The Wall Street Journal reports that two state lawsuits filed in Illinois and Washington claim that from 2000 to 2009, Sallie Mae extended billions of dollars in predatory, subprime student loans to borrowers likely to default.
New details that have emerged out of the legal action reveal how the lender used subprime loans to build its business with colleges and universities, knowing that many of the borrowers would not be able to repay the loans. A boon for the lender has, by many accounts, become a financial catastrophe for unemployed or underemployed students now on the hook for tens of thousands of dollars in debt.
Although Sallie Mae’s motivation for lending is clear…they were not the only one to benefit. Because no more than 90 percent of a college or university’s tuition payments can come from federal funds, schools looked to private lenders such as Sallie May to supply the 10 percent difference with an eye on enrollment. Unfortunately, many young and not-so-savvy borrowers signed off, not knowing the financial hardship they would soon face.
The attorneys general in Illinois and Washington along with a coalition of 27 other states are fighting to have the private loans forgiven on the grounds they shouldn’t have been made in the first place. If they succeed, some borrowers may see a chunk of their debt erased — a small, but welcome dent in the $1.4 trillion student loan debt burdening many in the United States today.
If you have a difficult financial situation arising out of unpaid student loans, credit card debt or an inability to meet other financial obligations, contact the bankruptcy Law Offices of Charles E. Covey to discuss what options may be available under chapter 7 bankruptcy or chapter 13 bankruptcy protection. Call today at 309-674-8125 for a free consultation.
Source: Wall Street Journal, “Loans ‘Designed to Fail’: States Say Navient Preyed on Students”,
by Stacy Cowley and Jessica Silver-Greenberg, April 9, 2017.