Mailbag: Private Loan Borrowers in Distress

At Higher Ed Watch, we hear regularly from financially-distressed borrowers with private student loans who believe they have been victimized by lenders' predatory practices. Much of that feedback comes in the way comments we continue to receive on blog posts that ran more than a year ago.

At a time when the federal government is providing a major bailout of the student loan industry, we think it is important to highlight the experiences of borrowers who are struggling with unmanageable levels of high-cost, private student loan debt. Surely borrowers such as these could use a helping hand too.

Many of our readers have shared stories with us about the seemingly inescapable burden these loans have had on their lives. Here are a few examples:

"I have borrowed about $50,000 in private loans. My estimated monthly payment for both loans is right around $800 and I earn around $1200 monthly. You guys do the math. I know I have a responsibility, but all I wanted was an education, not a $375,000 debt that i'm gonna carry all the way to my grave...At 18, I had no idea what I was doing to myself!!" (I have borrowed, May 7, 2008)

"My husband and I have over $200,000 in private student loans and over $150,000 in federal student loans. I am currently not working and my husband is a teacher. When our loans enter repayment, the monthly payment will be about $3,000! My husband doesn't even make that much per month and my degree (HISTORY-Lib. Arts) will not land me a high-paying job...We are currently driving one car that is 13 years old and we have two children in elementary school. HELP!" (Massive Debt, April 10, 2008)

"I'm a single mother that is not receiving child support. I have $39,000 of private loans and $17,000 in federal loans. I'm in default with my private student loans based on them not working out a payment plan with me. I have to pay $717 a month on my private loans -- mind you this does not include my federal loans. After taxes, I make about $1,700. This makes me hate the fact I even went to school and received an education." (Private Student Loans, May 8, 2008)

"I took out my loans two or more years ago. Part of that time I was working on my master's degree, but then put it on hold when I had my son in March of 2007. Since then I have been harassed, threatened, and basically called a liar and scam artist by Sallie Mae, when I was unable to start payment of the private loans. They want over $1000 a month and have now bullied me into putting my loans in forbearance twice, which they were kind enough to waive the $100 forbearance fee, but tacked on nearly $5000 each time for the forbearance itself. I am drowning in all this debt, I am disabled and my disability got worse after I gave birth and has been on a downward spiral ever since. I live on $600 a month from disability, so obviously I can not pay over $1000 a month to Sallie." (Disabled and Desperate, May 7, 2008)

Some of our readers say they fell victim to aggressive direct-to-consumer loan companies that never made them aware of their lower-cost federal loan options. Many of them acknowledge that they made bad decisions, but also believe that the loan companies took advantage of them:

"I am a victim of these financial institutions that are targeting college students with good credit. I was able to get $52,000 worth of loans over the internet never speaking to anyone. The terms were very unclear. I had no one to explain to me the devastating impact this would have on my life. By the time that these loans went into repayment status, I owed about $73,000. WOW!!! That is $20,000 worth of interest that they have racked up! My payment which I thought would be around $350 per month is over $700. There was no one to guide me and to explain what a libor rate is. I thought that my interest rate would be 4% and calculated like a regular federal student loan. I was so wrong and now my family is suffering because of this poor stupid choice that I made...I was only 22 years old and had no idea what a life changing event this would be." (Private Student Loans, April 12, 2008)

Others blame the colleges they attended for encouraging them to take on heavy loads of private loan debt with their favored lenders:

"I used Sallie Mae because the school I went to spoke of them like a god company. I borrowed $66,000 from them unfortunately, and now the payback amount is $266,000. (And they get away with it, April 23, 2008)

"I came to America to chase a dream and become a better person in this competitive world. I enrolled in the California School of Culinary Arts and being naive they recommended Sallie Mae to me. I wish I knew better. I was excited since I had no co- signer or good credit and I had the opportunity to get money for school. I jumped onto the train. I was told my payments would be about $200 dollars. Well, I am now looking at $500 dollar bills from Sallie Mae. I earn $2000 dollars a month. I can't even afford to send my people back in Africa some form of help because I basically have nothing left after I pay my bills. " (Sallie Mae worse than Enron, May 9, 2008)

And most cannot understand why the federal government treats private student loans differently than other forms of consumer debt by making it so difficult for financially-distressed borrowers to be able to discharge these loans in bankruptcy.

"Students should be able to discharge their student loans in bankruptcy as they can other non secured debt. Everyone knows there is risk involved with student loans and everyone should play by the rules that any other entity is forced to when it comes to loans. Sallie Mae is a company. A non government entity that is in the business of making money. The sooner people start realizing what is happening to the people of this country, the sooner things may turn around." (Will It Ever End?, December 11, 2007)

We appreciate all of the comments we have received on private loans and other items. Please keep them coming.