BUT what it means to borrow money?Of course the school gets their money upfront and the students don't feel the pain until they leave so what is their incentive? None!!!! They increase tuition at will because people are dumb enough to keep paying it and students have no clue what they are getting into until it's too late. Sad, very sad!!!

Don't people realize that if loans are dischargeable in bankruptcy, that lenders would charge even more, meaning those who are able to pay off the debt they contractually entered into, would be adversely impacted because of those who fail to take the time to read loan agreements they enter into or call the lender to ask questions. There are ample websites (finaid.org) and books that clearly explain the terms and conditions of private loans. People need to also take responsibility for their actions rather than just blame student loan companies.

Also, taking out loans to finance your education at a school or in a field that won't result in adequate income is the fault of: (a) school's that charge too much, and (b) individuals who do not think about what their future earnings are based on their educational path. Claiming you have a large debt load that is unserviceable post-graduation, because you are not working or not maximizing your earning potential is not the fault of the lender. Lenders are profit motivated, just like individuals who pursue higher education to maximize their future earnings potential.

Will someone ever regulate marketing practice of private student loans?

Sure people should take the time to find cheaper alternatives but a little regulation would go a long way!

Lori

I do not have federal loans through Sallie Mae. I have only private loans through Sallie Mae. I pay about $400 on these loans monthly, which is more than the minimum amount required.

I consolidated my federal loans in 2004 at a fixed interest rate of about 5%. AES is the holder of those loans, which are being paid back consistently through an employer sponsored program.

But yesterday I received a phone call from Sallie Mae saying I am late on my federal loan payment. Again, I have no federal loan with them. Yet they seem to think I have a $10K federal loan at 7.22% variable interest rate in addition to my private loans. NOTE: This interest rate would be above my interest rate on my private student loans.

I completed graduate school in 2003. I have not been back to school and I have no plans to go back to school. I have been paying my private Sallie Mae loans at a rate that will have them paid off ahead of (Sallie Mae's) schedule.

This is absolutely lunacy, especially when Sallie Mae touts its "borrower benefits"; its customer service and cries poverty to Congress at every opportunity.

Anyone else out there with a similar situation?

I borrowed less than $60,000, and received my degree in 1990. Following a consolidation, and deferments/forbearances, my student loan debt, with interest and penalties, stands at over $260,000. There have been sporadic payments over the years, and on a few occasions my wages have been administratively garnished. My scheduled payments have always exceeded my total net take-home pay, and all of my calls and letters to the Department of Ed have fallen on deaf ears. After waging this battle for over 18 years, I've long since given up. I'm all the more disheartened at the realization that if I ever live to see Social Security, the DOE can administratively garnish that too. The lenders have great influence on Congress, backed by profits made on educational loans. Those, like me, who desperately need the ability to discharge these debts in bankruptcy have no viable leverage to get Congress to provide relief. As a result of bad financial decisions made in our teens and early twenties, many thousands of us have no hope of ever being free from this crushing debt. Who speaks for us?