Wednesday, October 25, 2006

USA Today Article on Private Loans

Great article today in the USA Today that hits on a bunch of themes from yesterdays post regarding Loan to Learn in the broader context of rising student private student loan borrowing. One important piece at the end of the story is the discussion of the overly stringent bankruptcy protections in student lending. Sallie Mae throws out the consumer lending threat that without protections lenders can't offer cheaper loans. Deanne Loonin of the National Consumer Law Center smacks it right back at them:

Sallie Mae officials say that provision was needed to encourage lenders to offer private loans at reasonable rates.

"It's a loan being made to borrowers with no income, no near-term job prospects and no collateral," Goulding says. Giving additional bankruptcy protection to lenders, he says, "makes common sense."

Consumer groups counter that providers of private student loans don't deserve special bankruptcy protection, because there are no limits on the fees or interest rates they can charge borrowers. And because these loans lack protections included in federal loans, some borrowers could spend the rest of their lives paying off high-interest student loans, they say.

"The assumption is these people won't get stuck because college always works out financially," says Deanne Loonin, an attorney for the National Consumer Law Center. "I think that's a flawed assumption."


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