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An Accountable Consumer Bureau

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Last week, Professor Warren testified before Congress on our progress in building the consumer bureau. She talked about the many ways in which the CFPB is accountable to Congress, and to you, the public we’re here to serve.

From her testimony:

“The CFPB was designed to increase accountability by consolidating into a single agency the core consumer financial protection functions that had existed across the federal government. Under the old system, seven different federal agencies were responsible for consumer financial protection. Those agencies had other responsibilities as well and consumer financial protection was not anyone’s top priority. The tangle of seven agencies failed to create effective rules and left gaping holes in oversight. There were also basic problems of accountability. Because it was no one’s primary responsibility, it was more difficult to hold any single agency accountable. The CFPB will be directly responsible to the public for performing those core functions. Accountability was a central policy rationale for the establishment of the CFPB, and it is essential that the CFPB be accountable for its efforts moving forward.”

Read the entire written testimony.

  • Felipe Matos

    It is with great hope and prayer that you Professor help re-establish a fundamental protection that has been taken away by lobbyist and their successful attempts at making slaves of people going to college with the hopes of getting the American dream only to wind up as indentured servants to a corrupt and predatory lending system. Private student loan companies are reaping the benefits from federal protection but do not offer the same repayment options as the government. I hope that you truly stand for what is fair and right when it comes to our ability to make a living as Americans. Going to college should not be a mistake but a means to educate yourself and become a productive contributing member to society. How can students stimulate an economy when nearly 50% or more of their income on a monthly basis goes to paying back student loans? They can’t buy a car, a house or even get married or afford children because of these predatory lending systems. I am in full support of restoring bankruptcy to the student loans for those that truly need it. Please restore what needs to be restored. Banks got a bailout when the people that are hurting need it more.

    • Get A Job

      I am having difficulty understanding the concern with student loans obtained from private sources.

      It is unfair and inaccurate to label private student loans as “predatory”. Before each student loan is made, the applicant is provided with disclosures that clearly show the costs and fees involved as well as the repayment terms. Students willfully enter into these loans and no one is forced to take on the debt.

      Please explain how this is “predatory” or “unfair”.

      It is wrong to require private student loans to provide the same types of repayment terms that those from government souces do. This requirement will create two results that will be unfavorable to those needing to borrow for tuition needs. (1) It will increase the cost of those loans. Adding requirements that increase risk will cause the costs to rise to compensate for the additional risk. And yes, it will increase the risks to lenders. Increasing the uncertainty of when payments will be received substantially alter the risks involved with these types of loans. (2) Some private lenders may choose to cease offering student loans – limiting the options for applicants.

      Not to be contrary, but I do not believe Mr. Matos’ example of a student paying 50% or more of their income for student loans is typical or average. Certainly, there are unique situations that may rarely result in a student paying that much of his or her income in student loan debt. But this example is an outlier and not typical.

      Unfortunately, people do get into financial trouble. People lose jobs, get divorced, encouter medical problems, etc. There are situations that result in someone having difficulty in making payments. But these situations are most often the result of the borrower’s situation, not the result of lender action.

      Let’s keep student loan options open. Please don’t create a “plain vanilla” student loan product that all private lenders must offer. Requirements such as this will result in fewer choices and higher expenses. It will also result in fewer options to meet my unique financial situation.

      • Felipe Matos

        I would not be surprised if you were a member of a the loan industry. Read this.

        Government Profiting From Student Loan Defaults?

        by Farnoosh Torabi on 01/13/2011

        It’s a jaw-dropStudent Debtping claim, but one that Alan Collinge, founder of StudentLoanJustice.org, a consumer advocacy group, is confident is true.

        The Wall Street Journal ran an interesting piece last week suggesting the federal government collects a hefty portion of defaulted student loans. But Collinge – who was quoted in the story – argues that it didn’t quite paint the real picture. “After paying the companies that actually collect the loans and other costs, the U.S. Department of Education expects to recover 85% of defaulted federal loan dollars based on current value,” says the WSJ, noting that the percentage of student loan collections are relatively huge compared to collections on other defaulted consumer credit. Banks, for example, might retrieve 10 cents for every dollar from past due credit cards.

        But what the article doesn’t explain, Collinge tells me, is that the government is collecting 85% on hugely inflated loans. “The current value of the default portfolio includes principal plus interest at time of default, plus a tremendous amount of interest that accrued after default.”

        And therein lies some possible profit and perhaps a serious, twisted incentive to offer students six-figure loans they will most likely never be able to repay. ”Given a current defaulted loan portfolio of approximately $60 billion, the amount of revenue this represents to the Department of education is in the tens of billions of dollars,” writes Collinge in his self-published report.

        and read this.

        By Stephanie Kraft
        Illustration By Mark Roessler

        A nationwide financial disaster almost as farreaching as the foreclosure crisis is occurring quietly all around us. It has already turned hundreds of thousands if not millions of college-educated people into indentured servants, trapped in debt. The effects on their lives are crippling, and the broader economy suffers as the income of a large segment of the population is squeezed for interest payments and fees on loans taken out to pay for college, or for graduate or professional school.

        The scale of the problem is not easy to assess, but there are clues. Some $96 billion a year is loaned to people attending colleges, universities and trade or professional schools, and that doesn’t count so called “shadow” borrowing, such as taking money from home equity lines of credit, retirement accounts and credit cards (in 2005, a national survey by Smith College found that 23 percent of students were using credit cards to help pay their tuition).

        This year Americans’ total outstanding student loan debt from federally funded and private loans was estimated at $833 billion, a sum that exceeds our credit card debt (though the two kinds of debt overlap, since, as the Smith study showed, credit cards are used to help pay tuition). The Chronicle of Higher Education reported in July that the 15-year default rate for federal loans is 20 percent; for loans to community college students, 31 percent; for loans to students at for-profit schools, 40 percent.

        What has been reported about this problem so far is only the tip of the iceberg. There has been some press coverage of conflicts of interest between college financial aid administrators and large lenders. A recent wave of reports targets excessive default rates at for-profit universities. Still, the systemic scandal in the student loan industry, which reached from Congress to scores of institutions—not just the half-dozen mentioned in the newspapers—has only been reported in a few places, and the story seems not to have lodged in the public consciousness.

        But Alan Collinge, author of The Student Loan Scam and founder of the group (and website) Student Loan Justice, is determined to get that story told as often as it takes to end the abuses in the system.

        At the heart of the problem is the fact that, as Collinge explains, the conventional protections for borrowers don’t apply to student loans. They can’t be discharged in bankruptcy, even after many years. Wages, tax returns, including earned income tax credits, and even Social Security and disability benefits can be garnished to pay them.

        Incredibly, professional licenses can be revoked as a penalty for defaulting, making it even less likely that the borrower will ever catch up.

        And many classes of student loans are even exempt from truth-in-lending laws. Nonprofit state-operated lending operations were also exempted from the Fair Debt Collection and Practices Act. In many cases, state usury laws don’t apply to student loans.

        The result, Collinge says, is that borrowers have been set up to fail because defaulted loans are more lucrative for lenders than loans that are paid, especially loans that are paid on time. Collinge’s website, http://www.studentloanjustice.org, carries stories from every state in the country of people whose loans have ballooned to three or four times what they originally borrowed—more than they will be able to pay off in their lives. In a few cases people have left the country, gone underground, even committed suicide.

        “Trapped in limbo with a $120,000 tab on my head,” one poster writes, “I have been told frankly by my lenders that with all my interest and the 30-year repayment program (because I can’t do it any other way right now) I will be paying somewhere in the range of $500,000 and one million dollars. All in the name of a dream wherein I would become a journalist, at a meager $25,000 salary, chasing stories and serving the public…. I had the thought of killing myself many times, but the realization that my loan’s responsibility would merely fall onto the shoulders of my co-signer (my mother) is what really keeps me going.”

        Meanwhile, the lenders have been taking no risk, because the loans are guaranteed by the other victims of the scam: the taxpayers.

        *

        Collinge learned about the student loan debacle by hard experience. He borrowed $38,000 to acquire three degrees in aerospace engineering, and owed $50,000 when he finished his schooling in 1998. Given the income he expected to enjoy, his debt load didn’t seem insuperable. But things took a turn for the worse in 1999, after a month in which he was unable to come up with the whole amount of his loan payment. His lender, Sallie Mae, hit him with a fee. From then on, though he continued to make his payments regularly, the fee he had originally been told was a one-time charge was repeated. He appealed to the lender to no avail.

        In 2001, with the loans eating up more than 20 percent of his income, Collinge resigned his $35,000-a-year job as an associate scientist at a university after receiving a “weak offer” of a lucrative job in the defense industry. The job didn’t come through; the events of September 11 chilled his search; and though unemployment should have gotten him a forebearance, Sallie Mae threw his loans into default. His debt soon rose to $60,000; he was constantly hounded by collectors.

        For years Collinge worked 90 hours a week and more to pay off a debt that was swelling from the original $38,000 to $103,000. His lenders refused to negotiate. “I became obsessed,” he writes, “literally unable to put my student loans out of my mind for more than a couple of hours at a time. … Consumed, I began doing research. I found that Sallie Mae and other lenders made far more money from defaulted loans than they did from those that remained in good standing. … I found that well-connected student loan executives and shareholders had carefully orchestrated a lobbying campaign to strip away even the most basic consumer protections from student loans.”

        He also found that his case was not unique—that “millions of other citizens were trapped just as I was.”

        *

        How did it all start? There’s always a layer of paternalism in society’s view of students, who in fact are targets of much underreported exploitation—by credit card companies, slumlords, textbook scammers, employers who pay students less than nonstudents in the same age group and count on their transience to make them unlikely to report workplace abuses. Take paternalism, add a little corruption and a lot of profit motive and you get, among other things, the student loan scam.

        Paternalism was at the root of the idea, dating from the 1970s, that student loans were defaulted on more than other types of loans—a belief amped up by anecdotes about a few doctors and lawyers who finished their training and promptly staged phony bankruptcies to shed their student loans.

