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Sandy

I don't have a major horror story to share thanks to the school financial aid counselors at the Claremont Graduate School who did a good job of explaining exactly what I was getting into if I applied for more Stafford loans to finance graduate school. They did this because before the changes in the law that now allow the student borrower to be pursued for their pound of flesh, the schools themselves were the ones on the hook.

Schools became ineligible for any Federal Funding if the default rate of students who had borrowed through them exceeded a certain narrow margin. I'm not sure how carefully they explain things now, but in 1991 I had to attend a financial aid sponsored workshop on debt management and the details of the Student Loan program before they would complete their portion of the Student Loan Application.

The horror in my story relates to Consolidation. I currently have about $61,000 in Student Loan debt. It began as $67,000, was down to almost $59,000, but I'm currently in a 4-month forbearance period (my first since consolidating my loans after Grad School) where I have not been paying interest.

When I originally consolidated my loans which had been borrowed from the Stafford Loan Program through Merchants National Bank, the loan servicer was Educational Financil Services, ultimately they ended up at Sallie Mae. I was having no difficulties, but I was getting about 4 pieces of mail per day telling me the time to consolidate to save money under the new provisions passed by congress that would soon sunset was now. Four years ago or so when this first circulated I was told I was ineligible for the program, but here I was getting about 4 pieces of mail a week trying to convince me to refinance/consolidate and save.

So after maybe 8 months of this, I caved and called, figuring they'd tell me that because I had Stafford loans the program didn't really apply to me. (The interest rate part doesn't. All my Staffords were fixed rate. All but one at 7%.) But I was told I was eligible, and if I made the move and maintained my payments I'd save almost $14,000. I could also refinance for the full 30-years which would lower the required monthly payment. I'd been paying $470 which was about $14 more than the required payment, and was feeling a bit of a financial crunch thanks to gas and rising consumer rates, and minimum payment requirements, so I did the idiotic thing and refinanced.

The first month was fine. I got the paperwork, I got the loan payment set up to auto pay, like I had before with Sallie Mae, and then they pulled the rug out from under me. They sold my loan to a new outfit, meanwhile I'm still getting all these soliticiations from loan companies that want my student loan consolidation busines all of which reference a loan amount, so when I got the notices for the new outfit I got them lumped in with the sales promos, and didn't really pay any attention to them. Meanwhile the autopay activated for the second month.

I was moving which meant putting deposits down, etc. A few days later unbeknownest to me, money from the autopay was wired back into my checking account. It was a serendipitous/calamitous arrival. When I checked my checking account balance I was pleased with the balance because surprisingly I had enough cash to pay all the deposits and line up moving into the apartment I'd checked out that weekend. So I signed a conditional lease -- contingent on payment of the deposit and transfer of utilities, wrote the check and arranged for electric, cable, and phone when I should have been asking why I had a surplus in checking.

A week later a loan payment book from the new owner of my consolidated student loan arrived, and I learned my mistake. Now I was up a creek with no paddle. The funds for the loan payment were spent, and there was no way to unspend them.

--Hence the forbearence, and forfeiture of the .25% interest credit that I would have earned from the new loan servicer in 36 months if I had a perfect payment history with them. Maybe the forbearence might have needed to happen anyway. My financial circumstances have shifted somewhat, so I'm in the process of filing for Chapter 13 bankruptcy, but I didn't intend to get the student loans out of alignment. It just ened up being an undesired fait accompli.

>From my perspective, the whole consolidation thing is mostly just a way for profit corporations in the Student Loan business to make fees they can claim as earnings now,(and help boost earnings which boost the share price) over interest revenue that is accounted for differently in contribution margin thanks to risks and servicing obligations related to the loan balance. (At least I think that's why the bank I work at is so keen to grow off-balance sheet income at a faster rate than incremental revenue. No future expense or risk is linked to earned fee income which is not the case with either deposit or loan accounts.)

My guess is over time I will pay about $5,000 for this screw-up. (If my income moves up it could be less, because if I prepay more of the principal, it won't be so much.

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Pamela

My Daughter-in-law needed a co-signer for her school loans. I did so. I have received letters from the company that my daughter-in-law has not received, as she states. They told me on Oct 30, 2006 that if I didn't put a payment of $590 on my credit card right then that it would be sent to collection. I did so. I than called and talked to my daughter-in-law finding out that she had sent a payment of $400. She also said that she had tried to refinance with another company and could not because she had been sent to collection the previous month. Now! if it has been sent to collection, why are they still collecting? Also, my statement never shows what is owed and what has been paid from the beginnging. Nothing adds up on the statement they send. They must be doing something illigal! The last time I called them, they again wanted a credit card payment. When I ask for a print out of everything she refused and wanted me to take her work. I told her I was reporting them to the Texas Attorney General to be investigated for fraude. She hung up on me. Another thing they do, I get emails on opportunities for schooling as well as mail from schools. I am not the student and they have obviously sold my address to schools. As I stated my daughter-in-law in Texas is the student. They need to be shut down and investigated. Why won't they give an accounting of the account. Even my doctor and my dentist do that?

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JBGH

Do not use student loans!!
Keep a close watch on loved ones who are vulnerable to making bad decisions when the vultures at Sallie Mae come to offer them the answer to all their life long dreams.

