Home > Uncategorized > Reigning in Private Student Loans

Reigning in Private Student Loans

Today I received an email from projectstudentdebt.org regarding a hearing in Washington on Sept 23 concerning the toxicity of private student loans. A very thorough and interesting testimony by Lauren Asher, President of the Institute for College Access and Success can be read here

The Obama Administration is pushing for the creation of a new Consumer Financial Protection Agency (CFPA), which would protect consumers from risky financial products and services, including private student loans. A strong CFPA could help protect private loan borrowers from deceptive marketing and unfair loan terms and treatment.

The financial industry is lobbying hard against the CFPA, and consumers need to speak up before it’s too late. Please tell your members of Congress that we need a CFPA with authority over all private student loans to protect borrowers and ensure private loans are only used as a last resort.

Write to Your Elected Officials Here

Please click the link above and write to your elected officials- it took me less than 45 seconds. Hopefully, this will be the first step towards getting private loans put back on the same wavelength as other consumer debts like credit cards. I wasn’t going to take the time to bother but when I read the following excerpt from the above testimony I felt compelled to do something and write-

“Ironically, private loan creditors remain fully eligible for the bankruptcy protection that their borrowers are now denied. Bankruptcy helps failed businesses discharge outstanding debt and make a fresh start regardless of the nature or merits of their product or business model, or the types of debt they carry.

Last year, The Education Resources Institute (TERI) declared bankruptcy with tens of millions of dollars in outstanding debt. TERI guaranteed private student loans for First Marblehead Corporation, which was a major player in the private loan market and a strong advocate for making private loan debt non-dischargeable for borrowers. First Marblehead rode the wave of securitizations that led to the current credit crunch, packaging private student loans from other lenders and selling them as investments. When these loans experienced higher than expected default rates, TERI went bankrupt and First Marblehead’s stock tumbled. Apparently, bankruptcy has enabled TERI to reorganize, and reports of its impending recovery buoyed First Marblehead’s stock last month. Meanwhile, TERI’s website includes this reminder for private loan borrowers:

“The bankruptcy laws provide that, unlike, other commercial debt, a loan guaranteed by TERI can not be discharged or forgiven in a bankruptcy proceeding unless the borrower proves that repayment of the loan will cause him/her undue hardship.”

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Categories: Uncategorized
  1. October 11, 2009 at 8:44 pm

    My name is Ms. C. Cryn Johannsen, and I’m the Promotional Writer and Director of Marketing for the Forgive Student Loan Debt Movement (founded by Robert Applebaum – it’s non-profit). I attended this House Judiciary Subcommittee hearing about private student loans. Moreover, I have reached out to TICAS.org, and wanted to meet Ms. Asher in person – that’s one of the main reasons why I attended the hearing. (A connection I have at TICAS informed me of this hearing and encouraged me to attend with borrowers). A supporter of our organization provided me with a link to the Student Doctor Network Forum, and that’s how I found your blog. It’s great that you’re writing about this crisis. It’s appalling that most med students leave school with debt as high as 300K or more. I hope you reach out to our organization. I can be reached at ccrynjohannsen@gmail.com, and on Facebook (C Cryn Johannsen).

    We share similar concerns, and many of our supporters are medical students.

  2. medicinesux
    October 12, 2009 at 7:55 am

    Hello Ms. C. Cryn Johannsen. It is such a pleasure to hear from you and from someone who was at that very Subcommittee meeting. I now firmly believe private student loans come straight from hell after reading through Ms. Asher’s testimony. And yes, student loans are definitely a heavy burden that many medical students carry, particularly those going into primary care. Unfortunately, six figure debt loads are the norm rather than the exception for us. After reading over on SDN (Student Doctor Network) that they were having a “contest” this week to see who could top someone’s anticipated 500K debt (have you heard of anything more pathetic?), I was suddenly inspired to write a thread and make a video concerning Tufts University and its $315,000 price tag. Needless to say, it has caused quite the buzz and already has thousands of views. I am all about raising awareness about issues such as these that negatively impact on healthcare delivery in this country. I believe we are just in the beginning of a MAJOR student loan crisis that is coming our way. It will make Katrina look like an April afternoon shower if our govt does not step in. My Tufts posting proves this beyond a doubt to me. I commend you for being at the forefront in this struggle that so many of us face. I have also found and subscribed to your youtube channel and twitter page (just opened an account myself) and bookmarked your blog. I will be eagerly following you every step of the way and hope to keep in contact. I will also make announcements over on SDN and here on my blog to drum up further support for the Forgive Student Loan Debt Movement cause. I can be easily reached at medicinesux@gmail.com.

  3. Dianne Estes
    January 20, 2010 at 1:52 pm

    Our son has now (only) $50,000 of student loan debt, $30,000 of it being private loan debt. The $80,000 per year job which was promised to be there by the college did not happen although our son applied for many many jobs all over the country. He, his Dad and I, his Mom have been struggling since he graduated in 2005, to pay $500 to $600 per month, which has kept all of us in the poorhouse. Our son cannot even afford his own place; he has been unable to find a job. This college was supposed to make his life better, not hopelessly worse. Please advise us of any hope/improvements and of ANYTHING we can do for ourselves and other unfortunate young people in this situation.

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