        Yet a GAO report done in the late 1970s, when student loans could be discharged in bankruptcy after five years, showed that the default rate on student loans was only 1 percent (for purposes of comparison, the rate of delinquency on home mortgages at that time hovered around 4.6 percent, while the rate of foreclosure was .4). Nevertheless, the regulations about student loan dischargeability were tightened so in the 1990s and again in 2005 that now even many private student loans, as well as federally backed loans, can never be discharged in bankruptcy.

        In other ways as well, students have been treated like children who don’t deserve the same protections as “adult” borrowers. Particularly in the 1990s, after the largest student lender, Sallie Mae, had turned from a government entity with Treasury Department oversight to a private lender, protections were stripped away. Not only was discharge in bankruptcy eliminated; student loans were even exempted from state usury and truth-in-lending laws.

        Borrowers whose loans were in default could have wages garnished, tax refunds seized, Social Security and disability payments garnished. Their credit ratings suffered. Public employment could be terminated, professional licenses revoked. Collinge’s book includes the story of a man who borrowed $70,000 to become a chiropractor, then fell behind with his payments, lost his license and saw his loans balloon to $400,000.

        “Revoking the professional licenses—it makes no sense,” Collinge told the Advocate in a telephone interview. “Who designs that kind of a system? It’s a trap unlike any I ever thought I would come up against in this country.”

        In 1998, the government approved collection charges of 25 percent on defaulted loans. That meant that 25 cents of every dollar borrowers attempted to pay back went to the collection companies, which were in some cases owned by the lenders themselves. The fees left people already struggling to pay back their principal and interest so far behind they couldn’t catch up.

        With respect to the ballooning effect of fees, the pitfalls for the student loan borrower are the same as the pitfalls of paying off credit card debt. An important difference is that in the worst-case scenario, bankruptcy, credit card debt can be discharged.

        Another difference is that credit card users are not prohibited from consolidating their debt with another lender who offers better terms. But among the advantages student lenders fought for and won from Congress was the right to prohibit borrowers from consolidating most loans with firms other than the original lender. A loophole called the Two-Step, which allowed borrowers willing to go through a complicated process to seek lenders offering more favorable terms, was outlawed in 2005.

        In 2006 the so-called “single holder” law was repealed due to outcry by smaller lenders, but borrowers of federal loans must still stick with whoever becomes their lender the first time they consolidate. The result of all this has been to keep many students trapped in relationships with their original lenders.

        The lives of people whose loans go into default, even for the most pardonable of reasons, are severely damaged. “The student loans of Robert, an Air Force captain, defaulted in the mid-1990s while he was serving in the military,” Collinge writes. “His original $35,000 in loans grew to $155,000 despite his efforts to negotiate with the lender, the Illinois Student Assistance Commission. …Like most StudentLoanJustice.org members, Robert absolutely agrees that he should pay what he owes, but he simply cannot deal with a debt of this magnitude.”

        One of many Valley residents struggling to pay their loans for college and graduate school told the Advocate by email that she pays $1,100 a month on a schedule that is supposed to get her loans paid off in 10 years.

        “My starting salary after taxes totals $2, 800 a month, making my approximate loan payments total nearly 40 percent of my salary,” she wrote. “I decided to apply for extended repayment, which allows me to decrease my monthly payments and pay for 25 years. I promptly called to check on the status of my application, which the employee at the loan company stated would be processed in 10 to 14 days. One day later, I received an e-mail stating that my application for ‘graduated repayment’ had been denied on the basis that I was still in school. Interestingly, I neither applied for graduated repayment, nor am I still in school. … I will have to spend an inordinate amount of time on hold or arguing with the loan company, all in order to assure that I will be able to make my loan payments on time. ”

        Though she has no dependents, this young woman is so concerned about her co-signers that she has added to her living expenses by taking out a life insurance policy to protect them in case she dies.

        *

        The growth of the student loan business was not just a result of the rise in college costs but at least partly a cause of it, Collinge argues. He’s not alone in that hypothesis; Secretary of Education William Bennett said in 1987 that the increased availability of loans had changed the way colleges did their budgeting. The result, says Collinge, has been a bubble that has created fortunes for student loan company executives at the expense of students. Between 1999 and 2004, for example, Sallie Mae CEO Albert Lord received $225 million in total compensation.

        The largest lenders, like Sallie Mae and Nebraska-based NelNet, have been indefatigable in their efforts to make money from every sector of the student loan business. After years of working to take market share away from the Direct Loan program, they later courted and got contracts worth hundreds of billions of dollars to service loans made through that program. Ever more favorable laws allowed them to own collection companies, creating a profit stream through late fees and interest on defaulted loans.

        Sallie Mae and other lenders deny that borrowers are set up to fail. “Nobody wins when a student loan customer defaults,” Sallie Mae spokeswoman Patricia Nash Christel told the Advocate by email. “The only way any lender earns money on a loan is if it goes into repayment and stays in repayment. Simply put, we lose money if a borrower defaults. Even if we collect on a defaulted loan, we make only about one-third of what we would have made on that loan if it had stayed in repayment. … In academic year 2009-2010, Sallie Mae’s company-wide default prevention efforts helped 2 million customers resolve their past-due accounts and avoid default on $38 billion in federal and private student loans.”

        But it’s not only borrowers who have suspected they were set up to fail. In 1998 a Florida firm, Cybernetics and Systems, paid the government $30 million in penalties for claiming falsely that it had contacted borrowers before throwing their loans into default and requesting payment from the government for the “defaulted” loans. In 2001 Sallie Mae paid a much smaller sum, $3.4 million, to settle a case involving a similar practice.

        *

        In the heyday of big lending, before an investigation by the office of the Attorney General of the State of New York led to a crackdown, financial aid administrators at one institution after another were gifted, bribed and otherwise blandished by the major loan companies to establish so-called “preferred lender” programs that channeled their students toward those companies. In 2007, financial aid officials David Charlow of Columbia University and Ellen Frishberg of Johns Hopkins both left their posts under clouds because the New York AG’s investigation had exposed their ties to the lender Student Loan Xpress; Frishberg in particular became the lightning rod for publicity about the scandal.

        But the focus on two big-name schools actually obscured the fact that financial aid administrators in colleges across the country were found to have improper relationships with lenders, accepting their payments, owning their stocks. Sometimes lenders’ employees, rather than college financial aid staffers, actually served as loan counselors for students. Lenders’ logos appeared on athletic gear; lenders set up relationships with alumni associations to help business flow their way.

        The New York Attorney General’s office came on the scene very late in 2006, when then-AG Eliot Spitzer, just before assuming the governorship of New York State, identified the student lending business as ripe for investigation. A player of lesser standing than Sallie Mae, Education Finance Partners, had admitted to the AG’s office that it had given a college a piece of its business in return for being given “preferred lender” status and having student borrowers steered its way.

        Early in 2007, when Andrew Cuomo replaced Spitzer as AG, he immediately moved to investigate how wide the practice was and soon publicly identified several lenders and their complicit colleges. In a bold move, Cuomo also included colleges from outside New York State in his accusations that lenders and institutions were engaging in conflict of interest at student borrowers’ expense. Early on he came out swinging against Education Finance Partners and its “kickback” agreements with Baylor, Boston University, Clemson, Drexel, Duquesne, Fordham, Long Island, Pepperdine, St. John’s University, Texas Christian University, Washington University (St. Louis), the University of Mississippi and 48 other schools not named in public releases.

        Before the end of 2007, Cuomo had instituted disciplinary measures against Citibank, Sallie Mae, JP Morgan Chase, Bank of America, Wells Fargo, Wachovia and College Loan Corporation—the country’s largest student lenders—as well as Education Finance Partners and other smaller players. His investigation brought to light one abuse after another: one private lender who advertised interest rates “as low as” 7.15 percent was actually charging 16 percent on 40 percent of the loans it offered students. Cuomo’s office forced the termination of “preferred lender” agreements, gifts from lenders to college financial aid administrators, and arrangements allowing lender employees to serve as loan “counselors” in colleges all over the country.

        *

        This year, President Obama terminated the role of the large banks and private lending companies in the student loan business, a measure the Congressional Budget Office estimates will save the government $61 billion in subsidies over the next 10 years. The new rules also put a lower cap on monthly payments as a percentage of income, and on the number of years borrowers must go on paying.

        But fundamentally, Collinge says, borrowers are still up against the same odds as before, because the new rules do nothing to restore the protections borrowers of other types of loans enjoy.

        “I support [Obama's] program,” he says, “but it does nothing for students. It saves the government a ton of money, and more than that, the government also is getting the interest, where the lenders were getting the interest. But in terms of the predatory nature of the business, the system is the same. The bad guys are still going to be doing the same things they did before. Sallie Mae and NelNet will still be the people that decide whether a student defaults or not. Their collection companies will still be collecting debt. … The most damaging aspects of the system persist.”

        “I’ve got one primary wish,” Collinge adds. “Number one, bankruptcy protections have got to be re-established. The reason bankruptcy protections are so important is to prevent a predatory lending scheme from evolving. That will cause the federal government once more to have a stake in the success of the student rather than in the failure of the student.

        “They get 25 cents on the dollar—on average they get $123,000 back from the borrower on a student loan for $100,000. There’s no statute of limitations. … Sallie Mae often brags that they can predict very accurately who is going to default. They treat the people they predict will default much worse. They don’t grant them forbearances. At the root of it is [lack of] bankruptcy protections, which enables the whole system to start cycling up in this predatory fashion.”

        In 2007, with the financial crash looming, even a Sallie Mae executive was quoted in Time saying that it might be necessary to return to the older law allowing student loans to be discharged in bankruptcy after seven years, Collinge points out.

        Wish number two, Collinge says, is that the system would stop garnishing people’s Social Security. “I’ve gotten submissions [for the Student Loan Justice website] from senior citizens who couldn’t buy medications as a result of a percent of their income going for their loans,” he says.

        Wish number three is that the government would put a stop to the revocation of borrowers’ professional licenses—an irrational penalty, it would seem, since it not only cripples the borrower but even goes against the interest of the lender.

