<p>gbesq- I'm sure that what you paid for law school 17 years ago is a small fraction of what such a law school education runs today - not even counting college. I'm not sure the private loan companies who have offered these loans and then bundled them up and sold them to outside investors have done anyone a favor, especially the taxpayers who will end up bailing them out (afterall, they are federally insured) when students find it impossible to pay back hundreds of thousands of dollars in loans in a declining economy in fields not quite as lucrative as lawyering. Only 6% of individuals in this country earn more than $100,000 per year. Btw, these types of loans are disappearing rather quickly. A lot of the kids who would like to borrow money are going to be out of luck in fairly short order. This should solve the army's recruiting problem <smirk>.</smirk></p>
<p>gbesq What's wrong with this system, well since you seem to be a lawyer... A few statements; first the SL industry is the only form of loans in this country wherein the usual protections such as bankruptcy, interest rate caps, the ability to refinace at a more favorable rate and other protections have been gutted. By what sense of right do such companies as SM, NN or etc be exempt from the lender/borrower regulations which are considered normal in other areas of the credit market? As a attorney you'd have to know these trends, gods know those of us in academia know about them.
Additionally,I have seen applications from these companies were the interest rates can be effectively brought above 30%, especially after a student finds difficulty paying the demands. The intent with tricks like this is to ensure borrowers can never pay the debt, default, and the companies then collect from both the government and the borrower. Albert Lord, of the Sallie Mae executive board as much admitted to this tactic at a shareholders meeting.
Additionally the conduct of the major companies in this arena has often been contemptuous of the very rule of law. The SM board has chosen to ignore the provisions of the NYS court settlement, which included ending their inappropriate 'services' to the universities. Now any other form of business would have been held for contempt or even charged under RICO for such blatant conduct. Additionally when a investigation was pending to check into major financial misconduct, lo and behold, the SM board sold their company into a private holding to avoid inquiry.
Last year, a former auditor for the department of education noted massive overbillings and interest collections on the part of NelNet. When this little 'oversight' was noted, Bush's secretary of education Spellings, allowed Nelnet to keep the 250+ million provided they did not do it again. In any normal assessment of 'right' that company should have been compelled to return that money, or should have been investigated.
And finally when you apparently graduated school, there were protections in place and such programs as student loans had not been turned into a cash cow for vampiric private holdings. And the trends of cutting pells, and direct federal loans and other programs had not yet jelled,
And no, these companies are not doing a 'service', what they are doing is using public money (the government loan insurance) to run amuck over the future of a generation. For those who went to school in the 60's, 70's 80's its not such an issue, because this industry had not reached the point where there was no control over abuses. But for those who finished school in the 90's and 00's they have been subjected to a situation where payment is often impossible, even if they are trying to do so.
So although the fraud and felony territory in this thread began with an individuals delusionary hope to avoid the traps of a rigged system...if a proper investigation was done into the activities of certain of these companies...no doubt some very high profile people would be charged with much more than the penny level fraud and conspiracy which began this thread.
What we have here is beyond simple definition of right and wrong, the abuses of the large players in the SL field, and complicity of government officials who contemptibly forgot their duty is to serve the peoples interest...has ruined a generation and may play a major role in bringing an impending economic collapse...that is a condition that Satan himself would admire, or even be jealous of...so what Igeller advocated is lollipop stuff if we are going to assess these events on a basis of morality...</p>
<p>Quote:</p>
<p>"first the SL industry is the only form of loans in this country wherein the usual protections such as bankruptcy, interest rate caps, the ability to refinace at a more favorable rate and other protections have been gutted. By what sense of right do such companies as SM, NN or etc be exempt from the lender/borrower regulations which are considered normal in other areas of the credit market?"</p>
<p>Student loans can be discharged in bankruptcy under certain circumstances demonstrating severe hardship. As for interest rate caps, surely you are not saying that there is no ceiling on interest for loans in good standing? Do you know of any private loans (mortgage, car, personal loans, credit card advances, etc.) that give the borrower the option of deferment or forbearance, or total discharge of the indebtedness for disability or death of the borrower, or interest rates discounts for automatic debit, or further discounts for a good on time payment record, or that have the lender pay interest while the student is in school? Last time I checked, student loans do. As for refinancing at a lower rate, ever hear of a federal consolidation loan? Last time I consolidated before my loans were paid off, my fixed interest rate was 2.125%. </p>
<p>Quote:</p>
<p>"Additionally,I have seen applications from these companies were the interest rates can be effectively brought above 30%, especially after a student finds difficulty paying the demands. The intent with tricks like this is to ensure borrowers can never pay the debt, default, and the companies then collect from both the government and the borrower. Albert Lord, of the Sallie Mae executive board as much admitted to this tactic at a shareholders meeting.
