Buyer Beware - Student Loans from Private Lenders


An interesting article about private lenders such as Sallie Mae, and some potential upcoming changes in legislation. I think in this economic climate, students need to be more informed than ever about the loans they take out. Just another article to add to the pile of information that students should be taking into consideration when they are applying for school loans:


For lenders, the stakes are huge. Just last week, Sallie Mae reported that despite losing $213 million in 2008, it paid its chief executive more than $4.6 million in cash and stock and its vice chairman more than $13.2 million in cash and stock, including the use of a company plane. The company, which did not receive money under the $700 billion financial system bailout and is not subject to pay restrictions, also disbursed cash bonuses of up to $600,000 to other executives.

 I keep seeing people throwing themselves at one year programs with only private loans as options, and I think that students need to realize what they are for these lenders: major cash cows. In their eyes, the more stupid and underinformed the borrower, the better $$.

I think it's a good time to be at an inexpensive community college (in the U.S., that is) - particularly for those students who aren't really ready for a full college level workload. I've heard too many stories of students at private schools who are paying $100K for their educations who aren't really equipped to be in college yet, and in these economic times, that to me seems like one of the worst situations.
 If you're not ready for college yet, do yourselves, your parents, and your wallets a favor and investigate different options before committing to that lifelong loan - particularly if it's a private loan without a fixed interest rate.


Here is an editorial article on the same topic:

Private companies that reap undeserved profits from the federal student-loan program are gearing up to kill a White House plan that would get them off the dole and redirect the savings to federal scholarships for the needy. Instead of knuckling under to the powerful lending lobby, as it has so often done in the past, Congress needs to finally put the taxpayers’ interests first.

That means embracing President Obama’s plan. The proposal takes the long-overdue step of phasing out the portion of the student-loan program that relies on private lenders. At the same time, it expands the more efficient and less expensive portion of the program that allows students to borrow directly from the federal government through their colleges.


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