How did student loans get so sleazy?

[rudy-Diiriye]

Read this if u a student in usa with loans upto ying yang!!

 

Private lenders enjoy special status, so they lend huge amounts of money to students with limited prospects -- and then charge a fortune for the 'risk.'

 

By Liz Pulliam Weston

If you're not a recent graduate, the parent of a recent graduate or someone who pays really close attention, you may not be aware of how much the student-loan game has changed.

 

You may know that college costs continue to rise and loans have pretty much replaced grants in financial-aid packages.

 

But you may not realize how aggressively these loans are peddled to teenage and young adult borrowers; how tough it is to get rid of this debt once it's accrued; and how very, very profitable the whole game has become for many private companies.

 

So profitable, in fact, that:

 

Federal and state regulators are investigating allegations of kickbacks and conflicts of interest in college financial aid offices. Several schools have admitted that lenders showered their financial-aid officials with gifts, consulting fees and stock options in return for being added to the colleges' all-important "preferred lender" list, which determines where most students get their loans. Several lenders have agreed to new guidelines to curb the questionable practices.

 

Consumer advocates complain that some lenders mislead students into opting for more-expensive private loans when the borrowers are eligible for lower-rate federal loans. A 2003 study (.pdf file) by the U.S. Public Interest Research Group found half of private-loan borrowers failed to exhaust federal loan sources before turning to private borrowers, and 24% received no federal loans at all.

 

As the amount of student-loan debt soars, borrowers are learning to their chagrin that lenders have blocked off the exits. In 1998, Congress made federal student loans all but impossible to discharge in bankruptcy. In 2005, lenders persuaded lawmakers to make private loans just as difficult to shake -- even though there are no government guarantees or taxpayer subsidies involved and the lenders' rates are based on the risk involved in making the loans.

 

There are three basic types of loan programs for undergraduate students: direct loans made by the federal government; federal loans made through private lenders but subsidized and guaranteed by the federal government; and private loans made by private lenders, with no federal guarantees or taxpayer subsidies.

 

http://articles.moneycentral.msn.com/CollegeAndFamily/SavingForCollege/HowDidStudentLoansGetSoSleazy.aspx

[Ariadne]

In Canada we recently had our tuition freeze program recently toppled, but it's nothing compared to what the Yankee students are paying.