Additionally the conduct of the major companies in this arena has often been contemptuous of the very rule of law. The SM board has chosen to ignore the provisions of the NYS court settlement, which included ending their inappropriate 'services' to the universities. Now any other form of business would have been held for contempt or even charged under RICO for such blatant conduct. Additionally when a investigation was pending to check into major financial misconduct, lo and behold, the SM board sold their company into a private holding to avoid inquiry.
Last year, a former auditor for the department of education noted massive overbillings and interest collections on the part of NelNet. When this little 'oversight' was noted, Bush's secretary of education Spellings, allowed Nelnet to keep the 250+ million provided they did not do it again. In any normal assessment of 'right' that company should have been compelled to return that money, or should have been investigated."</p>
<p>Do you honesty think that the vast majority of student loan lenders engage in such practices? Is is possible that the behavior you cite can be attributed to a number of bad apples, as would happen in any industry (does subprime mortgage lending ring a bell)?</p>
<p>Quote:</p>
<p>"And finally when you apparently graduated school, there were protections in place and such programs as student loans had not been turned into a cash cow for vampiric private holdings."</p>
<p>What protections are you referring to that existed then which do not exist now?</p>
<p>Quote:</p>
<p>"And the trends of cutting pells, and direct federal loans and other programs had not yet jelled, And no, these companies are not doing a 'service', what they are doing is using public money (the government loan insurance) to run amuck over the future of a generation. For those who went to school in the 60's, 70's 80's its not such an issue, because this industry had not reached the point where there was no control over abuses. But for those who finished school in the 90's and 00's they have been subjected to a situation where payment is often impossible, even if they are trying to do so.
So although the fraud and felony territory in this thread began with an individuals delusionary hope to avoid the traps of a rigged system...if a proper investigation was done into the activities of certain of these companies...no doubt some very high profile people would be charged with much more than the penny level fraud and conspiracy which began this thread.
What we have here is beyond simple definition of right and wrong, the abuses of the large players in the SL field, and complicity of government officials who contemptibly forgot their duty is to serve the peoples interest...has ruined a generation and may play a major role in bringing an impending economic collapse...that is a condition that Satan himself would admire, or even be jealous of...so what Igeller advocated is lollipop stuff if we are going to assess these events on a basis of morality..."</p>
<p>I don't dispute that certain lenders have engaged in egregious behavior that needs to be reigned in and punished. But to accuse the entire student loan industry of running amok and ruining a future generation is a bit of a stretch, don't you think? Might part of the problem be the sense of entitlement that Generation X has when it comes to higher education (i.e., I want to attend the Ivy League no matter what it costs) and their willingness to incur an absurd amount of debt to attend dream schools?</p>
<p>Yes i'm quite aware of consolidations, however under regulations lobbied for by these large companies, you can only consolidate once, and often with the same company which founded the original loan. And as you note when loans go out of good standing, the interest rates can reach usury, which is incompatible with a good faith attempt by these companies to allow creditors in trouble to try to pay. But in the manner which they and government shills set the rules, it's actually to their benefit to drive lenders into default. Once again a tactic which Lord and others have admitted to...and that is very different from other sectors of the credit industry. </p>
<p>As far as bankruptcy, usually the situations have to be so extreme that a person who does potentially try that route to pay or salvage their economic situation is so far gone that hiring a lawyer to get through the maze is impossible. For most, the way the regulations were written, it is impossible. </p>
<p>As far as the majority of lenders engaging in such practices perhaps not. But, and this cannot be overstressed, the largest lenders in the field including NelNet and Sallie Mae have been repeatedly exposed for abusive lending practices. And that includes high profile exposures and investigations such as Clinton and the NYS SAG did last year along with the revelations of the education department auditor about massive overbillings.
