As the Author of this post , I just want to state that I am keeping abreast of this topic The good news is as of March 2017 alot of progress has been made to making public the awareness of the problem. I want to keep each post short for you the reader, check out other posts related to this one to learn more and get up to speed on what all new is going on.
Ther is a big difference between Private and Federal loans, make sure you understand the differences.
I first learned my self about Private Student Loans watching a 60 minute series noted back in 2006, noted There is a less costly way to make student loans , called “the direct loan program” run by the Department of Education studies by trree different government agencies say it costs taxpayers, about five times less per student loan, to have the program run by the Government directly.
So why do students borrow from private lendrs when the terms offered by the government are more generous ?
The answer “KICK BACKS” 60 minutes described back then in 2006 that “Most Universities & For profit Colleges ” guide their students to Private Lenders. Why ?
#1 reason is because they offer incentives to some of the schools under “the school as lender program“, private lenders pay universities money to help administer their loans, in return , Univesites & For profit schools steer students to the private borrowers.
Particulary notorious for exploiting this loophole was the organization known as Sallie Mae originally a public corporation Congress estadblished to create a secondary market to buy up student loans from banks and other lenders. One of the reasons Sallie Mae gets so much business is that it generously provides “Incentives” to colleges to push their student loans. that was taken from a book called “OutRaged” written by Dick Morris a political author and commentator. Mr Morris goes on to explain some very interesting facts.
One of the reasons Sallie Mae and other private student loan lenders make out so well is that Congress guarantees the lenders niney-seven cents on the dollar if a borrower defaults. Beyond the 97% of the principal, and the compounded interest, it can also seek to collect the loan from the borrowere as well- and if it is successful , it gets to keep up to one -fourth of whatever it recovers.
Here is How it works:
lets say you borrow $12,000 from Sallie Mae for college, and then you default. Sallie Mae hits up Uncle Sam for 97% of the $12,000, or $11,640, plus compunded interest, now lets say after years of problems, lawsuits ect… Sallie Mae manages to force you to pay back the $12,000. Sallie Mae keeps $3,000 of the money you paid back.
So Sallie Mae collects
$3,000 plus
$11,640 + compounded interest.
60 minutes reported back in 2006 that nearly a fifth of Sallie Mae’s revenues came from its collection business.
Now what can you do? where do you turn ? first now maybe you understand who Sallie mae is, and from another post in this section you read all about how they even came into existence. This is a huge mess and while the Colleges, banks, lenders, executives all have made billions of dollars on the Students. Students are the ones paying the price.
What you also need to know is all the scams taking place on promising to reduce your payments from un scrupulous companies. Dont fall for it many lawsuits happening on that issue too. my best advise is a federal government websites , read the below link, and you will know your options available at this time. But it is very important to stay abreast of this topic cause alot is happening.
The Consumer Financial Protection Bureau formed in 2006, well as you probably know or do know now , the problem all started back then, just before the mortgage crisis hit, the government and schools advertised for everyone to go back to school, It was a boom for Colleges, Sallie Mae increased its issuance of loans in the time period that lasted a good 6 years, and since then Students have been feeling the pain, paying the consequences , falling behind on payments, struggling to make ends meet. With the growing concern of the problem this Bureau the Consumer Financial Protection has been listening to consumer complaints area on its website, it has gathered hundreds of thousands maybey more of complaints and has many settled and ongoing law suits against lenders and schools ” Read other Post to find which ones ”
Knowledge if power, passion fuels action and after reading all these subtitles in the website having to do with student loans , you will be armed to talk to anyone reguarding your private loan with knowledge of what is really happening that know one tells you about.
Click Here for your current options available
Suggested things one could do to help the problem
- Write your Congressman, every former or current student, and Every parent with a student in school protest.
- Tell your friends and relatives who are going back to school or currently in school these things you have learned. When you take out a loan, be sure you go directly to the government and borrow from the Federal Department of Education. Don’t let your friendly college financial aid officer steer you to a higher cost Private Lender.
Now not to confuse you I am keeping abreast on one other issue and that is filling for Bankruptsy on your Private Student Loan, most will say you cant but as I have learned, it is being done the latest on that you have to read these links below to understand how and who is filing
This is a case where a single mom eliminated her loan by passing the “Brunner Test ” find out more
Another article on Private Student Loan Bankrupsty info
Dont believe everything you read, another example of student loans being discharged
Click Here for more information
