News
Students’ Lives Ruined by Debt
March 8, 2007 - 2:04amYesterday in Anabel Taylor Hall, Alan Collinge, founder of Student Loan Justice, spoke about massive problems he has seen arise from student loans. Though approximately 50 percent of Cornell students receive financial aid, according to Collinge, only two out of 10 know where their loan is coming from.
With colleges around the country raising tuition rates in response to budget cuts, many students are forced to compensate for these changes by taking out loans to finance their education. However, Collinge said that many students are unaware of the hidden penalties and fees that come attached to these loans, which could potentially cause financial ruin.
Collinge said that student loans are the worst kind of loans because they are not covered by the Consumer Credit Protection Act, leaving students vulnerable to the predatory tactics employed by loan companies.
In this light, he said, “students are like turkeys at Thanksgiving waiting to be served up to the loan companies.”
According to Collinge, many students operate under the illusion that most loan companies are a direct subsidy of the government and do not stand to gain profit. He said this misconception began in 1994, when Congress enabled student loan companies to spin off from the government and become for-profit organizations; as a result, companies started strictly looking to make money and disregarding the situation of the student.
More frightening, said Collinge, is that the collection agencies go after people who are willing to pay their principle with interest.
He pointed out that “most students are willing to pay back their loans at a reasonable amount, which includes the principle with interest. “It is only when companies start charging exorbitant penalty fees that people run into trouble.”
One aspect of Student Loan Justice is to compile stories of people whose lives, according to their assessment, have been ruined due to the overwhelming debt they have accrued and the strategies collection agencies use to retrieve their money.
“It is not uncommon to read stories about people committing suicide because they cannot deal with the burden of their debt. It becomes insurmountable,” Collinge said.
He said that many people are forced to flee the country due to the belligerent tactics employed by collection agencies.
He recalled the story of a young woman attending John Hopkins University who had taken on so much debt during her battle with breast cancer that she ended up committing suicide despite recovering from illness.
“Financial debt is an embarrassing nightmare, but then there just gets to be a point where enough is enough. People want to fight back … people want to pay. It is a massive psychological strain,” he said.
Heather Dunbar, who organized Collinge’s speech, said she knew the effects of overwhelming debt. Recently, the 40th anniversary of her unpaid loan just passed.
“The biggest consequence of that debt is that is really takes money out of the community,” Dunbar said.
Collinge, who himself at one point amassed debt up to $100,000 after attending The University of Southern California and California Institutite of Technology, said that the behavior of most lenders is monopolistic.
Because of the current structure of student loans, a person can only consolidate their debt once, so they are forced to stick one lender . He said that universities also enable lenders to trap students, since many institutions take on preferred lenders that bind students to one company without their knowledge.
Collinge is in the process of lobbying for political action that creates a fairer process of debt payment.
“Students are in dire need of counseling when it comes to debt. They need to know the infrastructure behind these loans,” he stated.
Collinge said he hopes to see results with the Student Borrower Bill of Rights but admits the document will probably go nowhere despite backing by Hillary Clinton. In spite of these setbacks, he said the goal is to have more people speak out and incorporate the ideas presented in the bill into a larger document sponsored by the Higher Education Act.
“Student loan is a national problem that ruins millions of lives. The word needs to spread about this. There is true strength in numbers when people seek out others in the same circumstances,” he said.
Preferred Lenders Lists do NOT bind
If Alan Collinge said words to the effect that "many institutions take on preferred lenders that bind students to one company without their knowledge," shame on him. He knows better.
"Preferred" means just that: not mandatory, preferred. You can look it up. A student is free under federal law to go to any lender he wishes.
Unlike at Cornell (and the rest of the 1 in 5 schools in the nation that participate in the Direct Loan program) where students MUST borrow from the U.S. Department of Education.
Now that's an institution that binds its students to one lender.
Student Debt
I had no idea the student loan industry was so corrupt. This is something the federal government needs to address, and it is encouraging Sen. Clinton is sponsoring legislation in regard to this issue. I will forward this article to my Senators, and I hope others will do the same.
We need to provide education to our students at a fair and reasonable cost, not cripple them financially by carelessly using them as bait for unscrupulous lenders, and cost indifferent universities.
Great job, Sun.
Student Loan Article
While I commend Elizabeth Manapsal for a well written article on an important subject, I would have hoped that a Cornell student would know that the word for the sum of money borrowed is PRINCIPAL, not principle.
Dept. of English--where are you??
Shame on me?!! Shame on YOU, David.
