Sallie Mae is the latest student loan lender/collection agency to expand operations; MarketWatch.com reports that Sallie Mae has announced plans for a new credit center that will create about 1100 jobs. Premiere Credit, which specializes in collecting on delinquent loans, also recently announced plans to open a new location, expected to create 300 jobs.
It’s hard not to notice that while everyone else is struggling, collection agencies are suddenly expanding. Very disturbing trend.
Eric and Sheila Washington, pastors of Texas church Fishers of Men Worhsip Center, along with the church’s secretary and treasurer, have been charged by federal prosecutors with student loan fraud. From KHOU.com:
Prosecutors claim the accused would recruit church members who were students, file for student loans in their names and pocket the cash.
They are also accused of committing fraud against FEMA by overstating the number of Katrina victims their church was assisting.
The South Carolina Student Loan Corporation, the largest lender in that state, has announced that it will stop making private loans. In the current year, about 12,000 students rely on those loans to fund their education.
Guest Post by James Scott
This is a difficult story to tell – in part because I have to live it all over again, but also because it sounds like an exaggerated Lifetime movie, and I wonder at times if people think I made it up. I never put college on a pedestal or had the dreams that are so cliché of children. I grew up quick and spent most of my time trying to survive. I didn’t have time to dream, and it would have been too painful to try. Read more…
There is an excellent video clip on YouTube that shows Obama talking to a Wayne Community College student and her financial officer about her loan debt. Apparently, this is from this past June, but I didn’t come across it until today (thanks to Financial Aid Finder), and I thought it was worth posting.
At one point during the clip, the student (Marilyn Pace, who is studying to be a dental hygienest) breaks down in tears, and Obama comforts her. There isn’t really anything about substantive policy here, but I do think it bodes well for Obama that he has reached out to real people in real need and seems to understand that loans aren’t always the answer.
The Department of Education is rapidly becoming the only student loan consolidation option for new graduates, The Pittsburgh Tribune-Review reports today. The article noted that many lenders, including Sallie Mae, which I reported on previously, have suspended their consolidation programs because in the current credit climate, they say, it is no longer economical:
The Pennsylvania Higher Education Assistance Agency, PHEAA, suspended its consolidation program in February. Sallie Mae, Nelnet and Next Student – all among the top 10 consolidators in 2007 — followed suit. Of the top 100 consolidators, 68 have suspended consolidations, said Mark Kantrowitz of Cranberry, publisher of FinAid, an online resource about financial aid…
In July 2006, federal loans began to carry a fixed 6.8 percent interest rate, so there are now fewer benefits to consolidating, and it’s more expensive for lenders, said Martha Holler, a spokeswoman for student loan lender Sallie Mae.
“It’s just not economical to make these loans,” she said. “The current credit crisis; the turbulence in the capital markets would have to settle down (in order for Sallie Mae to resume consolidation loans.)”
This might not be such a big deal except that many private and state loans are ineligible for consolidation through the Department of Education, which means that consolidating doesn’t necessarily come with one of its biggest benefits anymore – one monthly payment instead of several.
The New York Times reports that bankruptcies rose nearly 8% between September and October, due to the ongoing economic crisis, particularly dropping home values and the credit crunch. Over 100,000 filings were made in October, the first time the number has gotten that high since the new, harsher bankruptcy law was passed in 2005. Additionally, people filing for bankruptcy have more debt than in past years:
A recent study found that the typical family who filed for bankruptcy in 2007 was carrying about 21 percent more in secured debts, like mortgages and car loans, and about 44 percent more in unsecured debts, like credit cards and medical and utility bills, than filers in 2001.
I was struck that this article didn’t mention student loans at all or the fact that it is nearly impossible to clear them in bankruptcy. The people interviewed certainly had sympathetic stories – homes lost to foreclosure, medical bills, etc., but I wondered about the other people out there – those who are having some of the same issues and can’t get relief through bankruptcy. How are they going to survive?