        What can borrowers struggling with a mountain of debt do in the meantime? They can tell their stories, says Collinge. They can follow the issue, join Student Loan Justice or kindred organizations at websites like forgivestudentloandebt.com, bankruptyourstudentloans.com, or projectonstudentdebt.org. They can support reform measures in Congress and in their states and transparency in financial aid practices at their local educational institutions.

        They should let their Congresspeople know about their situations. Sometimes—though rarely—a Congressperson has actually managed to get a constituent a measure of relief. “More important,” Collinge writes, “borrowers should contact their local officials because these representatives need to understand the depth, breadth, and seriousness of the student loan problem. … Student loan borrowers, particularly those whose debt has exploded to unmanageable proportions, need to realize that suffering in silence serves only to perpetuate a predatory lending system that is in critical need of reform.”

        Yeah…there isn’t a problem…HA!

        By the way…I have a job.

        • Get A Job

          Mr. Matos:

          I appreciate your posts here.

          I have researched the source of your news articles posted above. Both articles are actually from a blog, titled “salliemaedebt.com”.

          The blog is just that, a blog. It is someone’s opinion. The blog is not a news organization and the articles were not developed or published by a known news organization.

          In the about section, the blog states, “This blog was created to help bring to light the defining factor in The United States brain trust. How will we ever more forward in this country, if were constantly being taken for a rise. As the phrase states. “A Hamster in a Spinning Wheel”.

          The blog, and its content, are biased against the student loan industry.

          The blog authors also have a Facebook page, titled “I Hate SallieMae”.

          Hardly independent journalism.

          In the future, I would also appreciate it you would include only hyperlinks to the stores instead of cutting and pasting the actual stories themselves. It saves time and space on these blogs.

          You can attack me on this blog and say negative things about me. I really don’t care. I have an opinion and I have a right to express it. Just as you have a right to express your opinion. We don’t agree.

          But I prefer to deal with facts and not emotions.

          I really don’t understand what you are asking for in your posts.

          If you hate student loans so much, no one is forcing you to borrow from student loan providers. Get your funding somewhere else.

          You can’t have your cake and eat it too. It is not feasible to demand easy student loans with low rates and ultraliberal payment plans that can easily be discharged in bankruptcy. There isn’t any entity that will provide such an instrument.

          The government doesn’t owe any of us a free education. Government isn’t free. Their souce of funding is you and me – the taxpayers.

          What the heck do you want, anyway?

      • Felipe Matos

        I would not be surprised if you were a member of a the loan industry. Read this.

        Government Profiting From Student Loan Defaults?

        by Farnoosh Torabi on 01/13/2011

        It’s a jaw-dropStudent Debtping claim, but one that Alan Collinge, founder of StudentLoanJustice.org, a consumer advocacy group, is confident is true.

        The Wall Street Journal ran an interesting piece last week suggesting the federal government collects a hefty portion of defaulted student loans. But Collinge – who was quoted in the story – argues that it didn’t quite paint the real picture. “After paying the companies that actually collect the loans and other costs, the U.S. Department of Education expects to recover 85% of defaulted federal loan dollars based on current value,” says the WSJ, noting that the percentage of student loan collections are relatively huge compared to collections on other defaulted consumer credit. Banks, for example, might retrieve 10 cents for every dollar from past due credit cards.

        But what the article doesn’t explain, Collinge tells me, is that the government is collecting 85% on hugely inflated loans. “The current value of the default portfolio includes principal plus interest at time of default, plus a tremendous amount of interest that accrued after default.”

        And therein lies some possible profit and perhaps a serious, twisted incentive to offer students six-figure loans they will most likely never be able to repay. ”Given a current defaulted loan portfolio of approximately $60 billion, the amount of revenue this represents to the Department of education is in the tens of billions of dollars,” writes Collinge in his self-published report.

        and read this.

        By Stephanie Kraft
        Illustration By Mark Roessler

        A nationwide financial disaster almost as farreaching as the foreclosure crisis is occurring quietly all around us. It has already turned hundreds of thousands if not millions of college-educated people into indentured servants, trapped in debt. The effects on their lives are crippling, and the broader economy suffers as the income of a large segment of the population is squeezed for interest payments and fees on loans taken out to pay for college, or for graduate or professional school.

        The scale of the problem is not easy to assess, but there are clues. Some $96 billion a year is loaned to people attending colleges, universities and trade or professional schools, and that doesn’t count so called “shadow” borrowing, such as taking money from home equity lines of credit, retirement accounts and credit cards (in 2005, a national survey by Smith College found that 23 percent of students were using credit cards to help pay their tuition).

        This year Americans’ total outstanding student loan debt from federally funded and private loans was estimated at $833 billion, a sum that exceeds our credit card debt (though the two kinds of debt overlap, since, as the Smith study showed, credit cards are used to help pay tuition). The Chronicle of Higher Education reported in July that the 15-year default rate for federal loans is 20 percent; for loans to community college students, 31 percent; for loans to students at for-profit schools, 40 percent.

        What has been reported about this problem so far is only the tip of the iceberg. There has been some press coverage of conflicts of interest between college financial aid administrators and large lenders. A recent wave of reports targets excessive default rates at for-profit universities. Still, the systemic scandal in the student loan industry, which reached from Congress to scores of institutions—not just the half-dozen mentioned in the newspapers—has only been reported in a few places, and the story seems not to have lodged in the public consciousness.

        But Alan Collinge, author of The Student Loan Scam and founder of the group (and website) Student Loan Justice, is determined to get that story told as often as it takes to end the abuses in the system.

        At the heart of the problem is the fact that, as Collinge explains, the conventional protections for borrowers don’t apply to student loans. They can’t be discharged in bankruptcy, even after many years. Wages, tax returns, including earned income tax credits, and even Social Security and disability benefits can be garnished to pay them.

        Incredibly, professional licenses can be revoked as a penalty for defaulting, making it even less likely that the borrower will ever catch up.

        And many classes of student loans are even exempt from truth-in-lending laws. Nonprofit state-operated lending operations were also exempted from the Fair Debt Collection and Practices Act. In many cases, state usury laws don’t apply to student loans.

        The result, Collinge says, is that borrowers have been set up to fail because defaulted loans are more lucrative for lenders than loans that are paid, especially loans that are paid on time. Collinge’s website, http://www.studentloanjustice.org, carries stories from every state in the country of people whose loans have ballooned to three or four times what they originally borrowed—more than they will be able to pay off in their lives. In a few cases people have left the country, gone underground, even committed suicide.

        “Trapped in limbo with a $120,000 tab on my head,” one poster writes, “I have been told frankly by my lenders that with all my interest and the 30-year repayment program (because I can’t do it any other way right now) I will be paying somewhere in the range of $500,000 and one million dollars. All in the name of a dream wherein I would become a journalist, at a meager $25,000 salary, chasing stories and serving the public…. I had the thought of killing myself many times, but the realization that my loan’s responsibility would merely fall onto the shoulders of my co-signer (my mother) is what really keeps me going.”

        Meanwhile, the lenders have been taking no risk, because the loans are guaranteed by the other victims of the scam: the taxpayers.

        *

        Collinge learned about the student loan debacle by hard experience. He borrowed $38,000 to acquire three degrees in aerospace engineering, and owed $50,000 when he finished his schooling in 1998. Given the income he expected to enjoy, his debt load didn’t seem insuperable. But things took a turn for the worse in 1999, after a month in which he was unable to come up with the whole amount of his loan payment. His lender, Sallie Mae, hit him with a fee. From then on, though he continued to make his payments regularly, the fee he had originally been told was a one-time charge was repeated. He appealed to the lender to no avail.

        In 2001, with the loans eating up more than 20 percent of his income, Collinge resigned his $35,000-a-year job as an associate scientist at a university after receiving a “weak offer” of a lucrative job in the defense industry. The job didn’t come through; the events of September 11 chilled his search; and though unemployment should have gotten him a forebearance, Sallie Mae threw his loans into default. His debt soon rose to $60,000; he was constantly hounded by collectors.

        For years Collinge worked 90 hours a week and more to pay off a debt that was swelling from the original $38,000 to $103,000. His lenders refused to negotiate. “I became obsessed,” he writes, “literally unable to put my student loans out of my mind for more than a couple of hours at a time. … Consumed, I began doing research. I found that Sallie Mae and other lenders made far more money from defaulted loans than they did from those that remained in good standing. … I found that well-connected student loan executives and shareholders had carefully orchestrated a lobbying campaign to strip away even the most basic consumer protections from student loans.”

        He also found that his case was not unique—that “millions of other citizens were trapped just as I was.”

        *

        How did it all start? There’s always a layer of paternalism in society’s view of students, who in fact are targets of much underreported exploitation—by credit card companies, slumlords, textbook scammers, employers who pay students less than nonstudents in the same age group and count on their transience to make them unlikely to report workplace abuses. Take paternalism, add a little corruption and a lot of profit motive and you get, among other things, the student loan scam.

        Paternalism was at the root of the idea, dating from the 1970s, that student loans were defaulted on more than other types of loans—a belief amped up by anecdotes about a few doctors and lawyers who finished their training and promptly staged phony bankruptcies to shed their student loans.

        Yet a GAO report done in the late 1970s, when student loans could be discharged in bankruptcy after five years, showed that the default rate on student loans was only 1 percent (for purposes of comparison, the rate of delinquency on home mortgages at that time hovered around 4.6 percent, while the rate of foreclosure was .4). Nevertheless, the regulations about student loan dischargeability were tightened so in the 1990s and again in 2005 that now even many private student loans, as well as federally backed loans, can never be discharged in bankruptcy.

        In other ways as well, students have been treated like children who don’t deserve the same protections as “adult” borrowers. Particularly in the 1990s, after the largest student lender, Sallie Mae, had turned from a government entity with Treasury Department oversight to a private lender, protections were stripped away. Not only was discharge in bankruptcy eliminated; student loans were even exempted from state usury and truth-in-lending laws.

