Student Loans: Malpractices, Frivolous Lending, Helpless Lendees 1.Introduction As of 2012, a research (H.C. Whisett, 1) discovered that there are 37,000,000 Americans with outstanding student loans. Over 7,000,000 USA students borrowed from the biggest student loan provider, Sallie Mae…
Growth of student loans has been very noticeable yearly. Chart A shows the uptrend since the year 2000. Chart A In 2008, the number of borrowers in default of their monthly amortizations had accumulated $ 60 billion worth of default, according to Jen Haley (money.cnn.com), “about 2% - 4% of delinquent student loan debt is owed by students abroad”. That means they left the country to avoid debt payment they felt they could not afford. But Alan Collinge had written a book in 2009 describing student loans as the most oppressive debts. From actual experience of regularly paying his own student loans, he discovered that his account had been charged penalties for late payments each month even while he paid on schedule. He asked for the removal of those unwanted penalties by Sallie Mae. But that lender refused to do so. In his research, he discovered what appeared to be a scam in the Student Loan Industry. There was “lack of consumer protections…beneficial for student loan companies” (A. Collinge, 5) resulting in Sallie Mae’s $920 million profits in 2005 or a 228% increase in profits compared to the year 2000. The bulk of profits came from penalties charged to students. A review of this book by A. Collinge was made by Frederick S. Goethel, author of Legalized Loan Sharking Courtesy of Congress. He highlighted among other comments the fact that student loans cannot be removed by the filing of bankruptcy. Government allowed the actual interest rates to reach 29.9%. Another significant observation and comment came from Loyd E. Eskildson who said that as a result of the student’s burdensome debts, wages, Social Security, and even the disability benefits can be garnished at the expense of the borrower. The CEO of Sallie Mae had received the highest salary and the company was 2nd to the most profitable business in the USA while student borrowers are oppressed. The facts about student loans are first of all described in this project. Thereafter, various feedbacks should be considered in order to have an objective end-user assessment of the schemes currently made available to the students and parents. Both facts and feedback will then be analyzed in order to point out the logical recommendations to rescue borrowers from actual and potential difficulties. 2.Facts about US Student Loans as of the Present The Global Economic Intersection reported (ecointersect.com) that a survey was conducted by The Los Angeles Times in 2011 with 1.8 million borrowers of student loans. Findings showed 15% had defaulted while 26% were delinquent although not in default. And the lack of orientation of students and parents who borrow explained why borrowers were not well aware about the terms and conditions. This was considered a cause for the difficulties. A survey was conducted wherein 680 bankruptcy attorneys were the respondents in February 7, 2012, and the topic was about student loans. The National Association of Consumer Bankruptcy Attorneys (NACBA, 1-2) released the results of their survey, with 81% of them saying that student loan cases have increased significantly over the past 3 to 4 years. The average student loan in 2010 was $25,250. Those in the age bracket of 35-49 have increased their debt by 47%. Even parents who availed of student loans experienced growth in the average of their debt from $34,000 to $50,000. Those who defaulted can lose their ...
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(Student Loans: Malpractices. Frivolous Lending, Helpless Lendees Research Paper)
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