Unfortunately since these large companies have lobbied to preclude competition, in all effective terms their questionable practices, many of which have been repeatedly investigated and reported do define the moral base of that industry. So yes, it may not be the entire industry, but when the regulations for that industry have been lobbied for, and obtained by companies making improper billions...it does tend to damn the rest with the same perception. Which is doubly unfortunate because this condition has ruined the lives of many, and makes it very difficult for less powerful and perhaps more ethical companies to compete. And as noted by "On Point" a year ago, any company which tries to break this effective monopoly, is excluded by the lobby power of the big players. </p>
<p>As far as the differences from when you went to school and the recent past, well in your era the SL industry still abided by the fair credit reporting act, which has been largely removed in their case since special privilages were obtained by lobbying. Such as social security, tax rebates, and SS disability incomes could not be attached by the private SL's. And as noted in other posting on this fora, there was a defined statute of limitations and these loans were covered by standard debtors protections, including accessible bankruptcy options. Additionally, in the past FTC regulations regarding harassment were followed much closer, but those protections have largely been gutted by the Bush administration and their camp followers. </p>
<p>As far as the sense of entitlement that generation X may have I cannot comment not being part of that generation. However with college costs rising on average 6% yearly since the late nineties, and the gradual reduction and abandonment of federal programs for students-its quite understandable the people who went to school in the 90's and after are resentful. Because of the simple fact that they, compared to preceding generations, have been left out to hang with ever increasing debt loads. And as I have mentioned on other threads, the US education funding system operates very differently than some other countries, especially in its approach to allowing private companies to essentially redistribute what is often public money. And to put it mildly, this system has been disasterous for the last decade or more. A system like Australia's or Swedens actually costs less to the commonwealth, and certainly exacts less of an unbearable debt burden on individuals who do seek an education. But these countries know that a direct investment in the education of their people, in the long term is much more beneficial to the country as a whole. Ireland for example had an economic resurgance in part because of their liberal education policy. In the US however, the economic resurgance has largely been confined to these large companies which somehow are effectively dictating US higher education policy.
And yes we both agree that certain of these companies need to be reigned in and punished. But gods when ?, the level of influence that these less than ethical companies have is simply appalling. And it is incredibly destructive both economically and socially, and if these unwarranted special privilages and attendent abuses are not negated-it will be one of the causes of a social and economic breakdown. So yes, gbesq I'd agree with you completely that some of these companies need to be brought to heal, but in my and others opinion we do not have that much more time before the intended and unintended consequences of their actions...will ruin academia, students and very possibly the mass economy, and the perceived credibility of an entire industry.</p>
<p>And these are the type of goings on which do make Igeller's little scheme seem positively naive...</p>
<p>From the Chronicle of Higher Education, week of April 30th, 07...</p>
<p>enator Kennedy Accuses Sallie Mae and Nelnet of Abusive Treatment of Borrowers</p>
<p>Sen. Edward M. Kennedy of Massachusetts, chairman of the Senate’s education committee, said today that two major student-loan companies, Sallie Mae and Nelnet, may have broken federal law by using “harsh and inappropriate tactics” with borrowers whose payments were overdue.</p>
