Mailbag: Borrowers in Desperate Straits

At Higher Ed Watch, we have long opposed the idea of the government bailing out private lenders who have engaged in predatory private student loan practices. Our view, as we have said before, is that student loan companies should have to bear responsibility for the consequences of pushing high cost private loan debt on high-risk borrowers. After all, for years, they gladly raked in profits from these loans.

Over the past six months, we have heard from scores of financially distressed borrowers who are outraged that the government would rush to the aid of private student loan providers without offering any relief to them. With U.S. Treasury Department officials preparing to start carrying out this month their plans for reviving the credit markets to help provide capital and liquidity to lenders so they can continue making high-cost private loans, we feel that it is our duty to make sure these voices are heard.

Typically in our mailbags, we provide a sample of comments that have been submitted on a given subject. But as we sifted through the dozens of comments we have received in recent months, one particularly caught our eye because it perfectly illustrates the human costs of a system that has left so many students vulnerable to abuse from predatory lenders and unscrupulous trade schools.

Like many of the distressed borrowers we hear from, this commenter says that he was duped into taking out high-interest private loans by aggressive trade school recruiters who misled him about the terms and conditions on these loans, as well as the quality of the academic programs their schools were offering:

I have attended two schools -- ITT and Westwood. When signing up they told me that I would need a Sallie Mae loan to cover what my grants didn't and that once I completed school that I would be making payments of around $50 a month for each loan.

After attending I didn't feel like I was receiving the education that I was paying for in these loans. The reason why I say this is because my 4th grade son was bringing home assignments that mirrored the ones I was receiving from ITT and Westwood. I was getting A's on all my assignments without any studying because it was so easy my son could do it. If you are going to pay over $75,000+ in loans when you complete a school shouldn't it actually teach you something??

After withdrawing from these schools, he says that these loans have become an inescapable burden for him and his family. The loan giant Sallie Mae, he says, has been inflexible and unwilling to help him find ways to make repayment easier.

Ultimately, this commenter has paid a heavy price for his decision to go back to school to try and better his life. His situation, he says, has become increasingly desperate:

Until we started going to receive food from the church last winter, my family had to all live in one room in the back of our trailer with no water, gas, or phone (can only pay electric on $120 a month). For heat we had a space heater that could only heat one room. My wife was late term high risk pregnancy at the time. We lived on ramen noodles and what the local church was able to help supply with their food assistance.

 It's bad when a government-protected institution puts money ahead of the welfare of its citizens. After the winter was over Sallie Mae collected around $3000+ of family assistance and it sure hasn't shown up as credit on my loans.

As policymakers move forward with their plans to help private loan providers, we believe that it is absolutely essential that they look for ways to help private loan borrowers who find themselves in dire straits. Borrowers with unmanageable debt loads may not be able to hire high-priced lobbyists or lavish lawmakers with generous PAC contributions, but that doesn't mean that they should be left out of the discussions.

As always, we appreciate the comments we have received on this topic and others. Please keep them coming.