Jason Hartman is joined by founder of , Alan Collinge, to discuss the lack of standard consumer protections on student loans. Alan’s personal research into the methods and policies of the student loan lenders found that the system is basically corrupt in that the system has a higher interest in borrowers defaulting rather than paying consistently on their loans.
Alan states that the Department of Education has been misleading Congress on the true default rate because they use what he calls a “cohort” default rate, a faulty metric. People hear that the default rate is only 5%, while in reality, it is above 25%. The five-year default rate is 15%! With the defaults come late fees and additional interest, on top of the original interest, leading to the lender making back roughly 122% on the loan. Lenders have a default rehabilitation program that makes the loan an even more unmanageable debt, strapping people to this student loan debt for a lifetime.
Alan discusses solutions to this huge problem, beginning with the return of bankruptcy protections on the loans. It is the only loan type that cannot be discharged in bankruptcy. This applies to parents and other relatives that co-sign student loans. Alan said, “There are two things that students are never told before they borrow.” It is never explained that there are no consumer protections on these loans and they are not told the true default rate. The outstanding student loan debt in the nation has now crossed the trillion dollar mark.
is a grassroots, citizens’ organization dedicated to returning standard consumer protections to student loans. The group was started in March, 2005, and has focused primarily on research, media outreach, and grassroots lobbying initiatives. The group and its members have been featured on 60 Minutes, 20/20, The News Hour, CNBC, and many other television programs, print media including the New York Times, Wall Street Journal, Washington Post, Fortune Magazine, The Chronicle of Higher Education, and many others as well as numerous radio and internet broadcasts.
The group is also featured in two documentaries airing and screening in Fall, 2010. The group was credited as the inspiration for The Student Borrower Bill of Rights, and has broken numerous news items in the press with its research findings regarding conflicts of interest in the student loan system, Student Debt levels, Default Rates, corporate lobbying, and other areas. Group Founder Alan Collinge has written numerous articles and editorials on the topic, and also published The Student Loan Scam in 2009. He was selected as one of seven “Financial Heroes” by CNN/Money Magazine in December 2008.