Report aims to help students with private loans

A report published this month by the National Consumer Law Center aims to help students with private loans who would otherwise have difficulty making payments.

Titled, "Too Small to Help - The plight of Financially Distressed Private Student Loan Borrowers," the report was developed by the NCLC's Student Loan Borrower Assistance Project. It was based on a survey of for-profit lender Sallie Mae and a nonprofit lender, although report author Deanne Loonin declined to name the nonprofit lender.

Loonin, an NCLC attorney, said the center was getting more calls from financially distressed students as seen by the "escalating numbers of [troubled] borrowers" in the current economic downturn.

"We know from our experience with borrowers who call us and who we work with that there are no options for them if they have difficulties repaying loans," Loonin said.

According to the report, few lenders voluntarily help students in need. As a result, the report offers measures that could benefit distressed students.

For example, it suggests requiring lenders who receive federal funding to provide options for students. The report also recommends restoring bankruptcy rights for students so they can make private loan repayments under less-severe laws.

These rights once provided students a safety net but were restricted in 2005 when lenders persuaded Congress to make laws for financially distressed students as severe as those controlling debts like alimony, overdue taxes and criminal fines, Loonin said.

The report also recommends creating measures such as loan cancellations for students who took out private loans to pay for unlicensed, unaccredited schools that may have closed or become bankrupt.

Additionally, the report recommends re-regulation of the industry by limiting interest rates and fees and providing improved disclosures.

"We needed to get information from the lenders and see what they would actually offer the students," Loonin said.

The SLBA project group contacted one nonprofit and four major profit lenders for the survey. However, according to Loonin, only Sallie Mae and the nonprofit lender offered information. Still, these two lenders represent 75 percent of the private student loan market.

The group gathered general information and checked investor reports to create more options for students.

The SLBA group has contacted several national organizations, like the American Association of State Colleges and Universities, to get the word out to students, said Loonin.

"This report is definitely useful, especially in this economy," said Meena Chitradurgam, recent Engineering graduate who has privately funded student loans from National City. "The lenders give you a six-month buffer [after graduation] to start repaying the loan . and after that if you cannot pay, the interest rates go up."

Student Financial Services Director Bill Schilling did not return requests for comment.

Please note All comments are eligible for publication in The Daily Pennsylvanian.