March 27, 2012

BLOOMBERG: Obama Relies on Debt Collectors Profiting From Student Loan Woe. “With $67 billion of student loans in default, the Education Department is turning to an army of private debt-collection companies to put the squeeze on borrowers. Working on commissions that totaled about $1 billion last year, these government contractors face growing complaints that they are violating federal laws by insisting on stiff payments, even when borrowers’ incomes make them eligible for leniency. . . . In failing health, after contracting hepatitis from a blood transfusion, Campos pleaded with Pioneer, owned by SLM Corp. (SLM), the nation’s largest student-loan company better known as Sallie Mae. He left a $40,000-a-year job at the Massachusetts health department when he got too sick to work and waited for a liver transplant. The 52-year-old former busboy, a naturalized U.S. citizen from El Salvador, earned bachelor’s and master’s degrees in the 1990s from Cambridge College in Massachusetts.”

Occupy the Department of Education! Or, you know, the White House. Just the kind of behavior you’d expect from the administration of President Goldman Sachs! (Bumped).

UPDATE: A reader emails:

Noticed your post regarding student loan providers engaging in hard-headed collection practices. You might want to also consider another feature of student loans that I believe resembles loan-sharking. After graduation, many students consolidate their loans into a single loan. This is because each year a student is in school, a new loan is made. Sometimes there are multiple loans in a single year, due to different kinds of eligibility, etc. This means that a graduating student can often have a half-dozen or more individual loans to manage. Student loan providers helpfully allow consolidation of all these loans into a single loan with a fixed interest rate. Now here’s the rub. Once consolidated, the loans cannot be refinanced and the borrower is locked to the same interest rate no matter how low market rates might go. There have been bills introduced to allow student loan refinancing, but so far the lenders have lobbied heavily against allowing the practice and the bills have failed. This means that a student who borrowed during a period of high rates is locked to those rates, potentially for decades, without any real recourse.

No name on this one. I am in administration now.

A report from the Dark Side!

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