Bill introduced to discharge private student loans in bankruptcy

[treehugger1]

Just for laughs...A friend of mine said he would never have to completely pay off his student loans due to "natural causes."

[brainless twit]

I think it would be wonderful if SOMETHING changed with private student loans, whether it be allowing them to be discharged in BK or simply regulating what the lenders are allowed to do.

Two years before we actually filed BK, we were on the brink. I was commuting over an hour to go to college, and it became apparent that I would have to quit school and get a job. The gas money and "extras" (like food because commuters weren't allowed to buy a meal plan) were eating us alive. I met with my advisor, who told me to talk to the financial aid office and see if they could help me.

The financial aid director advised me to take out a private loan through Wells Fargo to pay off our credit card debt. That way I would be able to afford to stay in school, and I wouldn't have to start paying it back until I graduated! Also, she told me I would be able to consolidate it with my federal loans so the interest rate (9%) wouldn't matter. It seemed like the perfect solution, and with someone like her telling me it was a good idea, I just knew nothing bad would come of it. The only problem? Even though we eliminated our debt, our income didn't change. We were still using the CCs for things like groceries, high gas bills, and clothes because we couldn't afford to buy those things with my husband's paychecks.

Two months after I took out the loan, I got a bill for the first payment. I called Wells Fargo and explained that I was still in school, but they said I still had to make interest payments. This was NOWHERE in the paperwork I filled out for the loan. So on top of everything else, we had a new $150 payment each month. Last summer, before we filed BK, I requested a deferment and they gave me 2 months - but at the end of the two months, I owed interest AND principle for the two months, plus the regular interest payment for the current month. I called them again, and they said that was the policy. Oh, and by the way, since my last payment before the deferment was a week late, my interest rate was raised to 18%. Since the BK, it was raised again due to a "credit review" and I'm not even sure how high it is.

I am now paying $240 a month for 15 years (plus $330 for my consolidated loan). The original loan was for $9,500, and by the time I pay it off I will have paid $43,500. Maybe it's only fair that I couldn't include this loan in the BK, because I'm the one who borrowed the money. But I honestly feel like I was manipulated by someone who I thought was acting in my best interest. The customer service people at Wells Fargo are rude and unhelpful, which doesn't help matters. There is nothing I can do but pay the money and hope that I'm never late on a payment again, because I don't know if I can pay any more than I'm paying. I'm just thankful that I only borrowed the amount I did.

[paulka]

Oopsy, first try didn't work out here, lets try again.

[paulka]

I have to comment on this issue. I am a student with an extensive amount of student debt. I am extremely proud of my degree, and find it to be an investment in my future. Here is the problem I have... My school had almost no loan entrance counseling when I started school. My parents had no idea how the student lending process worked. I thought you could consolidate everything. I had no idea that there was a difference between private and federal loans. Fortunately, since this time loan counseling has increased dramatically, and students are being made aware of the dangers of incurring too much debt. The reason I support bill S.1561 is because the student lending industry needs to be called to task for taking advantage of kids that are just on the cusp of adulthood. Schools also need to be held accountable for some less than savory practices. I borrowed from my schools "preferred lender" list (and this is top tier University.. one of the Big Ten.) The list changed pretty much every year, and I thought these were my only lending options. This resulted in FOUR different private lenders, all with variable interest rates and skyrocketing fees. No effort was made to inform students of other lending options, with better interest rates and other clear repayment options. I have since become quite savy on student lending. I have copies of all of my promissary notes. They are ambiguous, and highly unethical. I do not believe federal loans should be dischargable. Taxpayers pay for those programs, and as far as I'm concerned making those dischargable equates to fraud. Why should the government and the people of this country foot the bill for anyone's degree paid for with federal dollars? However, a private lender charging up to 20% interest rates with the terms that are similar to an unsecured loan/credit card (in which a credit check was needed I might add....) Making those types of loans undischargable simply does not make sense. A person who is bankrupt cannot make any considerable contribution to society until they take care of the problem. We are losing more and more people from badly needed public sector jobs (social workers, teachers...) because their student loan debt is too outrageous to be able to accept such a position. It is the private student loan industry that brought on the debacle, not the kids trying to better their future. It's a simple case of capitalism and opportunism run rampant (seems to be an ongoing theme these days...)