<p>In letters to the chief executives of both companies, Mr. Kennedy requested documents about students who took out loans under the guaranteed-loan program and whose loans have since become delinquent or entered collection. The inquiry represents the first time Mr. Kennedy, who has pursued an investigation into the student-loan industry, has looked into lenders’ practices with delinquent borrowers.</p>
<p>Sallie Mae, Mr. Kennedy charged, may have threatened a borrower with jail if the borrower failed to pay; may have used abusive language and harassed borrowers’ families and friends; and may have fired employees who tried to help students obtain information about their loans. Mr. Kennedy also alleged that the company may have intentionally sent borrowers’ bills to the wrong addresses in order to force the account into default.</p>
<p>Tom Joyce, a spokesman for Sallie Mae, said the company would cooperate with the request for documents. But he said in an e-mail message that the company had helped push default rates to record lows, and he criticized Mr. Kennedy for sending his letter to the news media before he sent it to Sallie Mae.</p>
<p>“It raises the question as to whether the facts are important in this inquiry,” Mr. Joyce said, “and whether the matter has been prejudged.”</p>
<p>Senator Kennedy alleged that Nelnet may have engaged in a much shorter list of harsh practices, including refusing to provide loan information to students and consolidating loans without a borrower’s consent. Nelnet did not immediately respond to a request for comment. —Josh Keller
Posted on Thursday April 26, 2007 | Permalink | </p>
<p>Sallie Mae is a nefarious organization chronicled by 6 years of tormenting abuse since I graduated medical school. They routinely place my account in delinquent status despite the fact I have sent yearly deferment forms (multiple times) secondary to ongoing subspecialty training. They claim that they ‘never got’ the forms repeatedly, resulting in a daily barrage of delinquency phone calls, adding to stress of everyday life.</p>
<p>Further, they have been extremely abusive to me. Managers in some cases flat out refuse to pick up the phone and when they do, they can be downright offensive and vulgar. As recently as last week a supervisor named “Angie” called me a ‘liar’ and promptly hung up on me while I tried to explain all necessary forms had been sent in. This is not the only example I have experienced in 5 years.</p>
<p>The real problem as I see it is lack of recourse. I have contacted all necessary agencies and authorities and it seems the evil empire operates with impunity devoid of any meaningful monitoring service. Further, they have the ability to destroy your life. The only defense is to avoid them like the plague when it comes time to consolidate loans. Sadly and largely due to collusive business practices, higher education universities across the country peddle this suspect entity to unwitting students, present company included.</p>
<p>— J Johnson Apr 30, 08:04 AM #
After YEARS of trying to deal with Sallie Mae I paid them off in one fell swoop last October. They refused to admit recieving forms, never would consolodate with my larger Direct Loans (funny I never had issues with Direct Loans).. Sallie Mae put me in collections while I was in school as a full time student and refused to accept that I was at VCU. I had to deal with these people while taking finals and was threatened with loss of my current loans. When I tried to pay them off in September of 2006 they had my social programmed into the phone tree. When I entered my social the phone would click 3 times and hang up. I sat on hold 5 nights in a row without entering a social waiting for someone to pick up the phone. It auto hung up at 9pm every time. When I finally got through in october from work the lady was unmoved and Sallie Mae added 600$ to the payoff and would not budge. I paid these scum off and then 2 months later I recieved an OVERPAYMENT refund of $5.08!!! But wait there is more: I checked my credit and they have me in all kinds of odd times. Im 60 days late in July and then 30 days late in August?? I was in deferment… When I was in school I was in collections…
I have no hope of getting this stuff off my credit as they have been paid and dont care.
