Options for Victims of Predatory Student Loans

 

UW staff behaved wonderfully. However, as the signer for my son, I have concerns about the WyoTech’s appearance of being cozy with Sallie Mae.

My chief concerns include: Teaser interest rates for my son of around 2 percent, but they jumped to 6-7 percent when it came time for us to start repaying loans. WyoTech refunded thousands of dollars to Sallie Mae that should have been applied to my son’s loan and it appears they weren’t. (The refunds were due after mistakes were made in my son’s original loan, and it had to be re-issued.)

Also, our original loan disbursement amounts kept changing regarding dates and dollar amounts. Sallie Mae has not been documenting their charges, and has not complied with my repeated requests for a verifiable pay-off schedule. Their employees are unable to answer questions about the accounting of loans.

What can be done?

Finally, please don’t tell me to seek help from state of Washington officials, because they didn’t help me in another situation regarding a predatory mortgage lender in my divorce case. Nor did going to court. Lawyers proved inept, but I finally got an un-enforceable $80,000 judgment against my ex for his violent behavior.

A: Whew. I’m sorry the state hasn’t been of help. You’re not alone in student loan complaints. I’m aware of others. So act with three truisms: 1. Every company has a higher authority. 2. Continue to believe in the power of the press. 3. Start a paper trail either via e-mail or by mail. And tap into your tenacity that helped you to graduate from UW while working full-time.

State attorneys general and Congress are considering action regarding predatory student loan lenders for charging hidden fees, high interest rates and for poor service. Washington Attorney General Rob McKenna joined numerous counterparts in asking Congress to pass the Student Loan Sunshine Act.

Unfortunately, here’s my read of the Student Loan Sunshine Act: It would prevent future illicit behavior, but it does not appear to help you and countless others retroactively.

Indeed, half of college grads in recent times reportedly borrowed money for their education, according to the National Center of Education Statistics. The average is $19,000 for undergrads and it’s not unusual for students to exceed $40,000.

Apparently, the nation is riddled with college administrators who apparently have been lining their pockets with payola from lenders. There have been published reports about the resignations of financial aid administrators at schools, such as Johns Hopkins and Columbia University.

Sallie Mae, Bank of America and Citigroup have been singled out and are reportedly the top three lenders with significant market share. Sallie Mae, alone, says it has a 27 percent share. Sallie Mae was created in 1972 as a government-sponsored agency.

The lenders oppose proposed legislation affecting them, which was recently approved by the Senate Education Committee. The measure would cut subsidies to lenders by $18.3 billion and reduce their massive profits gained at the expense of students and taxpayers.

House and Senate bills would also cap at 15 percent the income graduating students must allocate for repaying loans. The bills and a Bush Administration proposal would increase the ceiling for Pell grants to needy students.

The Federal Trade Commission launched an inquiry as the result of a request by Rep. George Miller, D-CA, the chair of the House Committee on Education, to investigate deceptive marketing practices. MyRichUncle, a student loan lender and an adversary of Sallie Mae, is also urging government policy makers to prevent colleges from marketing lenders by providing preferred lender lists to students. Apparently, MyRichUncle has been excluded from those lists.

The Education Department has been criticized for slow action by New York Attorney General Andrew Cuomo who has been active in the fight against lender and college-administrators’ behavior. After Cuomo’s pressure, Sallie Mae agreed in April to pay a $2 million fine and to limit but not cease its conflicting relationships with college administrators.

Meantime, Sallie Mae, which has nearly 10 million borrowers and more than $100 billion in loans, is crowing that the antitrust waiting period for its announced sale has ended for its sale expected to be completed later this year. The new owners would be private equity firms J.C. Flowers and Friedman Fleischer & Lowe LLC, along with Banc of America Corp. and JPMorgan & Chase Co. 

Critics refer to the government’s $18.3 billion subsidies to the lenders as corporate welfare. They also warn Sallie Mae’s sale will mean even less transparency because private investment firms don’t have to publicly disclose financials.

A published report states that principals of such firms are able to avoid paying income tax rates of about 35 percent. The executives claim their remuneration is carried interest from a series of capital gains, which means they only pay capital gains tax rates of 15 percent.

So should full disclosure and financial transparency remain even after public companies like Sallie Mae are sold to private investment firms? Yes. Plus Sallie Mae maintains an unfair advantage with its residual image of a quasi-government agency.

Possible solutions for our Biz Coach reader:

Ask your representative in Congress, and Senator Patty Murray (D-WA) and Senator Maria Cantwell (D-WA) for their help. Suggest that they find ways to make the Student Loan Sunshine Act retroactive to force reimbursements for over-charges and unpaid refunds.

Regarding your suspicions about Wyotech, ask Wyoming authorities to launch an inquiry by contacting this Web site: http://attorneygeneral.state.wy.us/consumer.htm.

Despite your previous unresponsive replies for help from Washington state government, I also decided to give the state a chance. So I contacted the Attorney General Rob McKenna’s office for help in your situation.

“First, as we discussed last night, at this point our office has worked with our congressional delegation to voice our support of the student loan sunshine bill and we consistently support efforts by Congress, state legislators and the National Association of Attorneys General to support reasoned efforts to address the problem of predatory lending,” said Janelle Guthrie, McKenna’s communications director.

“If she believes that she was the victim of unfair practices she may consider filing a complaint with the Department of Financial Institutions’ Division of Consumer Services, http://www.dfi.wa.gov/consumers/complaint.htm,“ Guthrie said.

“A second alternative for her is to file a complaint with the Attorney General’s Consumer Protection division, http://www.atg.wa.gov/FileAComplaint.aspx,” she added. “The Consumer Protection division mediates complaints that focus on disputes with a consumer business.  If a deeper, widespread problem was uncovered involving a number of consumers, then an investigation might be opened focusing on the public interest aspect. You’ve mentioned you’ve had several people contact you about this issue. If they all contact our office with their problems, it will help us discover trends and recurring problems with specific companies we can then pursue. By law, we are unable to engage in the private practice of law to represent a single individual.”

Guthrie says the state bar association lists pro bono attorneys – free services for low-income people, visit: http://www.wsba.org/atj/contact/legasst.htm.

The AG’s office also has self-help publications on its Web site.

From the Coach’s Corner, in the event Washington state vocational schools appear unfair, Ms. Guthrie suggests filing a complaint with the Workforce Training and Education Coordinating Board, RHinsch@wtb.wa.gov.