David knows only too well that students are extremely trusting of their universities, and will sign nearly anything put in front of them by the financial aid office.
What I said is that Universities like Cornell push branded loans, like (for instance) the "Cornell Key Alternative Loan". Sounds like it carries the blessing and Prestige of Cornell University, right? In fact, this is nothing more than a private loan that could very well carry credit card-like interest rates, but has none of the consumer protections, like, oh for instance...bankruptcy protection (as of October, 2005).
Does Cornell make these facts known to students before they sign on the dotted line, David? Does Cornell receive payments or other incentives from Keybank for pushing these loans, David?
If I were to do a random sampling of undergraduate students at Cornell, I bet $5 that fewer than half would even be able to identify who their lenders were, much less demonstrate awareness about the lack of consumer protections behind these loans, be they FFELP, Direct, or private.
I sat on a panel discussion of private loans recently in Chapel Hill. Sallie Mae declined the invitation to present. The private lenders who did show did not refute any of the points that I made.
I invite you, David to visit studentloanjustice.org/victims.htm to see for yourself what student loan debt has done to decent citizens who blindly trusted their financial aid offices,and were not made aware of the astonishing lack of consumer protections behind teir loans.
Further, Lets consider that the cost of college has increased at double the rate ofinflation for over 20 years running.
If there is any shame to be doled out, David, it is on the universities, the lenders, and the federal government. Not the students.
The problem is not just in NYS, but......
Alan Collinge, the founder of studentloanjustice.org
justice@studentloanjustice.org
Alan is touring the country, meeting with legislators and the public to talk about the current student loan industry and miseries.
Sallie Mae, by its own records has over 30 million active student loans that, in the case of default, can not be discharged through bankruptcy, have no have no applicable statute of limitation for collection and can be garnished for at a rate of not just 15% of one's wages or salary,
but to also offset 15% of one's Social Security and Social Security Disability payments without hope of foregiveness to the grave.
See the sad case of James Lockhart, whose case for discharge of his student loans because he is blind and because the fair debt collection act provides a 10 year statute of limitation which which student loans were legislatively made exempt:
http://www.myfairdebt.com/forum/viewtopic.php?p=10&sid=05856236519865b6fc4cc938a882421d
Consumer complaints are legion, suffering and even suicides are documented on studentloanjustice.org, state-by-state on a clickable map.
There are more person stories at:www.studentloanslave.org
and the Findlaw public topics under bankruptcy/ student loans message boards documenting abuse:
http://public.findlaw.com/mboards/webx.html?13@128.4JuQeQMb8R6^0@.ef05ad7
Alan Collinge, James Lockhart and I all have student loans in default which have amassed unreasonable fees, penalties and interest- unnegotiably and immutably. I, like James have a documented disability.
My loan is more than 33 years in default and I am still receiving dunning calls after a lifetime of marginal employment and a recent bankruptcy which did not discharge this ancient debt.
Andrew Cuomo's office's findings and press conference and release are but the tip of an iceburg. The same thing goes on all over the country.
Released yesterday: 3/15/07
http://www.oag.state.ny.us/press/2007/mar/mar15a_07.html
NYS Government Press Release
Department of Law
120 Broadway
New York, NY 10271
212-416-8060
For Immediate Release:
Department of Law
The State Capitol
Albany, NY 12224
518-473-5525
March 15, 2007
ATTORNEY GENERAL ANDREW CUOMO REVEALS DECEPTIVE PRACTICES IN THE
COLLEGE LOAN INDUSTRY; SENDS LETTERS TO MORE THAN 400 COLLEGES AND
UNIVERSITIES CAUTIONING THEM OF POTENTIAL CONFLICTS OF INTEREST;
ADVISES COLLEGE-BOUND STUDENTS TO PROTECT THEMSELVES
Student Lending Brochure
NEW YORK, NY (March 15, 2007) — Attorney General Andrew M. Cuomo today
revealed deceptive practices that he has uncovered in his nationwide
investigation into the college loan industry. In a letter sent to every
college and university in New York state, and certain other schools
across the country, Cuomo warned them to end or fully disclose
potential conflicts of interests in their relationships with private
lenders. He also cautioned students and their families to protect
themselves against these practices.
Industry practices revealed include: Establishment of so-called
“preferred lender” lists without disclosing the basis for selection or
the specific benefits associated with these preferred lenders; revenue
sharing and other financial arrangements between schools and lenders;
denials or impediments to a student or parent’s choice of lender based
on the borrower’s selection of a particular lender or guaranty agency;
impediments to competition in the lending industry that stifle better
loan terms for students and parents.