        Borrowers whose loans were in default could have wages garnished, tax refunds seized, Social Security and disability payments garnished. Their credit ratings suffered. Public employment could be terminated, professional licenses revoked. Collinge’s book includes the story of a man who borrowed $70,000 to become a chiropractor, then fell behind with his payments, lost his license and saw his loans balloon to $400,000.

        “Revoking the professional licenses—it makes no sense,” Collinge told the Advocate in a telephone interview. “Who designs that kind of a system? It’s a trap unlike any I ever thought I would come up against in this country.”

        In 1998, the government approved collection charges of 25 percent on defaulted loans. That meant that 25 cents of every dollar borrowers attempted to pay back went to the collection companies, which were in some cases owned by the lenders themselves. The fees left people already struggling to pay back their principal and interest so far behind they couldn’t catch up.

        With respect to the ballooning effect of fees, the pitfalls for the student loan borrower are the same as the pitfalls of paying off credit card debt. An important difference is that in the worst-case scenario, bankruptcy, credit card debt can be discharged.

        Another difference is that credit card users are not prohibited from consolidating their debt with another lender who offers better terms. But among the advantages student lenders fought for and won from Congress was the right to prohibit borrowers from consolidating most loans with firms other than the original lender. A loophole called the Two-Step, which allowed borrowers willing to go through a complicated process to seek lenders offering more favorable terms, was outlawed in 2005.

        In 2006 the so-called “single holder” law was repealed due to outcry by smaller lenders, but borrowers of federal loans must still stick with whoever becomes their lender the first time they consolidate. The result of all this has been to keep many students trapped in relationships with their original lenders.

        The lives of people whose loans go into default, even for the most pardonable of reasons, are severely damaged. “The student loans of Robert, an Air Force captain, defaulted in the mid-1990s while he was serving in the military,” Collinge writes. “His original $35,000 in loans grew to $155,000 despite his efforts to negotiate with the lender, the Illinois Student Assistance Commission. …Like most StudentLoanJustice.org members, Robert absolutely agrees that he should pay what he owes, but he simply cannot deal with a debt of this magnitude.”

        One of many Valley residents struggling to pay their loans for college and graduate school told the Advocate by email that she pays $1,100 a month on a schedule that is supposed to get her loans paid off in 10 years.

        “My starting salary after taxes totals $2, 800 a month, making my approximate loan payments total nearly 40 percent of my salary,” she wrote. “I decided to apply for extended repayment, which allows me to decrease my monthly payments and pay for 25 years. I promptly called to check on the status of my application, which the employee at the loan company stated would be processed in 10 to 14 days. One day later, I received an e-mail stating that my application for ‘graduated repayment’ had been denied on the basis that I was still in school. Interestingly, I neither applied for graduated repayment, nor am I still in school. … I will have to spend an inordinate amount of time on hold or arguing with the loan company, all in order to assure that I will be able to make my loan payments on time. ”

        Though she has no dependents, this young woman is so concerned about her co-signers that she has added to her living expenses by taking out a life insurance policy to protect them in case she dies.

        *

        The growth of the student loan business was not just a result of the rise in college costs but at least partly a cause of it, Collinge argues. He’s not alone in that hypothesis; Secretary of Education William Bennett said in 1987 that the increased availability of loans had changed the way colleges did their budgeting. The result, says Collinge, has been a bubble that has created fortunes for student loan company executives at the expense of students. Between 1999 and 2004, for example, Sallie Mae CEO Albert Lord received $225 million in total compensation.

        The largest lenders, like Sallie Mae and Nebraska-based NelNet, have been indefatigable in their efforts to make money from every sector of the student loan business. After years of working to take market share away from the Direct Loan program, they later courted and got contracts worth hundreds of billions of dollars to service loans made through that program. Ever more favorable laws allowed them to own collection companies, creating a profit stream through late fees and interest on defaulted loans.

        Sallie Mae and other lenders deny that borrowers are set up to fail. “Nobody wins when a student loan customer defaults,” Sallie Mae spokeswoman Patricia Nash Christel told the Advocate by email. “The only way any lender earns money on a loan is if it goes into repayment and stays in repayment. Simply put, we lose money if a borrower defaults. Even if we collect on a defaulted loan, we make only about one-third of what we would have made on that loan if it had stayed in repayment. … In academic year 2009-2010, Sallie Mae’s company-wide default prevention efforts helped 2 million customers resolve their past-due accounts and avoid default on $38 billion in federal and private student loans.”

        But it’s not only borrowers who have suspected they were set up to fail. In 1998 a Florida firm, Cybernetics and Systems, paid the government $30 million in penalties for claiming falsely that it had contacted borrowers before throwing their loans into default and requesting payment from the government for the “defaulted” loans. In 2001 Sallie Mae paid a much smaller sum, $3.4 million, to settle a case involving a similar practice.

        *

        In the heyday of big lending, before an investigation by the office of the Attorney General of the State of New York led to a crackdown, financial aid administrators at one institution after another were gifted, bribed and otherwise blandished by the major loan companies to establish so-called “preferred lender” programs that channeled their students toward those companies. In 2007, financial aid officials David Charlow of Columbia University and Ellen Frishberg of Johns Hopkins both left their posts under clouds because the New York AG’s investigation had exposed their ties to the lender Student Loan Xpress; Frishberg in particular became the lightning rod for publicity about the scandal.

        But the focus on two big-name schools actually obscured the fact that financial aid administrators in colleges across the country were found to have improper relationships with lenders, accepting their payments, owning their stocks. Sometimes lenders’ employees, rather than college financial aid staffers, actually served as loan counselors for students. Lenders’ logos appeared on athletic gear; lenders set up relationships with alumni associations to help business flow their way.

        The New York Attorney General’s office came on the scene very late in 2006, when then-AG Eliot Spitzer, just before assuming the governorship of New York State, identified the student lending business as ripe for investigation. A player of lesser standing than Sallie Mae, Education Finance Partners, had admitted to the AG’s office that it had given a college a piece of its business in return for being given “preferred lender” status and having student borrowers steered its way.

        Early in 2007, when Andrew Cuomo replaced Spitzer as AG, he immediately moved to investigate how wide the practice was and soon publicly identified several lenders and their complicit colleges. In a bold move, Cuomo also included colleges from outside New York State in his accusations that lenders and institutions were engaging in conflict of interest at student borrowers’ expense. Early on he came out swinging against Education Finance Partners and its “kickback” agreements with Baylor, Boston University, Clemson, Drexel, Duquesne, Fordham, Long Island, Pepperdine, St. John’s University, Texas Christian University, Washington University (St. Louis), the University of Mississippi and 48 other schools not named in public releases.

        Before the end of 2007, Cuomo had instituted disciplinary measures against Citibank, Sallie Mae, JP Morgan Chase, Bank of America, Wells Fargo, Wachovia and College Loan Corporation—the country’s largest student lenders—as well as Education Finance Partners and other smaller players. His investigation brought to light one abuse after another: one private lender who advertised interest rates “as low as” 7.15 percent was actually charging 16 percent on 40 percent of the loans it offered students. Cuomo’s office forced the termination of “preferred lender” agreements, gifts from lenders to college financial aid administrators, and arrangements allowing lender employees to serve as loan “counselors” in colleges all over the country.

        *

        This year, President Obama terminated the role of the large banks and private lending companies in the student loan business, a measure the Congressional Budget Office estimates will save the government $61 billion in subsidies over the next 10 years. The new rules also put a lower cap on monthly payments as a percentage of income, and on the number of years borrowers must go on paying.

        But fundamentally, Collinge says, borrowers are still up against the same odds as before, because the new rules do nothing to restore the protections borrowers of other types of loans enjoy.

        “I support [Obama's] program,” he says, “but it does nothing for students. It saves the government a ton of money, and more than that, the government also is getting the interest, where the lenders were getting the interest. But in terms of the predatory nature of the business, the system is the same. The bad guys are still going to be doing the same things they did before. Sallie Mae and NelNet will still be the people that decide whether a student defaults or not. Their collection companies will still be collecting debt. … The most damaging aspects of the system persist.”

        “I’ve got one primary wish,” Collinge adds. “Number one, bankruptcy protections have got to be re-established. The reason bankruptcy protections are so important is to prevent a predatory lending scheme from evolving. That will cause the federal government once more to have a stake in the success of the student rather than in the failure of the student.

        “They get 25 cents on the dollar—on average they get $123,000 back from the borrower on a student loan for $100,000. There’s no statute of limitations. … Sallie Mae often brags that they can predict very accurately who is going to default. They treat the people they predict will default much worse. They don’t grant them forbearances. At the root of it is [lack of] bankruptcy protections, which enables the whole system to start cycling up in this predatory fashion.”

        In 2007, with the financial crash looming, even a Sallie Mae executive was quoted in Time saying that it might be necessary to return to the older law allowing student loans to be discharged in bankruptcy after seven years, Collinge points out.

        Wish number two, Collinge says, is that the system would stop garnishing people’s Social Security. “I’ve gotten submissions [for the Student Loan Justice website] from senior citizens who couldn’t buy medications as a result of a percent of their income going for their loans,” he says.

        Wish number three is that the government would put a stop to the revocation of borrowers’ professional licenses—an irrational penalty, it would seem, since it not only cripples the borrower but even goes against the interest of the lender.

        What can borrowers struggling with a mountain of debt do in the meantime? They can tell their stories, says Collinge. They can follow the issue, join Student Loan Justice or kindred organizations at websites like forgivestudentloandebt.com, bankruptyourstudentloans.com, or projectonstudentdebt.org. They can support reform measures in Congress and in their states and transparency in financial aid practices at their local educational institutions.

        They should let their Congresspeople know about their situations. Sometimes—though rarely—a Congressperson has actually managed to get a constituent a measure of relief. “More important,” Collinge writes, “borrowers should contact their local officials because these representatives need to understand the depth, breadth, and seriousness of the student loan problem. … Student loan borrowers, particularly those whose debt has exploded to unmanageable proportions, need to realize that suffering in silence serves only to perpetuate a predatory lending system that is in critical need of reform.”

