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A Sub-Prime Student Loan Victim's Tale:

3/7/2011

   A commenter submitted this comment to another post but it is so full of warnings that (with some editing) I'm elevating it to a post. Be careful out there people! Just because they have "college" or "school" in their name, that doesn't mean that they are anything but a University of Hard Knocks. Note how badly this poor person was abused -- enough to be grateful to the collection agency for showing some minimal human decency:

    I attended [School X] (now called [School Y]) in Tampa, FL. I moved there just to attend this school. Unfortunately, my ex became abusive and I had to leave unexpectedly after my 1st semester. I made an A in medical terminology and a B in my career success class.

    A few years later, I went to reapply to college and they tell me I need transcripts from [School X/Y].   I call [School X/Y] to retrieve them and they tell me I owe the school $800.00.   What?!   And there was no getting around it. They were rude and never returned my calls; when I did talk to them they gave me a runaround. About six arguments and a few rude people later, they tell me we can't even help you it's been sent to the collections.   UGHHHH!

    These people are messing my with my education. . . . my life! They wouldn't give me info on the debt or anything. Finally after weeks of pulling teeth, I find out I can't use this credits and they've continued to charge me for credits I didn't take. So they basically kept charging me like I was physically there in class. . . .   CRAZY, right? So now the hard work I did do, I can't use 'cause THE CREDITS AREN'T TRANSFERABLE, they mean nothing to my future school.

    [Collection agency] was the debt collectors and they definitely made my situation easier and pleasant right off the bat. They even gave me a discount, which I greatly appreciated. I will gladly own up to any debt but [School X/Y] school had no right to charge me for 16 credits when I only completed 6. That company is a joke. But everybody I spoke with at [Collection Agency] was GREAT and I can't thank them enough, to top it all off they even sent in my transcripts request form! So my ties are hopefully done with [School X/Y] and I can get a real education now. . .

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Debt Collection Vampires Salivating Over Tapping Student Borrower Blood for Decades

2/27/2011

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Wow. I had to read this twice to ensure it wasn't an Onion satire . . . nope, this is how it is. Should be copied and given to every student with every FAFSA (the form that starts each little trickle of debt, with each one joining all the other little trickles of debt into a mighty river and then a bottomless abyss of debt that is drowning more and more young people (and many not so young people) each year, as they learn that student loans are often like herpes or drug-resistant syphilis: a lifetime of suffering for a brief act of poor judgment committed by a young person without even the legal right to buy beer.

    As I wandered around the crowd of NYU students at their rally protesting student debt at the end of February, I couldn’t believe the accumulated wealth they represented – for our industry. It was lip-smacking. . . .

     Putting aside some of the less savory aspects of loan origination, we can consider this, “good news in the pipeline.” As bill collectors and debt buyers only work on what is termed bad debt, which is guaranteed under these circumstances and in today’s economic environment – we are in for lifetime employment!

Will Students Begin Dusting off the Pitchforks?

Alan Collinge of StudenLoanJustice.org is one of the aggrieved that is leading a backlash. His research has shown that the Department of Education makes more on its defaulted loans than it does on its paying portfolio. As Alan states wryly, “This is exactly what the first President Bush meant when he declared his intention “to run government like a business.” . . .

    I allow that it is a bit of a bummer to consider the very real but incalculable cost to America and Americans in the damage done to those who intended to use their education to better themselves and their communities.

     These people were to be our future nurses, engineers, lawyers, salespeople – taxpayers! As many employers now pull credit reports on job applicants, our defaulting student loan applicant is almost automatically assured a “No, thank you” no matter how otherwise qualified they might be.

    This is just one way in which those who went to expensive private schools to earn a more prestigious degree are denied the gainful employment sufficient to even pay back the loans! These are the people who are now marginally employed, living either on the welfare of their family…or the state…and are poster children examples of the products of Predatory Lending and heated pursuit.

“Student-loan debt collectors have power that would make a mobster envious.”

    This was told a reporter in a WS Journal interview last year with Elizabeth Warren, a Harvard Law School professor and bankruptcy specialist and now Director of the new Consumer Financial Protection Bureau. (Another source to thank. Republicans are campaigning to cut this department’s funding in half).

     As reported by Mother Jones, the new Consumer Protection Bureau – created to crack down on shady real estate loans and predatory lenders – was not given that same authority to deal with student loans described as by (the then) New York Attorney General Andrew Cuomo as the ‘Wild West’ of lending.

     “Private student loans are exactly the kind of dangerously under-regulated financial product that the Consumer Financial Protection Bureau needs to oversee,” Pauline Abernathy, vice president of the Institute for College Access and Success, said. “Failing to give the new bureau full authority over all private student loans would leave young people and other vulnerable consumers, and our economy, at the mercy of unscrupulous lenders.” And collectors, I might add.

     A potential problem for us: student see no difference between loan predators and varmints . . .

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Thinking of co-signing a loan for someone?

2/23/2011

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Think again. Here's why:

This is the text of a post to a lawyers' group from a member who is trying to figure out how to help a client:

I need some help with the following scenario:

Client co-signed student loans for “friends” with Sallie Mae. Friends have stopped (or never started) paying on the loans. Sallie Mae has sent client a letter demanding payment. Friends are no longer communicating with client.