Attorney General Cuomo said, “There is an unholy alliance between banks
and institutions of higher education that may often not be in the
students’ best interest. The financial arrangements between lenders and
these schools are filled with the potential for conflicts of interest.
In some cases they may break the law.”
Cuomo continued, “I do not want another college-bound class to be taken
advantage of by schools or by lenders. Students and their families need
to know about the practices in the industry so they can better protect
themselves when being steered toward a lender by a college or
university. With this knowledge, students have the power to select the
lender that is truly best for their situation.”
The Attorney General has been leading an ongoing investigation into the
$85 billion-per-year student loan industry. In February, he requested
information from more than 60 public and private colleges and
universities nationwide regarding the standards they use to determine
which lending companies are included on their “preferred lender” lists.
Financial aid administrators often produce such lists to direct their
students toward the lenders that are most preferred by the schools but
may not be the best deals for students and parents.
Today, Cuomo notified over 400 colleges and universities throughout the
country, including all in New York state, to end relationships with
lenders that have the potential to mislead students and compromise
their ability to obtain the best rate for their student loans.
In his letter, Cuomo revealed the following problematic practices in
the student loan industry:
1. Lenders pay financial kickbacks to schools based on a percentage
of the loans that are directed to the lenders. The kickbacks are
designed to be larger if a school directs more student loans to the
lender. And the kickbacks are even greater if the schools make the
lender their “exclusive” preferred lender.
2. Lenders pay for all-expense-paid trips for financial aid officers
(and their spouses) to high-end resorts like Pebble Beach, as well as
other exotic locations in the Caribbean and elsewhere. Lenders also
provide schools with other benefits like computer systems and put
representatives from schools on their advisory boards in order to
further curry favor with the schools.
3. Lenders set up funds and credit lines for schools to use in
exchange for schools putting the lenders on their preferred lender lists.
4. Lenders offer large payments to schools to drop out of the direct
federal loan program so that the lenders get more business.
5. Lenders set up call centers for schools. When students call the
schools’ financial aid centers, they actually get representatives of
the lenders.
6. Lenders on preferred lender lists agree to sell loans to a single
lender so there is actually no real choice for the student.
7. Lenders sell loans to other lenders, often wiping out the
back-end benefits originally promised to the students without the
students ever knowing.
Rebecca Weber, Executive Director of the New York Public Interest
Research Group (NYPIRG), said, “NYPIRG, as a consumer group and a
student group, is particularly concerned about deceptive lending
practices that appear to target students and their families. The
Attorney General is alerting the colleges to the dangers of doing
business with predatory lenders and we think that's a crucial move as
this investigation continues.”
Cuomo also urged students and parents to use these findings to consider
whether a college or university is currently engaged in questionable
practices. The Attorney General’s office has prepared a pamphlet to
help those seeking student loans make more informed decisions. The
pamphlet is being distributed to every high school in New York State.
It is also posted on the Attorney General’s website at www.oag.state.ny.us.
The investigation is being handled by Executive Deputy Attorney General
for Economic Justice Eric Corngold and Assistant Attorneys General Joy
Feigenbaum, Melvin Goldberg, and Kevin R. Harkins.
The text from the letter sent to colleges and universities is attached.
Attached are:
Letter from Andrew Cuomo to the Colleges
http://www.oag.state.ny.us/press/2007/mar/OAG%20Letter%20to%20Colleges.pdf
Brochure from the NYS Attorney General's Office to potential student
borrowers:
http://www.oag.state.ny.us/press/2007/mar/final%20Bradford-student_loan_brochure.pdf
Alan is right
In fact Alan, have you by any chance asked the politicians and those who interview you, for those who took out loans, if THEY know who their lenders are even to this day? Or how long it took for them to figure it out?
I bet you get the same result.
I was taught in grade school and even high school about grants, scholarships, and financial aid through government loans. I was also taught that I probably wont get any real grants or scholarships unless I was a minority or Einstein and lucky. So, because I was not coming from a wealthy family, it was (what I thought) federal loans for me. At one time, Sallie Mae WAS part of the programs. Now they are private, they capitalize on this notion that has been pressed upon our generation that Sallie Mae is part of the government still by giving you very little information or any updates and using key words like Federal Guaranteed Loans.
For many, new students at the age of 18, 20, even 24 don't have the luxury of knowing from the start that they need to be super careful. By this age the few loans or credit cards they may have taken out haven't been nearly as abusive.
