Saturday, April 11, 2009

Student loan borrowers "too small to help"

Arthur Delaney reports this on Huffington Post:

A new report released Thursday on the private student lending industry offers a bit of deja vu.

"It's the same sad story: irresponsible lending," says Deanne Loonin, author of the report and director of the National Consumer Law Center's Student Loan Borrower Assistance Project, in an interview with the Huffington Post.

The report (PDF), titled "Too Small To Help: The Plight of Financially Distressed Student Loan Borrowers," laments that "unlike the lenders that made these loans" -- potential beneficiaries of the government's TALF and TARP bailouts -- "the borrowers are 'too small' to help."

Private lenders like Sallie Mae, Wells Fargo, and Citi relaxed their standards as the economy boomed and extended private loans to more students at lower-tier schools -- students often already maxed out on federal loans and unlikely to able to pay up.

The report calls out the newly infamous process of securitization for fueling bad lending: "Creditors made and sold loans to borrowers, but with the specific goal of selling them to investors. Loan products were thus developed for the repackaging rather than to provide the most affordable and sustainable products for borrowers."

Loonin's report says the Obama administration's Home Affordable Modiļ¬cation Program for modifying mortgages should be a blueprint for student borrowers. The report says the government should require lenders benefiting from bailout funds to work with borrowers, restore bankruptcy rights to student lenders, and increase industry regulation in the areas of underwriting and interest rates, among other things.


The Boise Picayune said...


The 1st Friday in May is Always No Pants Day!

Michael Shay said...

Let's hope it doesn't snow for Boise No Pants Day. Brrr.