Mailbag: Loan to Learn

From the start of Higher Ed Watch in September 2006, we have focused a healthy amount of attention on the non-profit company EduCap, which until recently marketed private student loans under the brand name Loan to Learn. The company, which is owned by the Washington, DC socialite Catherine B. Reynolds, shut down its student lending operations this fall after coming under heavy and deserved scrutiny from lawmakers, the news media, and Higher Ed Watch for its questionable practices.

A little more than a year ago, we broke a story about how the loan company had invited financial aid administrators on a four day, all-expense-paid junket to the Caribbean West Indies to educate them about its private loan product. The story was picked up by the national media and the trade press, and within three days of our initial publication, the company canceled the trip. This summer, we wrote a series of stories questioning the company's nonprofit status considering that it marketed private loans that were as expensive, and in many cases even more expensive, than its for-profit competitors, and when it was lending to better-risk students; that is those who tend to have higher credit scores than the population of students who are borrowing private loans from EduCap's largest for-profit rivals.

But our most read and commented on post about Loan to Learn was also one of the very first items we ever wrote for the blog. Back in September 2006, we published an item, "Loan to Learn or Bait and Switch," in which we showed how the company, through its marketing material, was encouraging students to borrow private loans rather than take out lower-cost federal loans. We've received two dozen comments on that post, including several over the last couple of months from frustrated borrowers and former employees of the company.

The comments from borrowers -- with several exceptions -- were extremely negative. Many of these borrowers were particularly unhappy with the quality of the company's customer service:

"I emphatically, unequivocally and absolutely discourage anyone considering private student loans to fund their education from choosing Loan to Learn...Their interest rate was fine, as low as anyone else's, but their mindblowing lack of customer service skills, unbelievable absence of efficient or effective communication, unprofessional approach, and discouraging level of insconsistency led me to feel as if I couldn't trust anything this company might tell me." (Loan to Learn, November 2, 2006)

"The internal operations of the company [Loan to Learn] are not in sync and I have had severe difficulty in getting any issue resolved. The company reported inaccurate late payments on my account and has been a problem to deal with ever since. The lack of consistency and customer service in a financial institution such as this is very disturbing. (Look before you jump, July 27, 2007)

"For all of you out there considering Loan to Learn to finance your education, stay away! Personally, I would rather work 70 hours a week to pay for everything then spend that much time in agony and on the phone with Loan to Learn!" (Repayment, September 8, 2007)

Several of the unhappy borrowers who wrote in had strikingly similar complaints about the strong-arm tactics that the company used to collect on even a single missed payment:

"Don't do it. Just stay away from this place -- they sent me to third party collections for being 30 days late and they added a $10,000 fee on top of my $30,000 loan -- YES, no kidding." (Loan to Learn, May 1, 2007)

"I missed my first payment because the bill was sent in an envelope from the "loan servicing and consolidation center." Thinking this letter was an advertisement from a consolidation center, I threw it away. When I called Loan to Learn, they said my payment wasn't due until next month. That is because they had sent it to their collections office and once a bill is out of their office they know nothing of it. My interest rate immediately jumped to 15.84% which, by the way, is compounded daily! (Loan to Learn, March 27, 2007)

"I have a Loan to Learn loan for $8,000 and missed one payment and they sent me a letter saying I owed them $12,400. (I have a Loan to Learn loan, August 14, 2007)

Frustrated borrowers were not the only ones who shared these concerns. A financial aid administrator wrote in to warn students against taking loans with the company:

"As a financial aid manager of an online college, I deal with many reputable lenders. I have several students that have been sucked in with the "bait and hook" hardcore sales of this lender. Once they have you, they will destroy your credit and dignity...they do not follow the standard collections regulations by charging astronical fees without any explanations. I was horrified to see that other studnets have gone through this with them as mine have. (Students and former employees, June 30, 2007)

The loan company did have its defenders. Several commenters, who claimed to be students, praised the company and lashed out at those criticizing it. The tone of some of their statements, however, make us suspicious that they may have come from company officials posing as borrowers instead. Here are some of those comments:

"I have a loan with Loan to Learn and to be honest I have not experienced the kinds of troubles the top commenter is stating..It took me 6 days from the day I applied untilI got my check via fedex. I am assuming obviously you had a bad experience, however if you have all of your information together and ready to go, you will get your funds very quickly. Most student loans take months to get funded. I am not quite sure why you are crying over a few weeks :)" (Loan to Learn not so bad at all, February 26, 2007)

I have 2 loans with the company and both experiences have been great compared to the experience I suffered at the hands of Ms. Mae and her moron cohorts. Loan to Learn took about a week to process my loan and fund my check. Don't be fooled students, the federal government isn't going to give you enough money and you'll have to go with a private lender eventually. Know this: all rates are gonna be pretty much the same. Just make sure you or a co-borrower have a fico score of 650 or higher with as much income and as little debt as possible and you'll get a great rate and a good experience. (Wow, to the above statement, May 22, 2007)

"First of all, when comparing Loan to Learn to other private lenders, I must say it is by far MUCH easier dealing with them than others. They are nicer and handle things alot faster than most other lenders, taking into account if you have your information accurate and presentable.. As far as Loan to Learn goes, I will be graduating next year and will be looking for them to consolidate my loans, but I advise other college students to use them because they are friendly, helpful, and very efficient!!!!!!" (Ha ha all I can do is laugh, June 19, 2007)

However, we've received may comments from former employees who confirm many of the frustrated borrowers' complaints:

"I totally agree with the negative comments made about Loan to Learn. As a former employee with this company, I can honestly relate to the comments expressing the unfortunate, dissatisfying experiences individuals have had with the company...No one, including myself, knew the exact reason why a customer had to wait up to several weeks for their checks or why the a customer account was automatically sent to a third party collection agency after 30 days of not receiving payment. Maybe we all knew or had an idea of the true reasons to these unfortunate and common situations, but chose not to disclose it to the customer for the sake of one's job. (From a former employee of Loan to Learn, May 2, 2007)

"L2L is offically shutting its doors!!! I am a former employee and have many friends who are still employed there (or were until last week)... This company is truly a nightmare and I'm glad to see that they will no longer be able to inflict anymore pain on college students, their families, and their employees. (Going out of business, August 10, 2007)

"I worked at Loan to Learn for about a year. Everything said above is 100% true. When I first joined the company, I bought into their vision of providing "customer delight" and thought I was actually helping students who wouldn't otherwise be able to afford college. But as time passed, I realized that this was not a "not for profit" company as it positions itself. We were selling loans with 16% interest rates. How is that truly helping students when they can get a loan from the government for 6-9%? We were literally told by senior management that LTL is not "a frick'in bleeding hearts club" and that we were there to make money. So why the charade? Why not just stand up and acknowledge what LTL is -- a bottom feeder sucking in unsuspecting students who either waited too long to apply for federal aid or just didn't know better. (Loan to Learn, November 13, 2007)

We appreciate all the comments we have received on Loan to Learn and other items. Please keep them coming. Sometimes, we respond publicly. Sometimes not. Regardless, others do. We publish nearly every comment, including those critical of us, without editorial change beyond legal considerations and aim to make sure the most trenchant comments are read widely. We'll continue to do so in the future.