        Yeah…there isn’t a problem…HA!

        By the way…I have a job.

      • EnnEll

        Get A Job is obvious lying or has not done his homework. I bring home $1200 (from the TWO part time JOBS I could get after 18 months of unemployment) but the lenders are demanding $800 a month for repayment. After talking with the lenders about lower payments, I came away understanding that they are US Government sanctioned mafiosi. They may not come to my home and break my physical knees, but they are determined to break my financial knees. If any irresponsible person who accumulates $100,000 in gambling debt can declare bankruptcy to wipe out that debt, then I, a hard working citizen whose only crime was to educate myself so that I can be a better contributor to society, then I should also be able to declare bankruptcy when the fees alone added onto my loan have become more than twice the original debt.

      • EnnEll

        Get A Job is obvious lying or has not done his homework. I bring home $1200 (from the TWO part time JOBS I could get after 18 months of unemployment) but the lenders are demanding $800 a month for repayment. After talking with the lenders about lower payments, I came away understanding that they are US Government sanctioned mafiosi. They may not come to my home and break my physical knees, but they are determined to break my financial knees. If any irresponsible person who accumulates $100,000 in gambling debt can declare bankruptcy to wipe out that debt, then I, a hard working citizen whose only crime was to educate myself so that I can be a better contributor to society, then I should also be able to declare bankruptcy when the fees alone added onto my loan have become more than twice the original debt.

      • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

        fYI there is a class action suit pending against Sallie Mae for
        ampa student Cathelyn Gregoire is one of two named plaintiffs in a possible class action lawsuit, accusing the company of “systemic discriminatory practices” in marketing student loans to minority applicants.

        The suit, filed Dec. 17 in federal district court in Connecticut, alleges the company violated federal civil rights and lending laws by intentionally targeting higher-priced loans to students attending schools with high minority populations.

        • Get A Job

          What does this have to do with your allegations of not being served proper summons in the legal action brought against you by SallieMae?

        • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

          I already addressed that so just read

      • DRA

        And your ‘unique financial situation’ would not benefit from a straight-forward, low simple interest “plain vanilla” loan?

        Sort of like the health care industry fought tooth and nail to stop Single Payer because it was a straight forward, ‘plain vanilla’ product?

        • Get A Job

          No, my unique situation would not benefit from a plain vanilla loan.

          Here is why.

          I pay my bills on time and have a very good credit score. In order for everyone to have a low cost, plain vanilla loan, those who have good credit and attributes will be supplementing the costs of those who do not. This is wrong.

          Those who have managed their finances well should be rewarded through a lower cost of credit. Those who have not should pay a higher rate due to the additional risk they pose.

          Car insurance is a good example. Bad drivers pay higher rates and good drivers pay lower rates. Why should a loan be any different?

          There are millions of people whose needs are each different. To force a “one size fits all” credit product on us to appease those who (1) have poor credit scores and (2) can’t manage their finances is wrong. It’s socialism.

    • Get A Job

      I am having difficulty understanding the concern with student loans obtained from private sources.

      It is unfair and inaccurate to label private student loans as “predatory”. Before each student loan is made, the applicant is provided with disclosures that clearly show the costs and fees involved as well as the repayment terms. Students willfully enter into these loans and no one is forced to take on the debt.

      Please explain how this is “predatory” or “unfair”.

      It is wrong to require private student loans to provide the same types of repayment terms that those from government souces do. This requirement will create two results that will be unfavorable to those needing to borrow for tuition needs. (1) It will increase the cost of those loans. Adding requirements that increase risk will cause the costs to rise to compensate for the additional risk. And yes, it will increase the risks to lenders. Increasing the uncertainty of when payments will be received substantially alter the risks involved with these types of loans. (2) Some private lenders may choose to cease offering student loans – limiting the options for applicants.

      Not to be contrary, but I do not believe Mr. Matos’ example of a student paying 50% or more of their income for student loans is typical or average. Certainly, there are unique situations that may rarely result in a student paying that much of his or her income in student loan debt. But this example is an outlier and not typical.

      Unfortunately, people do get into financial trouble. People lose jobs, get divorced, encouter medical problems, etc. There are situations that result in someone having difficulty in making payments. But these situations are most often the result of the borrower’s situation, not the result of lender action.

      Let’s keep student loan options open. Please don’t create a “plain vanilla” student loan product that all private lenders must offer. Requirements such as this will result in fewer choices and higher expenses. It will also result in fewer options to meet my unique financial situation.

  • Felipe Matos

    It is with great hope and prayer that you Professor help re-establish a fundamental protection that has been taken away by lobbyist and their successful attempts at making slaves of people going to college with the hopes of getting the American dream only to wind up as indentured servants to a corrupt and predatory lending system. Private student loan companies are reaping the benefits from federal protection but do not offer the same repayment options as the government. I hope that you truly stand for what is fair and right when it comes to our ability to make a living as Americans. Going to college should not be a mistake but a means to educate yourself and become a productive contributing member to society. How can students stimulate an economy when nearly 50% or more of their income on a monthly basis goes to paying back student loans? They can’t buy a car, a house or even get married or afford children because of these predatory lending systems. I am in full support of restoring bankruptcy to the student loans for those that truly need it. Please restore what needs to be restored. Banks got a bailout when the people that are hurting need it more.

  • Get A Job

    Why isn’t Elizabeth Warren allowing herself to be held accountable at Senate confirmation hearings?

    She and the administration are obviously holding her out as the leader of the CFPB. But through careful description of her title and role, they have managed to use political trickery to circumvent the confirmation process required for heads of major government agencies.

    Where is the accountability for that?

    Elizabeth Warren testified as to the following “…it is essential that the CFPB be accountable for its efforts moving forward.”

    The administration has yet to allow Ms. Warren to go through the Senate confirmation process. Why not? What is there to hide? If the CFPB is to be totally transparent, then why not go through the required process to confirm her as the leader of the organization?

    If Ms. Warren wants to require full and clear disclosures from financial providers, she needs to put her money where her mouth is and to fully disclose herself to the American people.

  • Get A Job

    Why isn’t Elizabeth Warren allowing herself to be held accountable at Senate confirmation hearings?

    She and the administration are obviously holding her out as the leader of the CFPB. But through careful description of her title and role, they have managed to use political trickery to circumvent the confirmation process required for heads of major government agencies.

    Where is the accountability for that?

    Elizabeth Warren testified as to the following “…it is essential that the CFPB be accountable for its efforts moving forward.”

    The administration has yet to allow Ms. Warren to go through the Senate confirmation process. Why not? What is there to hide? If the CFPB is to be totally transparent, then why not go through the required process to confirm her as the leader of the organization?

    If Ms. Warren wants to require full and clear disclosures from financial providers, she needs to put her money where her mouth is and to fully disclose herself to the American people.

  • gkmtn

    I am interesting in viewing this hearing but the House page has a version on it that cannot be opened in a Mac — can you provide one that we can all access?

  • gkmtn

    I am interesting in viewing this hearing but the House page has a version on it that cannot be opened in a Mac — can you provide one that we can all access?

  • Get A Job

    “Accountability was a central policy rationale for the establishment of the CFPB, and it is essential that the CFPB be accountable for its efforts moving forward.”

    Those are some of the words spoken by Elizabeth Warren in front of Congress recently.

    As part of the checks and balances of our federal government, a way to hold people accountable, the Senate is required to confirm the leaders of major federal agencies.

    The Consumer Financial Protection Bureau is one of those major agencies.

    Elizabeth Warren has yet to appear in front of the Senate in a confirmation hearing. Yet, here she is, leading the formation of the Consumer Financial Protection Bureau.

    As someone who is touting accountability and transparency, she and the administration aren’t following their own words. It is hypocritical for Ms. Warren to demand transparency and accountability from the nation’s financial industry when she herself will not permit herself to be questioned by the Senate.

    How can the head of this new agency be permitted to hide? Elizabeth Warren is not above the law. She is not above being held accountable. She is not above being questioned by the Senate.

    It is a shame that we have a person leading this agency talking out of both sides of her mouth.

    “Do as I say, not as I do” should be the motto for Ms. Warren and the CFPB.

    • Felipe Matos

      WOW. It is so obvious you are for the lending industry or a share holder of some type. Afraid you are about to lose your money train. Get ready cause its happening. And soon. The American people that are for this and that is a majority will cause this change. People truly struggling will get the relief they need. I know it. Professor Warren I support you.

      • Get A Job

        Felipe:

        You don’t know me, or anything about me.

        I simply have a different point of view.

        I am someone who pays their bills on time, lives within their means, and doesn’t expect a gift or bailout.

        I am concerned that our nation has become one in which its citizens feel “entitled”. Can’t pay our bills? Declare bankruptcy. Financially distressed? Let the government pick up the tab. Collectors calling? File a lawsuit.

        In the end, someone has to pay. Nothing comes for free.

        You received an education. Someone paid. It sounds like it was funded by a student loan. And now you are having difficulty paying.

        I am not judging. I am sorry that you are having difficulty. However, is that my fault? Should I have to pay for you? Did anyone force you to obtain the loan?

        If you don’t pay your loan, just give back the degree. After all, if it were a car, you would have to give that back, wouldn’t you?

        And, in case you didn’t know, they don’t provide gambling loans.

        • Fmatosjr

          I am no talking about federally backed loans I’m talking about private loans that have the benefits of federally funded loans but don’t offer the same repayment options. Bottom line is that private loans are like credit cards with rates that go as high as 30%. Federally funded loans have IBR payments and the like making it easier. Private loans dont offer that, nor do the give the consumer right of refinancing, truth in lending and the like. I want to pay my loans and do but if I have legitimate hard times I should be allowed the same treatment any other distressed debtor with legitimate problems the opportunity to a fresh start. I agree that taxpayers should not pay but the options offered now on federal loans help that. Private loans don’t cost taxpayers anything and should be treated like any other consumer debt like a mortgage or credit card.

          • Get A Job

            I believe you are confused about the situation.