Did anyone catch that they get paid twice on these loans? The gov pays them and then they collect the money anyway through High Pressure collections for the rest of the students life after default!!!</p>
<p>Nelnet refused to credit any payment I sent in by regular mail. I had to send it return receipt to get credit. I have dozens of checks I wrote to them lost…no way I can afford to cancel them all, so I can only hope they shredded them. Finally, they allowed people to pay online without having to pay the equivalent of a late fee and I haven’t had a problem since, but my balance isn’t going down appreciably, either, even though I routinely pay more than the required payment. I’ve been paying for 12 years and still owe half of the original balance!? I plan on refinancing with Beneficial; at least they credit the payments and the balance goes down!</p>
<p>And the preceding were from the very reputable "Chronicle of Higher Education" very indicative of how immoral it all is when the stalwart and very conservative voice of academia acknowledges the whole sleazy situation. And even more so when Kennedy, who is not exactly St. Francis, is the voice of higher ethics...</p>
<p>Alas gentry another trip into a much more malodorous swamp than the moral mire Igeller was planning to take a dip... </p>
<p>Nelnet to pay $1 mln over student loan impropriety
Fri Apr 20, 2007 3:44pm EDT</p>
<p>(Updates with NY investigation details, updates share price, adds byline)</p>
<p>By Emily Chasan</p>
<p>NEW YORK, April 20 (Reuters) - Student loan provider Nelnet Inc. (NNI.N: Quote, Profile, Research) said on Friday it agreed with the Nebraska Attorney General to pay $1 million for an educational campaign after disclosing improper student loan lending practices.</p>
<p>As the lending industry has come under scrutiny in recent months, Nebraska Attorney General Jon Bruning said on Friday that Nelnet approached his office two months ago to disclose some improper behavior.</p>
<p>Nelnet had improperly paid out $4,800 in a revenue sharing agreement with a school and purchased a plane ticket for an Albany admissions officer, Bruning said.</p>
<p>"As we looked at the scale of mistakes that have been made in the student lending industry, Nelnet was at the very bottom of the scale," Bruning said at a news conference in Lincoln, Nebraska, on Friday. "Nelnet self-disclosed, Nelnet has paid $1 million, which is meaningful, and Nelnet really didn't make any mistakes that rise to the level of some of these other companies."</p>
<p>The $1 million Nelnet is paying in its agreement with the Nebraska Attorney General will be committed to a nationwide campaign that will help educate students and families on how to plan and pay for education.</p>
<p>Problem is a million for this lot is pocket change...</p>
<p>And directly from Senator Kennedy's office...</p>
<p>KENNEDY QUESTIONS STUDENT LOAN LENDER COLLECTION TACTICS
April 26, 2007</p>
<p>FOR IMMEDIATE RELEASE</p>
<p>WASHINGTON, D.C.—Today, Senator Edward M. Kennedy, Chairman of the United States Senate Health, Education, Labor and Pensions Committee, sent the following letters to Tim Fitzpatrick, CEO of SLM Corporation, and Michael S. Dunlap, Chairman and CEO of Nelnet, Inc.</p>
<p>Chairman Kennedy raises concerns about the collections process and the possible use of tactics that are prohibited by federal law and regulations.</p>
<p>The letters appear below.</p>
<p>April 26, 2007</p>
<p>Tim Fitzpatrick
Chief Executive Officer
SLM Corporation
12061 Bluemont Way
Reston, VA 20190</p>
<p>Dear Mr. Fitzpatrick:</p>
<p>I am writing about information that has come to my attention which raises concerns about private lenders’ treatment of borrowers in the Federal Family Education Loan Program. Specifically, I am concerned that several private lenders may be engaging in harsh and inappropriate tactics with regard to borrowers whose payments are overdue and or whose loans are in the collections process, tactics that are prohibited by federal law and regulations. My office has obtained information indicating that the company may have engaged in the following practices:</p>
<p>• Telling a borrower’s spouse that the borrower would go to jail if he didn’t pay – a blatantly false assertion;
• Putting a borrower into default who lost his home in a natural disaster, adding substantial default and collection fees to his loan balance, taking tax refunds, and garnishing his wages – all in violation of guidance from the Secretary of Education;
• Harassing a widower about illegitimate, forged loans under the name of his deceased spouse;
• Refusing to negotiate with borrowers about deferment;
• Regularly calling borrowers at their job after being instructed to stop;
• Harassing borrowers’ neighbors, family and co-workers;
• Using abusive and profane language to intimidate borrowers;
• Attempting to collect debts not owed;
• Attempting to collect from deceased borrowers’ families and relatives;
• Attempting to collect from elderly, disabled borrowers;
• Firing employees who attempt to help borrowers obtain correct information about their loan status;
• Instructing employees to give borrowers “the run around” rather than provide them with correct information on their loan status; and
• Intentionally sending loan payment notices to an incorrect address in order to force a borrower’s account into default.</p>
