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Students, Beware: Private Student-Loan Companies Are Not Your Friends
from The Nation:
Students, Beware: Private Student-Loan Companies Are Not Your Friends
Kay Steiger
September 4, 2012
Once again, student-loan season is upon us. As a new class of freshmen ships off for a hopeful first year of college or trade school, many are as busy figuring out financial arrangements as lining up classes. It wasnt always this way, but as education has become both more costly and more necessary, many students feel they dont have any other choice. And so they borrow $10,000, $25,000, as much as $100,000, often unaware of the unforgiving nature of the debt theyre taking on.
This year, as these students prepare to sign away their futures, they would do well to consider a report released by the Consumer Financial Protection Bureau (CFPB). On July 20, the agency designed by Massachusetts Senate candidate Elizabeth Warren released Private Student Loans, a devastating expose of the $150 billion private student loan industry, one of the banking worlds Goliaths. The report is both an official account of private lenders underhanded subprime-style tactics as well as a sharp warning against taking out private loans that put students at risk of financial ruin.
As described in the report, the student-loan industry is a villainous enterprise, set on scamming some of the countrys most eager and vulnerable citizens. Anchored by lending giants like Sallie Mae and bolstered by some for-profit colleges that lend to their own students, it bears all the hallmarks of some of the last decades other most predatory industries. Much like the mortgage industry, it used cheap-credit tactics to prey on low-information borrowers, typically students of color, effectively quadrupling in size between 2001 and 2008. And like the mortgage industry, it collapsed in the recession, leaving many students drowning in debt. Today, more than $8.1 billion worth of private student loans are in default.
Heres one way the industry goes about its business: though private student loans typically come to students through a menu of lending options from a college or universitys financial aid office, along with federal options like Pell grants and subsidized Stafford loans, the CFPB report explains that many of these loans are offered directly to students without input from a financial aid office. This tactic, called direct to consumer lending, results in significant over-borrowing. This is problematic because over-borrowing increases the likelihood of default, to the detriment of both borrower and lender. ................(more)
The complete piece is at: http://www.thenation.com/article/169728/students-beware-private-student-loan-companies-are-not-your-friends
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Students, Beware: Private Student-Loan Companies Are Not Your Friends (Original Post)
marmar
Sep 2012
OP
xchrom
(108,903 posts)1. Taking 'profit' out of labor's earnings that
Haven't even been made.
That shit should be illegal.
mwooldri
(10,303 posts)2. Private student loans. A nasty loan option.
Federal loans: they have deferment options, income sensitive repayment plans, and even ways for loan forgiveness.
Private loans: deferment options are much more limited, payment plans aren't sensitive to income, and forget about loan forgiveness. Oh, and interest rates - if your interest rate is above 6% the only sure-fire way to get that reduced is join the military and go on active duty.
Both cannot be discharged through bankruptcy.
Considering everything, I'd rather put tuition on a credit card. At least if anything goes wrong the bankruptcy option is available to either go into a payment plan (chapter 13) or have the debt discharged (chapter 7).
SJohnson
(120 posts)3. Thanks for posting