            A private student loan, is just that, a student loan provided by a private, non-government lender. The lender establishes the terms, rates, rules before the loan is made.

            There is no requirement that private student loans are to have the same repayment options as those provided by a government agency. Nor should there be such a requirement.

            Why should the government dictate what terms and conditions that every loan should follow?

            I disagree that hard times create a right to be the same treatement as other distressed debtors. To begin with, the statement is too broad. Exactly what is “the same treatment as other distressed debtors”?

            And why should distressed debtors with legitimate problems be given the right to a fresh start? What are “legitimate problems”? What are “illegitimate problems”?

            What do you say to the people who pay their bills and loans on time? What incentive would those folks have to pay on time if all persons unable to pay due to “legitimate problems” are placed into the same position to give them a “fresh start”?

            I am sorry to say this, but yes, people have problems. And those that have problems need to deal with those problems. No one has the right to make their problems my problems.

            The other statement you make that is nonsensical is the one that you “agree taxpayers should not pay but the options offered now on federal loans help that.” What?

            The reason private student lenders are willing to offer these types of loans, which are higher in risk, is in large part due to the protections afforded in bankruptcy law to those loans. Private student lenders don’t have a federal backstop. If a private loan goes into default, there is no federal payment to make the lender whole.

            If private student lenders are required to forego the bankruptcy protection, mark my words, the private student loan market will dry up. No more private student loans.

            Will a nation without private student loans make things better? Or worse?

            What most persons don’t understand here on these blogs is the economic principle of “risk versus return”. The more risk an instrument poses, the higher the return has to be in order to compensate adequately for the risk. That’s why credit card rates are so much higher than mortgage loan rates. Credit card loans have no collateral. In bankruptcy, they typically get wiped out with the lender bearing the entire loss. Is it any wonder credit card rates are higher? The same holds true for student loans.

            If you don’t like private student loans then don’t get one. Stay away. Use another funding source. If they are that horrible, then don’t apply for one.

      • Get A Job

        Let’s get down to some facts.

        You state in your post above “People truly struggling will get the relief they need. I know it.”

        OK Felipe. Tell us. How will the CFPB give these “people truly struggling the relief they need”?

        How about some specifics instead of just the normal bull and emotional jargon?

        • Get A Job

          Felipe,

          How about answering my simple question?

    • Felipe Matos

      WOW. It is so obvious you are for the lending industry or a share holder of some type. Afraid you are about to lose your money train. Get ready cause its happening. And soon. The American people that are for this and that is a majority will cause this change. People truly struggling will get the relief they need. I know it. Professor Warren I support you.

  • Get A Job

    “Accountability was a central policy rationale for the establishment of the CFPB, and it is essential that the CFPB be accountable for its efforts moving forward.”

    Those are some of the words spoken by Elizabeth Warren in front of Congress recently.

    As part of the checks and balances of our federal government, a way to hold people accountable, the Senate is required to confirm the leaders of major federal agencies.

    The Consumer Financial Protection Bureau is one of those major agencies.

    Elizabeth Warren has yet to appear in front of the Senate in a confirmation hearing. Yet, here she is, leading the formation of the Consumer Financial Protection Bureau.

    As someone who is touting accountability and transparency, she and the administration aren’t following their own words. It is hypocritical for Ms. Warren to demand transparency and accountability from the nation’s financial industry when she herself will not permit herself to be questioned by the Senate.

    How can the head of this new agency be permitted to hide? Elizabeth Warren is not above the law. She is not above being held accountable. She is not above being questioned by the Senate.

    It is a shame that we have a person leading this agency talking out of both sides of her mouth.

    “Do as I say, not as I do” should be the motto for Ms. Warren and the CFPB.

  • Felipe Matos

    WOW, GET A JOB. It is so obvious you are for the lending industry or a share holder of some type. Afraid you are about to lose your money train. Get ready cause its happening. And soon. The American people that are for this and that is a majority will cause this change. People truly struggling will get the relief they need. I know it. Professor Warren I support you. By the way. Why did you delete my answer to you earlier “Get A Job” and I have one by the way.

    Here it is again so you can’t delete it.

    It’s a jaw-dropStudent Debtping claim, but one that Alan Collinge, founder of StudentLoanJustice.org, a consumer advocacy group, is confident is true.

    The Wall Street Journal ran an interesting piece last week suggesting the federal government collects a hefty portion of defaulted student loans. But Collinge – who was quoted in the story – argues that it didn’t quite paint the real picture. “After paying the companies that actually collect the loans and other costs, the U.S. Department of Education expects to recover 85% of defaulted federal loan dollars based on current value,” says the WSJ, noting that the percentage of student loan collections are relatively huge compared to collections on other defaulted consumer credit. Banks, for example, might retrieve 10 cents for every dollar from past due credit cards.

    But what the article doesn’t explain, Collinge tells me, is that the government is collecting 85% on hugely inflated loans. “The current value of the default portfolio includes principal plus interest at time of default, plus a tremendous amount of interest that accrued after default.”

    And therein lies some possible profit and perhaps a serious, twisted incentive to offer students six-figure loans they will most likely never be able to repay. ”Given a current defaulted loan portfolio of approximately $60 billion, the amount of revenue this represents to the Department of education is in the tens of billions of dollars,” writes Collinge in his self-published report.

    and read this!

    Student Loan Debt, Reframed
    March 16, 2011

    WASHINGTON — Much of the discussion about college student debt revolves around the 15 percent of borrowers who default on their loans, with federal policies assessing institutions’ quality in part on the proportion of their graduates who default and advocates for students pushing to win (back) bankruptcy protections for those who face that crushing fate.

    Yet all the attention to that relatively small (but growing) slice of borrowers tends to create the impression, says Alisa Cunningham, a researcher at the Institute for Higher Education Policy, that “everyone else” is in just fine shape, debt-wise. Yet a study released Tuesday by the nonprofit think tank suggests otherwise, showing that a majority of borrowers at least delay some loan payments, and a full quarter (26 percent) actually go into delinquency on their debt at some point during their first five years of repayment.

    And those delinquent borrowers face some if not all of the painful ramifications of the higher-profile loan defaulters, including damage to their credit scores and future borrowing ability, and are far less likely to finish college than are their peers who pay off their loans on time, the study finds.

    “The default figures lead to a misleading impression that few students are struggling,” says Alisa F. Cunningham, vice president of research and programs at the higher ed policy institute and a co-author of the paper, with Gregory Kienzl, IHEP’s director of research and evaluation. Defaults alone do not “fully capture the extent of the problems that many borrowers are facing.”

    The federal government has held colleges accountable for the rates at which students at individual colleges default on their federally subsidized loans since the early 1990s, on the theory that doing so would weed out fraudulent schools and force other institutions and lenders to take the issue of student debt more seriously. The rates fell sharply through the 1990s and early part of the 2000s, before edging up in recent years as graduates’ economic prospects dimmed.

    Critics have long argued, though, that the government’s method of calculating default rates may mask many struggling borrowers, especially if colleges — to avoid higher default rates that can threaten their students’ access to federal financial aid — encourage them to take advantage of deferments, forbearances, and other options that allow them to postpone repayment. (The Education Department’s proposed regulation to require for-profit colleges to show that they are preparing students for “gainful employment” would count borrowers who are in deferment or forbearance as not in full repayment, to the dismay of career college officials.)

    The study by the Institute for Higher Education Policy examined the records (provided by five large guarantors of federal student loans) of 8.7 million borrowers who entered repayment between October 1, 2004 and September 30, 2009, with a focus on about 1.8 million borrowers who entered repayment in 2005.

    As seen in the table below, slightly more than a third of the borrowers in the 2005 cohort made all their payments on time, and 15 percent had defaulted within five years of entering repayment. The rest were granted deferments and/or forbearances, and a total of 26 percent became delinquent on their loans, but did not default on them — at least within the five-year repayment period studied (an important qualification.)

    Repayment Status of Borrowers Who Entered Repayment in 2005
    Timely Repayment 37%
    Deferment Only (in-school enrollment) 7%
    Deferment Only (economic hardship) 4%
    Forbearance Only 6%
    Forbearance and Deferment 6%
    Delinquency Only 5%
    Delinquency and Deferment 5%
    Delinquency and Forbearance 8%
    Delinquency with Deferment/Forbearance 8%
    Default 15%

    Borrowers at for-profit colleges (two-year and four-year) were likelier than their public and private nonprofit college peers to default, and likelier than other four-year colleges to become delinquent on their loans. Borrowers who had attended public two-year colleges were likelier than other student loan borrowers to have delinquencies, although far smaller proportions of community college students borrowed than did students in other sectors.

    The fact that there are two delinquent borrowers for every defaulter — and that at least some of the delinquent borrowers may well fall into default at some point beyond what was captured in the five-year window — suggests that policy makers and the government need to pay more attention to delinquent borrowers, the researchers said.
    — Doug Lederman

    • Get A Job

      Felipe:

      Thanks for the great article above. I am glad you posted it here because it essentially makes my point.

      The article says that only a third of those student loan borrowers made all of their payments on time. It also says that a very high percentage of student loan borrowers are delinquent or in default.

      Student loans are risky from a lending standpoint.

      Given these high default and delinquency rates, lenders need protection. Thus, this is likely why our government has determined that student loans should not be dischargable in bankruptcy.

      If student loans could be easily wiped out in bankruptcy, what incentive would there be for a newly minted college graduate to pay their loans? Get a degree, declare bankruptcy before getting a job, wipe the debt slate clean and then earn an income – free of student loan payments. There is a moral hazard to eliminating the bankruptcy provisions.

      That is my point.

      But let me ask you – what is your solution?

      Instead of just complaining about this issue – tell us what you would propose as a solution.

      What are you going to do to protect lenders if the bankruptcy protections are taken away?

      Please stop throwing stones and complaining. Anyone can do that. What we need are suggestions and solutions – not sticks and stones.

      • Get A Job

        Hey Felipe Matos:

        I asked some straightforward questions above.

        Again, I ask, what is your solution?

