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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsDebt Collectors Cashing In on Student Loans
"It's the closest thing to debtor prison that there is on this Earth," former student Patrick Writer said of his federal loan.""Most US college students hope to land a good job with a high salary after graduation. But for some the reality is very different. Many find themselves faced with insurmountable debt - and a loan industry that's happy to cash in on their misfortune."
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"You are going to pay it, or you are going to die with it," said John Ulzheimer, president of consumer education at SmartCredit.com.
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http://readersupportednews.org/news-section2/340-187/13393-debt-collectors-cashing-in-on-student-loans
proverbialwisdom
(4,959 posts)...In all, nearly one in every six borrowers with a loan balance is in default. The amount of defaulted loans $76 billion is greater than the yearly tuition bill for all students at public two- and four-year colleges and universities, according to a survey of state education officials.
...Though there are programs in place to help struggling borrowers, the companies hired to administer federal student loans are not paid enough for lengthy conversations to walk borrowers through the payment options, critics say. One consequence is that a government program called income-based repayment has fallen short of expectations. Under the program, borrowers pay 15 percent of their discretionary income for up to 25 years, after which the rest of their loan is forgiven. But participation has lagged because borrowers are either not aware of the program or are turned off by its complexity.
If people were well informed, how many defaults could be averted? asked Paul C. Combe, president of American Student Assistance, a loan guarantee agency based in Boston. We are hurting people here.
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The New Oil Well?
...With an outstanding balance of more than $1 trillion, student loans have become a silver lining for the debt collection industry at a time when its once-thriving business of credit card collection has diminished and the unemployment rate has made collection a challenge. To recoup unpaid loans, the federal government, private lenders and others have turned to collection agencies like ConServe.
Mark Russell, a mergers and acquisition specialist, writing in the same trade publication as Mr. Ashton, the consultant at the N.Y.U. protest, suggested student loans might be a new oil well for the accounts receivable management industry, or ARM, as the industry is known.
While the Department of Education debt collection contract has been one of the most highly sought-after contracts within the ARM industry for years, I believe it is now THE most sought-after contract within this industry, centered within the most sought-after market student loans, Mr. Russell wrote last October.
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http://www.insidearm.com/daily/credit-card-accounts-receivable/credit-card-receivables/student-loan-debt-actually-will-top-one-trillion-as-in-dollars/
http://www.insidearm.com/obs-in-focus/student-loans-the-arm-industrys-new-oil-well/
http://www.insidehighered.com/news/2011/10/19/its-not-me-its-you
POST 19.
Since '78, the price of tuition at U.S. colleges has increased over 900%, 650 pts above inflation... 36,000,000 Americans have student debts.
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25 April 2011
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What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce?
During the expansion of the housing bubble, lenders felt protected because they could repackage risky loans as mortgage-backed securities, which sold briskly to a pious market that believed housing prices could only increase. By combining slices of regionally diverse loans and theoretically spreading the risk of default, lenders were able to convince independent rating agencies that the resulting financial products were safe bets. They werent. But since this wouldnt be America if you couldnt monetize your childrens futures, the education sector still has its equivalent: the Student Loan Asset-Backed Security (or, as theyre known in the industry, SLABS).
SLABS were invented by then-semi-public Sallie Mae in the early 90s, and their trading grew as part of the larger asset-backed security wave that peaked in 2007. In 1990, there were $75.6 million of these securities in circulation; at their apex, the total stood at $2.67 trillion. The number of SLABS traded on the market grew from 200,000 in 1991 to near 250 billion by the fourth quarter of 2010. But while trading in securities backed by credit cards, auto loans, and home equity is down 50 percent or more across the board, SLABS have not suffered the same sort of drop. SLABS are still considered safe investmentsthe kind financial advisors market to pension funds and the elderly.
eppur_se_muova
(36,247 posts)You can defer your loan for various reasons, including financial hardship, for a year or two, but after that deferment is used up you don't get any more.
When your income is ZERO, and has been for months or years, there is no point in trying to talk to a SLMA representative who keeps asking if you can pay "just" $500 a month. When you don't pay, of course you are in default, but you will not be offered ANY other option.
proverbialwisdom
(4,959 posts)<...>
...Though there are programs in place to help struggling borrowers, the companies hired to administer federal student loans are not paid enough for lengthy conversations to walk borrowers through the payment options, critics say. One consequence is that a government program called income-based repayment has fallen short of expectations.
Under the program, borrowers pay 15 percent of their discretionary income for up to 25 years, after which the rest of their loan is forgiven.
But participation has lagged because borrowers are either not aware of the program or are turned off by its complexity.
If people were well informed, how many defaults could be averted? asked Paul C. Combe, president of American Student Assistance, a loan guarantee agency based in Boston. We are hurting people here.
opiate69
(10,129 posts)And it took going to a bankruptcy lawyer for me to find out about it. For 3 years, my monthly payment was $0. Then my wife went back to work and it was bumped up to a little over $100. Helped clean up my credit score big time too. Of course, now I`m lookibg into going back to school, so further into debt I shall go, but as soon as I`m done, I plan to reapply for the consolidation.
porphyrian
(18,530 posts)xchrom
(108,903 posts)SoCalDem
(103,856 posts)If they can still even get credit cards.. The CC industry has to fear young people using ccs to live on (can get bankruptcy relief from these debts in most states)...and use their salaries to pay down college debt (non-dischargeable in BK)
A guy my son knows graduated without debt, but his parents had used credit cards to finance most of his college costs..and a few years later they did go bankrupt (Dad's business failed).. Had those college costs been on a traditional school loan, they would have been stuck with them
BOG PERSON
(2,916 posts)don't be a fool, stop after high school