<p>In light of these events, I ask that you provide to my office information and documents concerning your company’s collections practices concerning federally-guaranteed student loans. Please see the attached Document Request for specifics. I ask that you coordinate the production of documents with Nicholas W. Bath, Counsel to the Committee, at (202) 224-6912.</p>
<p>Gentry the moral swamp is this situation is so deep it makes the Marianas trench look like a rain puddle...</p>
<p>^Quote:</p>
<p>"Sen. Edward M. Kennedy of Massachusetts, chairman of the Senate’s education committee, said today that two major student-loan companies, Sallie Mae and Nelnet, may have broken federal law by using “harsh and inappropriate tactics” with borrowers whose payments were overdue."</p>
<p>Atana, isn't the fact that Kennedy is investigating these companies for possible violations of federal law an indication that there are, in fact, laws on the books designed to protect borrowers? Isn't the investigation of the student loan industry by the NY attorney general and AGs in some other states indicative of the same thing? Again, I don't dispute your contention that some student loan lenders have engaged in egregious and illegal practices, but in light of the investigations that you note in your own posts, I don't think that you can accurately say that all legal protection for borrowers has been gutted.</p>
<p>Yes the laws are in place, but if they are not applied, or selectively applied they have no meaning. And that, is very much what has happened in the last decade regarding the SL industry. And it is still occurring, as is borne out by the SM board not complying with a court order to cease and desist activities such as co-opting college financial aid offices, kickbacks and etc. </p>
<p>And the reason that these investigations have occurred was precisely because the provisions intended to protect students and borrowers were ignored...the situation got so out of hand that even some politicians who'd supported the industry, such as Kennedy, could no longer ignore the situation.
But these investigations have not proceded far enough, and are being obstructed by insiders and lobby organizations. The problem is or might become, that because of the power of this lobby, eventually the investigations might be quashed, or the press coverage will. And that seems to have already occurred, given the recent vote in the house to once again massively subsidize these companies without apparent additional oversight.
And it still comes to the immutable fact that reputable business's do not conduct themselves in such a long standing and blatant violation of codes of law and ethics, to become the subject of these kind of investigations, and on a repeated basis involving several state goverments and most of the dominant companies. Additionally there seems to be substantial governmental interference into these investigations as is evidenced by Spellings obstructing the inquiries of her own departments auditor.
As an attorney, you seem to have a profound respect for the rule of law. But some of the players in this industry cannot be said to bear that same respect.
If you or I conducted ourselves with such blatant disregard for the rule of law, the best we could expect is to be driven from our professions, and possibly several years in a lockup.</p>
<p>^Given that you seem to be very passionate about this topic, I am curious as to whether you or someone that you are close to experienced the sorts of problems with a lender that you describe in your posts.</p>
<p>Yes, as a prof I routinely have to assist students through the intended and unintended consequences of the aforementioned abuses. Including talking decent people away from the desperate and rash actions which have been resultant from the abuses of law and power evidenced by some in the industry. And if these activities are allowed to continue they will eventually ruin the promise of higher education for many. That trend is already very much in evidence...</p>
<p>And unfortunately the type of abuses and problems I have witnessed are very, very widespread. One could talk to many students and professionals and hear the unfortunate horror stories...as is evidenced by the postings to the Chronicle story I'd posted. And the Chronicle vets the reponses to their stories so they don't permit random or inaccurate rantings...</p>
<p>And when the demands, and abuses, of certain members of this industry have reached a point where professional organizations have become seriously concerned, something is very wrong. The AMA asked the Bush administration to reinstate loan forgiveness, and extends deferments for MD's. Despite the high wages they do make, it was becoming literally impossible for their members to pay the demands. The NEA has published articles essentially stating that there may be a shortage of teachers because they cannot, even with some programs of loan forgiveness, make enough to meet the inflated demands of lenders. And this holds for other professions, to the extent that I have reluctantly advised students not to seek advanced degrees in my arena of the education field.
Now what type of a society will we have , when one generation is in a form of debt bondage to profiteers, and the next avoids necessary professions because they know that it will not be beneficial...and we no longer have teachers, doctors, nurses and such...</p>