  • Felipe Matos

    WOW, GET A JOB. It is so obvious you are for the lending industry or a share holder of some type. Afraid you are about to lose your money train. Get ready cause its happening. And soon. The American people that are for this and that is a majority will cause this change. People truly struggling will get the relief they need. I know it. Professor Warren I support you. By the way. Why did you delete my answer to you earlier “Get A Job” and I have one by the way.

    Here it is again so you can’t delete it.

    It’s a jaw-dropStudent Debtping claim, but one that Alan Collinge, founder of StudentLoanJustice.org, a consumer advocacy group, is confident is true.

    The Wall Street Journal ran an interesting piece last week suggesting the federal government collects a hefty portion of defaulted student loans. But Collinge – who was quoted in the story – argues that it didn’t quite paint the real picture. “After paying the companies that actually collect the loans and other costs, the U.S. Department of Education expects to recover 85% of defaulted federal loan dollars based on current value,” says the WSJ, noting that the percentage of student loan collections are relatively huge compared to collections on other defaulted consumer credit. Banks, for example, might retrieve 10 cents for every dollar from past due credit cards.

    But what the article doesn’t explain, Collinge tells me, is that the government is collecting 85% on hugely inflated loans. “The current value of the default portfolio includes principal plus interest at time of default, plus a tremendous amount of interest that accrued after default.”

    And therein lies some possible profit and perhaps a serious, twisted incentive to offer students six-figure loans they will most likely never be able to repay. ”Given a current defaulted loan portfolio of approximately $60 billion, the amount of revenue this represents to the Department of education is in the tens of billions of dollars,” writes Collinge in his self-published report.

    and read this!

    Student Loan Debt, Reframed
    March 16, 2011

    WASHINGTON — Much of the discussion about college student debt revolves around the 15 percent of borrowers who default on their loans, with federal policies assessing institutions’ quality in part on the proportion of their graduates who default and advocates for students pushing to win (back) bankruptcy protections for those who face that crushing fate.

    Yet all the attention to that relatively small (but growing) slice of borrowers tends to create the impression, says Alisa Cunningham, a researcher at the Institute for Higher Education Policy, that “everyone else” is in just fine shape, debt-wise. Yet a study released Tuesday by the nonprofit think tank suggests otherwise, showing that a majority of borrowers at least delay some loan payments, and a full quarter (26 percent) actually go into delinquency on their debt at some point during their first five years of repayment.

    And those delinquent borrowers face some if not all of the painful ramifications of the higher-profile loan defaulters, including damage to their credit scores and future borrowing ability, and are far less likely to finish college than are their peers who pay off their loans on time, the study finds.

    “The default figures lead to a misleading impression that few students are struggling,” says Alisa F. Cunningham, vice president of research and programs at the higher ed policy institute and a co-author of the paper, with Gregory Kienzl, IHEP’s director of research and evaluation. Defaults alone do not “fully capture the extent of the problems that many borrowers are facing.”

    The federal government has held colleges accountable for the rates at which students at individual colleges default on their federally subsidized loans since the early 1990s, on the theory that doing so would weed out fraudulent schools and force other institutions and lenders to take the issue of student debt more seriously. The rates fell sharply through the 1990s and early part of the 2000s, before edging up in recent years as graduates’ economic prospects dimmed.

    Critics have long argued, though, that the government’s method of calculating default rates may mask many struggling borrowers, especially if colleges — to avoid higher default rates that can threaten their students’ access to federal financial aid — encourage them to take advantage of deferments, forbearances, and other options that allow them to postpone repayment. (The Education Department’s proposed regulation to require for-profit colleges to show that they are preparing students for “gainful employment” would count borrowers who are in deferment or forbearance as not in full repayment, to the dismay of career college officials.)

    The study by the Institute for Higher Education Policy examined the records (provided by five large guarantors of federal student loans) of 8.7 million borrowers who entered repayment between October 1, 2004 and September 30, 2009, with a focus on about 1.8 million borrowers who entered repayment in 2005.

    As seen in the table below, slightly more than a third of the borrowers in the 2005 cohort made all their payments on time, and 15 percent had defaulted within five years of entering repayment. The rest were granted deferments and/or forbearances, and a total of 26 percent became delinquent on their loans, but did not default on them — at least within the five-year repayment period studied (an important qualification.)

    Repayment Status of Borrowers Who Entered Repayment in 2005
    Timely Repayment 37%
    Deferment Only (in-school enrollment) 7%
    Deferment Only (economic hardship) 4%
    Forbearance Only 6%
    Forbearance and Deferment 6%
    Delinquency Only 5%
    Delinquency and Deferment 5%
    Delinquency and Forbearance 8%
    Delinquency with Deferment/Forbearance 8%
    Default 15%

    Borrowers at for-profit colleges (two-year and four-year) were likelier than their public and private nonprofit college peers to default, and likelier than other four-year colleges to become delinquent on their loans. Borrowers who had attended public two-year colleges were likelier than other student loan borrowers to have delinquencies, although far smaller proportions of community college students borrowed than did students in other sectors.

    The fact that there are two delinquent borrowers for every defaulter — and that at least some of the delinquent borrowers may well fall into default at some point beyond what was captured in the five-year window — suggests that policy makers and the government need to pay more attention to delinquent borrowers, the researchers said.
    — Doug Lederman

  • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

    not only are they making money they will steal it too
    This is what is happening to me

    In 2002 My son wanted to attend Chubb Institute in New York. When applying for financial aid we were told that before he could be considered for any other aid I had to apply for a parents loan. Given that I was only making 250 a week and had just had an auto repossessed I told the financial aid office I was certain I would be denied. I filled out the application and was never told I had been granted a loan for over 13,000 so we thought that with his own federal loan they had found grants for him.

    In February 2004 a lawsuit was filed against me in NY By Sallie Mae. They claim to have given service to someone they state was a “co-tenant” named Jorge Torres. At no time have I ever lived with anyone by that name. The owner of the house I lived in is Juanita And Julio Torres who are my aunt and uncle. They have since filed in Florida to recognize this judgment and have stated they sent me a copy at 21609 Sally St SE Palm Bay Fl. My address is 1069. They then sent a summons for a deposition to 31069 Sally st. The process server located me due to her ability to figure out that there is no address as stated on her paperwork. During the deposition their attorney asked me if my address was 21069 Sally St and I said no. He then asked me what it was and I provided him with the correct address Last month they filed for a garnishment with no notice to me whatsoever. I asked their attorney for a copy of the promissory note they claim I signed, it took him in excess of 30 days to get it to me and only after I notified him that he failed to do so and while the signature is close it does not appear to be mine. The copy of his letter prefacing the copy of a promissory note shows he used the address he knew to be invalid. This leads me to believe he deliberately did so use a fake address in order to prevent me from any self defense Additionally I had asked 2 other collection agencies for this beginning in 2008 and their current attorney has chosen to NOT send me a copy of all pertinent court documents filed here in Florida including the garnishment at to my correct address and in all likelihood has told the court he has while using an address he knows is false in order to once again deprive me of my rights

    While I am filing in Florida to have the garnishment removed I must also file in NY to have this vacated. If Sallie Mae and their representative engages in this type of fraud here in Florida it’s not much of a stretch to conclude they engaged in sewer service in NY and have probably done so to many others.

  • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

    not only are they making money they will steal it too
    This is what is happening to me

    In 2002 My son wanted to attend Chubb Institute in New York. When applying for financial aid we were told that before he could be considered for any other aid I had to apply for a parents loan. Given that I was only making 250 a week and had just had an auto repossessed I told the financial aid office I was certain I would be denied. I filled out the application and was never told I had been granted a loan for over 13,000 so we thought that with his own federal loan they had found grants for him.

    In February 2004 a lawsuit was filed against me in NY By Sallie Mae. They claim to have given service to someone they state was a “co-tenant” named Jorge Torres. At no time have I ever lived with anyone by that name. The owner of the house I lived in is Juanita And Julio Torres who are my aunt and uncle. They have since filed in Florida to recognize this judgment and have stated they sent me a copy at 21609 Sally St SE Palm Bay Fl. My address is 1069. They then sent a summons for a deposition to 31069 Sally st. The process server located me due to her ability to figure out that there is no address as stated on her paperwork. During the deposition their attorney asked me if my address was 21069 Sally St and I said no. He then asked me what it was and I provided him with the correct address Last month they filed for a garnishment with no notice to me whatsoever. I asked their attorney for a copy of the promissory note they claim I signed, it took him in excess of 30 days to get it to me and only after I notified him that he failed to do so and while the signature is close it does not appear to be mine. The copy of his letter prefacing the copy of a promissory note shows he used the address he knew to be invalid. This leads me to believe he deliberately did so use a fake address in order to prevent me from any self defense Additionally I had asked 2 other collection agencies for this beginning in 2008 and their current attorney has chosen to NOT send me a copy of all pertinent court documents filed here in Florida including the garnishment at to my correct address and in all likelihood has told the court he has while using an address he knows is false in order to once again deprive me of my rights

    While I am filing in Florida to have the garnishment removed I must also file in NY to have this vacated. If Sallie Mae and their representative engages in this type of fraud here in Florida it’s not much of a stretch to conclude they engaged in sewer service in NY and have probably done so to many others.

    • Get A Job

      Dear Alice:

      Let me get this straight.

      You applied for a parent loan, but were never informed that you were approved.

      You never signed any loan documents for a parent loan, but they gave your son $13,000 anyway.

      You and your son never received any information, prior to the legal actions of Sallie Mae, that you had obtained a parent loan.

      No one in your family questioned where the $13,000 came from that funded your son’s education.

      Right.

      Sorry, but I don’t believe you.

      It does sound like you are the victim of clerical errors, errors in proper address numbers. I would be upset about that as well.

      But is that “fraud” as you put it? I think not.

      Here are a few questions?

      Did you get the money? It sounds like the answer is yes.

      Did you pay the money back on time? It sounds like the answer is no.

      So, you got the money, and you didn’t pay it back. Now the lender wants payments.

      And you say this is fraud. I think you may be the one committing the fraud here.