I have not been able to find a way to extricate client from the loans absent the original debtor making 24 consecutive months payments AND Sallie Mae agreeing to remove her.

I am trying to determine client’s rights as against “friends.” Can client get a judgment against original debtor and garnish wages because they didn’t make payments?

Yikes -- imagine yourself trying to figure out how to go after a "friend" for an unpaid loan that you co-signed. While the professionals laugh all the way to the bank, you'd be left trying to figure out how to get and collect a judgment against a person with no written contract between you. Good luck with that.

MORAL OF THE STORY: do not co-sign for a loan for a friend or family member unless you could afford to make the loan yourself and lose the entire amount.

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College Debt meets Real Life: Minn/St. Paul Star Tribune

2/20/2011

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College debt meets real life

Living with parents. Struggling to cover medical bills. Abandoning dreams of the perfect job. . . .

"My student debt has made me nervous to take chances," one woman wrote.

"I haven't been able to afford health insurance," said a 2010 graduate of Minnesota State University Moorhead.

"Student debt has deterred me from pursuing many job offers (and passions -- I would love to work with a nonprofit organization assisting veterans) that did not pay enough," said a woman who expects to pay back more than $40,000 in student loan debt over 30 years.

Many students surveyed went straight to graduate school. That decision defers loan payments but eventually adds to them.

"That may not be the best idea in the long term . . . . At least it gives you a little more time. It's especially hard with this job market."

Halfway through, the survey asks: "Looking back, how would you change your college experience, related to finances?"

"I wouldn't have gone," Ezra Kazee answered. Kazee finished his political science degree at Winona State University in 2008. Thanks in part to $300 monthly loan payments, his family lives paycheck to paycheck, he said. "At the end of the day I have mortgaged my life and my children's future for an education that did absolutely nothing for me." He works as a debt collector.

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More on the Subprime Crisis in Student Lending

2/7/2011

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Another story about the way students are encouraged to borrow huge sums for the promised rewards that rarely come.

    The single mother in a small town near Salt Lake City wanted an associate's degree as a first step toward medical school. She said she chose Everest, a for-profit college, after a recruiter guaranteed that she could apply her credits toward a higher degree at the University of Utah.

     It wasn't until after she graduated in 2008 — two years and $30,000 in student loans later — that Miller learned the state university wouldn't take her credits from Everest, a unit of Santa Ana-based Corinthian Colleges Inc.

     "I got completely taken advantage of, and now I'm struggling to pay the bill for it," said Miller, now 26. "I got sold my degree by a used-car salesman. I got a lemon." . . .

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More on the Student Loan Debt Trap

1/28/2011

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Bloomberg's Businessweek [sic] magazine has a good article on the student loan debt trap as it plays out at private, for-profit colleges and trade schools. Choice excerpt:

Students seeking to move up in life by getting a degree from a for-profit college are being trapped in a growing underclass of education debtors. Under U.S. law, their loan obligations can rarely be discharged in bankruptcy, making them more onerous than credit-card debt or subprime mortgages. Defaults can subject students to government confiscation of salaries, tax refunds, and Social Security payments—and disqualify them for aid to get more marketable degrees.

Students at for-profit colleges carry the biggest loans in U.S. higher education. Bachelor's degree recipients at for-profits have median debt of $31,190 compared with $17,040 at private, nonprofit institutions and $7,960 at public colleges, according to Washington-based nonprofit Education Trust.

While currently enrolling one in eight U.S. students, for-profit colleges account for almost one in two federal-loan defaults. The Obama Administration wants to curb rising default rates and the threat of student destitution by cutting off federal funds to for-profit college programs whose students have the worst loan-repayment rates and lowest incomes relative to debt, which suggests their degrees aren't translating into higher salaries. . . .

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Student Loans -- blue-chip investment in yourself, or a subprime mortgage on your future?

1/24/2011

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The financial world used to tell people not to worry too much about taking out student loans. The thought was that the money was going for education, which would always pay off. Kind of like housing prices, which always went up.

Alas, not so.

Do you know what you're getting into when you sign up for a student loan? With a student loan, you can, before you're even able to buy beer legally, radically change the course of your life for decades, dramatically limiting your options for future career and family choices.
The time to talk to a consumer law attorney about financing your education is before you take out that first loan. It's not enough to ask your parents or the college's financial aid office. You need to speak with someone objective, someone who hasn't been seeing you as a future Nobel Prize winner since you were drooling on their shoulder, and someone who doesn't see you as a $100,000 revenue source.

If you've already taken student loans, you can consult the Student Loan Borrower Assistance website for information about your options and your rights. (And if you have not yet taken out a student loan, you should still visit the SLBA site, if only to get an idea of the kind of problems that others have run into and to find out what kind of reputation the lender you are thinking of using has.)

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Forward>>

A Sub-Prime Student Loan Victim's Tale:

Debt Collection Vampires Salivating Over Tapping Student Borrower Blood for Decades

Thinking of co-signing a loan for someone?

College Debt meets Real Life: Minn/St. Paul Star Tribune

More on the Subprime Crisis in Student Lending

More on the Student Loan Debt Trap

Student Loans -- blue-chip investment in yourself, or a subprime mortgage on your future?

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