A U.S. Student Loan System Stacked against the Borrower

By Morgenson, Gretchen | International New York Times, October 12, 2015 | Go to article overview

A U.S. Student Loan System Stacked against the Borrower


Morgenson, Gretchen, International New York Times


The Consumer Financial Protection Bureau is turning its attention to student loans; one problem is that borrowers are not advised of all their options.

"It feels like I'm being set up to fail."

That's how Patrick Wittwer, 31, described his experience trying to repay his roughly $50,000 in student loans. Between misdirected payments by one of the companies servicing his loan and the abusive collection tactics he encountered when he fell behind, Mr. Wittwer said the repayment process simply seemed stacked against him.

A 2008 graduate of Temple University with a degree in media arts, Mr. Wittwer is not alone in his experience. Consumer advocates say student-loan servicers often make an already heavy debt load even more burdensome for borrowers.

A report issued late last month by the United States Consumer Financial Protection Bureau supports this view. Even though the economy and labor market have improved, student loan borrowers are experiencing high distress levels compared with borrowers with other types of consumer debt, the government report found. More than one in four student loan borrowers are delinquent or in default on their obligations.

In the aftermath of the financial crisis, we learned repeatedly about dubious practices among mortgage servicing companies that made it harder for homeowners trying to repay or renegotiate their loans. Now similar horror stories are emerging about the companies servicing student loans.

Some 41 million Americans owe $1.2 trillion in student loan debt. The median debt burden among borrowers was $20,000 in 2014, up from $13,000 in 2007.

Companies servicing these loans manage borrowers' accounts, process their payments and enroll them in alternative repayment plans, including those based on a fixed share of the borrowers' income. Among the biggest companies are Navient, Great Lakes and Discover Bank.

The United States Education Department has contracts with 11 loan servicers. But with no federal standards governing these activities, student-loan servicers have great leeway in their practices. Making matters worse, borrowers are not allowed to choose their servicers, so if they encounter problems, they cannot take their business elsewhere.

"Good loan servicing is expensive," Maura Dundon, a senior policy counsel at the Center for Responsible Lending, said in a recent interview. "It requires reaching out and talking to people, and servicers don't do it because they don't get compensated for that. This is the fault of servicers, but it's also the fault of the Department of Education for not writing this into their contracts."

Denise Horn, a spokeswoman for the Education Department, said the agency continued to strengthen the federal Direct Loan program "to ensure all students and families receive the highest quality support from their federal loan servicers." She added, "Everyone needs to do more to protect student loan borrowers -- including servicers -- and we'll continue to take steps to strengthen the program and enhance oversight."

A recent questionnaire by Young Invincibles, a research and advocacy organization focused on advancing economic opportunity for young adults, points to some of the weaknesses in student loan servicing.

One common borrower complaint among the roughly 1,200 people who responded to the survey was that servicers failed to follow instructions. Borrowers hoping to reduce the cost and length of their repayment period, for example, often ask servicers to steer payments toward higher-cost loans first. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

A U.S. Student Loan System Stacked against the Borrower
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.