Very Important Student Loan News from StudentLoanJustice.org Alan Collinge

[1776Forever]

Alan M. Collinge, founder of StudentLoanJustice.org, sent this out in an email today. Please read on if you have a Student Loan - Alan reports this will even effect those Sallie Mae borrowers who may want to get in on the mortgage help monies if they have an outstanding loan:

1. The Justice Department is getting ready to file a large number of lawsuits (this month) against defaulted student loan borrowers. They have retained a number of law firms in the Chicago area to pursue collections of student loans that have exploded with penalties and fees. You could very well be receiving a summons soon. This came out in the National Law Journal:

http://www.law.com:80/jsp/nlj/PubArticleNLJ.jsp?id=1202428251815

This comes precisely at a time when I thought the Obama Administration would be considering the real harm that has been done to student loan borrowers who often tried their best to keep their loans in good stead but were defaulted nevertheless. I really expected that after 8+ years of policy skewed badly towards the interests of the creditors, Obama might be considering some kind of relief...not a continuation and even enlargement of George Bush's policies on this issue.

2. Sallie Mae told their shareholders recently that they would be purposely making it very difficult for certain of their borrowers to obtain forbearance on their private loans. This group is, according to Sallie Mae, likely to default anyhow, and the company wants them to default sooner rather than later.

This transcript below, provided by Nicole Mayer at the law firm of James Hoyer, shows that the company is using models developed from past borrowers to identify the group that is most likely to default. Then, they are actually inducing the borrowers to default through tightened forbearance policies. The ramifications of this are tremendous. This shows, for instance, that Sallie Mae is willing and able to induce students into default when it is in their financial interest to do so I have little doubt that they have used similar programs in the past to default federal loan borrowers.

From Nicole Mayer:

I took detailed notes on Sallie Mae's 4th Quarter Earnings Conference yesterday and thought you and your readers might be interested in the quotes on forbearance changes and underwriting and payment changes for private student loans. Here they are if you want to send to your members. This is a post I made on our "Fight back against Sallie Mae website."

If you have Sallie Mae private loans, pay attention to this. These are quotes from the Sallie Mae/SLM Corp. investor conference yesterday (1/22/09). It seems that they have majorly changed their forbearance policies and are going to make borrowers pay interest only payments while in school.

Jack Remondi speaking:

"On the non traditional side of the equation and particularly in the forbearance changes, what we are looking at here, there are segments of the population who don't benefit from a forbearance, they're relatively small, they comprise about 17% of the total forbearance that we grant, don't benefit to the same degree as the other side of the equation. And when we parse through the data and look at the actual experience, and remember you need time to be able to evaluate this and see the trends and develop models to approach this, we see that that 17%, looking back over the last couple of years, accounted for roughly 97% of the charge offs we incurred to loans that received a forbearance. So by ending that practice and pushing those borrowers into repayment sooner what you're doing is accelerating charge offs that would have occurred in future years and a part of our default calculations and part of our reserve calculations but they will result in higher charge offs in 2009 as a result. And I'm going to say again, it is not a forecast that our cumulative default rates are going higher it's just the shifting of the time of when they're recognized."


Jack Remondi speaking:

"Loans in forbearance as a percentage of loans in repayment declined sequentially this quarter as we recently implemented a risk-based eligibility model to assess the potential effectiveness and benefit of forbearance for individual borrowers. This change will result in incrementally higher charge offs in 2009 as previously discussed. Specifically, we expect this change to accelerate approximately $225 million in charge offs into 2009."

Jack Remondi speaking:

"Our new forbearance policies are reducing both the term of the forbearance granted and the usage."

Albert Lord speaking:

"As you may know, we are restructuring our private credit product to make it more financeable and to strengthen the credit worthiness of the asset. We will strengthen the credit with greater cosigner participation, we're going to shorten the term of the asset, and while students are in school we're going to require interest only payments so that loan balances do not grow as a consequence of negative amortization."

.........

Collinge also asked that everyone who has concerns contact the media and request this issue be looked at immediately.

Please Donate to the PAC, go to www.studentloanjustice.org/pac.htm

[carlyhippy]

1. wow

shortening the term of the asset will mean higher payments, no?
I have been paying the interest on my kids' stafford loans from the beginning, it's paid quarterly, I just did it to ease the burden when they have to start paying after grad.

[2Design]

2. student loans even when fed loans are/have been changing policies and reporting

it seems you have to overtly turn in paperwork every semester and other gyrations that were not necessary in earlier years - student loans are tough especially if you got sucked into outside vendors - so many colleges push other or their own financing - I am lucky I did not fall for that scheme - having tuition so high and loans and no jobs after college because most are over educated for the jobs in the usa at this time - jobs that used to be high school diploma now want a college degree - there is no reason to require a college degree for anything paying less than $20 an hour and full benefits and even then - there are so many jobs that are advertised needing a college degree that don't need an educated person