[alyssa]

I went to a big ten school also. I loved it and wouldn't have it any other way... but with the thousands of students admitted every year there is no way they could have ever had any type of loan counseling. And that is really a shame because too many people end up like me and it's not right. They also had a list of lenders and I really thought they were the only ones approved by my school... that is the impression they gave me. The whole system is just screwed up and it's time the lenders get with it and stop taking advantage of people.

I just want private loans to be treated like any other loan. I love how someone said it is essentially an unsecured loan with the name student in the title.... That is the truth! So it should be treated the same as any other. My loans were based on my credit score. I could have taken out the maximum... there was no limit as long as I was credit approved. There is something wrong with that!! As I mentioned above about Astrive.... you can take out a max of $40,000/yr. As long as you are credit approved you can have it. Same with CFS. It is a huge huge huge problem.

If you support the bill then please call to make your senators aware. I called and the guy on the phone seemed interested in it.... and it sounded like he wasn't aware of the bill which means no one is calling.

There is no reason for treating private student lenders differently from any other type of creditor.

[treehugger1]

Alyysa, I seriously doubt the bill will get much support from students who are strapped with student loan debt. The majority of student loan debt is currently held through the guarantor agencies (in the billions of dollars is what I've heard). Why would anyone who cannot seek BK relief for guaranteed student loans, support a bill that benefits "private" debt versus "public" debt? The bill makes no sense to me. Cheers.

[rrockinggramma]

After reading here about the new bill being introduced and as a payor of 3 private Plato Education Loans for my son (no end in sight, been paying since 1999 to Wells Fargo, only thing that changes is the interest rate and the fees, have not paid much on principal since inception, payment has increased now to 300 a month for all 3 loans, orginally 150.00) I sent an email to my representatives in the senate and in congress. Well lo and behold I got a response today. (email) It will be interesting to see if Carl Levin really follows up but he said he was going to check into it and that a check and balance system needed to be in place especially if private lenders were taking advantage. So maybe . . ..

[jbr12]

I also email'd some senators about this bill and this is what I've got back so far:

Thank you for contacting me regarding investigations into the student lending industry. I appreciate receiving your views on this issue.

Higher education is an investment in the future of our nation. I believe it is in our national interest to provide students with a fair student aid program, with reasonable loan interest rates, so that all young adults have the opportunity to pursue higher education, without the burden of onerous debt. It is disturbing that some have taken advantage of the increasing need for students to accrue significant debt in the pursuit of higher education. I will continue to monitor the student lending industry, and I am hopeful that Congress will put in place strong measures to prevent abuse of the student lending system.

Please be assured that I will continue to work to increase federal support for higher education and to adequately fund student loan programs to ensure access for students to higher education at more affordable rates. Thank you again for contacting me.

Sincerely,
Carl Levin

[rrockinggramma]

lolololol that is exactly the letter I got. Can I spell form letter? LOLOLOLOL

[Carlysmom]

I know this thread is a little old but I wanted to comment on it. I completely agree with the OP that private loans should be dischargeable as they were based on credit and not Guaranteed SL's as the Staffords and Perkins loans are. I primarily have Staffords and one private loan, my private loan interest is 3x what my staffords are...it is rediculous. And i went back to school part time for a semester and I called the TERI loan people for an in-school deferement and they said I had used up my allowable 18 months in-school deferment. How absurd is that? So Freshmen have to start paying their loan back after 18 months?

Anyways, I wanted to interject that I work in the Bursar's Office/Student Debt Office of a major university and I cannot believe the amount of loans that these student's take out. Many times it appears that parents are doing all the paperwork for the student and telling them to sign here and here. I don't think they realize how much it really adds up. In my job I also collect on past due Perkins Loans, I work with these student's as much as I can because they really are hurting. Some of them don't even realize they have a Perkins Loan and think all of their loans are through "Citibank" or the likes. I really feel for these students taking these loans to pay for their education and I hope that they all get much higher paying jobs than I have and I went to the same university.

I will contact my Senators as well about this.