      Yes, clerical errors should be corrected. They should get your address right. But, regardless of the error on the address, they found you, served notice on you, and you are aware of the issue.

      I see no fraud.

      The other thing going against you is the fact another lender made you a loan to buy a car. You promised to repay the loan, but you did not. So the lender reposessed the car. Was that fraud too?

      Please stop wasting our time on these blogs with these types of stories where it is very apparent that no fraud has been committed. Pay your bills and loans on time and people won’t be taking legal action against you.

      • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

        Explain the creation of a fictitious character to claim proof of service. I suppose you will say this was “a clerical” error. Sewer service is FRAUD. MAking sure I cannot defend myself in court by using false information EVEN AFTER a deposition IS FRAUD. And YES the school was probably a party to all this since MANY schools AND SALLIE MAE were investigated in New Ypork for “improper” relationships and Sallie Mae entered into a settlement with the State of New York rather than have State Attorney General Cuomo dig deeper. Just so you know several law firms in NY are also being investigated for sewer service and at this time there are 100′s YES 1000′s of default judgements being vacated for FRAUD!

        • Get A Job

          Alice,

          Did you, or did you not, sign the promissory note for the parent loan?

          • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

            nope!
            just the application and after waiting 120 days for Sallie Mae’s attorney to get me a copy of what they claim is the promissory note it does not look like my signature…..close but the formation of several letters is off

          • Get A Job

            If the promissory note is not signed by you and is a forgery, you should have no problem getting a court of law to declare the note as a forged document, freeing you from the obligations contained in the note.

      • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

        here’s some answers

        Given that I was only making 250 a week and had just had an auto repossessed I told the financial aid office I was certain I would be denied. I filled out the application and was never told I had been granted a loan for over 13,000 so we thought that with his own federal loan they had FOUND GRANTS for him.

        My”family” is just my son since I am a widow and have been widowed since 1991. My parents, in case you want to cover that too, died in 1968 and 1971

        To get paid a company/creditor has to send bills and or at least supply you with a schedule of payment due dates

        And I say it’s fraud because the proof of service filed in NY claimed to have given service to a co-tenant which I never had and no one at that address bears that name. I can only guess that the process server saw J Torres and decided to make up the first name

      • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

        to answer your last question……….9/11 happened and the company I worked for shut down

  • Fmatosjr

    Hey people don’t let this GET A JOB guy that is clearly for the bankers intimidate you. I’ve seen that screen name on several sites for the restoration of Bankruptcy to student loans always saying the contrary. Don’t let him scare you to type what is the truth about these loans. He’ll attack me next and everyone else on here. Just keep posting the truth and soon we will have what is right done for us.

    • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

      if he’s not a collector maybe he workss for Sallie Mae

      • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

        for those of you interested here are links regarding what has happened in NY with sallie Mae and law firms engaging in sewer service in order to obtain default judgements

        these are 2seperate cases but ………..
        http://www.newyorkbankruptcyhelp.com/sallie-mae-settles-with-ny-ag-in-student-loan-probe-to-pay-2-million/

        http://www.abajournal.com/news/article/new_york_ag_sues_35_law_firms_seek_to_void_100000_default_judgments/

        • Get A Job

          Dear Alice:

          Your post is misleading.

          The link to the ABA Journal article does not even mention the words “Sallie Mae”. The article also says the law firms were not found to have engaged in any wrong doing. The article states that problem was with the process server hired by several law firms. The process server was allegedly telling law firms that persons were served when in fact they were not.

          How about getting your facts straight? Someone reading your post would be seriously misled if it weren’t for persons like me who do their research and shed light on the bull you are posting.

          In the article from “newyorkbankruptcyhelp.com” the same holds true. The article says nothing about SallieMae and the service of summons on persons being sued for non-payment. The article discusses SallieMae and its financial ties with universities and colleges. It says not one word about collection of delinquent debts or serving summons.

          Get your facts straight. Stop spreading false information.

          • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

            I was addressing yor question of fraud sincwe you so obviously chose to ignre that people they hired created a fictitious charter for “proof” of service…….thats what ONE article speaks about
            the other which your comments ignores shows that NYS went after Sallie Mae for improper relationships with schools

    • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

      I noticed he/she did not address the fictious character in NY. He/she wants to call using an invalid address used in court even after being given correct information an error. What I want to know is how can an attorney do this and think it won’t be noticed. He/she also does not address why it took so long to even get a copy of the promissory note.

    • Get A Job

      I am not attacking anyone. I am simply trying to provide honest answers and opinions related to this subject of these blogs.

      There are usually two sides to a story. I am telling one side – the side I truthfully believe is correct.

      If you don’t like your financial choice, shop around. There are many different companies, good companies, looking for good business.

      If your credit is poor, work on it. Improve your score. Yes, it takes time, but folks don’t typically get into financial trouble overnight.

      If you hate banks, don’t deal with them. No one is forcing you to. Use cash to transact your business.

      Not one of you have replied in a factual way to my posts. Facts only please. No emotions. No hearsay.

      I’m not casting stones. Just trying to have a factual and honest debate.

      • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

        Fact. the creation of a fictitious co-tenant is improper service and is ground to void a default judgement per Supreme Court Rules, Janove v. Bacon, 6 Ill. 2d 245, 249, 218 N.E. 2d 706, 708

        Fact, the NYS attorney general filed against 35 law firms for improper or sewer service

        Fact, the NYS attorney general filed against Sallie Mae for paying colleges and universities to steer student borrowers toward its loans

        Fact, new york settlement with Sallie Mae, the nation’s largest student lender. Reston, VA based Sallie Mae voluntarily agreed to adopt the Attorney General’s code of conduct governing student lending and contribute $2 million to a fund devoted to educating college bound students about their loan optiions

        Fact, there is litigation pending in Florida and Connecticut against sallie Mae for predatory practices against minority students

        • Get A Job

          Janove v. Bacon has absolutely nothing to do with your assertion above that “the creation of a fictitious co-tenant is improper service and is ground to void a default judgement per Supreme Court Rules, Janove v. Bacon…”

          I reviewed the case and found the following in the court’s order…

          “According to defendant’s answer and to the stipulation made below, the Stockyards Trust and Savings Bank, the original trustee, in 1933 “changed its corporate name” to the Stockyards Bank and Trust Company, and the latter “changed its name” to the Livestock National Bank of Chicago. Defendant does not deny that E.E. Crawford, on whom service was made, was an agent of the Livestock National Bank, nor does he allege that the Livestock National Bank received no notice of the suit. Under these circumstances we think that the fact that summons was directed to the Stockyards Trust and Savings Bank amounted only to a misnomer which cannot be taken advantage of in the present proceeding.”

          The issue raised surrounding the service of summons had nothing to do with a co-tenant. It was related to the fact the bank upon which a summons was served had changed its name. And then, the court goes on to say that this was “only a misnomer which cannot be taken advantage of in the present proceeding.”

          Obviously, you are not an attorney.

          Further, your information is false and intends to mislead readers of this blog.

          If you can’t post factual information, please don’t post anything at all.

        • Get A Job

          Dear Alice,

          Apparently you are not an attorney.

          The case you cite as supporting your point, Janove v. Bacon, doesn’t have anything to do with service of a summons on a co-tenant, nor does it have to do with anything related to improper service.

          Another post of false information.

          • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

            it has to do with fraud and voiding a judgement

          • Get A Job

            Alice, the case of Janove v. Bacon has absolutely nothing to do with fraud and voiding a judgement.

            In the case, a bank changed its name. A summons was served on an officer of the bank by the previous name of the bank. The judge ruled that the officer was served and had knowledge of the summons. The name of the bank, although incorrect, was not enough for the court to find there wasn’t proper service.

            What in the world does that have to do with fraud and voiding a judgement?

      • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

        I replied but you chose to relegate the response to “hearsay” In Sallie Mae’s filing in NY they claimed service to someone they claimed was my co tenant…no such person exists at the NY address

        you asked about the repo..Sept 11 happened and the company I worked for in NY shut down…no income makes it impossible to pay bills and you can verify with NYC labor statistics that for at least 3 years after Sept 11 many were unemployed to the point of expiring all unemployment benefits and having to go on welfare

        Fact the nys attorney has sued 35 law firms for sewer service such as I experienced
        Fact also in ny has Sallie mae been sued for improper relationships with schools
        Fact in connecticut and florida there is litigation pending for predatory lending by Sallie Mae to minority students

      • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

        now you answer this
        why do you think there is no fraud when a fictitious character was created serve the summons upon for the suit in NY

        • Get A Job

          I cannot answer your question. I was not there.

          If someone attempted to falsely claim a summons was served, when it actually was not, then I do believe fraud may have occurred.

          But the question remains, did you, or did you not, sign the promissory note?

          • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

            already answered that one too

          • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

            I’m pretty sure I have answered all your interrogatories and did not come up short since you rolled over on the fraud. so maybe you can explain as why the NYS attorney general investigated Sallie Mae for improper relationships and why, if Sallie Mae is so pure as you seem to believe, they settled for 2 million and why they agreed to establish a code of conduct. Even the SEC is looking into this

            http://www.msnbc.msn.com/id/18055629/ns/business-your_retirement/

          • http://pulse.yahoo.com/_KLRW2YOF36JAFPETCEVGOM5N4M alice c

            ease stop wasting our time on these blogs with these types of stories where it is very apparent that no fraud has been committed. Pay your bills and loans on time and people won’t be taking legal action against you. you said that first
            then back flipped
            then admitted there “may have been fraud as stated above…….Sallie Mae hired that firm and has been investigated for other types of improper behaviors…..they even settled in New York so why don’t you just face the fact that Sallie Mae like many other financial institutions does in fact engage in some shady practices.
            They have been accused of predatory lending practices with targeted demographics and are being sued for such in 2 states they are being sued for illegal collection practices and in one particular instance I have clearly demonstrated that they are capable of fraud. that is by your own admission above. Connect the dots. Where there is smoke there is fire. Your words remind me of Richard Nixon’s claim of “I am not a crook” in that they can be applied to Sallie Mae.

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