So why and how could student loans, the very thing needed to get us an education that will ultimately improve economy to get more loans and spend more money, possibly be worse than that?
Sallie Mae and their ilk are nothing more than vulchers. Not only are they draining students and graduates before they can get their lives started, but they are decaying our future as a productive country.
We already have one to many of those things going on in the present today. Having the entire future population stuck paying $1200 or more per month for the rest of their lives in Sallie Mae bondage, or default because that amount would make them homeless if they don't happen to choose to be a doctor or lawyer or future Sallie Mae executive, does not bode well for us. The negative future of our country will not come from global warming, or the war. It is stuff like this. Corporate abuses to the nth degree.
Student Loan Reform IS Needed
Check out this article featured today on MSN:
New York AG alleges student loan corruption
Colleges across the country are taking kickbacks from student loan companies and reaping other benefits while making it harder for students to get better deals on their loans, the state attorney general has charged.
http://www.msnbc.msn.com/id/17644168/from/ET/
Student Loans are helping to defend the status quo.
Keeping students on the hook with all-but-insupportable debt (especially those working toward law or medical degrees) is a great way of seeing to it that students don't get any bright ideas about working toward social progress the way their elders did in the 60's and 70's, isn't it? I mean, it's tough to think about changing the world for the better when you have a mortgage-sized debt hanging over your head, right?
Sallie Mae should change its name to Bullie Mae
While Sallie Mae pretends to have the best interests of their customers at heart, they have covertly worked hard behind the scenes to pass anti-competitive legislation that costs students and parents billions of dollars.
Can you imagine the uproar if homeowners were suddenly told that if they want to refinance their home, with a different lender, they can't; -- or even worse, if they were informed that they cannot re-finance at all?
Specifically, I'm talking about Sallie Mae's successful effort to add to and solidify the restriction-of-trade laws that have dogged the federal student loan program for decades. This collection of laws has made it difficult, if not impossible, for student loan borrowers to shop around for the lowest available rates when they wish to consolidate their education debt.
Put another way, Sallie Mae and a few other big lenders didn't want the lure of lower rates tempting their customers to switch to competitors. That's why they lobbied so hard for these restrictions. And as of now, they are still winning.
For years, participants in the federal student loan program have converted their variable-rate federally guaranteed college loans into fixed-rate federal consolidation loans, to lock in favorable interest rates, in much the same way that homeowners do with their mortgages. And for the same reasons.
But under the laws effective July 1, 2006, the vast majority who had previously consolidated their loans are now legally barred from ever re-financing again, no matter what other lender later might have offered them a better deal. And no matter how many times you read this paragraph, its meaning will remain the same.
Some would argue that because the government is subsidizing student loans, open market re-financing is not appropriate. But the fact is that under the just repealed laws that heretofore allowed reconsolidation, lenders -- and not the taxpayers, absorbed the cost of lower rates offered to borrowers.
Also, until the Congress finally repealed the Single Holder Rule, borrowers whose loans are owned by a single lender had been prohibited from shopping around for the best of rates and terms when it came time to consolidate.
The dollars lost to higher interest rates resulting from this collection of restriction-of-trade legislation will never show up in the Congressional Budget Office cost estimates that everyone in Washington is forever quoting. And if you are wondering where those dollars will end up, you need look only so far as the bottom line of Sallie Mae's income statement.
And to add insult to injury, Sallie Mae, like a football player spiking a ball after a game-winning touchdown, began celebrating. Their VP, Tom Joyce, was quoted in USA TODAY as saying, "The consolidation loan program was never meant to be a re-financing bonanza for students." And later, his crowing grew even louder when he told the Orlando Sentinel, "Smaller corporations will now think twice about getting into the student loan business."
Such ugly statements by Sallie Mae's chief media spokesperson graphically emphasize the immediate necessity of Republicans and Democrats joining forces to restore open competition in this very important marketplace. The cost of college is just too high to protect Sallie Mae's profits at the expense of America's students and their parents.
C. Victoria Patrick
Retired Educator, College Administrator and Financial Adviser
StudentLoanJustice
Just a side-note for everyone. Alan Collinge has not 1, not 2, but 3 engineering degrees. All this and he still was unable to make the simple payments on money he chose to borrow. Look into his story just a little and you realize that HE is exactly what is wrong with the system. He borrows, gets his degree, then wants a free pass which lets him off the hook. This is exactly the reason why bankruptcy isn't an option with student loans, because of slackers like him. For his entire story, as written by him, check out:
Alan Collinge Story