My brother took out a Sallie Mae tuition answer loan that has now climbed to an amount of 135,000. He was suffering from mental illness and depression after a recent unexplained illness took away his eyesight and his ability to take care of himself for nearly a year. During that time he lost his job, "they were downsizing" and he decided to go back to school.

He contacted Sallie Mae to see about financing him for school.
They gave him a string of loans during this time that totalled almost 100,000. He sent in his disability checks as proof of income!!!

He got better for a few months while he was starting school and then his illness progressed and he was unable to stay in school. He attempted to contact Sallie Mae and consolidate his loans to start making payments on them as soon as possible, and they informed him that if he did not finish his degree they would not allow him to consolidate!!!

Since then the loans have climbed by over 20,000 and now total nearly 135,000!!! He is not eligible to file bankruptcy on these loans even though he has finally been diagnosed with a neurological disease that randomly robs him of his eyesight and ability to control other bodily functions. He is depressed, anxious, and I am affraid for his life. If he ever does get better the loans that he has with Sallie Mae will have grown to unmanageable proportions.

My brother is now depressed and suicidal and even if he gets better I don't know how he will ever be able to survive. Why did these people give him so much money!!! How could someone send in a disability check as proof of employment!!! Why can't he file bankruptcy on these loans so that he is only responsible for the original balance of the loan interest free?!!!

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Renee

In 2003, I was suckered into borrowing from Sallie Mae for my private loans. It was the only choice offered to me by my university's admissions advisor. Unfortunately, I would find out after I graduated that universities are offered incentives from Sallie Mae for pushing their name. I understand that I borrowed money and I understand that I have to pay it back. What I don't understand is the 13% interest they tack on your loans. I also don't understand that when I borrowed the money from Sallie Mae, I had a good credit rating and therefore I wouldn't need a co-signer for my loans. But when it as time to consolidate my loans to pay them back, I needed a co-signer as Sallie Mae said my credit rating was low. That's funny cause my credit rating has always been good.

Never had any late payments on my credit card. Never had any problems with my home bank and borrowing money from them. Infact, when I called my home bank and told them about the situation, they said my credit rating was fine. HHMMM. So because I couldn't find a co-signer, and quite frankly why should I REALLY NEED one, my three loans from Sallie Mae remain to this day at 13% interest EACH, making my monthly payments over $1200 dollars for the next 20 years now. I find this convenient for them to make some extra money off of 13% than 7%. I was in an immediate financial bind to which I needed to apply for a forbearance/ deferment. And managed to cough up the first $150 dollars that is needed for the forbearance application. But my financial situation lasted longer than the forbearance did and I couldn't come up with another $150 when THEY wanted. I had argued many times over with Sallie Mae about this $150 fee. The whole point of a forbearance / deferment is an application stating you HAVE NO MONEY. If I have $150 to put down for the application, then I have $150 to put towards my loan. If I am THAT BROKE, than $150 is for me to live off of not throw around for some application to say I have no money. So when I informed them I couldn'tgive them the money, they asked if I could pay $300 to them to put towards my loan. ???? Does that make sense? Obviously I said 'no'. And they said 'well I guess we will just have to put you down as refusal to pay'. Well, I didn't refuse to pay. I just said I can't pay you. There's a difference.

Is this $150 application fee legal? Government loans are not required a fee. Private loans are, according to Sallie Mae. But what does that money go to? Does it REALLY COST $150? And has this been investigated?

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Kyle

I have come to the conclusion that the DOE is part of the vast education complex that helps lure many desperate and ignorant people into the system which finances the higher education institutions of this country. The DOE endorsed the misleading information I used as "vocational guidance". Funding my education was like a social program on the onset. But now I am treated as a deadbeat because I am poor. This is not the life that was descibed to me "if I go to college".

I based my judgment as to career choice on information provided by reference books endorsed by the DOE and after graduating found that the industry is not what was described in these books.

I am a first generation college graduate. My father was in the military when I was conceived. I was mentally and physically impaired when I walked into an Iowa state agency (Vocational Rehabilitation of Iowa) and was, at the very least, encouraged on my collegiate path. It was determined that I had "disabilities" and needed to get an education and career change. I chose a career that I thought was the most practical and would give me the best chance for success. I was in college for eight years where I had no income and was dependant on the loans to survive my curriculum. Upon graduation I found that there were no real jobs in chiropractic like the vocational resource books claimed. I accumulated 156,000 dollars of dept and now 7 years later having earned no money as a Chiropractor I owe in excess of 250,000 dollars.

I support myself by doing construction work when I can find work or when my health permits. I fear that I will be prosecuted or have leans and judgments placed on me. I fear I have no future other than living hand to mouth as before, but now my Social Security eligibility might one day be in jeopardy.

Would you please try to introduce legislation, which will give people like me amnesty from this incredible dept? Or can you look for a law that would provide relief for someone like me who has no hope to repay loans because of physical and mental imparities?

I made a horrible mistake. I was misled. I had no one in my family to give me sound guidance. The state agency I trusted to help me become a productive member of society guided me down a path to financial disaster and tremendous debt. I have no retirement, no health insurance, or no consistent income. I see no way to pay off this debt.