Shocked & amazed

I am shocked and amazed that the giant lenders aren’t happy that the huge profits they make from lower and middle-income families might take a small hit. There goes their month-long vacations to Europe. And I’m shocked and amazed that the Dept of Educ would come out in favor of the big banks rather than in favor of the student borrowers. Did someone throw a pea at corporate welfare? The mega-lenders felt it through their fat wallets.

Charlie, at 2:35 pm EDT on October 30, 2007

Fairness

When will these whiners be happy with interest rates and fees to students? In today’s FFEL world, students are paying low, fixed interest rates and only have to pay origination and default fees that amount to less than three percent. Students today have many options to postpone repayment and can consolidate and lock in rates and terms for up to 30 years. What’s next ... Zero Percent Loans, Nickel Beer and Free Love??

What ISAC has essentially attempted to undertake is a unilateral attempt to use the private sector to make their agency more competitive with guarantors that waive fees. The banks are not whining about the impact to their bottom lines ... it’s about fairness and what essentially amounts to an attempt to over-regulate.

Oh ... and by the way ... it is not the large banks that established tuition and fee rate increases at three to four times the rate of inflation. Bankers aren’t the only folks taking European vacations!

Lance Teinert, First Place Resources, at 3:40 am EDT on October 31, 2007

Return Standard Consumer Protections

The verbal gymnastics the lenders employ to shirk responsibility for this problem are becoming highly predicatable: Blame the borrower, then obfuscate the issue to mask the fact that the lending industry has run roughshod through Congress, and the Department of Education, and had nearly all consumer protections stripped away from student loans on the way.

“Gradgirl", who apparently makes a living from the FFEL program, is just another example.

Here’s the solution that you seek. Return standard consumer protections to student loans to give student borrowers the same rights that Pay day borrowers, credit card borrowers, etc. enjoy.

No one wants to file for bankruptcy. It is a horrible thing to have to do. However, not having this protection leads to abuse by lenders/guarantors/collection companies, as we have so clearly seen in the student loan industry.

I could point to any number of articles and pieces that more than clearly point this out from reputable news organizations including The Wall Street Journal, CBS News, and many others.

Further, if a borrower is being overwhelmed with fees tacked onto their loan by their lender (Sallie Mae’s fee income rose by 107% between 2001-2005), and there are other lender out there willing to accept less profit, then why can’t a borrower take their loans to that lender? The big FFEL lenders like to talk about competition, but walking the talk is a different story: they have persuaded Congress to take away this important consumer protection.

And since this “lender attack dog” grad girl has seen fit to attack me personally, let me state that since my student loan was put into default in 2001 (The day after I requested a forbearance), I have made multiple and repeated efforts to negotiate a reasonable settlement of my debt. I have offered to repay every dime that the government paid for my default claim (The government paid about $60,000 on an original $38,000 in loans). I have offered to repay this amount, which includes principle, interest, and a boatload of profit for the lender. I’ve been refused at every step in the way.

This is par for the course for defaulted borrowers. There is no negotiation,there is no fair and reasonable settlement. This system is set up to rake the borrowers over the coals, and to this point, alot of people have become exceedingly wealthy due to this unearned income extracted from borrowers by the guarantors and collection companies (who often are owned by the lenders).

Student loans are the most absent of standard consumer protections of any debt instrument in our nation’s history, and no one can dispute this, no matter how many highly paid attack dogs, like Grad Girl, are employed to convince the public otherwise.

Alan Collinge, Founder at studentloanjustice.org, at 4:15 pm EDT on October 31, 2007

Tired arguments.

Using the principle of personal responsibility as a camouflage for serious lender irresponsibility is an increasingly weak and transparent tactic. I sincerely hope that intelligent people reading this are beginning to see through it.

Grad Girl claims that my aim is allow students to “weasel out” on their debts by returning bankruptcy protections to student loans. However, everyone knows that the bankruptcy laws have tightened considerably since October 2005 to guard against fraud and abuse. Bankruptcy is no longer a “walk away” scenario for the vast majority of borrowers. Most people still have to pay at least the principle of their debt, and some interest. This is why filings have dropped hugely since October, 2007. I am not arguing the merits of the new bankruptcy laws. In general, I rather agree that bankruptcy should not be easy to do.

Not having this basic, standard protection, however has led to abuse, and predatory behavior by lenders/collectors, and guarantors. When Sallie Mae was called to the carpet by 60 Minutes on this issue, they declined to be interviewed. Why is that, Grad Girl?

Could it be because in 2003, Albert Lord bragged to shareholders that Sallie Mae’s record profits were attributable to “fee income” collected on defaulted loans?

Could it also be because true default rates are actually more than 20% for people who borrow more than $15,000 for college, not the 4% that the lenders and even Department of Education always brag about?

Further, Grad Girl insinuates that defaulted loans cost the government/industry money, which is an out and out lie. Not only do the collection companies, and guarantors derive a large, or even the majority of their income from penalties and fees on this debt, even the federal government MAKES-not loses- money on defaulted loans (a 20% return, actually). This was originally reported in the Wall Street Journal in 2004 by John Hechinger, if you don’t believe me.

Grad Girl is quick to continue to attack me, personally, and claims not to be connected to, or making a dime from, the student loan business, but I find this to be hard to believe. She’s shared information with the group about my payment history that only someone with access to Sallie Mae’s financial records would have. Not only does this anger me personally, it also raises serious questions about the motivations and agenda of this anonymous poster. Why don’t you dispel the murkiness for us, gradgirl, and tell us how you came to be expert on the matter of my personal repayment history, and why you feel so compelled to share this information? Why don’t you also share a little more about your background to debate about the larger issue?

My guess is that this is the last post we will be seeing from grad girl. “S/he” will likely appear later under a different name and identity, spewing the same self serving propoganda, personal attacks, and loaded statements designed to evoke paternalistic reponses from the readership.

...At which time my winning argument will be precisely the same.

It is sad to see industry attack dogs, like Grad Girl use this argument to become self-inflated with righteous indignation—when in fact she is just covering the fact that her friends (and likely she herself) make lots of money from defaulted loans, and they are just protecting this stream of unearned (free) revenue, despite the human toll it takes on real people for whom this tragedy isn’t a game.

Alan Collinge, Founder at Studentloanjustice.org, at 7:30 am EDT on November 1, 2007

Correction

In my previous post, I erringly said that bankruptcy filings have dropped considerably since October 2007. I meant to say October, 2005.

Also, I claimed that my argument was the winning one. This is also wrong, and I don’t want to be percieved as cocky in saying that. Given the legislative history of the federal student loan program since 1998, this argument has in fact been on the losing side of the debate, and we now are beginning to see the consequences.

I do feel strongly that it is the correct argument, however, and I hope those of you out there who remember 30 years ago when student loans barely even existed will agree that this “industry” has grown completely out of control, and has become something that the 1965 Congress would never have wished to be inflicted upon the country.

Alan Collinge, Founder at Studentloanjustice.org, at 9:51 am EDT on November 1, 2007

!!

Bravo Ed!!

Common Sense, at 9:10 am EDT on November 2, 2007