Student Loans: Legal Loan Sharking

Student Loans: Legal Loan Sharking

Student Loan Sharking. Harsh? NO! Outstanding student loans in this country have exceeded $1,000,000,000.00 (One Trillion Dollars). At least 15% of those loans are "private" loans, meaning not made by a government agency or sponsored lender. So what is the difference.

Remember all of the discussion (still heard throughout the country) about "Sub-Prime" and "Predatory" Lending? It's live and well on campuses all over. And why not? The Bankruptcy law change in 2005 created a form of indentured servitude. Have a PRIVATE student loan that is at a level 5 times the entire annual salary that can be earned, accumulating interest at 6%-20% (based on payment history - a default of a payment and the rate jumps to the maximum in most cases - how can anyone pay it?

"Too many student loan borrowers are struggling to pay off private student loans that they did not understand and cannot afford,...We must do our best to leave the next generation in a better place than we are today, rather than buried under a mountain of debt." - Richard Cordray, Director of the COnsumer Finance Protection Bureau ("CFPB"). Both the CFPB and the Federal Reserve are gravely concerned about the problem. 25% of the outstanding loans are in some state of default.

I deal with the problem on a daily basis. I have clients who have no possibility of ever paying their student loans, whether they be PRIVATE or FEDERAL. The issues include federal loans as well as private loans. It is true that Federal loans are able to be modified through the lender, and payments made based on a current income/ability to pay. They can also be consolidated through "DIRECT LOANS" which is THE WILLIAM FORD FOUNDATION". However the loans will hinder the student's ever purchasing a house or a car or anything else where credit is needed. The loans stay on credit reports until paid.

The 2005 Bankruptcy law change made it next to impossible to prove EXTREME AND SUBSTANTIAL HARDSHIP in repayment, the requirement for discharge.

The Bankruptcy Courts are able to modify all loans except First Mortgages on primary residences and STUDENT LOANS. The commonalities - the PREDATORY nature of the lending tactics and the LOBBYING by the respective trade groups. And, Private Student Loan Lenders DO NOT have to allow a consolidation, nor forebearance in payments.

Here is a link to the 131 page report which details the entire issue. The report was published by the CFPB and the Secretary of Education. (It's a .pdf so it's easily browsed) http://tinyurl.com/c8eudpr

Advice: Don't borrow more than is needed for SCHOOL costs and borrow from a Federal Agency. And READ EVERYTHING & ASK QUESTIONS. TRUST NO ONE!

Author's Copyright by Richard I. Isacoff, Esq. July, 2012
http://www.isacofflaw.com/        isacofflaw@msn.com

Debit Cards and Colleges; An Unholy Alliance

Colleges are courting the Devil - the Debit Card Devil. Debt counseling and money management are urgently needed on Campus! Hard pressed for funds, Colleges are resorting to "quiet" side deals to the detriment of its students. By this time most students are aware of some of the traps in credit cards, especially the killer default interest rates. The implication or at least the inference drawn by most people is that Debit Cards Are Safe:. THEY'RE NOT!

During the summer break, students and their parents, guardians, sponsors etc. should pay attention to the increasing use of, and demand for, Debit Cards on College Campuses by the Colleges themselves. The furor over credit card interest and fees has quieted (for now) but a more insidious replacement has arisen; Debit Cards.

A PIRG study, demonstrates that debit card using students have traded a headache for an upset stomach (I realize that shows my age but...). I was a banker for 18 years and ran failed banks and S&Ls for FSLIC and then FDIC. That part of me wants to delve into the extent the colleges have accepted payoffs for signing contracts with Debit Card Issuers that expose their students to legitimized financial crimes; transaction fees, overdraft fees, annual fees, a fee for being late paying a fee...

The Consumer Finance Protection Board ("CFPB") should jump into this mess but it has its hands full, especially with a Congress beholding to the Banking industry. In the meantime States' AGs could take up the fight. It will be easier than the Student Loan problem which is not getting any better in the near and maybe distant future. Here there are no issues with Federal agencies being the card issuers.

Every college, with an agreement with a debit card issuer, should be forced as part of disclosure regulations to explain, in plain English, with documentation provided, how much the college is receiving and what "arrangements" were made with the administration, development office, and financial aid office for starters.

Oh, and maybe, as a mandatory Freshman year course, all colleges should have a 1 credit course in financial management covering topics like budgeting, all forms of plastic, the full cost of attending school, and the probable length of time it will take to pay back student loans. In fact, maybe the college should have to credit each debit card user with student loans, at least one-half of the fees the college received to the Student's student loans

Author's Copyright by Richard Isacoff, Esq, July 2012

rii@isacofflaw.com
http://www.isacofflaw.com/