December 10, 2013
Durbin pushing bill to ease struggle of repaying private student loans
U. S. Sen. Dick Durbin, D-Ill., said Tuesday he is introducing a bill when the Senate convenes next week to protect students from getting overwhelmed by private-loan payments that grow out of control without explanation.
The bill would ensure that students who take out private loans, which carry no interest-rate limits and offer few alternative repayment plans, understand repayment options, the resources available to them and that they be treated fairly by financial institutions servicing the loans. Private loans are different from federal loans, which already have such consumer protections in place.
One student who got caught up in today’s private-loan debacle is Hannah Moore, a 32-year-old Albany Park resident who worked two to three jobs to try to pay off a student loan, and even after her dad came out of retirement to help, saw her debt balloon from $90,000 to $165,000.
Moore, who earned a degree in 2007 from the Harrington College of Design at 200 W. Madison, said at a news conference with Durbin on Tuesday that she made consistent payments of $800 a month for more than three years, but the principal and interest on her private loan kept going up — pushing the payments to $1,700 a month. She said she was never late on a payment and often paid early.
In a phone interview, Harrington College of Design President Max Shangle said the school is “very careful” to advise students about their obligations when they borrow money, whether they take federal or private loans. Moore got her loan with the college’s financial aid office.
Shangle said he couldn’t comment on each student’s situation, but Moore’s experience “certainly is not the way we do business and it certainly is not the way our students are advised and counseled regularly.”
Even after appealing to federal authorities and Sallie Mae, the nation’s largest student lender, Moore now is $155,000 in debt; pays $830 a month toward the debt; is required to enroll in automatic payment, and fears that her debt will go higher next year.
“I don’t feel I can make any large purchases,” she said at a news conference Tuesday. “I have no credit cards. I don’t want to be dependent on my parents in this way. I want my parents to be able to retire. I’m watching this about to spiral out of control again. If something like this bill isn’t passed, I feel it’s guaranteed to happen and others will be crushed.”
Moore, who found her first full-time job in September as a project manager at a furniture design and fabrication company, hopes Durbin’s bill will let student know their rights and make an educated decision before they take out a loan.
She is among 54 percent of students enrolled in for-profit colleges in 2008 and 2009 who had dropped out by 2010, according to the latest data from the U.S. Department of Education.
And 96 percent of students at for-profit colleges have taken out loans, compared with about 50 percent at traditional four-year colleges, according to the Education Department.
Durbin’s bill would give student loan borrowers the rights to options before they default; to be told about key terms and conditions of the loan; how to reach the loan servicer, and the right to have errors resolved quickly and promises and promotions honored.
“With student loan debt far outpacing the rise in (students’) starting salaries, many of these borrowers find they are unable to make their monthly payments,” Durbin said. “When lenders refuse to work with them on a repayment plan, they begin a downward spiral that is difficult to turn around.”
Student loan debt has tripled in the past decade, with more than 40 million borrowers owing about $1.1 trillion, making student loan debt higher than credit card debt, Durbin said, noting that his office regularly receives calls from students who owe much more than the average $25,000 in student debt, including those with $100,000 in debt.
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